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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

Written by admin on . Posted in Budget. No Comments on 17 October 2022: ‘The Growth Plan’ – a further update

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

Written by admin on . Posted in BREXIT, Budget, Tax. No Comments on UK Prime Minister’s Statement – 14 October 2022

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

Written by admin on . Posted in Making Tax Digital, MTD, Tax, VAT. No Comments on Making Tax Digital: avoiding VAT penalties

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

Written by admin on . Posted in Employment Tax, Income Tax, National Insurance Contributions, PAYE, Tax. No Comments on The rise of mini umbrella company fraud

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

Six-fold increase on late payment interest rates

Written by admin on . Posted in Income Tax, self-assessment, Tax. No Comments on Six-fold increase on late payment interest rates

HMRC late payment interest rates have now been raised six times during 2022 – from 2.6% at the start of the year to a current rate of 4.25%. However, at least there’s some good news, with an uplift to the tax repayment rate.

The charge for late payment is set at base plus 2.5%. So, with the Bank of England base rate going up from 1.25% to 1.75%, HMRC’s late payment rate has correspondingly gone up from 3.75% to 4.25%. The increased rate applies from 23 August and covers almost all taxes and duties – the exception being quarterly instalment payments of corporation tax, for which the rate has risen from 2.25% to 2.75% since 15 August.

Unfortunately, current predictions have the base rate peaking at 2.25% or 2.5% by the end of 2022, so further late payment interest rate hikes should be expected.

Get up to date

The latest late payment rate increase will hit taxpayers who are not up to date with their tax payments. Many will be struggling to pay outstanding taxes -–particularly the latest self-assessment payment on account due on 31 July – against the backdrop of rising living costs.

  • Banks and building societies have generally not passed on the latest 0.5% base rate increase to savers, so it makes sense to use savings to repay, or at least reduce, tax debt.
  • For a tax liability of, say, £15,000, the annual late payment interest cost has already risen by nearly £250 to almost £650 during 2022.


Repayment rate

The one piece of good news is that the repayment rate on overpaid tax has gone up by 0.25% to 0.75%, being the first increase in over a decade.

However, the still meagre repayment rate means there is little incentive for HMRC to make prompt repayments, with taxpayers often encountering significant delays.

HMRC interest rates for late and early payment can be found here.

Photo by Markus Spiske on Unsplash

Getting in touch: HMRC’s new email facility

Written by admin on . Posted in PAYE, Stamp Duty, Tax, VAT, Wills & Probate. No Comments on Getting in touch: HMRC’s new email facility

Although there is no general facility to contact HMRC by email, it is slowly moving into the 21st century by providing the option to receive an email response. But of course, this comes with a few conditions.

Dealing with HMRC by post can be a slow process. With resources having been spread more thinly than ever due to the Covid-19 pandemic and Brexit, HMRC has only recently been working its way through the built-up backlog of post.

Scam risks

Scammers can use fake HMRC emails as a way of obtaining personal information, although, with improved scam email detection, they have now largely switched to text messaging. Nevertheless, HMRC points out the risks associated with using email. Their guidance raises various concerns:

  • Emails sent may be intercepted and altered.
  • Attachments could contain a virus or malicious code.

To reduce the risk, HMRC will desensitise information, by, for example, only quoting part of a unique reference number.

Confirmation

Anyone who would like to be contacted by email has to confirm to HMRC in writing by post or email that:

  • They understand and accept the risks of using email;
  • They consent to financial information being sent by email;
  • Attachments can be used; and
  • Junk mail filters are not set to reject and/or automatically delete HMRC emails.

HMRC should also be sent the names and email addresses of all people to be contacted by email, such as business owners, staff and the business’s tax agent.

Confirmation will be held on file by HMRC and will apply to future email correspondence, with the agreement reviewed at regular intervals to make sure there are no changes. The use of email can be cancelled at any time by simply letting HMRC know.

HMRC publish a list of recent emails it has sent out to help people determine if an email is genuine. This list can be found here.

Photo by Brett Jordan on Unsplash

Energy Costs Statement – 8 September 2022

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After a prolonged period of speculation, the new Prime Minister Liz Truss has announced preliminary details of how the government plans to deal with the energy price crisis.

In late May this year, the then Chancellor, Rishi Sunak, announced a range of measures to reduce the impact of the anticipated October 2022 Ofgem utility price cap increase. Mr Sunak’s announcement followed an earlier assistance package revealed in February, ahead of the April 2022 Ofgem price cap increase from £1,277 to £1,971.

Sunak’s measures, which included a flat £400 off all consumers’ bills, were made at a time when the price cap was projected to rise to £2,800 a year for the October 2022 ­­– March 2023 period. Since then:

  • Ofgem has reduced the energy price cap review period from six months to three in an effort to bring more stability to energy markets.

 

  • The regulator has set a price cap for October ­– December 2022 of £3,549, an 80% rise on the current level.

 

  • Projections for the next cap reviews suggested the annual bill could exceed £6,500 by April 2023.

 

The problems created for the government by soaring gas prices are exacerbated by the fact that many businesses renew their fixed term energy contracts (typically for one or two years) in October.

The commercial sector does not benefit from any price cap and stories have emerged of small businesses seeing their utility costs jumping as much as tenfold or even being refused new contracts. Outside the commercial sector, there have been similar issues for schools and hospitals.

The Government plan

In yesterday’s announcement during a House of Commons General Debate on UK Energy Costs, the new Prime Minister announced that:

  • The government is introducing an Energy Price Guarantee (EPG) set at an annual £2,500 for the next two years from 1 October 2022. This will apply on the same basis as the existing Ofgem cap, i.e. a regional based limit on standing and unit charges in England, Wales and Scotland, not on total bills.

 

  • The £400 flat rate payment, spread over six months, announced in May will remain in place. This reduces October – December 2022 bills by £66 a month and January – March 2023 bills by £67 a month. Arguably this means the effective cap is £1,700 through to March and £2,500 thereafter.

 

  • Other assistance announced in May, such as the £300 additional payment for pensioners, remains in place.

 

  • Green levies are temporarily suspended, an adjustment included in the EPG.

 

  • Households using heating oil and LPG will receive discretionary payments.

 

  • The same level of support will be given to households in Northern Ireland.

 

  • The government ‘will also support all business, charities and public sector organisations with their energy costs this winter, offering an equivalent guarantee for six months’. After that period further support will be provided to vulnerable sectors, such as the hospitality sector.

 

Details of the funding for these measures will be announced by the Chancellor in his fiscal statement ‘later this month’, currently expected in the week of 19 September.

For more on the government’s announcements, see:

https://www.gov.uk/government/news/government-announces-energy-price-guarantee-for-families-and-businesses-while-urgently-taking-action-to-reform-broken-energy-market

Source: Ofgem, Cornwall Insights and DBEIS

Further information on different forms of assistance for households can be found at:

https://helpforhouseholds.campaign.gov.uk/

Confused on claiming residence band relief?

Written by admin on . Posted in Inheritance Tax, Lasting Will & Testaments, Wealth, Wills & Probate. No Comments on Confused on claiming residence band relief?

Working through inheritance tax (IHT) requirements come at a difficult time. The provisions of the residence nil rate band (RNRB), which can be passed on between deceased spouses and civil partners, has caused some confusion.

Any unused RNRB from the first death of a spouse or partner can be relieved on the death of the second individual. The claim is based on the value of the RNRB at second death, but some executors are mistakenly using the value at the date of first death.

The RNRB was introduced from 6 April 2017 at £100,000, increasing by £25,000 a year until reaching its current value of £175,000.

The claim for RNRB is made on IHT form IHT436, with the confusion coming from the entry at box 11: the value of the RNRB enhancement at the spouse or civil partner’s date of death. However, the actual claim is based on the value entered at box 14. This should be the value of the RNRB at the date of second death, although it is easy to see why mistakes are being made given the confusing wording used by HMRC.

HMRC does not seem to be picking up the error, so if a mistake has been made a correction will have to be made by writing to the Revenue.

Conditions and transfer

Unlike the normal IHT nil rate band, the RNRB comes with various conditions. It is only available:

  • At death (not against lifetime gifts).
  • Against the value of a home (only one property can qualify).
  • Where the home is inherited by direct descendants (including step, adopted and foster children).

Any unused RNRB can be transferred in the same way as the nil rate band, with a claim required within two years of second death. It doesn’t matter if first death was before the introduction of the RNRB on 6 April 2017.

The unused RNRB of more than one spouse or civil partner can be transferred, but the overall total cannot exceed one full RNRB (£175,000).

Detailed HMRC guidance on working out and applying the RNRB can be found here.

Photo by Joel Moysuh on Unsplash

 

 

 

 

Pension top-ups for lower-paid employees

Written by admin on . Posted in Income Tax, Pensioners, Pensions. No Comments on Pension top-ups for lower-paid employees

Employees who contribute to an occupational pension scheme under a net pay arrangement do not currently benefit from any tax relief if their earnings are below the personal allowance. This anomaly will be rectified from 6 April 2024 when HMRC will start making top-up payments.

A net pay arrangement is where pension contributions are deducted from pay before tax is calculated. The anomaly arises because someone in a similar situation, but making contributions with relief given at source, benefits from 20% relief. The change will mean low earners benefiting from the same tax relief regardless of earnings.

Top-up payments

HMRC’s top-up payments will be introduced from tax year 2024/25 onwards, with the top up not paid until after the end of the tax year. The implementation delay is due to the significant HMRC system changes required.

  • The intention is that HMRC will notify those who are eligible and invite them to provide the necessary details for the top-up to be paid direct to their bank account. The requirement to claim the top-up, however, runs the risk of non-take up.
  • As an example, someone qualifying with savings of £500 into an occupational pension scheme for a tax year should receive a subsequent top-up from HMRC of £500 at 20% = £100. The same rate will apply for Scottish taxpayers.
  • If part of a person’s pension savings already benefits from tax relief due to earnings exceeding the personal allowance, a top-up payment can still be given for the proportion not benefiting.
  • Top-ups will be taxable, although this will not mean any additional income tax for many recipients given their level of earnings.

Although top-ups are only estimated to be an average of just over £50 a year, more than a million employees should benefit – the vast majority of them women.

The government’s policy paper explaining the change can be found here.

Photo by Egor Myznik on Unsplash