The government has announced a new initiative to counter fraudulent activity, particularly in the financial sector.

You might not be surprised to learn that fraud is now the most common crime in England and Wales, although you may not be aware that it accounts for more than 40% of all crime. The growth in fraud has so far not been accompanied by a corresponding increase in prevention measures. At present, less than 1% of police resource is directed towards dealing with fraud.

In May, the Home Secretary announced a new fraud strategy ­– Stopping Scams and Protecting the Public. The Home Office’s plans include:

Stopping abuse of the telecom networks: Many scams start with unsolicited calls and text messages. The government says it will be “making it harder” for criminals to spoof phone numbers, which make their calls appear to be coming from your bank or another trusted source. Under the same heading, the government has launched a consultation on banning SIM farms, devices that can send thousands of fraudulent texts in a matter of seconds.

A ban on cold calling on investment products: Currently, there is a ban on cold calls from personal injury firms and pension providers (unless the consumer has explicitly agreed to be contacted). The government plans to extend this ban to all investment products, with an initial consultation on the mechanics “by summer”. The logic behind this move is that the ban will mean that anyone receiving such a call will know it is unauthorised – assuming they are aware of the law.

More protection for fraud victims: If you are a victim of unauthorised fraud (such as bank card theft), you are entitled by law to be reimbursed by your bank within 48 hours. However, if you fall foul of authorised fraud – for example, by being tricked into transferring money – you are currently not eligible for the same level of protection. The Financial Services and Markets Bill, currently on its way through parliament, will remove this distinction.

These and the many other proposals will inevitably take time to reach the statute book and, as now, will encounter the problem of offshore and ever more creative fraudsters. In the meantime, there is one sound piece of advice – if you receive an unsolicited call from your bank, the police or anyone else, tell them you will call them back on the number you have (e.g. on your bank card). A scammer will do everything to prevent that happening, but a genuine caller will have no such issue.

Find out more about the latest fraud strategy here.

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A recent investigation into Child Trust Funds (CTFs) by the National Audit Office (NAO) has revealed that, disturbingly, nearly £400 million in matured CTFs remain unclaimed.

CTFs were opened for some 6.3 million children born between 1 September 2002 and
2 January 2011 into which the government paid £2 billion.

Unclaimed funds

The first CTFs began maturing from 1 September 2020 onwards as children reached 18. By
5 April 2021, some 175,000 18-year-olds had either withdrawn or reinvested the funds from their matured CFTs, but 145,000 (45%) matured CTFs went unclaimed. A more up-to-date estimate shows the situation improving, but 27% of CTFs maturing at least one year earlier are still unclaimed.

There are various reasons for this:

• 28% of CTFs – 1.7 million accounts – were set up by HMRC when parents did not do so. Without parental involvement, it is no surprise that account holders may be unaware of a CTF’s existence.
• The number of CTF providers has shrunk to 55, compared to 74 in 2011. Some have merged, with others exiting the CTF market. This means many CTFs will now have a different provider to when the account was set up.
• Although HMRC has begun publicising the fact that a child might have a CTF, such as writing to 15-year-olds with their National Insurance number, the NAO is generally unimpressed with HMRC’s performance. Much of HMRC’s statistical data is incomplete, with several active CTF providers not providing annual return data.

Tracing lost accounts

As a result of government contributions, every CTF has between £100 and £500 invested, even if no family contributions have been made. So, it is worthwhile tracking down lost accounts.

• If the provider is known, then they should be contacted directly.
• If the provider is not known, HMRC provides a tracing service for parents and guardians, or for those aged at least 16 and looking after their own CTF. There is an online form that can be used, although details can also be requested by post.

HMRC will usually respond with details of the CTF provider within three weeks.

The starting point for HMRC’s CTF tracing service can be found here.

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Annual inflation, as measured by the Consumer Prices Index (CPI), was 10.5% in 2022 against 5.4% in 2021. The official CPI calculator, the Office for National Statistics (ONS), says that the last time inflation was as high was in 1981. But what drove the inflation indices to four-decade highs last year? As is often the case, a simple economic question does not lead to a straightforward answer.

The hierarchy graph above offers a visual response:

• The ONS CPI inflation ‘basket’ contains 12 categories, each with different weights (see figures in brackets) based on typical household expenditure. In 2022, the second largest category of spending, Housing, water, electricity, gas and other fuels, recorded an increase of 26.6%. Unsurprisingly, the star performer was gas prices, which rose 128.9% across 2022. That alone was worth a 1.8% rise in the CPI. Electricity prices jumped by 65.4%, adding another 1.3% to the CPI.
• The next largest contributor to inflation, with a slightly smaller weighting in the basket, was Food and non-alcoholic beverages, which rose by 16.8% over the year. The ONS says this category’s annual inflation has increased for 17 consecutive months (from -0.6% in July 2021) and is now at 1977 levels. It accounted for 1.95% of CPI inflation.
• In 2022, the category with the largest weighting in the CPI basket, Transport, played a less significant role in terms of overall inflation (0.9% on the CPI) than it did last year. Over the year, the category’s inflation was 6.5%. In June, annual transport inflation was nearly 15%, driven by the rise in petrol and diesel prices. As these fell back, so too did the transport inflation rate.
• The category with the lowest inflation (2.0%) was also the one with the second lowest basket weighting – Communications – so did little to counter the sharp rises elsewhere.

The two main causes of 2022 inflation – food and gas prices – help to explain why inflation is expected to drop sharply in 2023. Both rose in response to the war in Ukraine and as that is now a year ago, prices should start to stabilise – indeed wholesale gas prices have fallen from their peaks.

The consensus is for the annual CPI number to end the year around 5%, less than half of 2022’s level but still enough to mean any long-term financial plans need to build in the value-eroding effects of inflation.

Source: ONS.

A new business energy support scheme is set to run from 1 April 2023 to 31 March 2024 but will be less generous than the scheme currently in effect. Businesses with energy costs below £107/MWh for gas and £302/MWh for electricity will not receive any support.

The current scheme runs until 31 March 2023 and is based on fixed prices. The new scheme will instead provide a discount on wholesale prices.

The new discount

Businesses will receive a unit discount of up to £6.97/MWh unit discount on gas bills, with a discount of up to £19.61MWh on electricity bills. The discounts only apply above a threshold level of £107/MWh for gas and £302/MWh for electricity.

• At first glance that might not seem too bad, but energy billing is in kWh. When converted ­– two pence off a kWh of electricity and just over half a penny for gas – the reduction can be seen as much less generous.
• Many smaller firms are struggling to pay energy bills even with existing support. For a typical retail store, the total reduction over the 12 months under the new scheme will be just £400.
• As for the current scheme, the discount will not be available to businesses on existing fixed-price contracts agreed prior to 1 December 2021.

Although businesses do not need to take any action or apply for the new scheme, they should be aware of how the changes from 1 April 2023 will impact their cash flow forecasts.

Energy and trade-intensive businesses

A higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive. Similar to the current scheme, the discount for these businesses will reflect the difference between government-supported prices and wholesale prices.

Businesses may need to register for this additional support.

A full list of eligible energy and trade-intensive sectors can be found here.

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Small company owners should by now be aware of the corporation tax changes taking effect from 1 April 2023, but with the associated company rules being introduced at the same time, don’t be caught off guard.

From 1 April 2023, there will be two rates of corporation tax:

• A small profits rate of 19% where profits are below £50,000; and
• A main rate of 25% where profits exceed £250,000.

Where profits are between £50,000 and £250,000, marginal relief applies so that the rate of tax is gradually increased from 19% to 25%. The effective tax rate on this band of profits is 26.5% ­– slightly higher still if a company receives dividend income.

Impact of associated companies

The profit thresholds are divided between associated companies. For example, if two companies are associated, they will respectively only benefit from the 19% tax rate on profits up to £25,000. This means each company pays around £1,875 more in corporation tax each year than if the full £50,000 limit had been available.

• Overall, this may make little difference if both companies have profits in excess of £25,000 – the full £50,000 limit being utilised – but it will if one company has minimal profits.
• Should this be the case, business owners may wish to consider running just the one company.

Meaning of associated

The basic rule is that companies are associated if they are under common control – this means a shareholding of more than 50%. For example, two companies are associated if two people both have 30% shareholdings in each company.

• Companies only associated for part of an accounting period count as associated companies for the whole of that period.
• Overseas resident companies can be included.
• Dormant companies (not carrying on a trade or business) do not count as associated companies.

Determining whether or not a company is associated can get quite complex because shareholdings of associates can, in certain circumstances, be included.

The associated company rules almost certainly prevent the hiving off of profits to another company controlled by a spouse or civil partner in order to benefit from two £50,000 limits.

A detailed explanation of the associated company rules can be found here.

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Annual CPI inflation hit 10.1% in September, but that does not mean every price is showing a double-digit increase.

The September Consumer Prices Index (CPI) inflation reading is probably the most important inflation metric in a given year. Traditionally, this number is the one used by the Government as the basis for increasing tax allowances and bands, as well as benefits – including the state pension.

In recent years the significance of September’s CPI reading has waned, as the Government has chosen to freeze or restrict increases to limit the cost to the Exchequer of these benefits. The most obvious recent example is the freeze to the personal allowance (£12,570) and higher rate threshold (£50,270 outside Scotland), which would be £14,270 and £57,170 from April 2023 had the first two years of a four-year freeze not happened.

This year, the September 2022 annual inflation rate of 10.1% is more significant and not all it seems. The graph above shows the annual inflation rate in the 12 categories that make up the CPI ‘shopping basket’ of goods and services.

Variable effects

Only a third of those categories registered inflation above 10%. And another third recorded rises of no more than 5%. All the categories experienced higher inflation in September 2022 than September 2021, when the annual inflation rate was a more modest 3.0%, but the changes brought about over the intervening twelve months have had significantly varied effects across the different categories:

• Housing, water, electricity, gas and other fuels inflation has increased from 1.9% to 20.2%, due to the war in Ukraine, resulting in soaring energy bills.. This category is shortly expected to see another jump, as the Government’s new energy price guarantee took effect from 1 October.
• Food inflation jumped from 0.8% in 2021 to 14.5% in 2022. This can also be largely attributed to war in Ukraine. Not only has the war affected the production of grain and sunflower oil, directly increasing their prices, but the higher cost of fossil fuels – used in transportation and in fertiliser manufacture – has exacerbated the price increase.
• At the other end of the scale, however, the communications category, primarily telecoms, is experiencing only 2.4% inflation (albeit in 2021 the corresponding figure was 1.5%). Health (medical, hospital and outpatient services) has also seen a modest rise, from 1.3% to 3.5%.

These large variations help explain why your experience of inflation may seem, at different times, better or worse than the headline figure.

The Office for National Statistics (ONS) recognises this fact and has recently introduced an online personal inflation calculator which is worth exploring.

It is important to build  the impact of inflation into your planning, and wise to seek professional advice to better understand how these figures affect you personally

Source: ONS

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/

HMRC has decommissioned its interactive PDF that businesses have been using to submit up to 150 P11Ds. For 2021/22, former users will instead have to turn to HMRC’s PAYE online service or use commercial payroll software.

The deadline for filing P11Ds to report taxable benefits and expenses for 2021/22 is not due until 6 July, so there is still time to go with one of the alternatives.

P11Ds are not required if all taxable benefits have been payrolled, although it is still necessary to submit the employer declaration (form P11D(b)) to confirm that all the required P11Ds have been filed.

• Paper returns Although there is no requirement to file P11Ds online, paper returns will only be an option for those employers with just a few returns to file.
• PAYE online HMRC’s PAYE online service may be the natural choice for businesses that can no longer use the interactive PDF – it can be used for submissions for up to 500 employees. The online service provides more functionality than the decommissioned PDF, such as the ability for an employer to check what is owed, pay bills, see payment history and provide company car details.

The same Government Gateway details can be used as for the interactive PDF service.

Payroll software

Since software must be used for payroll purposes, it makes sense to also use the same software to file P11Ds. However, not all payroll software has this feature. If you are moving from using the interactive PDF it might be a good time to look at changing providers but keep an eye out for what improved software will cost.

Those employers that need to make more than 500 submissions have no choice but to do so using payroll software.

Payrolling

Although not an option for 2021/22 or 2022/23, looking further ahead, the P11D obligation can be avoided by payrolling taxable benefits. However, payrolling might not be as simple as it appears:

• Registration is required before the start of the tax year;
• The payroll software used must be able to deal with the payrolling of benefits; and
• Benefit information has to be available for each pay period.

The starting point for using HMRC’s PAYE online service can be found here.

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A downside to running a limited company is that financial information is publicly available. However, micro-entities and small companies do not have to file a profit and loss account, so available information is somewhat restricted. This situation is set to change.

The information currently filed by a micro-entity at Companies House can be as little as just three figures: total fixed assets, current assets and current liabilities. If a company provides services, with profits largely withdrawn as remuneration, these figures might all be negligible.

Thresholds

For a company to be classed as either a micro-entity or small company, it needs to be below any two of three thresholds for turnover, balance sheet total (total of fixed and current assets) and average number of employees:

A company can continue to qualify under either definition if it temporarily fails to meet the criteria for just the one year.

Changes

The key change in the government’s white paper, Corporate Transparency and Register Reform, published in February ­– setting out its final position on reform ahead of introducing legislation – is that micro-entities and small companies will have to file their profit and loss account. This means that sensitive commercial information will be readily available to a company’s competitors. Employees, customers, family members and any other interested parties will also be able to see how profitable a company is. In addition, small companies:

• will lose the option of preparing abridged accounts, so a full balance sheet will be required; and
• will have to file a directors’ report.

Although it will be some time before the extended filing requirements come into effect, they are an additional consideration when setting up a new business or deciding whether to incorporate an existing business.

Companies House accounts guidance can be found here.

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Rising prices hurt just about everyone, but small business owners face a double hit: the impact on their own spending power, but also less revenue coming in from cash-strapped customers.

The volume of retail sales fell 1.4% in March, with spending on food dropping by 1.1%. These are the first signs of the effect of high inflation, which for March was measured at 6.2%.

Managing your spending

The well-publicised drop in the number of streaming subscriptions is just one example of how household budgets are being slimmed down to cope with the cost-of-living crisis. Suggestions from government ministers to change shopping habits to own brand items may not have been well received, but there are other potential ways to make much larger short-term savings:

• At the immediate personal level, cancelling or suspending gym memberships and other exercise-related subscriptions could produce valuable savings.
• If you have time on your side, regular personal pension contributions can be put on hold or revised down until your finances are back to some sort of normality. Although it is also possible to opt out of workplace pension contributions, this is generally not advisable because the free employer contributions will be lost.
• If you are facing serious difficulty, it might be possible to temporarily stop or reduce monthly mortgage repayments. The decision will depend on the lender and mortgage contract and is not a decision to be taken lightly.

Business owners

Some small business owners may have actually seen improved sales, with the amount spent on DIY and furniture increasing. However, most retailers will need to ensure their prices remain competitive to retain customers who are trimming household spending and cutting products seen as superfluous.

For small businesses providing services on credit, managing cashflow is essential, especially as clients might be tempted to delay payment for weeks or even months. The human touch is always important, and any potential non-payers need to be dealt with swiftly and decisively.

And of course, the business’s own costs need to be kept under review, especially fuel costs in the coming months. Budgeting for increased prices needs to be factored in to your planning.

If you’re walking this tightrope, the MoneySavingExpert website has a useful cost of living survival guide across a range of issues which can be found here.

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