Companies without a digital invoice processing system in place are leaving themselves open to invoice fraud. Over the past year, nearly a third of businesses have been targeted.

Fake invoices often appear to be genuine and are easily processed by employees if the amount involved is below a company’s payment threshold.

Types of invoice fraud

Common types of invoice fraud include:

• a false invoice for non-existent goods or services;
• duplicate invoices; or
• alteration of existing invoices, e.g. bank details are changed which could indicate email hacking has taken place.

Fake invoices can be harder to identify if they appear to be from a business that your company has previously dealt with.

The threat of invoice fraud is not always external. Companies also need to be wary of internal threats, which can be much more difficult to identify. Typically, a senior employee will swap the bank details on an invoice to divert payment to their own account. In a recent case involving a member of staff, a public limited company lost £660,000 due to 29 fake invoices in one month.

Invoice fraud is not just a case of suffering financially. It can also harm business relationships, brand reputation and impact staff morale, especially among the team that fell for the fraud.

Prevention

Updating to a digital processing system will mean that invoices are automatically compared with orders and payment information, preventing most types of fraud:

• If all suppliers are required to use your digital system, potentially fraudulent traders are prevented from joining the trading network by carefully managing the onboarding process. There is then little scope for fake invoices.
• You will also find that the benefits of digital invoicing extend well beyond fraud prevention. For example, invoice due dates will not be missed, the number of errors will be reduced and cash flow forecasting improved.

Updating to a digital system also means supplier invoices will be conveniently stored for easy retrieval in the future.

The British Business Bank’s guide to how to avoid invoice fraud can be found here.

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HMRC is warning iPhone users about a new wave of scam text messages claiming to be about tax refunds. Unlike most spam texts, these reportedly cannot be blocked by iPhones or reported to the usual Ofcom anti-spam number.

The scam messages are targeted solely at the owners of Apple devices and claim that the recipient is entitled to a tax refund. Scam messages can also be sent through an email, other messaging services or social media. QR codes are also used. Unwary users will end up being directed to a fake link.

HMRC has said that 79,000 fake tax refund scams were reported in the year to January 2024, which is nearly 40% up on the preceding year. Real figures are almost certainly much higher.

Spotting a scam message

What is the advice to worried iPhone users who do not want to be scammed? HMRC point out that they will never contact taxpayers by text message or email in relation to a tax refund. Instead, the taxpayer would receive an official letter. Nor will HMRC ask for personal details or payment information to be disclosed in a text or email.

While scammers may be able to find out your name – for example, if your email address is PeterSmith@gmail.com – they should not have access to your unique tax reference (UTR) or NI number. Warning bells should be ringing if a text or email includes these details.

Tax refund scams

Although the prime time for tax refund scams – February – has passed, taxpayers still need to be on alert the year round:

• A scam message will typically link to a fake HMRC website. These fake websites will have been copied from the genuine HMRC website, so can be quite convincing.
• The taxpayer will then be asked to enter debit or credit card details.

Tax refund scams are designed to access a taxpayer’s bank account, or to obtain personal details which can then be sold on the web.

HMRC’s guidance on identifying tax scam phone calls, emails and text messages can be found here.

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The introduction of a £500 income exemption from 6 April 2024 will impact many trusts. It comes with various complications, especially as income within the £500 exemption will still be taxable in the hands of beneficiaries.

The exemption is on an all-or-nothing basis. A trust with an income of £501 will find the whole amount is taxable; not just the excess over £500. A further complication is that, in some circumstances, the £500 exemption is shared between trusts created by the same person.

When the £500 exemption was first proposed, it appeared relatively generous for savings income given the bank rate was 0.75%. However, it does not appear as beneficial now that the current bank rate sits at 5.25%.

Interest in possession (IIP) trusts

IIP trusts pay income tax at 20%, except for dividend income which is taxed at 8.75%. The £500 exemption will mean that smaller IIP trusts no longer have to file returns or pay tax, but this income will now be received gross by beneficiaries without any associated tax credit.

This is good news for non-tax paying beneficiaries as they will no longer need to make repayment claims. However, basic rate taxpayers will now have to account for tax on trust income, a liability previously met by the tax credit.

There will be no change for either the trust or the beneficiaries where trust income exceeds £500.

Discretionary trusts

Discretionary trusts pay tax at 45%, except for dividend income which is at 39.35% – the same rates paid by an additional rate individual taxpayer. Previously, there was a £1,000 standard rate band on which lower rates applied.

The £500 income exemption has replaced the standard rate band.

The complication for discretionary trusts is that any distributions to beneficiaries carry a 45% tax credit, even if the exemption applies. Therefore, the trust will still have to pay sufficient tax to cover the tax credit, which can mean complex calculations.

The beneficiaries of discretionary trusts will not see any change to their tax treatment given that trust income will continue to have a 45% tax credit attached.

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There are many benefits to moving to Scotland for work or retirement, especially the stunning scenery. However, anyone contemplating a move should consider the tax cost of relocating from elsewhere in the UK.

The Scottish Parliament has set income tax rates and bands since April 2017, with the result that most Scottish taxpayers have generally faced a higher tax burden than other UK taxpayers. This cost is set to get even wider from April 2024.

Tax rates

The main difference between Scottish tax rates and those applicable to the rest of the UK is going to be Scotland’s new advanced rate of 45% which, from April 2024, will apply on income between £75,000 and £125,140. This is 5% higher than is payable on equivalent income in other parts of the UK.

Given that the personal allowance is tapered away where income is between £100,000 and £125,140, this will mean a marginal rate of 67.5% on this band of income: it is 60% in other parts of the UK. Once income hits £125,140, the Scottish top rate is 48% compared to the rest of the UK’s 45% additional rate.

Comparison

The Scottish tax system generally hits harder at the higher end of the pay scale. Someone moving to Scotland after April with an income of £40,000 will see their annual tax bill go up by just over £110. However, it is nearly £3,350 more with an income of £100,000, and almost £6,000 where income is £150,000.

At the lower end of the scale, a pensioner moving to Scotland with an income of, say, £25,000, will actually see a modest reduction in their tax liability.

Scottish taxpayers

Having one home in Scotland and living there will make you a Scottish taxpayer, but also if:

• You have two or more homes – whether owned, rented or lived in for free – and the main home is in Scotland; or
• You spend more time in Scotland compared to the rest of the UK.

A person’s main home is usually where the majority of time is spent, although this is not always the case.

The government has published a guide to income tax in Scotland on its website.

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Companies House is introducing wide-ranging reforms – subject to new legislation being in place – from 4 March 2024. Directors need to get ready for the first tranche of measures.

The reforms are being introduced with the aim of clamping down on financial crime and improving corporate transparency and form part of the recently enacted Economic Crime and Corporate Transparency (ECCT) Act. The changes will particularly impact when incorporating a new company, but existing companies are also affected.

Registered office

The use of a PO box as a registered office will no longer be permitted. A registered office must be an address where the receipt of documents can be recorded by an acknowledgement of delivery. This means that a third-party agent’s address should still be suitable.

Directors should make sure that any existing company using a PO box as a registered address has made a change by 4 March 2024. This can be done online at the Companies House website.

Any company without an appropriate registered office address risks being struck off the Companies House register.

Email address

When a company is incorporated from 4 March 2024, it will be a requirement to provide a registered email address for Companies House. The same email address can be used for more than one company:

• Existing companies will need to provide an email address when they next file a confirmation statement.
• Companies House will use the email address for communications about the company.
• A company’s email address will not be published on the public register.

It will be possible to update an email address in the same way as a company’s registered office address online at the Companies House website.

Lawful purpose

In future, the subscribers (shareholders) will need to confirm they are forming a new company for a lawful purpose.

For existing companies, confirmation statements filed from 4 March 2024 will include a declaration that a company’s future activities will be lawful. Companies House may take action if it receives information that a company is not operating lawfully.

Other changes are in the pipeline, in particular, mandatory identity checks for company officers will be introduced later in 2024. Details of the changes being introduced by The ECCT Act can be found on the government website.

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Changes to individual savings account (ISA) rules coming into effect from 6 April 2024 will make ISAs more user friendly, most notably the move to allow multiple subscriptions of same-type ISAs in a tax year.

Multiple subscriptions

It is currently only possible to pay into just one ISA of each type in a tax year. Multiple subscriptions will mean:

• Cash savers will be able to open new cash ISAs if better deals become available. Greater flexibility will mean some funds could go into a fixed-rate deal, with a reserve held in an easy-access cash ISA.
• Investors will be able to spread their investments over several different providers. For example, one stocks and shares ISA might be used for longer-term investments, with another – offering low dealing costs – used where regular trades are made.

For 2024/25, the annual £20,000 ISA contribution limit will not see any change, with the £9,000 Junior ISA and £4,000 Lifetime ISA limits also frozen.

Other changes

Although details are still to be announced, the government’s intention is that in future it will be possible to hold fractional share contracts within a stocks and shares ISA. Under existing rules, at least one full share must be held, even though the shares of some US tech companies can cost hundreds.

Other changes to be introduced from April 2024 include:

• Partial transfers between ISA providers will be possible during the tax year. For example, if £15,000 has been paid into a cash ISA since 6 April, £5,000 could be moved to a different provider. Currently, the whole £15,000 would have to be moved.
• The minimum account-opening age for cash ISAs is to be harmonised at 18. It will therefore no longer be possible for 16- and 17-year-olds to open a cash ISA – just a Junior cash ISA where the investment limit is somewhat lower.

Any 16- and 17-year-olds without a cash ISA might want to open one while they still can ­– by 5 April 2024 at the latest.

Although not yet updated to the 2024/25 tax year, HMRC’s basic guide to ISAs can be found here.

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I am reaching out to my LinkedIn connection for some direct networking – I have seen an increase in the volume of insolvency work (rescissions, WUP, validation orders) coming through my pipeline in recent months and whilst this is great, it is placing some pressure on my sole practice within @Nexa and so for this reason, I am looking to talk to legal practitioners (solicitor, Paralegal, Legal Executive) who may or may not be local to my base in Merseyside – and is familiar with LEAP – to work with me on my current cases.

I should add that I am not looking to employ anyone so I would only be willing to chat to individuals who work for themselves whether that be via a corporate vehicle, partnership or old fashioned self-employment. If this is you, or if any of my connections know anyone who might be interested in chatting about what’s on offer, then please feel free to share this missive.

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The administration of lasting powers of attorney (LPA) is on its way to becoming fully online.

In an ideal world, you should have an LPA (or its Scottish or Northern Ireland equivalent) sitting beside your will. The absence of either can complicate matters considerably for your family. Without a will, the distribution of your estate defaults to the laws of intestacy, which may not match your (or your family’s) wishes. Similarly, if illness means that you cannot manage your own affairs, then in the absence of an appropriate LPA, the Court of Protection will be your family’s first port of call to make decisions on your behalf. Going to the Court can be an expensive and slow process.

In England and Wales, the LPA process is dealt with by the Office of the Public Guardian (OPG). Over the years, technology has gradually crept into what has traditionally been a heavily paper-based system. You can now prepare an LPA for property and financial affairs and/or health and welfare matters online (https://www.lastingpowerofattorney.service.gov.uk/lpa/type). These LPAs are basic, government-drafted documents, but you may prefer to use a solicitor to include specific provisions that the standard issue version does not contain.

However your LPA is prepared, it will need to be registered before it can be used. While in theory registration can be delayed until your attorney needs to act on your behalf, in practice it is best to register your LPA as soon as it has been completed. That involves signing the document and sending the paperwork to the OPG (with a fee of £82 per LPA). The OPG says that it takes “up to 20 weeks” to register an LPA, provided there are no mistakes in the application.

The Powers of Attorney Act 2023, which received Royal Assent in September, paves the way for LPA registration to be completed online (as is currently possible in Scotland with powers of attorney). The paper option will also remain available.

If you do not have an LPA, then do not let the passing of the Act be an excuse to carry on without one until the technology is in place. Even the Chief Executive of the OPG says “…it’s important to recognise that we’ve still got a long way to go.” You – and your family – could need an LPA before that journey is over.

Footnote: In October, the Law Commission launched a consultation on allowing wills in England and Wales to be made and stored in electronic form. More information can be found here.

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The government’s backtracking over the introduction of energy performance targets for property let out in England and Wales is facing criticism, but it will be welcome news for landlords with older properties deemed too expensive or difficult to upgrade.

Let property must currently have an energy performance certificate (EPC) rated E or above. Without this, the property cannot be legally let regardless of whether the tenancy is an existing one, a renewal or a new let. The government’s intention was to raise the EPC requirement to C or above by 2028.

The penalty for not having a valid EPC is £5,000. Under the now scrapped proposals, the penalty was going to be £30,000.

The cost

The cost of moving from a D or E rating to a C would typically be in the region of £10,000 to £20,000. There were reports that the government would have covered anything over £10,000, but that would still leave a significant burden for many landlords. As capital expenditure, most upgrades would not even have qualified for tax relief against rental income.

• Raising energy efficiency to the required standard might have required improving insulation, installing double glazing or replacing old gas boilers.
• However, it would have been very difficult, if not impossible, to bring some older properties up to an EPC C rating.

One concern considered by the government was that costs would have been passed on to tenants by way of higher rents.

The future

Although new EPC rules are off the agenda for now, there is every chance this could change if Labour wins the next election. Regardless of future changes, however, landlords should be aware that a good EPC rating makes a property more attractive to tenants given current high energy costs.

For Scottish landlords, it looks as if the Scottish Government still intends to go ahead with a move to an EPC C rating by 2028.

A useful guide to energy performance certificates can be found here.

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Draft legislation has been published that will, from 6 April 2024, restrict the geographical scope of agricultural relief and woodlands relief to property in the UK.

Currently, property can qualify for either agricultural relief or woodlands relief if it is situated in the European Economic Area (EEA). With the UK having left the EU, the change will bring the inheritance tax treatment of property located in the EEA in line with the treatment of property located in the rest of the world.

The change will also see property located in the Isle of Man and the Channel Islands ceasing to qualify for agricultural relief from 6 April 2024, bringing the treatment in line with that for woodlands relief.

Inheritance tax relief

• Agricultural relief: This effectively exempts most land or pasture used to grow crops or to rear animals from inheritance tax. Relief applies both for lifetime gifts and on death.
• Woodlands relief: Not as generous as agricultural relief, given it only covers growing timber, not the land itself, and inheritance tax is just deferred until timber is sold.
• Business relief: There are no indications that business relief will be likewise restricted, so it may be possible to restructure agricultural and woodland interests affected by the change to instead qualify for this relief. Another option will be to gift agricultural property while relief is still available. If such planning is not possible, individuals will need to review their future inheritance tax exposure.

Environmental land management

The government is also consulting on how agricultural relief might be extended to certain types of environmental land management. The current rules are sometimes perceived as a barrier to landowners participating in environmental schemes due to concern that tax relief could be lost. Although business relief will often be available as an alternative, this relief is not available in all circumstances.

HMRC’s detailed guidance on agricultural relief can be found here.

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