Client Update November 2022
In this month’s news we consider the latest news on the upcoming Autumn Statement. We also update you on inflation and the cost-of-living crisis. With guidance for employers and a warning for self assessment taxpayers, there is a lot to update you on.
If you have any questions about any of the below please do get in touch with your Old Mill adviser in the first instance, or alternatively click here…
7th November 2022
Government pushes back economic statement
Chancellor of the Exchequer Jeremy Hunt has delayed the announcement of the government’s economic plan until 17 November.
The Medium-Term Fiscal Plan was due to be delivered by the Chancellor in the Commons on 31 October, along with a forecast from the Office for Budget Responsibility.
This had been brought forward because of the market turmoil that followed September’s Mini Budget.
But it will now be put back by more than two weeks and be turned into a full Autumn Statement – expanding its remit and providing longer term plans.
The delay followed the reversals of most of the measures announced in the recent Mini Budget.
Mr Hunt announced that the following tax policies will no longer be taken forward:
- cutting the basic rate of income tax to 19% from April 2023. The basic rate of Income Tax will remain at 20% indefinitely.
- cutting dividend tax by 1.25 percentage points from April 2023. The 1.25 percentage point increase, which took effect in April 2022, will remain in place.
- repealing the 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) from April 2023. The reforms will remain in place.
The changes follow decisions not to proceed with proposals to remove the additional rate of Income Tax and to cancel the planned rise in the Corporation Tax rate.
Mr Hunt said:
‘Our number one priority is economic stability and restoring confidence that the United Kingdom is a country that pays its way. But it is also extremely important the statement is based on the most accurate possible economic forecasts and forecasts of public finances.’
Internet links: GOV.UK
New PM must restore confidence, say business groups
The UK’s new Prime Minister Rishi Sunak must restore confidence in the country’s economy, say business groups.
Mr Sunak will have to deal with a range of issues stemming from inflation and the cost-of-living crisis.
Business groups say he will need to set out plans to deal with soaring energy bills, labour shortages, spiralling inflation, and climbing interest rates.
Shevaun Haviland, Director General of the British Chambers of Commerce (BCC), said:
‘The new Prime Minister must be a steady hand on the tiller to see the economy through the challenging conditions ahead.
We cannot afford to see any more flip-flopping on policies – the UK’s businesses need a sustainable, long-term economic plan they can believe in.
We need a clear long-term vision of how the new Prime Minister will deal with the challenges ahead and create the business conditions that allow firms, and the communities that rely on them, to thrive.’
The BCC says business need more certainty on the energy support package for businesses and how the system will work from April.
In addition, it says the government must set out a strategy to boost international trade and exports.
Tony Danker, Director-General at the Confederation of British Industry, said:
‘The new Prime Minister can lose no time in easing the impact of market turmoil on households and firms, and helping to restore fiscal credibility.’
Inflation returns to 40-year high
The rate of inflation rose to 10.1% in September as the economy felt the effects of rising prices and the fallout from the Mini Budget, according to the Office for National Statistics (ONS).
The ONS said the Consumer Prices Index (CPI) measure rose from an annual rate of 9.9% in August to match the recent 40-year high seen in July.
The report showed that the largest upwards contribution came from food costs, while fuel provided the greatest downside pressure. It said the pace of food price rises was at its highest since April 1980 – running at an annual rate of 14.6%.
Commenting on the figures, Martin Sartorious, Principal Economist at the Confederation of British Industry (CBI), said:
‘Inflation returned to its recent 40-year high and is expected to grow further in October as energy bills rise in line with the government’s Energy Price Guarantee.
‘While the Chancellor’s statement (on 17 October) seems to have restored some fiscal stability, adjustments to the Energy Price Guarantee suggest inflation may yet remain higher for longer.
‘The prospect of household energy bills rising sharply again in April 2023 emphasises the need for the government to set out the details of any future targeted support sooner rather than later, in addition to how the country will establish its longer-term energy security.’
Internet link: ONS website
FCA warns that eight million are struggling to keep up with bills
Almost six in ten UK adults are struggling to keep up with their bills, according to new research from the Financial Conduct Authority (FCA).
The research estimates that 7.8 million people were struggling to keep up with their bills – an increase of around 2.5 million people since 2020.
In addition, 60% of UK adults are estimated to be finding it a ‘heavy burden’ or ‘somewhat of a burden’ keeping up with bills.
One in four UK adults has said they were in financial difficulty or could find themselves in difficulty if they suffered a financial shock.
Some 4.2 million people have missed bills or loan payments in the six months before the survey took place.
Sheldon Mills, Executive Director of Consumer and Competition at the FCA, said:
‘Our research shows that people up and down the country are struggling to keep up with their bills.
‘If you are facing financial difficulty, you don’t need to struggle alone. There is free debt advice available, and we have told firms that they must work with their customers to solve any problems with payment.’
Internet link: FCA website
Institute of Directors (IoD) survey finds UK businesses anticipate growth in exports
A survey conducted by the Institute of Directors (IoD) has found that 42% of UK businesses that trade internationally expect to see an increase in their exports over the coming year.
The survey also revealed that 47% of businesses are still finding Brexit challenging, and just 33% envisage opportunities materialising as a result of Brexit.
Additionally, 28% of firms reported that supply chain disruption has had a negative impact on their business, and 12% have an exportable product but are not currently exporting.
Commenting on the findings, Emma Rowland, Policy Adviser for Trade at the IoD, said:
‘There is no doubt that smaller businesses in particular are finding the current international trading environment challenging. Importers and exporters feel especially constricted by the UK’s new trading relationship with the EU.
‘It is therefore encouraging that, in spite of these barriers, businesses are anticipating an increase in exports over the coming months. There are opportunities that give traders reason to be optimistic.’
Internet link: IoD website
Self assessment clock ticks down to under 100 days
HMRC has reminded taxpayers that they are now less than 100 days until the deadline for self assessment online return submission.
Self assessment taxpayers have until 31 January 2023 to submit their online return for the 2021/22 tax year.
According to HMRC, more than 66,000 taxpayers beat the clock and filed their tax return on 6 April – the first day of the new tax year.
HMRC is now encouraging others to complete their return as soon as they can so they know what they owe and can budget to make the payment by 31 January 2023. This also means that if a repayment is due, it can be claimed back sooner.
Last year, more than 95% of taxpayers filed online and those who submit their returns early still have until 31 January 2023 to pay.
Speaking on 24 October, Myrtle Lloyd, HMRC’s Director General for Customer Services, said:
‘With 100 days to go until the online deadline, there’s still time to complete your tax return, to budget and look into the range of payment options if you need to.’
Internet link: HMRC press release
Latest guidance for employers
HMRC has published the latest issue of the Employer Bulletin. The October issue has information on various topics, including:
- the reduction in the rate of National Insurance contributions
- making PAYE Settlement Agreement payments and using the PSA1 online form
- the new starter checklist interactive guidance
- Making Tax Digital returns and changes to VAT penalties and interest charges
- the Government Information and Advice Service.
Please contact us for help with tax matters.
Internet link: Employer Bulletin
British Business Bank lending now exceeds £12 billion
The British Business Bank (BBB) was supporting £12.2 billion of lending to over 96,000 businesses at the end of March 2022, according to its annual report.
As part of its role in reducing regional imbalances the BBB was deploying £900 million of finance and supporting almost 83,000 businesses outside London at the end of March 2022.
In addition, its Regional Angels programme made six new commitments totalling £45 million, to help reduce regional imbalances in access to seed and early-stage equity finance for smaller businesses across the UK.
And its Start Up Loans programme was allocated a further three years of funding, which will deliver around 11,000 loans.
Catherine Lewis La Torre, CEO, British Business Bank, said:
‘We have increased our impact and market reach to smaller businesses across the UK’s regions and nations and designed innovative programmes while at the same time generating an attractive return on capital employed.
Despite this success over the last financial year, we are aware that areas of economic and geopolitical uncertainty remain. The serious headwinds that the economy is encountering make a national economic development bank an invaluable strategic asset, and we are ready and prepared to play whatever role is required to support UK smaller businesses.’
Internet link: British Business Bank website
Staff out of office? Rules under review
With employees increasingly able to work from almost anywhere in the world, the Office of Tax Simplification (OTS) is examining the rules around tax and social security as they apply to distance and hybrid working – within the UK and globally. Click here for full article.
Did claims comply with the furlough scheme?
HMRC is heavily involved in the Taxpayer Protection Taskforce investigating this area. Although HMRC stresses that it is not actively looking for innocent errors, Coronavirus Job Retention (JRS) compliance activity is very much live and it is important for businesses to look back and check past claims and supporting calculations. Click here for full article.
VAT: terminating a contract early
When someone charges a customer to withdraw from an agreement to supply goods or services, the position can be complicated. What is the position as regards Value Added Tax (VAT) – never a set of tax rules to take lightly? And why is it news now? Click here for full article.
Introducing the Plastic Packaging Tax
If your business imports or manufactures plastic packaging components, or regularly trades with a business that does so, the Plastic Packaging Tax (PPT) needs to be on your radar. Click here for full article.
Patent Box – a 10% tax rate as reward for innovation
- Is any of your company’s income derived from a patented invention?
- Does your company have any pending patent applications, or plans to submit a patent application?
- Is your company undertaking a Research & Development (R&D) project or has it already completed a successful R&D project?
If your answer is yes to any of the above, you should consider the company’s current and future eligibility for the valuable Patent Box tax relief, accessing the effective 9% saving on certain Intellectual Property (IP) related profits. Click here for full article.