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Month: October 2022

Over-65s set new employment record

Written by admin on . Posted in PAYE, Pensioners, Pensions, self-assessment. No Comments on Over-65s set new employment record

The latest data from the Office for National Statistics (ONS) reveals that more people than ever are working beyond age 65.

One of the stranger economic statistics of recent times has been the strength of employment markets on both sides of the Atlantic. For all the talk of an impending recession and the upward march of interest rates, employment has remained buoyant in both the UK and the US. The unemployment rate in both countries is under 4.0%, which is about as close to full employment as can be reached. The latest estimate for the UK is that unemployment numbers are 42,000 less than job vacancies, whereas in the US, job openings are double the unemployed numbers.

A notable feature of the UK employment market has been the increase in the population aged 65 and over who are in work. The latest data from the ONS – covering the period April to June 2022 – showed both a record quarterly increase and a record total of close to 1.5 million, of whom nearly three quarters were employed. Viewed another way, 15.5% of men and 9.2% of women aged 65 and over were in work during this period.

The longer-term ONS figures show that over the last ten years, while overall employment has risen by about a tenth, employment among those aged 65 and over is up by a little over a half. These senior workers are not labouring all week, but they are, on average, putting in nearly 22 hours. The recent joiners of the 65-and-over workforce are predominantly part-timers, both employed and self-employed, according to the ONS.

What the ONS statistics do not reveal is why employment is growing so rapidly in this sector of the population. There is a clue in the fact that, to quote the ONS, “The industries where informal employment is more common, such as hospitality and arts, entertainment and recreation, saw some of the largest increases.”

The combination of sharply rising inflation and the increase in state pension age to 66 is likely to be forcing some former retirees back into work to make ends meet. It does not help that the April 2022 increase in the state pension was 3.1%, less than a third the current (August) rate of CPI inflation.

If the idea of joining that growing band of those still working at 65 and over does not appeal, then make sure your retirement planning provides you with enough income when you need it.

Source: ONS 9/2022.

17 October 2022: ‘The Growth Plan’ – a further update

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At 6.00 am on Monday 17 October, the Treasury issued a press release announcing that the (new) Chancellor, Jeremy Hunt, would making a statement “bringing forward measures from the Medium-Term Fiscal Plan”. The timing of the press release suggested that the Treasury was concerned it had not done enough the previous Friday to calm markets ahead of the end of Bank of England gilt purchase support.

 

The Chancellor’s statement was in two parts: firstly, a pre-emptive media statement in the morning, then an official statement to the House of Commons in the afternoon. He announced what amounts to a near total unwinding of Kwasi Kwarteng’s ‘fiscal event’ of 23 September.

 

Measures revoked

 

  • The cut to 19% in the basic rate of tax (outside Scotland) from 2023/24 will not take place. Instead, basic rate will remain at 20% “indefinitely”, meaning that even Rishi Sunak’s 2024/25 scheduled timing has been dropped.

 

  • The off payroll working rules in the public and private sectors (often referred to as IR35) will remain in place, reversing their removal at the start of the next tax year.

 

  • The 1.25 percentage points reduction in dividend tax rates, due from 2023/24, will be scrapped.

 

  • VAT-free shopping for overseas visitors will not be re-introduced.

 

  • There will now be no freeze on alcohol duty for one year from February 2023.

 

Under review

 

  • The Energy Price Guarantee (EPG), which was due to cap average domestic bills at £2,500 a year for two years from the start of October, will be scaled back to last only until April 2023. In the meantime, the Treasury will design “a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need”. Any support for businesses from April 2023 “will be targeted to those most affected”.

 

Measures retained

 

  • The reduction in national insurance contributions, which reached its third reading in the House of Lords on 17 October, will go ahead.

 

  • The stamp duty land tax cuts that took effect on 23 September will not be reversed.

 

  • The extension of the £1 million annual investment allowance beyond March 2023 remains, as do enhancements to the seed enterprise investment scheme (SEIS) and company share option plans.

 

Financing

 

The measures unwound today account for about £11 billion of the extra £45 bn of borrowing by 2026/27 created by the 23 September ‘fiscal event’. The U-turn on abolishing the top 45% rate of tax (outside Scotland) and Friday’s decision to keep the already legislated for corporation tax increases were worth about £21 bn, implying that over 70% of Kwasi Kwarteng’s planned borrowing spree has now disappeared.

 

Based on recent analysis by the Institute for Fiscal Studies, the 2026/27 financing black hole that remains after all the unwinding is about £32 bn, although press rumours at the weekend suggested that the Office for Budget Responsibility (OBR) could add another

£10 bn to the IFS’s debt projection.

 

The Chancellor stated that there will be “more difficult decisions” to come on both tax and spending. Government departments will be asked to find efficiencies within their budgets. In his initial statement Mr Hunt also said, “Some areas of spending will need to be cut.”

 

Further changes to fiscal policy to put the public finances on a sustainable footing will be announced on 31 October alongside the publication of the OBR’s Economic and Fiscal Outlook.

Photo by Zachary Kyra-Derksen on Unsplash

UK Prime Minister’s Statement – 14 October 2022

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On 14 October, as an important deadline loomed for Bank of England support of the government bond markets to expire, the government’s political turmoil ratcheted up as the fallout from the ‘fiscal event’ of 23 September claimed its first scalp.

A new Chancellor

Jeremy Hunt replaced Kwasi Kwarteng as Chancellor, making him the fourth Chancellor in as many months.

Chris Philp, the Chief Secretary to the Treasury, was also sacked. He was replaced by Ed Argar, formerly the Paymaster General and Minister to the Cabinet Office.

Corporation tax

At a press conference (the House of Commons was not sitting), the Prime Minister announced that the planned reversal of the increase to corporation tax would not go ahead. The rise from April 2023 to a main rate of 25%, with reduced rates for companies with profits below £250,000, was legislated for in the Finance Act 2021.

31 October remains the date when the Medium-Term Fiscal Plan will be announced. The Prime Minister said that the £18bn tax savings from the corporation tax reversal was a ‘down payment’ on this strategy. That still leaves a shortfall of about £24bn in 2026/27 stemming from September’s announcement.

Spending, said Liz Truss, would grow ‘less rapidly than previously planned’.

Timetable of reversals

Today’s announcements were the culmination of a series of statements and retractions over the last few weeks:

·      On 26 September the previous Chancellor, Kwasi Kwarteng issued an ‘Update on Growth Plan Implementation’ revealing that his Medium-Term Fiscal Plan would be presented on 23 November, alongside a forecast from the Office for Budget Responsibility (OBR).

·      The planned abolition of the 45% tax rate announced in September’s ‘mini-Budget’ survived just ten days before being reversed on 3 October.

·      Seven days later, on 10 October, the Treasury announced that the Chancellor would bring forward the announcement of his Medium-Term Fiscal Plan from 23 November to 31 October.

This last date for the calendar is one of the surviving elements of Kwasi Kwarteng’s planning which Jeremy Hunt will now take forward.

Photo by Juli Kosolapova on Unsplash

Making Tax Digital: avoiding VAT penalties

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From 1 November 2022, VAT-registered businesses that do not yet comply with the Making Tax Digital (MTD) requirements will face penalties. Businesses should also be aware of the new VAT penalty regime being introduced from 1 January 2023.

Although VAT-registered business should already be submitting their VAT returns using MTD compatible software, they have until now been able to continue using their VAT online account without incurring a penalty. However, for those businesses filing their VAT returns monthly or quarterly, this option will no longer be available, making it impossible to file other than by using MTD software.

HMRC has said that a business filing annual VAT returns can continue to use their VAT online account until 15 May 2023.

Around 10% of businesses filing returns using the correct MTD software have not yet signed up for MTD with HMRC but will need to do so to avoid a penalty.

Penalties

The maximum penalty for filing a VAT return using the incorrect method is £400, but only £100 if a business’s turnover is below £100,000.

Any business that is not signed up for MTD will also be at risk of incurring penalties under the new regime applicable for VAT return periods beginning on or after 1 January 2023:

  • Interest, currently set at 4.75%, will be charged from the due date.
  • Late payment penalties will kick in, initially at 2% of the outstanding VAT, once payment is more than 15 days late.
  • Late submission penalties will be charged under a points-based system, with an initial £200 penalty charged if four quarterly returns are late.

Having a reasonable excuse might provide a potential escape route, but failure to use MTD software is hardly likely to count.

HMRC’s guidance on how to avoid penalties for MTD for VAT can be found here.

Photo by Artyom Kabajev on Unsplash

The rise of mini umbrella company fraud

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The rise of mini umbrella company fraud continues to concern HRMC which has recently updated its guidance for businesses that either place or use temporary labour. Mini umbrella companies can be used to abuse the VAT flat rate scheme and the national insurance contribution (NIC) employment allowance.

The VAT flat rate scheme can only be used if a business’s turnover is no more than £150,000, and the NIC employment allowance covers the first £5,000 of employer NIC liability each tax year.

Fraud

Mini umbrella company fraud is where multiple limited companies are created, with only a small number of temporary workers employed by each one.

Businesses should be aware of the potential dangers in their labour supply chain – apart from the impact on reputation, the business’s workers may end up receiving less than they are entitled to.

Workers are often unaware of the arrangements, may not even know who their employer is, and might be regularly moved around between different mini umbrella companies. The use of the mini umbrella company model can mean the loss of some employment rights.

Warning signs

Mini umbrella companies will normally be low down in the supply chain, so it can be challenging to spot them. Warning signs include:

  • Unusual company names: The companies are often set up around the same time and given a similar or unusual name.
  • Unrelated business activity: The business activity listed at Companies House may not relate to the services provided by the worker.
  • Foreign national directors: Foreign nationals – who have no previous experience in the UK labour supply industry – are often listed as directors.
  • Movement of workers: Employees are moved frequently between different mini umbrella companies.
  • Short-lived businesses: Mini umbrella companies typically have a relatively short lifespan – often less than 18 months – before being dissolved by Companies House for not meeting filing obligations.

HMRC’s updated guidance on mini umbrella company fraud can be found here.

Photo by J W on Unsplash