Month: June 2024

HMRC can enquire into any statutory return (or amendment of that return) or statutory claim to check if the return / claim has been prepared correctly or if further information is required.

HMRC’s internal manuals state that there is no statutory definition of an enquiry, so it carries its normal dictionary meaning of `seeking information, asking, questioning’. In practice the nature and extent of enquiries will vary considerably.

HMRC has historically referred to ‘full enquiries’ covering a tax return as a whole, and ‘aspect enquiries’ dealing with one or more matter(s). However, the legislation does not distinguish between different types of enquiries. Therefore, all enquiries into tax returns are legally enquiries into the full return, even if in practice HMRC only need to check part of the return.

If HMRC make no enquiries within the period allowed, or if they have completed an enquiry, the return becomes final unless

• the taxpayer is still within time to amend their return;
• the taxpayer has carelessly or deliberately caused a loss of tax; or
• HMRC discover that the return was incorrect, and the taxpayer had not disclosed enough information to show this. This is known as a discovery assessment. If a discovery is made in such circumstances HMRC can make a discovery assessment up to 6 years (20 years if the taxpayer has failed to notify chargeability) after the end of the relevant accounting period.

The following notes are reproduced from a Treasury statement issued 21 May 2024.

Lower inflation supports people by maintaining the purchasing power of their money.

If prices only rise slowly, people can plan their budgets more effectively – encouraging spending and investment, which fuels the economy.

Lower inflation also helps businesses grow by providing a stable, predictable environment for them to operate in – allowing for more job opportunities or the ability to research new products and services. 

Finally, low inflation enhances the UK’s competitiveness in a global market. When the economy is stable and predictable, other countries are more interested in investing in the UK.

This can bring in more money from foreign investors, give us better trade deals, and make the overall economy stronger. 

How will lower inflation help my business?

If inflation is lower, it means the price of materials businesses use to produce their goods and services aren’t rising as quickly, so there is less pressure on them to pass price increases onto their customers. 

For example, a coffee shop won’t face large increases in the cost of their coffee beans, paper cups, or the energy to turn on the lights in the coffee shop.

Because none of those things are getting drastically more expensive, they don’t have to pass those costs on to coffee for their customers.

Lower inflation provides a sense of stability for businesses, which is important to empower them to make decisions about their future. 

If inflation is high and volatile, businesses aren’t able to plan for their future spending decisions.

For example, if you want to invest in a factory that will take a year to build, it’s important to know how much things will cost in a year’s time.

What does inflation going down mean for my mortgage?

Inflation influences mortgage rates indirectly, through financial market’s expectations for the Bank of England’s base interest rate.

The base interest rate, which is also known as the Bank Rate, is the tool used by the Bank of England to bring inflation down. 

Mortgages are generally priced to reflect what the financial markets expect future interest rates to be. 

This means that if markets start to expect higher inflation, they will raise their expectations for the Bank Rate, in order to cool the economy and bring inflation back to target. This is in turn reflected in mortgage interest rates.

If inflation falls more quickly than expected, it may lead to reductions in market expectations for the base interest rate and therefore reductions in mortgage rates offered.

As time passes during the present election campaign, its seems more likely that we may have a change of government from the 5 July.

Labour have disclosed a number of tax changes they would introduce. To summarise they are:

• Private school fees will attract VAT at 20% which private schools will no doubt pass on to parents. The Labour Party has also said it will also end business rates relief for private schools. The £1.7bn raised by this move will be used to improve local authority schools.
• There may be changes to the taxation of Non-Doms to close loopholes that the Labour Party considers are unfair.
• To introduce a windfall tax on the profits of the energy supply companies.

They have also been vocal in confirming that they will not raise Income Tax, National Insurance or VAT (apart from the changes highlighted above).

In contrast, the Conservative Party has pledged to:

• Introduce a triple-lock pension allowance that would raise the tax-free pension allowance by at least 2.5% a year.
• They would raise the threshold for the claw back of child benefits (the High Income Child Benefit Charge) to £120,000 and base the income on household income rather than the income of the highest wage earner.
• Longer term, the Chancellor has disclosed his intention to reduce employees NIC and consider scrapping Inheritance Tax.

Of course, we will have to wait for the outcome of the election and then the formal disclosure of any future tax changes. Which ever party assumes control, let us hope we can look forward to a period of economic growth. If the pundits are correct, expanding economic activity and productivity are the necessary ingredients to increase prosperity. Fingers crossed that the new brooms are up for this task.