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Welcome to our latest monthly tax newswire. We hope you enjoy reading this newsletter and find it useful. Contact us if you wish to discuss any issues further.

Content accurate as at 24 Feb 2022

VAT RATES FOR HOSPITALITY SECTOR DUE TO INCREASE FROM 1 APRIL

Early in the COVID-19 pandemic, the Chancellor reduced the rates of VAT for the leisure and hospitality sector to just 5%. That reduced rate applied from 15 July 2020 until 30 September 2021 when the rate was increased to the current 12.5%. However, the rate is scheduled to revert to the normal 20% rate from 1 April 2022.

The businesses affected by the temporary rate reduction are those

• supplying catering services including restaurants and takeaways
• operating hotels and providing holiday accommodation and
• operating leisure attractions such as zoos and theme parks

Businesses should listen to the Chancellor’s Spring Statement on 23 March in case he announces an extension of the 12.5% rate.

If there is a change announced on 23 March, there will only be a limited amount of time to implement changes to prices and VAT accounting.

For businesses using the VAT Flat Rate Scheme, the flat rate percentages will revert to the pre 15 July 2020 amounts if the VAT rate reverts to 20% from 1 April 2022.

CHANGES TO ACCOUNTING FOR VAT ON IMPORTS

HMRC have recently updated their guidance for VAT registered importers. These traders must account for postponed import VAT on their VAT returns for the accounting period which covers the date they imported the goods. The normal rules apply for what VAT can be reclaimed as input tax and the trader’s monthly statement will contain the information to support their claim.

HMRC is aware of the problems some importers are having when trying to access their monthly VAT statements. If you cannot access your statement or you’re having problems when viewing your statement, you can estimate your import VAT figures for the months you cannot access statements for. Your estimate should be as accurate as possible, based on the amount you’ve paid for the goods and any other costs you agreed to cover. As long as you take reasonable care to follow the guidance, there will be no penalty for errors.

There are also important changes from 1 June 2022 for small businesses using the Flat Rate Scheme who are importing goods and using postponed VAT accounting.

PAYROLLING BENEFITS IN KIND

HMRC are encouraging more employers to payroll employee benefits in kind rather than declaring benefits on the end of year P11d forms.

If employers haven’t already done so they should register online with HMRC on or before 5 April 2022 to payroll employee benefits for the upcoming 2022/23 tax year.

The advantages of payrolling benefits in kind are:

• employers no longer need to submit P11D and P46(Car) forms to HMRC
• simpler PAYE codes mean HR teams receive fewer queries from employees regarding tax
• tax deductions in monthly payroll will be more accurate
• tax codes for individuals should change less frequently
• fewer forms for employers to complete at year-end

DON’T LOSE YOUR 2021/22 PERSONAL ALLOWANCE

For every £2 that your adjusted net income exceeds £100,000 the £12,570 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%. The restriction applies between £100,000 and £125,140 adjusted net income.

CONSIDER A SALARY SACRIFICE SCHEME

Another way that you could avoid the personal allowance trap and also reduce income tax and national insurance would be to agree with your employer to sacrifice some of your salary in exchange for a tax free, or low tax benefits in kind. Common examples would be additional pension contributions or providing an electric company car in exchange for a lower salary.

We can assist you in setting up a salary sacrifice arrangement correctly as it will involve amending the contract of employment. You may be doing this anyway as many employers are moving to “hybrid” working and changing the days that staff are required to work in the office.

MISSING OUT ON HELP WITH CHILDCARE COSTS?

The government are concerned about the lack of take up of tax-free childcare accounts, with HMRC estimating that only about 25% of families eligible for the scheme had joined.

With many parents returning to work following the pandemic, they should be encouraged to set up a tax free childcare account to help with their childcare costs. For every £8 paid into an online account, the government will add an extra £2, up to £2,000 per child per year and that money must be used to pay eligible childcare costs.

Tax-free childcare is available for working families (including the self-employed) who are not receiving tax credits, universal credit or childcare vouchers.

It can also be used at the same time as the 15 or 30 hours of free childcare in England. The couple (or single parent) must earn at least £142 per week each. Their children must be under 12 (or under16 if disabled).

The account can be used to pay for nursery fees, breakfast clubs, after school clubs, summer camps and OFSTED registered childminders.

Note that the tax-free childcare scheme is not available if either partner expects to individually earn more than £100,000 a year.

BUY NEW EQUIPMENT BEFORE 6 APRIL?

Your business year end, not 5 April, is relevant for capital allowances purposes.

If, however you are running a business and making up accounts to 31 March or 5 April you should consider buying plant and machinery to take advantage of the £1 million Annual Investment Allowance (AIA).

The AIA provides a 100% tax write off for new and second hand equipment used in your business. This tax relief extends to fixtures and fittings within business premises such as electrical, water and heating systems. AIA does not apply to motor cars but there is a special 100% tax relief if you buy a new zero-emissions motor car.

If you are running a limited company, remember that new plant and equipment currently qualifies for a 130% tax deduction.

ADVISORY FUEL RATE FOR COMPANY CARS

These are the suggested reimbursement rates for employees' private mileage using their company car from 1 March 2022. Where there has been a change the previous rate is shown in brackets.

Engine Size	Petrol	Diesel	LPG
1400cc or less	13p		8p (9p)
1600cc or less		11p
1401cc to 2000cc	15p		10p
1601 to 2000cc		13p
Over 2000cc	22p	16p	15p

Note that for hybrid cars you must use the petrol or diesel rate. You can continue to use the previous rates for up to 1 month from the date the new rates apply.

2022/23 NATIONAL INSURANCE BANDS

Unless the Chancellor makes an announcement to the contrary on 23 March, which is very unlikely, the rates of National Insurance Contributions for workers and employers increase by 1.25% from 6 April 2022. This is to provide extra funding for health and social care and will become a separate Levy from 2023/24.

The starting thresholds for employee and employer national insurance contributions (NICs) have also been increased. Employees will be liable to 13.25% NICs between £190 and £967 a week (£50,270 a year). Employer contributions at 15.05% will start at £175 a week.

For 2022/23 the self-employed will pay 10.25% Class 4 NICs on profits between £9,880 and £50,270. Employees and the self-employed will pay 3.25% on earnings or profits in excess of £50,270 from 6 April 2022.

DIARY OF MAIN TAX EVENTS

MARCH / APRIL 2022

Date	What’s Due
01/03	Corporation tax payment for year to 31/5/21 (unless quarterly instalments apply)
19/03	PAYE & NIC deductions, and CIS return and tax, for month to 5/03/22 (due 22/03 if you pay electronically)
01/04	Corporation tax payment for year to 30/6/22 (unless quarterly instalments apply)
05/04	End of 2021/22 and start of the 2022/23 tax year.
19/04	PAYE & NIC deductions, and CIS return and tax, for month to 5/04/22 (due 22/04 if you pay electronically)

Content accurate as at 24 Feb 2022

Welcome to our latest monthly tax newswire. We hope you enjoy reading this newsletter and find it useful. Contact us if you wish to discuss any issues further.

Content accurate as at 24.1.2022

WILL THERE BE A MINI BUDGET ON 23 MARCH?

Whilst most of us were wrapping our Christmas presents on 23 December 2021, the Chancellor of the Exchequer, Rishi Sunak, commissioned the Office for Budget Responsibility (OBR) to produce an economic and fiscal forecast for Wednesday 23 March 2022.
The main Budget is scheduled for Autumn each year, but it is anticipated that the Chancellor will take the opportunity to make a number of tax announcements.

Many are hoping that the Chancellor will zero rate VAT on domestic power to ease the burden of households struggling to pay their energy bills. Now that the UK has left the EU, we are free to set our own VAT rates and the Prime Minister made this one of his key Brexit promises!

HMRC HAVE PUT BACK TAX RETURN DEADLINE

Normally self-assessment tax returns need to submitted by 31 January, otherwise there is an automatic £100 late filing penalty. Don’t panic however, as HMRC have recently announced that provided 2020/21 tax returns are received by the end of February, the late filing penalty will not be applied. Filing late will, however, extend the period during which HMRC may open an enquiry into your return.

YOU ALSO HAVE LONGER TO PAY YOUR PERSONAL TAX

2020/21 income tax, CGT, class 2 and 4 NIC liabilities normally need to be paid by 31 January 2022. However, HMRC have recently announced that provided the tax is paid by 1 April 2022, there will be no penalty, although interest accrues from 1 February 2022 at 2.75%.

If you need longer to pay, then you will need to agree a payment plan with HMRC.

NEW VAT PENALTY REGIME DELAYED TO JANUARY 2023

A new, and arguably fairer, system for determining penalties for late returns and late payment of VAT was due to be introduced from April 2022. However, it has been recently announced that the start has been delayed until January 2023. The same system will also apply to returns under MTD for income tax and those penalties will now start in April 2024.

Under the new regime taxpayers will accumulate points for late submissions, and only after reaching a certain threshold will an automatic penalty be imposed. The threshold will depend on how regularly the taxpayer is required to submit a return.

PLANNING TO SELL YOUR BUSINESS IN 2022?

Now that the economy is starting to recover, this could be a good time to think about selling your business. Remember that under the current capital gains rules, the first £1 million of an individual’s gains potentially qualify for a 10% rate of tax, provided business asset disposal relief applies. We can check whether or not you and other business owners qualify for this generous relief. Note that the £1 million limit applies to all disposals during an individual’s lifetime.

If your business is worth more than £1 million, you might want to consider the transfer of shares to other family members, although they will need to satisfy the conditions for business asset disposal relief for at least 2 years prior to any sale.

PASSING ON YOUR BUSINESS TO THE NEXT GENERATION

If you do not wish to sell your business but are looking to reduce your involvement, you may be considering passing on your business to the next generation, or maybe your management team.

Where you are passing on the business or some of your shareholding, there are generous tax reliefs that facilitate the transfer of ownership without tax charges arising. These tax reliefs are currently available on the transfer of a trading business although it may also be possible to pass on an interest in an investment business with careful planning. We can of course discuss your plans with you to ensure that you are able to take advantage of all available tax reliefs.

WHAT ABOUT A MANAGEMENT BUY-OUT?

If your family are not interested in taking over your business, have you considered selling the business to your management team?

In a typical management buy- out the existing management would set up a new company which would then raise finance to acquire your current business, so this is essentially the same as a sale to a third party, except the management team will know quite a bit about your business already. They would still nevertheless need to carry out due diligence and require you to provide warranties and indemnities as in a third party sale.

An increasingly popular alternative to the classic management buy-out referred to above would be to sell your company to an Employee Share Ownership Trust (ESOT).

SALE OF COMPANY TO EMPLOYEE SHARE OWNERSHIP TRUST

This alternative to the classic management buy-out enables the shareholders of a trading company to sell their shares free of CGT to a trust set up for the benefit of the employees. This has become more popular as an exit route since the lifetime limit for CGT business asset disposal relief (formerly entrepreneurs relief) was reduced from £10 million to just £1 million.

This tax break has recently been used by the owners of a number of well-known companies including Richer Sounds and Riverford Organics, and is similar to the structure in place at John Lewis.

Like business asset disposal relief, the company must be a trading company. The outgoing shareholders are only allowed limited participation in the company following the disposal of their shares. There are a number of other conditions that need to be satisfied. If you are interested in going down this route, contact us to discuss whether it would be suitable for you or your company.

COMPANY BUY BACK OF SHARES AS AN ALTERNATIVE EXIT

Another potential exit for shareholders would be for the company to buy back their shares. This would normally be taxed on the shareholder as a dividend unless certain conditions are satisfied resulting in the payment being taxed as a capital gain.

Clearly CGT treatment is preferable as the rate could be just 10% compared to up to 38.1% on dividends.

Consequently, HMRC need to be satisfied that the share buy-back benefits the company’s trade, and a large cash payment may be difficult to justify if that depletes cash flow. With careful planning it may be possible to stage the buy back over a number of years, but it is recommended that you get advance clearance from HMRC to confirm capital treatment.

DIARY OF MAIN TAX EVENTS

FEBRUARY / MARCH 2022

Date	What’s Due
01/02	Corporation tax payment for year to 30/4/21 (unless quarterly instalments apply)
19/02	PAYE & NIC deductions, and CIS return and tax, for month to 5/02/22 (due 22/02 if you pay electronically)
28/02	Extended deadline for filing self-assessment tax return for 2020/21 without incurring late filing penalty.
01/03	Corporation tax payment for year to 31/5/21 (unless quarterly instalments apply)
19/03	PAYE & NIC deductions, and CIS return and tax, for month to 5/03/22 (due 22/03 if you pay electronically)

Welcome to our monthly newswire. We hope you enjoy reading this newsletter and find it useful.

Setting objectives for your team

Setting goals for the business is one thing, but in order to succeed, you need to set smart objectives for your team.

Any good business will have a set of goals which have been agreed by the management team. However, in order to achieve those goals, they need to cascade, throughout the business. For example, if you want to grow sales by 10%, each of your sales team should have an objective to achieve revenue that is 10% higher than last year. If you want your people to move in the same direction towards a common goal, you need to set specific, measurable, achievable, relevant and time-bound (SMART) objectives for each member of the team.

Biting off more than you can chew can be demotivating. Therefore, the best way to set realistic objectives for your team is to start small. For example, rather than asking your customer facing team to sign up 120 new clients this year, break that goal down into smaller monthly chunks and set an objective to sign up 10 new clients per month.

Laying out the small, attainable stepping-stones each month can have a much more positive effect on motivation.

Ensure that you and your team write down your objectives. This helps commit them to memory. Objectives should be revisited regularly and keeping them visible can help to keep them top of mind. If a goal is staring you in the face because it is on your computer desktop, you will be much more likely to do something about it.

Ensure that you set measurable objectives for your team members. Agree metrics at the start of the year and ensure that a monthly reporting system is in place. Whether you measure - sales, headcount, revenue or production levels, will depend on the objective - the key is being able to measure progress on a regular basis.

Putting the right reward structure in place can motivate your team to drive forward and achieve their objectives. Consider what sort of incentive structure would work well in your firm.

Managing stress at work

Work-related stress is an increasing area of concern.

The Covid-19 pandemic has exacerbated work-related stress as many of us have had to suddenly shift to new ways of working as well as balancing family responsibilities with home-working and home schooling, etc. This has put a lot of pressure on people and has tested the resilience of many of us. Stress can have a very negative effect on physical and mental health, to the extent that it can affect behaviour and people’s performance.

This can have a knock-on effect on relationships with colleagues. Work-related stress is a major cause of long term absence from work, so knowing how to manage work-related stress is key for businesses.

Ideally, employers should approach stress management proactively, focusing on prevention and early intervention.

Managers should lead by example and promote healthy working habits. This may include taking regular breaks, encouraging employees to take all of their annual leave and avoiding sending emails outside of working hours as much as possible. If managers take an interest in their own well-being, others will follow suit.

Keep an eye on workloads and discuss this with your team regularly. Ensure that work is being shared equally and try to identify any people who may be overworked. If someone is showing signs of stress, try to delegate some of their workload elsewhere, or extend a couple of deadlines, to take the pressure off.

Invest time in building relationships with your team. If you know your team better, you will be more attuned to their stress levels. Keep up positive communication, celebrate successes and encourage your people to switch off after work or at weekends.

Regular team meetings and one-to-one meetings are key, particularly if your people are working from home. Positive interactions with colleagues can help give people a boost if they are feeling under pressure. Encourage feedback and let your people know that it is ok to ask for help if they have too much on their plate.

Top 5 management tips for 2022

Great managers build great businesses. Here are some top tips to help you become a better manager in 2022.

A goal without a plan is just a wish

Good managers create a business plan every year and communicate that plan with their team. It’s important to keep your team informed of project goals, priorities and deadlines because employees who feel uninformed can become anxious and can even lose trust in their manager.

Hunger to learn

Good managers are open to learning and growing. Managers who are closed to learning and are set in their ways tend to be less effective. Be prepared to learn from others, including team members who report into you. Be willing to adapt to change and to embrace new technology. Encourage a culture of “life long learning” in your team.

Set a good example

Your team will look to you to set the standard. Lead by example and try not to demand too much of your team. The best managers exhibit a high level of professionalism and dedication – this inspires others to behave in the same way. Try to create an environment where the energy is positive and ideas are welcomed.

Set an example by being efficient and doing things properly - this will inspire others in your team to try to do the same.

Recognition builds confidence

By publicly recognising the achievements and efforts of your team, you will build their confidence. This will, in turn, encourage future contributions and effort from you team.

Recognition doesn’t always have to be formal. Praising team members can be part of your day to day routine. You can also recognise the achievements of team members during team meetings, one to one catch ups or during an informal chat.

Lots of managers cancel monthly meetings and catch ups when time is limited. The best managers never cancel these meetings as doing so can make team members feel under-valued.

Be decisive

A good manager is one who doesn’t procrastinate. Focus on making decisions in a timely fashion and stick to them. People tend to feel uncomfortable with someone who back tracks or changes their mind all the time. Decisive managers build stronger trust among their team members. You can also build trust with your team members by asking for their views and including them in making decisions.

Network Attached Storage (NAS) Drives

Businesses are creating and storing more data across more devices than ever before. NAS drives can offer an effective solution for small and medium sized businesses.

A NAS drive is a high-capacity storage device in a box, which is designed to connect quickly and easily to a network. NAS drives offer a good solution for small and medium sized businesses who need to share files, documents and data across a range of laptops, tablets and mobile devices.

NAS drives can be set up to allow multiple users to store and share files in a centralised location rather than individuals storing files on their own computers. They are popular with small and medium sized businesses who need a scalable solution at a relatively low cost.

NAS drives are designed to be simple to operate - a dedicated IT manager is often not required to run this type of solution, and this helps to keep IT costs down. NAS drives also offer an easy backup solution, ensuring that data is always accessible when it is needed.

Having data accessible from a centralised location also makes it easier for employees to collaborate, respond to customers in a timely fashion and manage day to day aspects of the business, even if they are working remotely. NAS devices usually have space for between 2 and 5 hard drives in the box. This means that as your business grows, you can increase your storage capacity as needed. In terms of connectivity, NAS drives can be connected to your network with an ethernet cable or over WiFi.

In terms of cost, NAS drives start at around £300 for a basic unit with around 4TB of storage and go up to around £5,000 for a high-end unit with around 100TB of storage. As ever with IT, it pays to do your research. Think carefully about what your business needs are now and in the future, and consult with a good IT professional for guidance on what options would suit your business best.

All limited companies need to submit annual accounts and a confirmation statement to Companies House. If these documents are not submitted the company can be struck-off.

This filing requirement applies to dormant companies in the same manner as it does for active trading companies. HMRC do not require accounts from dormant companies but Companies House does. A confirmation statement must also be filed annually for each dormant company along with the fee of £13 for filing this statement.

Trading companies need to file accounts and a corporation tax return with HMRC, as well filing accounts at Companies House.

Written by the Tax Advice Network

In our newsletter on 16 December 2021, we outlined HMRC’s new online VAT registration service. This service may appear to be easy to use, but it’s not fool-proof, and clients will need our help to avoid making mistakes that require manual intervention and thus delay their VAT number.

Tax agents can’t yet use this online VAT registration service on behalf of clients, although that should change soon.

Written by the Tax Advice Network

In normal circumstances the cost of statutory sick pay (SSP) can’t be reclaimed by employers. But for periods of covid-related absences from 13 March 2020 smaller employers could reclaim up to 14 days of SSP paid per employee (see our newsletter 9 April 2020).

That SSP refund scheme was brought to a close on 30 September 2021, and employers had until 31 December 2021 to submit claims for refunds.

Written by the Tax Advice Network