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HMRC and Time to Pay Arrangements: What You Need to Know

Written by admin on . Posted in Bankruptcy, Company Insolvency, Director Disqualification, Insolvency. No Comments on HMRC and Time to Pay Arrangements: What You Need to Know

HMRC and Time to Pay Arrangements: What You Need to Know

When facing financial difficulties, paying taxes on time can be a challenge for individuals, partnerships, and companies alike. On a discretionary basis, His Majesty’s Revenue and Customs (HMRC) may be willing to offer a  Time to Pay Arrangement (TTP); a flexible solution that allows taxpayers to spread the cost of their tax debts over an extended period. These arrangements are typically agreed upon if HMRC is satisfied that the taxpayer is genuinely unable to pay the full amount immediately but can settle the debt in instalments.

Why Time to Pay Arrangements Are Useful

A TTP agreement helps alleviate the immediate pressure of a tax bill and avoids severe enforcement actions like penalties or interest charges, which could further strain finances. Whether it’s personal income tax, VAT, PAYE, or Corporation Tax, these arrangements offer breathing space for managing cash flow while staying compliant with your tax obligations. HMRC generally expects businesses or individuals to proactively engage with them before defaulting, and they usually respond positively to reasonable requests for payment plans.

Pitfalls of Not Keeping to the Agreement

Failing to adhere to the terms of a TTP arrangement can have serious consequences. If payments are missed, or HMRC believes the business is no longer able to meet the terms, the arrangement can be terminated. HMRC will then escalate recovery measures, which may include legal proceedings.

HMRC’s Escalation Procedures

Once a taxpayer defaults, HMRC will typically send reminders, followed by more formal actions if the debt remains unpaid. This can include:

  • Issuing a statutory demand: A formal request for payment within 21 days.
  • Commencing legal proceedings: HMRC may seek a court judgment for the debt, which could lead to seizure of assets or garnishing of income.
  • Winding up petitions: For companies, failure to resolve tax debts may result in HMRC applying to the court to wind up the business, forcing it into liquidation.

Avoiding Legal Action

It’s crucial to negotiate with HMRC if you foresee any problems with adhering to your TTP agreement. Having professional assistance ensures you make a reasonable case to HMRC and avoid unnecessary legal complications.

Whether you’re an individual, partnership, or limited company, we can help with finding a resolution to your tax debt issues and assist with negotiating a Time to Pay Arrangement with HMRC. For expert advice and assistance, contact Femi Ogunshakin on 07867 795 439 or via email at either femi@femiogunshakin.com or femi.ogunshakin@nexa.law

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EPC upgrade work

Written by admin on . Posted in Landlord, Leasehold, Property. No Comments on EPC upgrade work

Rental property has been set a government target to meet an energy performance certificate (EPC) rating of C by 2030. Although new funding in support of this initiative has been announced, the grants will not help all landlords.

Around a third of rental properties were built before 1919, many with solid walls. Such property will be particularly difficult to bring up to an EPC C rating. From 2030, it will not be possible to legally rent out a property without such a rating.

Grant conditions

From 1 April 2025, a grant of up to £30,000 will be available for a landlord to improve their first rental property. This funding will be capped at £15,000 for energy performance upgrades and £15,000 for low carbon heating:

  • For second and subsequent properties, the overall grant will be capped at £15,000, with the landlord having to contribute a corresponding amount (or more).
  • If a property is situated within an eligible postcode area, it will automatically qualify for a grant. Around half of England’s postcode areas qualify, selected on deprivation factors.
  • Other properties will qualify if rented to tenants who receive certain means-tested benefits (such as universal credit or housing benefit), or the tenants’ annual gross income is less than £36,000.

There is no limit on the number of properties for which a landlord can claim grants, but the overall maximum funding per landlord will be £315,000.

Properties will only qualify for a grant if they have an EPC rating between D and G. After upgrading, a property should reach a C rating wherever possible.

Upgrades

Upgrades include:

  • Low carbon heating: Clean heat measures such as heat pumps or high retention storage heaters. Older properties may, however, be unsuited to heat pumps, and the current method of calculating EPCs could result in a lower rating if a heat pump is installed.
  • Energy performance upgrades: Measures such as double/triple glazing, insulation, draughtproofing, solar panels and smart heating controls.

A detailed explanation of the available grants can be found here.

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Double hit for employers

Written by admin on . Posted in Employment Tax, National Insurance Contributions, National Living Wage, National Minimum Wage. No Comments on Double hit for employers

The October Budget was not particularly kind to employers, with the cost of employer national insurance contributions (NICs) going up substantially from April 2025, combined with inflation-busting increases to the National Living/Minimum Wage.

Employer NICs

From 6 April 2025, the rate of employer NICs will increase from 13.8% to 15%, and the starting annual threshold will be lower at £5,000 (it is currently £9,100). For example, for someone employed on £50,000 per annum, the employer NIC cost will be just over £1,100 higher for 2025/26:

  • The increased 15% rate will also hit employers if they provide taxable benefits, such as medical cover, to employees.
  • The £5,000 threshold will stay in place until 5 April 2028. The threshold reduction will have a disproportionate impact on employers with a large number of low earners.

On the plus side – especially for smaller employers – the employment allowance is being increased from £5,000 to £10,500. Currently, this allowance is not available where employer NICs were £100,000 or more in the previous tax year. This restriction will be removed.

Although four full-time workers on the National Living Wage can be employed without any NIC cost for the employer, the changes are likely to see employers being increasingly careful with their recruitment policies.

National Minimum/Living Wage

Minimum wage rates will see substantial increases from 1 April 2025, with younger workers and apprentices benefiting the most:

  • For those aged over 21 and over, the hourly rate will go up by 6.7% to £12.21.
  • For 18- to 20-year-olds, there is a 16.3% increase to £10.00.
  • For apprentices and those under 18, the increase to £7.55 represents an 18% hike.

This follows similarly high increases in April 2024. Employees will welcome the uplift, but many employers will struggle with the additional cost; especially those in the hospitality sector. For full-time employees aged 21 and over, the increase is worth £1,400 a year. For 18- to 20-year-olds, the annual benefit is potentially worth over £2,500.

The rates of National Minimum/Living Wage can be found here.

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The Autumn Budget – a brave new tax world

Written by admin on . Posted in Budget, Capital Gains Tax, Corporation Tax, Income Tax, Inheritance Tax, National Insurance Contributions. No Comments on The Autumn Budget – a brave new tax world

Chancellor Rachel Reeves’ first Budget was a significant one in all senses.

“…this Budget delivers a large, sustained increase in spending, taxation, and borrowing.”

So said the Office for Budget Responsibility (OBR) in the first paragraph of its overview of the Autumn Budget. The numbers are indeed large:

  • spending is up by almost £70 billion a year over the next five years;
  • taxation will rise by £36 billion a year; and
  • borrowing will still be above £70 billion a year in 2029/30.

The Chancellor’s tax-raising opportunities were constrained by the Labour manifesto pledges to hold the rates of income tax, VAT, corporation tax and national insurance contributions (NICs) – only for employees, although other interpretations are available. The result was that other taxes had to carry the burden of providing extra funds for the Treasury:

  • Over half the additional revenue came from changes to employer’s NICs from 2025/26. These saw the class 1 employer rate rise from 13.8% to 15.0%, and the starting point for payments fall from £9,100 of annual earnings to £5,000. The impact of this was mitigated slightly by a £5,500 increase to £10,500 in the employment allowance – effectively an employer NIC credit.
  • The main capital gains tax rates have increased from 10% to 18% (for non-taxpayers and basic rate taxpayers) and from 20% to 24% (for higher and additional rate taxpayers). The rate for business assets disposal relief will rise from 10% to 14% in 2025/26 and then 18% in the following tax year, with the maximum amount of lifetime relievable gain staying at £1 million.
  • Inheritance tax (IHT) relief for businesses and agricultural property will be cut back from April 2026, with the relief for qualifying shares listed on the Alternative Investment Market halved to 50%.
  • Death benefits from pensions will be brought into IHT from 2027/28, although there were none of the other tax changes that had been rumoured in the weeks before the Budget. Notably full income tax relief on contributions remains and employer contributions continue to be free of NICs.

If you could be affected by any of these changes (or further changes not mentioned in this update), make sure that you seek advice. The sooner you are prepared for this new, higher tax environment, the better.

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First aid for ailing businesses: let us help you!

Written by admin on . Posted in Bankruptcy, Insolvency, Winding Up Petitions. No Comments on First aid for ailing businesses: let us help you!

Sadly, no matter where we are in the economic cycle, there are businesses which find themselves in distress.

Given higher interest rates, increasing costs all round, not to mention the ever-increasing tax burden, it’s not surprising that the insolvency rate for businesses is also going up.

Owners, directors and investors may be worried about the financial health of their businesses and be considering their options.

Sharing our knowledge

Over the next few weeks, I will be publishing a series of short, practical blogs on insolvency related topics, including the effects of debt/insolvency on companies (and/or individuals) struggling to meet their financial commitments.

Read our blogs

Among other useful articles, you can read my blogs on what a winding-up petition is (and how to avoid one) and why a validation order might save your business (by unfreezing bank accounts and keeping essential parts of the business running) on my website.

Book your free consultation

I’m currently offering a free 30-minute consultation to help you explore your options and protect your business. The earlier you seek professional advice for your business, the more options you have.

So don’t delay, reach out to me today by calling 07867 795 439 or emailing me at either: femi@femiogunshakin.com or femi.ogunshakin@nexa.law 

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Making way for E-invoicing

Written by admin on . Posted in VAT. No Comments on Making way for E-invoicing

The government wants businesses to make more use of electronic invoicing to combat VAT fraud and enhance tax collection.

E-invoicing is where invoices are created, sent, received and processed in a digital format, with the e-invoice containing exactly the same information as a traditional invoice.

With more than half of the Organisation for Economic Co-operation and Development (OECD) countries having mandated e-invoicing, the UK is seriously lagging and even still allows paper invoices. The government plans to carry out a consultation, the details of which are scarce.

Benefits of e-invoicing

Even though UK mandation almost certainly remains some way off, you will probably need to use e-invoicing if your business operates internationally. Even if this is not the case, there are still benefits to early adoption:

  • With a standardised and structured format, e-invoices can be processed faster and with fewer errors. Invoices sent to a buyer can be tracked in real time, and the number of invoice rejections and disputes considerably reduced.
  • Duplicate invoices are avoided, and fraudulent activity will be largely prevented since it will not be possible to intercept invoices to change bank details.
  • Invoices, both sent and received, will be processed immediately, so cashflow forecasting will be improved and working capital requirements better managed. Faster payment of invoices received will ensure prompt payment discounts are taken advantage of.

Apart from the more obvious benefits, the relationship between buyer and supplier should improve, leading to higher customer retention and satisfaction.

Implementation of e-invoicing

Based on what has happened in other countries that have adopted e-invoicing, the implementation process can take at least three years. The usual approach is for a phased roll-out, with larger businesses required to comply first.

With mandatory e-invoicing likely for the UK, businesses should start preparing as early as possible. Rather than developing their own e-invoicing solution, many businesses will prefer to work with an e-invoicing service provider. Take care in the selection process to ensure that future e-business needs will be fully met.

Guidance on selecting the right e-invoicing service provider can be found here.

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How to raise £10,000,000,000

Written by admin on . Posted in Budget, Pensions, Retirement. No Comments on How to raise £10,000,000,000

With a ‘black hole’ of £22 billion to fill, there are plenty of groups giving Rachel Reeves advice.

The Fabian Society published a report on taxation on August Bank Holiday Monday. While their main audience is in Scotland, which has its summer bank holiday at the start of August rather than at the end, the timing was unusual. Nevertheless, that was the date chosen by the Fabian Society to release Expensive and Unequal. The case for reforming pension tax (2024).

The Fabian Society is one of the Labour party’s original founders and remains an affiliate to this day. Like several other left-leaning think tanks, post-election what it says has suddenly started to attract more attention. This is especially true on the issue of tax ahead of the Budget on 30 October.

The Society’s pension proposals are wide-ranging, but all of them have appeared before in one form or another. Taken together, the Society suggests that they could raise £10 billion a year. To put that in context, the controversial decision to means-test Winter Fuel Payments will save about £1.5 billion a year in 2025/26.

The most significant element of the proposals is the introduction of a flat rate tax credit to replace income tax relief on pension contributions. This idea was once allegedly considered by George Osborne, the former Conservative chancellor. For example:

  • At present, a higher-rate taxpayer (42% in Scotland, 40% elsewhere in the UK) pays £60 (£58 in Scotland) to add £100 to their pension.
  • Alternatively, the Fabian Society suggests a personal contribution of £75 from net income would receive a £25 government tax credit, bringing the total to £100. This is similar to a Lifetime Individual Savings Account.

Such a reform would benefit most taxpayers, who would see the net cost of their pension contributions drop. It would also reduce the tax benefit given to higher and additional rate taxpayers, who according to the most recent HMRC calculations (for 2022/23) receive just over half of all pension contribution tax relief.

Most of the Fabian Society’s tax-raising ideas were likely already under consideration by the Treasury. Regardless of whether they are included in the Budget on 30 October, they are worth noting if you are contemplating topping up your pension.

Find out more about the Fabian Society’s report here.

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Capital gains tax receipts

Written by admin on . Posted in Budget, Capital Gains Tax. No Comments on Capital gains tax receipts

Raising tax rates is a traditional government strategy to increase tax receipts for HMRC, but this may not be the case for capital gains tax (CGT). This is because taxpayers generally have more control over when gains are realised.

The upcoming Budget at the end of October is widely expected to see a hike in CGT rates. However, recently published data from HMRC suggests that the 4% higher rate reduction from 6 April 2024 (28% down to 24%) on residential property disposals may have helped to increase tax receipts as landlords could be taking a good opportunity to sell up.

For the five months to 31 August 2024, CGT receipts increased by nearly 10% compared to the year before.

Take care to plan ahead

Compared to landlords, those with an investment portfolio have more opportunity for CGT planning since they have considerable flexibility over the timing of disposals. However, there is now somewhat less scope for basic CGT planning with the annual exempt amount cut to just £3,000:

  • With an investment portfolio, disposals can be spread over several years to make use of multiple annual exempt amounts and basic rate tax bands. Couples can also make use of the annual exempt amounts and basic rate tax bands of a spouse or civil partner. Such strategies should be used with care, however, as this type of planning will unravel if CGT rates increase in the future.
  • Making personal pension contributions in the same year as a disposal will increase the basic rate tax band.
  • More sophisticated investors might consider investing in a seed enterprise investment scheme. With 50% income tax relief and CGT exemption on 50% of a reinvested gain, a landlord could currently benefit from total tax relief of 64%. This relief will increase in line with any future uplift of CGT rates. These investments are high risk and advice should be taken before engaging in them.

Longer term, those with a large investment portfolio might be able to avoid any tax liability if they retire overseas. This option does not work for landlords because UK property remains subject to CGT regardless of the owner’s residence status.

HMRC’s guide to capital gains tax (what you pay it on, rates and allowances) can be found here.

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Unclaimed child trust funds

Written by admin on . Posted in High Income Child Benefit Charge, Wealth. No Comments on Unclaimed child trust funds

With around 670,000 child trust fund (CTF) accounts sitting unclaimed by Generation Z adults aged between 18 and 22, HMRC is concerned.

CTFs were opened for every child born between 1 September 2002 and 2 January 2011, with each account started off with a £250 voucher (£500 for low-income families). A similar amount was added for any child who turned seven by 31 July 2010. That means all CTFs hold some money; in fact, each unclaimed account has an average of £2,200.

Given that nearly 30% of CTFs were set up without any parental involvement, it’s no surprise so many account holders are unaware of a CTF’s existence.

Tracing a CTF

A CTF will be held by a bank, building society or other savings provider. The number of providers has shrunk, with some merging and others exiting the market, meaning many CTFs will now have a different provider to when the account was set up. There are two free tracing options for anyone who does not know their CFT provider:

  • HMRC’s tool; or
  • The approved tool from The Share Foundation.

Only a few details are required for either tool, although anyone searching for a CTF provider will need the account holder’s National Insurance number and date of birth.

HMRC are advising account holders to avoid the use of third-party agents who offer to search for missing CTFs. They will always charge for this service, even as much as 25% of the value of the account.

Fund options

Funds remain in the CTF account until the holder reaches 18, with no one else having access. At age 18, the account holder can either:

  • Withdraw the funds; or
  • Transfer the money to an individual savings account (ISA).

If the funds are not immediately required, there are currently some attractive interest rates on offer for two- or three-year fixed rate cash ISAs. ISA charges will normally be lower than those for a CTF, with higher rates of interest available. HMRC’s guide to child trust funds can be found here.

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Tips and troncs – what does it mean for your business?

Written by admin on . Posted in Employment Tax, National Insurance Contributions, PAYE. No Comments on Tips and troncs – what does it mean for your business?

Since July, it has been illegal for employers to withhold tips from staff. The payment of tips will probably result in a national insurance contribution (NIC) cost for both employer and employees, but this extra cost can be circumvented if a tronc arrangement is used to distribute tips.

The new legislation applies mainly to those operating in the hospitality sector, and covers all tips, gratuities and service charges. It also brings the law into line with modern payment practices as it covers tips left via card payment.

NICs

Tips paid to employees are subject to both income tax and employee NICs. The NIC cost is at a rate of 8% where tips – when added to normal earnings – fall between £1,048 and £4,189 monthly. Employers pay NICs once a monthly threshold of £758 is reached, although their liability is normally reduced by the annual £5,000 employment allowance.

For example, if a restaurant pays out £25,000 worth of tips, the employer will probably be facing an additional NIC cost of nearly £3,500. The cost for the staff could be up to £2,000. This is where a tronc arrangement comes into play.

Troncs

A tronc is an arrangement used to distribute tips. It is run by a troncmaster.

Provided it is the troncmaster who decides how tips are to be distributed among staff, there are no employee or employer NICs on amounts paid out. It is still possible, however, for the tips to be included on the employer’s payroll.

The troncmaster will typically be a member of staff, although larger businesses might prefer to use the services of a specialist provider. There is no problem if the employer makes the decision on who to appoint as troncmaster; what is important is that the employer plays no part, directly or indirectly, in the allocation of tips.

HMRC’s detailed guidance on tips, gratuities, service charges and troncs can be found here.

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