WELCOME TO HARBOUR KEY'S AUGUST NEWSLETTER
We're delighted to bring you the August edition of our newsletter, with the sun starting to appear, and watching the inspiring British team at the Olympics.
The HK team are taking their summer breaks, but we continue to be busy, following the announcements made by the new Chancellor on Monday 29 July. The announcement started by blaming the previous Government for leaving a “£22bn black hole” in the Government finances, resulting in difficult decisions having to be taken, and admitting for the first time plans to raise taxes in the Budget this autumn. The Autumn Budget date being set for 30 October.
As part of the announcement the Chancellor announced the scrapping of many infrastructure projects across the UK, for example the Stonehenge tunnel works, as well as cutting the winter heating benefit payment for pensioners, unless in receipt of pension tax credit. There was no warning re: the cut to the winter heating benefit, or consultation, just the announcement, and shows that this Chancellor means business.
The Chancellor emphasised that the Labour manifesto made commitments not to increase National Insurance, VAT or income tax, which they will stick to. With no indication of which taxes will be raised, but in the knowledge the above are protected, the “noise” has started with capital gains tax and inheritance tax seen as the likeliest taxes to be increased. Although pension tax relief, which comes up for debate before every Budget, is back in the mix. Could there be a wealth tax!
As the Chancellor was speaking in the House of Commons, the Treasury were publishing draft legislation/policy documents on other tax areas:
It is now confirmed that private school fees will now no longer be exempt from VAT from 1 January 2025. In addition, anti-forestalling provisions came in to force from 29 July preventing the early payment of fees to escape VAT. If fees are paid for the post Xmas term and beyond, these will be charged to VAT charges. In addition:
- VAT will also be applied to board and lodging fees which will be confirmed at the Autumn Budget;
- Nursery classes provided at private schools will remain exempt from VAT, which is defined as schooling of children below the compulsory school age for the UK;
- If a pupil is receiving funding due to special needs which state schools cannot deal with then ‘their funder will be compensated for the VAT they incur’ which will keep charitable organisations keen on aiding children with special needs.
- Labour confirmed that they will implement the March 2024 Budget announcement by the Conservatives, abolishing the tax advantageous furnished holiday let rules, with details of the transitional rules. See our blog on Furnished Holiday Lets.
- Confirmation of the abolishment of the favourable tax regime for non-UK domiciles announced in March 2024 will take place, but this Chancellor is going further, including bringing in a new test for Inheritance Tax in relation to non-UK assets based on 10 years of tax residency. See our blog Non-UK Domicile.
(Changes to the taxation of the carry forward interest regime were also announced).
WELCOMING LEON TO THE HARBOUR KEY TEAM
We are excited to announce that Leon has joined the Harbour Key team in July. Leon is in the final stages of his Chartered Institute of Taxation exams and has recently relocated to Gloucestershire to take on this new role with us.
Leon will be working closely with Jo shaw, assisting with tax returns, familiarising himself with our systems and processes, and diving into various advisory projects. We’re thrilled to have Leon on board and look forward to the contributions he’ll bring to the team.
SERIOUS VAT INVESTIGATION
Outside of the teams’ normal workloads and dealing with queries/planning pre-Autumn Budget, we got hit with a serious, short notice, VAT investigation (the type where HM Customs produce badges and set out the caution). A client had been caught within a missing trader fraud case (where someone in a supply chain steals the VAT, also known as carousel fraud,) however not involved, HM Customs investigate the whole of chain, as this type of fraud is very sophisticated, and steps and mechanisms can be put in place to hide the perpetrators.
The lesson from the investigation, and what protected the client, is that they undertake due diligence in respect of their large suppliers, checking the suppliers VAT number, meeting in person at their trading premises, Companies House review, credit checks etc, all of which they save, as evidence of what has been undertaken. The client was therefore able to show that they took due care and attention with who they dealt with, meaning that their was no risk to any VAT reclaimed on supplier invoices.
SMALL MEDIUM ENTERPRISES (SME's) CONCERNED ABOUT SURVIVAL!
At the same time, a report from HSBC Innovation Banking and Dealroom stated that Venture Capital investment in UK start-ups fell in 2023. Investment fell to $21.3bn in 2023, down from $31.3bn in 2022 and a record $41bn in 2021, according to the report. (However, there were signs of a tentative recovery, with companies raising $12.6bn in the second half of 2023 - a 46% increase on the previous six months). Tax concerns have now become the primary reason US companies consider the UK an unattractive place for investment, according to research by trade association British American Business.
With the new Chancellor pledging to build growth on strong and secure foundations with stability, investment and reform, and forged through a new partnership with the private sector, it is hoped that the SME confidence dial can be turned to a more positive setting, with a favourable Budget for business and SME founder/owners.
DIRECTOR BANS!
Many businesses are still finding the economic and trading environment tough having come out of the covid pandemic, then hit with the cost-of-living crisis, inflation, increased tax rates (remember corporation tax increased on 1 April 2023 to 25%) etc, while having to service covid loans. Insolvencies are on the increase; however, directors need to consider the position in respect of any covid support their business received. Nearly two thirds of all director bans last year were related to misconduct and fraud related to covid loans although most avoided criminal prosecution,
With billions of pounds of covid-related fraud, the Insolvency Service annual report showed that 831 directors were disqualified in 2023-24 for abuse and fraud over bounce back loans and other covid support programmes, against a total of 1,222 director bans. Read our full blog HERE!
AND FINALLY
Our commitment to compliance work (accounts and tax) remains unwavering, doing a good job in a timely fashion. However, there have been a number of occasions recently where information has been delivered up against deadlines, incomplete records, delays in dealing with queries. This type of behaviour could result in an error being made resulting in a tax enquiry, but also impact other clients work, which has to get pushed back to meet deadlines for those who deliver late. We kindly request our clients to address information requests and queries promptly, allowing us to efficiently complete our tasks without causing any delays in moving on to the next assignment, creating risk for the client, or an increase in fees. Your timely cooperation is greatly appreciated.
DATES FOR YOUR DIARY
- Key tax dates for the period July 2024 to December 2024 can be found by clicking HERE!
- 30 October 2024 – Autumn Budget.
Should you wish to speak with us about a specific matter, or just to be a sounding board or for a chat, please do not hesitate to give us a call on 01452 71327
