OTS calls for ‘urgent review’ into how UK tax system affects businesses

MTD

OTS calls for ‘urgent review’ into how UK tax system affects businesses

In a new report, the Office of Tax Simplification (OTS) has called for the government to carry out ‘urgent work’ in order to simplify the business tax system for UK firms.

The OTS report focused on businesses owned by individuals and families, and examined how the tax system affects firms at each of the key stages of their development, from starting-up to disposal or cessation. The OTS’s stated aim was to ‘highlight the complexity entrepreneurs face when seeking to establish or grow a business’.

In the report, the tax reliefs and charges that apply to new and growing businesses were examined in order to ascertain how well they operate and whether they achieve their objectives.

The OTS concluded that the reliefs and charges would ‘benefit from an overhaul to reduce complexity’, which would help to make reliefs ‘more accessible’ to firms.

The regulatory body has urged the government to consider streamlining or simplifying a number of key reliefs in order to better help entrepreneurs in starting up and expanding their businesses.

The OTS has highlighted 12 key observations, focusing on two main areas: the operation of the Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) schemes; and Entrepreneurs’ Relief (ER), capital gains tax (CGT) gift relief and inheritance tax (IHT) reliefs for business.

The organisation has invited the views of businesses and the industry, and will ‘consider some of the areas touched upon in more depth in the future’.

Paul Morton, Tax Director at the OTS, said: ‘This paper takes a significant first step towards meeting the pressing need to undertake a detailed review of the tax system as it operates across the business lifecycle.

‘It is aimed at helping the businesses that are the lifeblood of the UK economy to maximise their opportunities and to make the system clear and simple to understand and use.’

Chancellor invites small firms to contribute views on VAT threshold

Chancellor Philip Hammond has invited small businesses to provide feedback on the impact of the current VAT threshold on their firm.

In November 2017, the Office of Tax Simplification (OTS) outlined a range of measures intended to help simplify the VAT system. The OTS suggested examining the current approach to the level and design of the VAT registration threshold, and argued that the current registration threshold of £85,000 is ‘costly’, and has a ‘distortionary impact’ on business growth and activity.

The government has acknowledged that the current design of the VAT registration threshold could be ‘disincentivising’ small businesses from expanding their firm. The consultation will explore the effects of the VAT threshold on small businesses and examine different policy options.

Businesses can contribute their views online at www.surveymonkey.co.uk/r/W7TLCZ7. The deadline for firms to respond is 5 June 2018.

Meanwhile, the government recently introduced new rules to combat online VAT fraud. The measures, which were first announced by Mr Hammond during the 2017 Autumn Budget, strengthen the powers to make online marketplaces accountable for VAT fraud perpetrated by sellers using their platforms.

Under the government’s new guidelines, online marketplaces will be liable for any unpaid tax if they do not remove sellers who fail to pay VAT from their sites. The regulations apply to both UK sellers and those based overseas.

Marketplaces are also now required to ensure that sellers using their platforms display a valid VAT number.

New tax year ushers in key business and tax changes

New tax year ushers in key business and tax changes

With the beginning of the 2018/19 tax year, some significant changes to business and tax legislation are taking effect. Here, we take a look at some of the key measures that could affect your business or personal finances.

Increase in employers’ minimum auto-enrolment contributions

Currently the pension auto-enrolment legislation requires employers to contribute at least 1% on qualifying earnings. From 6 April 2018, employers may be required to increase the contribution they pay into their automatic enrolment workplace pension scheme. Affected employers will be required to pay a minimum of 2% from this time, with a further increase to 3% set to take place from 6 April 2019.

Reduction in the Dividend Allowance

The Dividend Allowance is set to reduce to £2,000 on 6 April 2018, from its current level of £5,000. The stated aim is to ‘address the unfairness associated with director-shareholders’ tax advantage’.

Rising National Living Wage (NLW) and National Minimum Wage (NMW) rates

From 1 April 2018, the NLW for employees aged 25 and over will increase to £7.83 per hour.

Meanwhile, the NMW will increase to £7.38 per hour for workers aged 21-24, and to £5.90 an hour for workers aged 18-20. For workers who are aged 16-17, the NMW will rise to £4.20 per hour, and for apprentices, the rate will rise to £3.70 an hour. An apprentice is an individual who is aged under 19, or 19 and over and in the first year of their apprenticeship.

Introduction of the new Welsh Land Transaction Tax (LTT)
1 April sees the introduction of the new LTT, which preserves the essential structure of Stamp Duty Land Tax (SDLT), but with some key differences, including a higher starting threshold for residential properties. For those seeking to purchase a residential property in Wales, there will be no tax to pay on a home worth up to £180,000.

The new Scottish income tax bands

From 6 April 2018, a raft of additional changes will take effect for taxpayers who are resident in Scotland. In the 2017 Scottish Budget, the Finance Secretary for Scotland, Derek Mackay, announced two new income tax bands, bringing the possible income tax rates payable up to five. The new Scottish income tax rates range from 19% to 46%.

Rise in the pensions Lifetime Allowance (LTA)

The LTA has increased in line with the Consumer Price Index (CPI), and for 2018/19 it will rise from £1,000,000 to £1,030,000.

For more information on the key changes set to take effect from April 2018, please visit the Hot Topics section of our website.

Congratulations to the Skipton Business Awards winners…

We were delighted to attend, and be involved in, the 2nd Skipton Business Awards ceremony – which took place on Thursday 22nd March.

The awards – which launched (with great success) last year – took place at the Rendezvous Hotel. The room was full to capacity with over 230 attendees – all keen to celebrate the great businesses our area has to offer!

We sponsored the Best Professional/Financial Services Business award… and we’d like to say “HUGE congratulations!” to the winners of the category, Walker Foster Solicitors!

The event was a triumph – expertly coordinated by Wendy Lawson of Skipton Chamber of Trade & Commerce.

Here’s to many more years of the Skipton Business Awards.

 

Picture credit: Stephen Garnett (who was the official photographer at the event).

Research suggests 70% of individuals ‘unaware of inheritance tax nil-rate band’

Research suggests 70% of individuals ‘unaware of inheritance tax nil-rate band’

Research carried out by Canada Life has suggested that a significant amount of individuals ‘do not know the threshold’ for the standard inheritance tax (IHT) nil-rate band. Canada Life found that 70% of those surveyed did not know the standard nil-rate band threshold, which currently sits at £325,000.

55% of those questioned do not know the rate at which assets above their available nil-rate band are taxed, the data also revealed.

Meanwhile, an additional 38% do not believe that their main home is liable for IHT. Canada Life has warned that many families in the UK could face ‘unexpectedly high’ tax bills as a result.

‘There is a disturbing lack of knowledge which will undoubtedly translate into unnecessarily high inheritance tax bills,’ said Karen Stacey, Head of Distribution Services at Canada Life.

‘Unless people learn more about taxes and actively plan the future of their estate, the government is in line for a large, ongoing and often unnecessary windfall.’

Meanwhile, Chancellor Philip Hammond has commissioned the Office of Tax Simplification (OTS) to review the UK’s IHT regime, and make suggestions as to ways in which the tax can be simplified.

In a letter to the Chair of the OTS, the Chancellor acknowledged that the IHT regime is ‘particularly complex’, and suggested that the review focus on the technical and administrative issues surrounding the tax.

Mr Hammond also said that the review should examine how existing gifts rules interact with the IHT system, and consider whether the current rules cause taxpayers to rethink their decisions when it comes to investments and transfers.

A ‘scoping document’ for the review into IHT will be agreed and published ‘in due course’, the OTS said.

As your accountants we can help you to plan to minimise the IHT due on your estate – please contact us for further advice.

Survey suggests two thirds of businesses ‘unprepared for GDPR’

Survey suggests two thirds of businesses ‘unprepared for GDPR’

A survey carried out by professional services firm EY has suggested that two thirds of businesses are ‘unprepared’ for the upcoming introduction of the General Data Protection Regulation (GDPR).

The GDPR is set to come into effect on 25 May 2018, and will strengthen the obligations on all businesses in regard to the safeguarding of individuals’ personal information. Firms have been urged to review their data privacy and security practices ahead of the introduction of the Regulation, to ensure that they are compliant.

Businesses who fail to take action in respect of the new Regulation will face severe financial penalties, with fines costing up to €20 million, or up to 4% of total annual worldwide revenue, whichever is the greater.

EY found that 78% of firms consider data protection and privacy to be a growing concern: however, only 33% of businesses stated that they have a plan in place for the implementation of the new GDPR.

Meanwhile, a report published by software technology company Senzing suggested that businesses are ‘sleepwalking towards a GDPR abyss’. Senzing believes that 24% of businesses should be deemed ‘at risk’ of receiving significant fines for failing to comply with the new Regulation, and a further 36% are ‘challenged’ when it comes to complying with the obligations.

Worryingly, Senzing’s report also found that 30% of firms believe GDPR fines and penalties ‘will have no impact at all’ on their business, and an additional 15% ‘don’t know’ if fines will have an impact.

Commenting on the findings, Jeff Jonas, CEO of Senzing, said: ‘The fines that can be levied for non-compliance will be potentially terminal to some organisations, and even the largest companies – and certainly their shareholders – will feel a significant impact.

‘A huge number of companies simply don’t understand the dangers of non-compliance, with smaller firms apparently particularly unaware.’

To find out more on this issue, please visit the Hot Topics section of our website

Government outlines VAT proposals for post-Brexit Britain

Businesses groups have voiced concerns over government proposals to amend the way in which EU imports will be treated following the UK’s withdrawal from the EU in 2019.

Plans to change the VAT rules are included in the Taxation (Cross-Border Trade) Bill 2017-19, which is currently making its way through Parliament. The proposals could see UK businesses being required to pay VAT upfront in cash to HMRC.

Currently, goods imported from the EU are treated as ‘acquisitions’ for tax purposes, meaning that VAT is not paid until the products have been sold to the end consumer. However, if the UK exits the Customs Union, goods from the EU will be treated in a similar way to other imports.

The British Retail Consortium (BRC) has warned that the proposed changes could create ‘additional burdens’ for UK businesses. Commenting on the Bill, the BRC stated: ‘If the Bill becomes law without any commitment to inclusion within the EU VAT area, UK businesses will become liable to pay upfront import VAT on goods being imported from the EU27 for the first time.

‘Liability for upfront import VAT will create additional cashflow burdens for companies, as well as additional processing time at ports and border entry points attached to the customs process.’

Meanwhile, the Chair of the Treasury Select Committee, Nicky Morgan, has written to the head of HMRC, Jon Thompson, urging him to address the BRC’s concerns.

Ms Morgan stated: ‘I have written to HMRC to seek clarification on the costs to businesses and consumers arising from this legislation, the options being considered to mitigate these costs and the likelihood of the UK participating in the EU VAT area as part of its end-state relationship with the EU.’

As your accountants, we can help you with your VAT obligations. Please contact us for advice and assistance.