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For deaths that occur on and after 1 January 2022, the reporting requirements for estates which have no IHT liability have been relaxed, so around 90% of those estates should be ‘excepted’ and won’t have to submit a IHT400 form.
Excepted estates may be of low value or exempt.
Exempt estates are generally those where the bulk of the estate is subject to the exemptions for spouse/civil partners and charities.
Written by the Tax Advice Network
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Happy New Year and welcome to our first monthly newswire of 2021.
We hope you enjoy reading this newsletter and find it useful.
Content accurate as at 15 Dec 2021
In his Spring 2021 Budget the Chancellor announced that there would be 8 “Freeports” in England with generous tax breaks to encourage businesses to set up and invest in those areas. The devolved governments will also be announcing locations in Scotland, Wales and Northern Ireland in due course.
The proposed locations of the freeports can be found here:
https://www.gov.uk/guidance/freeports#where-are-they-located
The main tax and customs duty advantages of locating in a designated freeport area are as follows:-
7 of the 8 freeport areas are on the coast and thus ideal locations for businesses importing goods into the UK. There is however no restriction on the nature of business carried out within the designated freeport area.
The eighth English freeport is around East Midlands Airport which would be an ideal place to locate a distribution centre, being half way up the M1 motorway.
Please contact us for more details on the tax breaks for locating in one of the designated freeport areas.
Many businesses may have been too short of cash to take advantage of the new super-deduction for investing in new plant in 2021 but may be more confident about investing in 2022.
This tax break, which started on 1 April 2021 continues until 31 March 2023, allows companies to deduct 130% of the cost of new plant and machinery from their profits where that plant would normally be included in the general capital allowances pool.
If a company buys a new commercial vehicle costing £50,000 that means they can deduct £65,000 from trading profit saving £12,350 in corporation tax.
Note that there would be a clawback charge on disposal of the asset, which could be as much as 130% of the proceeds.
There is currently no financial limit on the amount that the company spends on new equipment qualifying for 130% tax relief.
Second hand plant and machinery does not qualify for the 130% super-deduction but would still qualify for the 100% Annual Investment Allowance (AIA).
The amount of expenditure qualifying for 100% tax relief was originally scheduled to revert to just £200,000 from 1 January 2021 but will now continue at £1 million until 31 March 2023.
Although the 130% super-deduction only applies to limited companies the AIA is available to sole traders and partnerships as well.
Remember that there is currently a further 100% first year allowance for the cost of buying a new zero emission car for the business.
Previously 100% relief was available where the CO2 emissions of the car were no more than 50g per kilometre. However, that threshold changed in April 2021.
At this time of year, we think about New Year’s resolutions. It is also a good time to start planning your tax affairs before the end of the tax year on 5th April.
An obvious tax planning point would be to maximise your ISA allowances for the 2021/22 tax year (still £20,000 each).
You might also want to consider increasing your pension savings before 5 April 2022 as the unused annual pension allowance is lost after three years. For those looking to do some inheritance tax planning it would be a good time to review (or make) your Will.
In the run up to the Autumn Budget many were predicting that the chancellor might announce restrictions to pension tax relief. Thankfully nothing has changed -yet.
For most taxpayers the maximum pension contribution continues to be £40,000 each tax year. This limit covers both contributions by the individual and by their employer into their pension fund.
Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current year, but then lapses if unused. Thus, the unused pension allowance for 2018/19 will lapse on 5 April 2022 if unused.
Top of the new year to do list for many individuals is to make or update their will. Many think this is something to leave until later in life, but it is important to get things in place once property is acquired or when children come along.
In the absence of a will there are statutory rules which dictate how your assets are distributed on death. Those statutory intestacy rules may not be tax efficient, and you might want to make specific provision in your will for your unmarried partner or for the guardianship of your children.
Talk to us about the tax implications of your plans before you instruct a solicitor to get your will drafted or updated.
If your tax payment due on 31 January is more than you expected there is still time to reduce the liability if you are prepared to take a risk. An HMRC tax planning opportunity is to invest in a company that qualifies under the Enterprise Investment Scheme (EIS) or under Seed EIS.
These investments enable you to deduct 30% or 50% respectively of the amount invested from your income tax bill. For example, £10,000 invested in a qualifying EIS company will enable you to deduct £3,000 from your tax bill.
Normally the shares need to be issued in the tax year in question, but it is also possible to invest in the following tax year and carry back the relief to the previous year.
You will need to get independent financial advice as these tend to be risky companies, particularly Seed EIS companies which are smaller start-up companies.
| Date | What’s Due |
|---|---|
| 01/01 | Corporation tax payment for year to 31/3/21 (unless quarterly instalments apply) |
| 19/01 | PAYE & NIC deductions, and CIS return and tax, for month to 5/01/22 (due 22/01 if you pay electronically) |
| 31/01 | Deadline for Self-Assessment tax return for 2020/21 if filed online. Also, the due date for 2020/21 balancing payment and 50% payment on account of 2021/22 tax |
| 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) |
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Welcome to our monthly newswire. We hope you enjoy reading this newsletter and find it useful.
The world is changing fast and businesses are having to adapt accordingly.
Businesses across the world have been grappling with rapid transformation because of changes to working practices, shifts in buyer behaviour and ongoing economic uncertainty.
The way we work is evolving
In the last 18 months, the shift to agile or flexible working has been accelerated by the pandemic. In 2022 the way we work will continue to evolve. Gig workers, remote workers and a move away from the traditional model of employment look set to be themes that will continue to evolve into 2022 and beyond.
Sustainability
All businesses must seek to reduce their environmental impact. Some businesses are trying to reduce the amount of waste that they produce, while others are setting lofty objectives to decarbonize their supply chains. Any business that ignores sustainability and the green agenda is unlikely to do well in the new age of conscious consumption.
Communication using apps
The pandemic has shifted commerce online and away from bricks and mortar / in-person meetings. In addition to telephone calls or emails, customers now expect businesses to be able to communicate using popular apps such as WhatsApp, Teams, Zoom or Skype. This trend is likely to continue post pandemic.
Virtual events
Meetings have moved online for many businesses and so have events. Whether it’s launching a new product or service on a livestream video or hosting a webinar, virtual events are here to stay. Physical, in-person conferences and events may return after the pandemic, but virtual events eliminate the need to travel so are time efficient and less costly to attend or to run.
Social media marketing
When was the last time you looked at an advert on television or a billboard outside? Now that we spend more of our time online and connecting through social media, businesses have responded by focusing their marketing budgets on online campaigns. Social media marketing is not just for large, global businesses - small and medium sized businesses can use social media campaigns to create targeted, local campaigns with data-driven analytics which help to zone in on specific types of clients and prospects. Buyer behaviours have shifted - people now buy more online than ever before, so it makes sense that businesses are shifting their marketing focus to the online platforms that people are now using.
With the growing popularity of crypto currencies, some businesses have started to accept crypto payments.
In simple terms, cryptocurrency is a form of digital money. It can be used for online transactions and is designed to be secure. The most common crypto currencies are Bitcoin and Ethereum, but there are many more available.
Crypto currencies are very secure. They use computer code that is almost un-crackable, which means that making transactions using crypto currency is attractive to customers (particularly when buying online).
Crypto currency merchant accounts are available in the UK and overseas. From a business’s perspective, accepting crypto currencies for payments is appealing, in that transactions cannot be faked or reversed. This provides an element of security for both the customer and the merchant.
A growing number of small and medium-sized businesses are already accepting cryptocurrency. If you want to start accepting crypto payments you will need a digital wallet, which allows you to accept, store and sell cryptocurrencies. These crypto wallets come with a private key which is your access code for your digital wallet.
If you already sell your products or services online on platforms such as Etsy or Shopify, these platforms often partner with payment processors like Coinbase and Bitpay, which allow users to accept payments in crypto currencies such as Bitcoin. Businesses can also sign up directly on payment processors such as Coinbase.
Accepting crypto payments is not without its risks. The value of crypto currencies fluctuates a lot and significant swings in value from one day to the next are not uncommon. Any business that is accepting crypto payments needs to track its value on the day it was received and the day it was sold. Crypto payments are still in the early stages of being adopted by the wider business community. As such, it’s important to understand the challenges and risks inherent in accepting it as a form of payment.
New design, same old Windows, and that’s a good thing.
Windows is the world’s most popular operating system for desktop and laptop computers. For decades, businesses around the world have relied on Windows to run their IT systems and processes. So, when Microsoft launches a new version of Windows, the whole world sits up and takes notice. Welcome then, to Windows 11.
So what’s new? Windows 11 offers a sleek, modern and more consistent design. Despite its new look, Windows 11 remains functionally similar to Windows 10. This is a good thing as it means that users who upgrade to the new version over the next few months or years will find that it feels familiar.
Windows 11 launched in October and the upgrade is coming to both recent and new PCs. It will be offered as a free upgrade to Windows 10 users on a rolling basis, based on validated hardware configurations. The rollout will be complete by mid-2022.
System requirements for running Windows 11 are a 1 Ghz minimum processor, 4GB RAM and 64 GB storage. A 64-bit processor is required. Most PC’s from the last three or four years should be fine to run Windows 11.
One of the key new features in Windows 11 is the widget panel which shows tiles for news, weather, financial market updates and so forth. Third party developers can offer content through Windows 11 widgets and we will likely see these become available over the coming months.
Windows 11 has been designed with Microsoft Teams video conferencing in mind. With the increasing importance of virtual meetings, having Teams chat and Teams video conferencing in the taskbar as a default, is quite a helpful feature.
In summary, Windows 11 is easy to use and more streamlined. It offers some useful tools and the roadmap for future development suggests that it will continue to improve over time.
How can businesses train their teams of people more effectively?
Businesses that invest in training their team enjoy greater employee retention and the right training can also have a positive effect on your profit margins.
To build a high performing organisation, you need to plan for sustained learning. Providing the training is one thing, but what happens once your employees leave the training room?
In order for your training to be effective it needs to combine formal training, ongoing coaching and peer learning. Learning a new skill is one thing but in order to master it, your employees need to apply it day in and day out.
The foundation for acquiring new skills is formal training and it works best if it is fun, practical and interactive.
The formal training needs to be supported by coaching. When managers focus on coaching their people, they help them to use their new skills in new and different ways as part of their day to day roles. Coaching leads to positive reinforcement of the right behaviours and clear guidance on how to improve. This can have a positive impact on employee engagement and enthusiasm.
As a team begins to apply what they have learned they need to share experiences and share positive feedback with their peers. It’s the job of managers to ensure that these opportunities to gather and share stories actually happen. Regular team meetings create opportunities to share feedback on training sessions. Asking different team members to take turns leading these meetings ensures that they are invested in the process. Encouraging the team to identify themes and priorities helps to reinforce key lessons.
In the current environment, digital platforms such as Zoom or Teams can make it easier for people to connect and share their learning and experiences. Making training stick requires a multi-faceted approach.
For best results, combine formal training, ongoing coaching and peer learning / feedback. All of these can add up to sustainable improvement following a training programme.
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Companies and partnerships have been able to use the HMRC online service to register for VAT using their government gateway account since late 2020. If the business has been newly formed and doesn’t have a Government Gateway ID they need to set that up first.
Until recently this online registration service has not been available to sole traders, but it should be extended to all unincorporated businesses by the end of 2021. Tax agents will also be able to use this online registration service to register their clients for VAT from a date in early 2022.
Unfortunately, during this dual-system period, when an agent submits a paper VAT registration form, the client has received this odd missive from this email address: noreply@vatreg.hmrc.gov.uk -
Subject: Transaction with HMRC reference XXXXXXXXXXXXXXX
Re transaction XXXXXXXXXXXXXXX in respect of VAT, please log on to the HMRC portal and access the communications area to check new information about this transaction. Use the same user id and password as you used to create the transaction.
This causes great confusion for clients who may not even have a user ID. HMRC has confirmed that this confusing messaging will be resolved as part of the roll out of the new VAT registration service to agents.
The VAT registration number is still sent to the client in a letter.
The online VAT registration process is much quicker than the paper VAT1 form, and it has been known for a VAT number to be issued with a few days using this system.
Written by the Tax Advice Network
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HMRC had paused its debt collection visits during the pandemic, but in spite of the fact that the covid pandemic is nowhere near over, HMRC’s bailiff teams are out of the road again.
A bailiff visit is always alarming, and potentially damaging to the business reputation, and unfortunately the HMRC field force team (aka bailiffs) can arrive even when there is no outstanding tax debt.
For example - if an amended return has been filed that reduces the tax due, the return may not have been processed by HMRC’s computer due to software problems, although the return will have been acknowledged as received. We advise our clients to keep an eye on the tax owing function of their online personal tax account or business tax account. Even if you ring HMRC and get a note added to HMRC’s debt management system there is no guarantee the field force team will review this note before visiting.
In case HMRC bailiffs do turn up we advise our clients to take the following actions:
If the HMRC visit is part of a dawn raid under criminal law, the client should call a criminal lawyer immediately, as different rules and procedures apply.
Written by the Tax Advice Network
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Paying the tax due by 31 January is difficult for many taxpayers, and new traders will have to find 150% of their annual tax liability, which will come as a shock. There are three potential solutions to this problem:
You can set up a Budget Payment Plan with HMRC to pay a small amount of tax each week, or month, by direct debit. This little-known facility can be used to pay income tax due under ITSA but not currently; CGT, CT or VAT. Unfortunately, the taxpayer needs to be fully up to date with their SA tax liabilities before they can start a payment plan, but new traders can use it.
The government has promised to make improvements to the Budget Payment Plan by April 2022, and we will keep you informed of any changes when they are announced.
At this stage in the tax year you should have a good idea of how your trade has performed in 2021/22. If the profits are below expectations, especially for hospitality businesses which are facing a disappointing Christmas, then we can reduce the payments on account for SA tax due for 2021/22.
If profits are above expectations when the 2021/22 tax return is finalised you will have to pay some interest on what you should have paid on 31 January 2022 and 31 July 2022, but that’s better than having to find the money now.
You need to be able to pay at least one twelfth of your tax bill immediately, as under a Time to Pay arrangement HMRC will expect the tax owing to be paid off in regular instalments within a year, via direct debit payments.
The good news is that getting a Time to Pay arrangement is now an automated process where the tax debt is less than £30,000, as the taxpayer can set it up through their Government Gateway account. If the taxpayer owes more than £30,000 to HMRC a Time to Pay deal must be arranged with a real HMRC officer by ringing the self-assessment payment helpline: 0300 200 3822.
Written by the Tax Advice Network
