Client Update September 2024

The UK government has extended two key investment schemes, the Enterprise Investment Scheme (EIS) and the Venture Capital Trust (VCT), by 10 years to April 2035.

These schemes aim to boost start-up growth and economic recovery by offering tax relief to investors in new or early-stage companies. The extension supports innovation, job creation, and long-term economic growth, building on over £41 billion of investment generated since their inception.

EIS and VCT provide investors with up to 30% upfront Income Tx relief and exemptions from Capital Gains Tax on profits. Introduced in the 1990s, these schemes have played a crucial role in driving investment in high-risk, early-stage businesses. In 2022-23, they raised £2.9 billion, supporting 1,280 companies through EIS.

Industry leaders, including the BVCA and the Association of Investment Companies, have praised the move, highlighting its role in maintaining the UK’s competitive edge in venture capital. The government’s commitment to these schemes ensures continued support for entrepreneurs, fostering economic stability and growth.

From September, HMRC will stop sending certain non-statutory Corporation Tax letters, as the information can be accessed online. This change is part of HMRC’s efforts to reduce paper usage, cut costs, and support environmental goals. The Corporation Tax process itself remains unchanged, and agents can still access the necessary information through HMRC’s online services.

The following letters will no longer be issued:

• CT205/A return reminder
• CT608 instalment payment reminder
• CT207 interest statement
• CT209 payment receipt.

In October, HMRC will also stop sending the CT603A agent list, although the CT603 notice to file will still be issued to customers.

Additionally, HMRC is trialling the discontinuation of the CT208 combined Corporation Tax return reminders from September until January 2025. The trial includes payment reminders and return reminders, and it will be stopped if it negatively affects customers.

For more information, visit GOV.UK for guidance on Corporation Tax accounting periods and Company Tax returns.

The landscape of financial reporting for small to medium enterprises (SMEs) in the UK is about to undergo some major changes. These changes are expected to reduce the complexity and burden of legislative reporting requirements, making company compliance easier.

Read the full article here:

HMRC is failing on the key metrics of responsiveness, ease and accuracy, according to the annual HMRC Charter report.

The report reviewed HMRC’s performance against its Charter from April 2023 to March 2024.

The survey received over 1,600 responses, with complaints about service levels a recurring theme.

• ‘Being responsive’ scored the lowest of the Charter standards, with an average score of just 2.4 out of 10.
• ‘Making things easy’ and ‘getting things right’ also scored poorly, at 2.8 and 3.5 respectively.
• The remaining standards – ‘being aware of your personal situation’, ‘treating you fairly’, ‘recognising that someone can represent you’, ‘mutual respect’ and ‘keeping your data secure’ – scored higher at 4.1, 5.0, 5.7, 5.6 and 6.8 respectively.

Richard Wild, the Chartered Institute of Taxation’s (CIOT) Head of Tax Technical, said:

‘Significant time is lost every day for members, their clients, and indeed HMRC themselves, due to delays and inefficiencies in dealing with HMRC.

‘The three standards on responsiveness, ease and accuracy were by far the lowest scoring, which is disappointing as between them they represent the health of the tax system.

‘Businesses are prevented from operating effectively due to the inability to obtain timely registrations or responses. Taxpayers’ legitimate refunds are withheld or delayed. Guidance and correspondence from HMRC is misleading or incorrect. All these things are inhibitors on growth and investment.’

HMRC has sent ‘nudge’ letters to crypto investors who it suspects have failed to pay the correct tax on their gains, according to the Chartered Institute of Taxation (CIOT).

Many crypto investors are unaware of their tax obligations due to uncertainty over tax rules and limited understanding of the nature of crypto assets.

A chargeable disposal occurs when an individual:

• Sells crypto assets for fiat
• Exchanges one crypto asset for another.
• Uses crypto assets to buy goods or services.
• Gives away crypto assets to someone other than spouse or civil partner (in this instance, the individual is deemed to receive the value of the asset even if they do not actually receive anything).

Gary Ashford, Chair of the CIOT’s Crypto Assets Working Group, said:

‘Many investors may be unaware that profits from crypto assets are subject to Income Tax or Capital Gains Tax (CGT) like any other asset, depending on how they’re held.

‘If you receive a ‘nudge letter’ from HMRC, it’s important to take it seriously. Even those who don’t receive a letter should review their crypto activity and file a tax return or use the capital gains real time transaction service if necessary.

‘Sometimes tax can be due even where the investor does not think his or her investments have been profitable. Selling, lending or ‘staking’ crypto assets – or potentially even just transferring assets between crypto sites and portfolios – will usually trigger a disposal in the tax year in question.’

Internet links: CIOT website

HMRC has reduced late payment and repayment interest rates following the cut to the base rate.

The Bank of England cut the base rate to 5.0% on 1 August, the first reduction for over four years.

This has triggered a cut in HMRC interest rates which are pegged to the base rate.

From 20 August, the late payment interest rate was cut to 7.5% from 7.75%, where it had been for 12 months. The repayment interest rate was also reduced to 4.0% from 4.25% from 20 August.

HMRC late payment interest is set at base rate plus 2.5%. Repayment interest is set at base rate minus 1%, with a lower limit – or ‘minimum floor’ – of 0.5%.

Corporation Tax Self Assessment interest rates relating to interest charged on underpaid quarterly instalment payments dropped to 6.0% from 6.25% from 12 August.

The interest paid on overpaid quarterly instalment payments and on early payments of Corporation Tax not due by instalments is down by 0.25% to 4.75% from 5% from 12 August.

Internet link: GOV.UK

The 5p cut in fuel duty to be scrapped in the upcoming Autumn Budget, according to the RAC

The motoring organisation says that motorists in the UK are ‘not gaining any benefit’ and retailers have failed to pass on lower petrol and diesel prices to drivers.

Prime Minister Keir Starmer recently refused to rule out a rise in fuel duty and warned that the Autumn Budget will be ‘painful‘.

The RAC suggested that average petrol prices should be reduced from 142p per litre to 136p per litre and diesel prices from 147p per litre to 139p per litre.

Simon Williams, Head of Policy at the RAC, said:

‘We’d normally be against any increase in duty. But we’ve long been saying drivers haven’t been benefiting from the current discount due to much higher-than-average retailer margins.

‘As more and more EVs come onto the roads the government will need to tax drivers differently. We think replacing fuel duty with a pay-per-mile system as soon as possible is the way forward as then the only tax levied on fuel would be VAT. This would give retailers nowhere to hide.’

Internet link: RAC website

Freelancers want to see Chancellor Rachel Reeves use the Autumn Budget to move towards a fairer, simpler tax system, according to the Association of Independent Professionals and the Self-Employed (IPSE).

IPSE’s research found that 80% of freelancers believe that government tax policies, such as IR35, are harming their businesses.

Meanwhile, just under half of freelancers reported having less confidence in the UK’s economic outlook for the coming year compared to the past 12 months – down from 63% in findings from Q1 2024.

IPSE’s Director of Policy, Andy Chamberlain, said:

‘For the past two years, the impact of record high inflation has been the main story in the business world. But for millions of freelancers, who are our very smallest businesses, the biggest barrier to growth has always been the tax system.

‘This is about more than just rates of tax. Convoluted tax rules like IR35 are crushing freelancers and the businesses they’ve worked so hard to build.

‘Rachel Reeves faces her first big test as Chancellor with a Budget in October and has made no secret of the need to raise money. But freelancers will be hoping that the Chancellor is also open to building a fairer, simpler tax system for millions of sole proprietors going it alone.’

Internet link: IPSE website

The number of self-employed people aged 60 or over has reached a record level, according to analysis by Rest Less.

These numbers have increased by over a third in the past decade, totalling 991,432 self-employed people aged 60 or over in 2023.

The analysis found that while the number of self-employed workers in their 50s and older has grown since 2021, it is those in their 60s who have set the new high.

The total number of workers who are self-employed is about 4.3 million, after a two-year recovery following a sharp fall during the pandemic, according to the research.

Stuart Lewis, Chief Executive of Rest Less, said:

‘With the state pension age soon to be 67 and set to go higher still, many people are choosing to work beyond the point of traditional retirement.

‘For many, self-employment is a great option as it allows people to remain active and engaged in the community and workforce whilst also providing greater flexibility – leveraging their skills, experience and network to make an impact.

‘The decision to go self-employed can be driven by wildly different sets of circumstances from people living comfortably and pursuing an entrepreneurial passion to those who are forced to generate an income and have not been able to find a permanent solution in the mainstream workforce.’

Internet link: Rest Less website

New company car advisory fuel rates have been published and took effect from 1 September 2024.

The guidance states: ‘you can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 September 2024 are:

HMRC guidance states that the rates only apply when you either:

• reimburse employees for business travel in their company cars
• require employees to repay the cost of fuel used for private travel.

You must not use these rates in any other circumstances.

The Advisory Electricity Rate for fully electric cars is 7p per mile.

If you would like to discuss your company car policy, please contact us.

Internet link: GOV.UK AFR

HMRC has published the latest issue of the Employer Bulletin. The August issue has information on various topics, including:

• electronic payment deadline falls on a weekend
• P11D and P11D(b) for tax year 2023 to 2024
• supporting employees with changes to the High Income Child Benefit Charge
• pensions for seasonal temporary staff
• getting your new employees on the right pay.

Please contact us for help with tax matters.

Internet link: Employer Bulletin