fpdteam, Author at Bennetts Accountancy

Spring Budget 2023 – Social investment tax relief to end

16th March 2023 by fpdteam

It was confirmed as part of the Spring Budget announcements that the Social investment tax relief (SITR) scheme will end as planned on 5 April 2023. New investments made on or after 6 April 2023 will no longer qualify for Income and Capital Gains Tax relief. The scheme was initially introduced to encourage individuals to support social enterprises and charities access new sources of finance.

For any investments made before 6 April 2023, the lifetime maximum amount of investment social enterprises can raise through the SITR is £1.5 million. This includes any money received by subsidiaries, former subsidiaries or businesses that have been acquired.

Individuals making an eligible investment in a SITR of up to £1,000,000 can deduct 30% of the cost of their investment from their Income Tax liability for the relevant later year in which the investment is made or the previous tax year. Qualifying investors can also benefit from Capital Gains Tax hold-over relief. To qualify for this relief, a Social enterprise must have been a community interest company, a community benefit society, with an asset lock or a charity.

Source:HM Treasury| 15-03-2023

Spring Budget 2023 – Creative industry tax reliefs

16th March 2023 by fpdteam

As part of the Spring Budget measures, the Chancellor announced that the government will extend the temporary higher rates for Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR) and Museums and Galleries Exhibitions Tax Relief (MGETR) for two further years from 1 April 2023.

These reliefs are part of a collection of creative industry tax reliefs (CITR) that allow qualifying companies to claim a larger deduction, or in some circumstances claim a payable tax credit when calculating their taxable profits.

The sunset clause for the MGETR was supposed to come into force on 31 March 2024. It was also confirmed that the relief will be extended for another two years to 31 March 2026.

The headline rates of relief for the TTR and the MGETR will remain at 45% (for non-touring productions) and 50% (for touring productions). OTR rates will remain at 50%. From 1 April 2025, the rates will be 30% and 35%, and on 1 April 2026 the headline rates of relief for TTR and MGETR will return to 20% and 25%. The headline rates of relief for OTR will return to 25%.

There will also be reforms to the film, TV and video games tax reliefs which will become expenditure credits instead of additional deductions from 1 April 2024.

Source:HM Treasury| 15-03-2023

Spring Budget 2023 – Alcohol and Tobacco Duty

16th March 2023 by fpdteam

As part of the Budget measures the Chancellor confirmed that the duty rates on beers, spirits, wines and ciders will increase in line with the retail price index (RPI). These rates will increase from 1 August 2023.

The Chancellor did announce some help for the hospitality industry by increasing the Draught Relief duty differential from 5% to 9.2% for qualifying beer and cider products and from 20% to 23% for qualifying wine, other fermented products (previously made wine) and spirits.

These changes will also take effect from 1 August 2023 and mean that individuals who drink draught products in on-trade venues (such as pubs) will pay less tax than on the equivalent non-draught product in off-trade venues (such as supermarkets).

There will also be changes to help reform the current duty system from 1 August 2023. This will result in the creation of standardised tax bands based on alcohol by volume. The government will also introduce two new reliefs and transitional arrangements for certain wine products.

The rates of duty on tobacco products were increased by 2% above the rate of inflation (based on RPI) effective from 6pm on 15 March 2023. The rates of duty for hand-rolling tobacco increased by 6% above RPI and the Minimum Excise Tax (MET) by 3% above RPI at the same time. The government is committed to maintaining high tobacco duty rates as a tool to reduce smoking.

Source:HM Treasury| 15-03-2023

Spring Budget 2023 – Pension changes

16th March 2023 by fpdteam

One of the key measures of the Spring Budget was the announcement that the £40,000 cap on annual pension contributions will be increased by 50% to £60,000 from 6 April 2023. Tax relief for contributions to pension schemes is given at a taxpayer’s marginal rate of Income Tax and is subject to the increased underlying limits. Taxpayers will continue to access carry-forward, unused annual allowances for the last three tax years if they have made pension savings in those years.

The lifetime allowance is the maximum amount of pension and/or lump sum that benefits from tax relief. Although it was expected that the lifetime allowance would increase, the Chancellor made the unexpected announcement that the lifetime allowance of £1,073,100 is being abolished from 6 April 2023. Both of these changes are intended to incentivise older employees to continue in work whilst continuing to build additional pension savings.

The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023. Those earning over £260,000 (from 6 April 2023) will begin to see their £60,000 annual allowance tapered. For every complete £2 income exceeds £260,000 the annual allowance is reduced by £1. The annual allowance cannot be reduced to be less than £10,000 (2022-23: £4,000). The Money Purchase Annual Allowance will also increase to £10,000 (2022-23: £4,000) from 6 April 2023.

There will be other incentives to help get over 50’s back to work including expanding the DWP’s “Mid-life MOT” Strategy. This helps people to access financial, health and career guidance ahead of retirement. There will also be a new kind of apprenticeship targeted at the over 50s who want to return to work, called Returnerships.

Source:HM Treasury| 15-03-2023

Spring Budget 2023 – Energy Price Guarantee

16th March 2023 by fpdteam

The Chancellor had previously announced that the energy price guarantee cap, which will see the average household have their energy bills capped at £2,500 a year, would remain in place until the 31 March 2023. It was announced as part of the Spring Budget measures that this cap will now be extended for a further 3-months until 30 June 2023.

From 1 July 2023 (rather than 1 April 2023 as previously announced), this guarantee will change so that the typical household will pay on average £3,000 a year (an increase of £500). The government will also adjust the energy price guarantee scheme from 1 July 2023 to bring charges for comparable direct debit and Prepayment meter (PPM) customers into line until April 2024 when the scheme is set to end. This measure will help over four million households on prepayment meters.

No changes were announced to the previously announced business Energy Bills Discount Scheme that will replace the current Energy Bill Relief Scheme from 31 March 2023. The new scheme will offer support to eligible non-domestic energy customers, including UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals from 1 April 2023 – 31 March 2024. A substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries.

Source:HM Treasury| 15-03-2023

Spring Budget 2023 – Capital allowances

16th March 2023 by fpdteam

Designed in part to help offset the increased Corporation Tax main rate, the Chancellor announced the introduction of a new ground-breaking 100% first-year capital allowance for qualifying plant and machinery assets. This measure is also expected to help boost business investment and growth.

The new measure, known as full expensing, will initially apply from 1 April 2023 until 31 March 2026 although the Chancellor suggested that it may be made permanent in due course. The measure builds on the success of the super-deduction which ends on 31 March 2023. Under full expensing, for every pound a company invests, their taxes will be cut by up to 25p.

To qualify for full expensing, expenditure must be incurred on the provision of “main rate” plant or machinery. It should be noted that full expensing is available to companies subject to Corporation Tax only.

Plant and machinery that may qualify for full expensing includes (but is not limited to):

machines such as computers, printers, lathes and planers
office equipment such as desks and chairs
vehicles such as vans, lorries and tractors (but not cars)
warehousing equipment such as forklift trucks, pallet trucks, shelving and stackers
tools such as ladders and drills
construction equipment such as excavators, compactors, and bulldozers
some fixtures such as kitchen and bathroom fittings and fire alarm systems in non-residential property.

For “special rate” expenditure, that doesn’t qualify for full expensing, a 50% first-year allowance (FYA) can be claimed instead. The 50% FYA was introduced alongside the super-deduction and was due to end on 31 March 2023. It will now be extended by three years to 31 March 2026.

Businesses can also continue to use the Annual Investment Allowance (AIA) to claim a 100% tax deduction on qualifying expenditure on plant and machinery of up to £1m per year. This includes unincorporated businesses and most partnerships.

Source:HM Treasury| 15-03-2023

Spring Budget 2023 – Childcare changes

16th March 2023 by fpdteam

One of the main areas targeted by the Spring Budget was changes to childcare. Billed as a revolution in childcare, the Chancellor, Jeremy Hunt, said that he wanted to reform the childcare system to help more than a million women come back to work.

The 30-hours per week of funded childcare for eligible 3 to 4-year-olds in England will be extended to children from 9-months of age. This reform will be introduced in stages starting with the addition of 15-hours of free care for 2-year-olds from April 2024. The 15-hours will be extended to all children from 9-months from September 2024 before increasing to 30-hours from September 2025.

All schools will also be expected to offer breakfast and 'wraparound' clubs by September 2026 so all school-age parents can drop-off and collect their children between 8 am and 6 pm.

Universal credit provision on childcare is also being improved. This includes the government paying the upfront payment necessary to access subsidised childcare for any parents who are moving into work or want to increase their hours.

There will also be an increase in the maximum they can claim to £951 for one child and £1,630 for two children, an increase of almost 50%.

The Chancellor also announced an increase in the funding paid to nurseries providing free childcare by £204m from this September rising to £288m next year. The government will also change the minimum staff-to-child ratios from 1:4 to 1:5 for two-year-olds in England (the same as Scotland). The new ratios will remain optional.

Source:HM Treasury| 15-03-2023

Spring Budget summary 2023

15th March 2023 by fpdteam

As expected, the Chancellor, Jeremy Hunt, resisted pressure to reduce taxes in any significant way, and the majority of his announced changes were already in the public domain. According to the Chancellor, the UK economy is on track to grow in the coming year with inflation halving.

We have listed any new variations in the UK tax rates, allowances, reliefs and other matters of interest in the update set out below.

Impact on UK businesses

Full expensing
The major announcement affecting business investment, and to reduce the impact of the forthcoming increase in Corporation Tax from April 2023, is the ability of companies to “fully expense” the purchase of qualifying plant and other equipment.

Profits	£50,000	£75,000	£100,000	£150,000	£200,000	£250,000
Effective CY %	19%	21.50%	22.75%	24.00%	24.63%	25.00%

This will include spending on, but is not limited to, warehousing equipment such as forklift trucks, tools such as ladders and drills, construction equipment such as bulldozers and excavators, machines such as computers and printers, vehicles such as tractors, lorries and vans, office equipment such as chairs and desks, and some fixtures such as kitchen and bathroom fittings and fire alarm systems.
Effectively, qualifying purchases can be written off completely against company taxable profits.

The ‘full expensing’ policy will be introduced from 1 April 2023 until 31 March 2026.

The 50% First Year Allowance (FYA)
This current allowance lets taxpayers deduct 50% of the cost of other plant and machinery, known as special rate assets, from their profits during the year of purchase. This includes long life assets such as solar panels and thermal insulation on buildings.

The 50% FYA was introduced alongside the super-deduction and was due to end on 31 March 2023. It will now be extended by three years to 31 March 2026. For each year following the first year, 6% of the remaining cost will be written off via Writing Down Allowances (WDAs).

The 50% FYA allows for faster relief than under the default WDAs-only regime, which is worth 6% each year, including year one.

As part of his commitment to maintain a stable economy, the Chancellor’s long-term ambition is to make the 50% FYA permanent.

Simplifying tax system
Changes to simplify the tax system of the UK were underlined by a number of changes to positively impact the lives of small business owners. They are:

Changes to the Enterprise Management Incentives (EMI) scheme from April 2023 to simplify the process to grant options and reduce the administrative burden on participating companies. This includes, from 6 April 2023, removing requirements to sign a working time declaration and setting out details of share restrictions in option agreements.
Delivery of IT systems to enable tax agents to payroll benefits in kind on behalf of their clients – allowing agents to better support their clients and reducing burdens on employers.
The government will extend the Help to Save scheme by 18-months, on its current terms, until April 2025. A consultation will also be launched on longer terms options for the scheme.
Measures to simplify the customs import and export processes, including improvements to the Simplified Customs Declaration Process, and the Modernising Authorisations project.

R&D tax credits
A £500 million per year package of support for 20,000 research and development (R&D) intensive businesses through changes to R&D tax credits was announced. In full, the Chancellor’s announced changes in this important area are:

The scheme is targeted specifically at loss making R&D intensive SMEs. Focusing support towards those most impacted by the rate changes introduced at Autumn Statement 2022.
A company is considered R&D intensive where its qualifying R&D expenditure is worth 40% or more of its total expenditure.
Eligible loss-making companies will be able to claim £27 from HMRC for every £100 of R&D investment, instead of £18.60 for non-R&D intensive loss makers.
Around 1,000 claiming companies will come from the pharmaceutical and life sciences industry. This will support the development of life saving medicines.
Around 4,000 digital SMEs will be from the computer programming, consultancy, and related activities sector. This will support the development of AI, machine learning and other digital based technologies.
Around 3,000 other manufacturing firms, and another 3,000 professional, scientific, and technical activities firms will also qualify for the enhanced support.
This builds on previously announced changes to support modern research methods by expanding the scope of qualifying expenditure for R&D reliefs to include data & cloud computing costs.
The permanent increase from 13% to 20% for the R&D Expenditure Credit rate announced at Autumn Statement 2022 also means the UK now has the joint highest uncapped headline rate of tax relief in the G7 for large companies.

Creative sector tax concessions
Newly announced reforms to tax reliefs for the creative sectors will ensure theatres, orchestras, museums and galleries are protected against ongoing economic pressures and will continue to guarantee that more world-class productions are made in the UK.

UK AI research support
£900 million of funding was committed for an AI Research Resource and an exascale computer – making the UK one of only a handful of countries to have one – and a commitment to £2.5 billion ten-year quantum research and innovation programme through the government’s new Quantum Strategy.

Levelling up
The following measures were announced to help level-up growth across the UK:

Greater responsibility for local leaders to grow their local economy.
Over £200 million for high quality local regeneration projects in areas of need, from the transformation of Ashington Town Centre to a skills and education campus in Blackburn.
Over £400 million for new Levelling Up Partnerships for twenty areas in England, such as Rochdale and Mansfield.
Business rates retention expanded to more areas in the next Parliament.
Delivering trailblazer devolution deals for the West Midlands and Greater Manchester Combined Authorities that include single multi-year settlements for the next Spending Review, alongside a commitment to negotiate further devolution deals in England.
12 Investment Zones across the UK including 4 across Scotland, Wales and Northern Ireland.
£8.8 billion over the next five-year funding period for a second round of the City Region Sustainable Transport Settlements.

Many of the Budget decisions on tax and spending apply in Scotland, Wales and Northern Ireland. As a result of decisions that do not apply UK-wide, the Scottish Government will receive around an additional £320 million over 2023-24 and 2024-25, the Welsh Government will receive £180 million, and the Northern Ireland Executive will receive £130 million.

Previously agreed changes effective from April 2023
Changes to personal or business finances (from April 2023) that were agreed or announced prior to the Budget presentation by Jeremy Hunt on 15 March are listed below:

Corporation Tax: 19% rate for profits up to £50,000, tapering to main rate of 25% for profits over £250,000, from April 2023
£900 Cost of Living Payment for households on means-tested benefits in 2023-24
£300 Pensioner Cost of Living Payment in 2023-24
£150 Disability Cost of Living Payment in 2023-24
Business Rates: freezing the multiplier in 2023-24
Business Rates: 75% relief for Retail, Hospitality and Leisure sectors in 2023-24, up to £110,000 cash cap
Business Rates: three-year transitional relief to limit bill increases at the revaluation
Business Rates: three-year supporting small businesses scheme for properties losing Small Business Rates Relief or Rural Rates Relief
Business Rates: delay improvement relief by one year to April 2024
Business Rates: relief for property improvements from 2024-25
Income Tax and National Insurance: maintain thresholds at 2023-24 levels until April 2028
Inheritance Tax: maintain thresholds at current level until April 2028
Income Tax: reduce the dividend allowance from £2,000 to £1,000 from April 2023 and then £500 from April 2024
Income Tax: reduce the additional rate threshold from £150,000 to £125,140 from April 2023
Capital Gains Tax: reduce the annual exempt amount from £12,300 to £6,000 from April 2023 then £3,000 from April 2024
Vehicle Excise Duty: equalise treatment of electric and internal combustion engine vehicles from April 2025
National Insurance: maintain the secondary threshold for employer contributions at current level from April 2023 until April 2028
R&D tax reliefs: rebalance generosity of reliefs from 1 April 2023
VAT: maintain registration threshold at current level, £85,000 to 31 March 2026
Van benefit charge: uprate with CPI in 2023-24
Car fuel benefit charge: uprate with CPI in 2023-24
First Year Allowance for electric vehicle charge points: extend for a further two years until April 2025
Pension Credit: uprate Standard Minimum Guarantee by CPI in 2023-24
Benefit cap levels: uprate by CPI in 2023-24
Capital Gains Tax: extend the period for no gain/no loss transfers to three years for couples that separate or divorce
Annual Investment Allowance: permanently set at £1m from April 2023
Income Tax: basis periods reform for the self-employed from April 2024 with transition year in 2023-24

Impact on personal finances

Increase in pensions’ tax support
The present £40,000 cap on annual pension contributions that qualify for Income Tax relief is being increased to £60,000 from 6 April 2023.

The present Lifetime Allowance is being abolished.

Both of these changes are intended to incentivise older employees to continue in work whilst continuing to build additional pension savings.

In addition, the Money Purchase Annual Allowance will increase from £4,000 to £10,000 and the minimum Tapered Annual Allowance will increase from £4,000 to £10,000 from 6 April 2023.

The adjusted income threshold for the Tapered Annual Allowance will also be increased from £240,000 to £260,000 from 6 April 2023.

Childcare support increased
Childcare support in England is being expanded to include children over the age of 9 months. The announcement confirmed 30-hours of free childcare for every child over the age of 9 months, with support being phased in until every single eligible working parent of under 5s gets this support from September 2025.

The changes will be introduced in phases, with 15-hours of free childcare for working parents of 2-year-olds coming into effect in April 2024 and 15 hours of free childcare for working parents of children from 9 months from September 2024.

Parents receiving Universal Credits as well as being in employment will receive financial support to include upfront payment of childcare costs. The maximum they can claim will also be boosted to £951 for one child and £.1,630 for two children – an increase of around 50%

Extension of Energy Price Guarantee
It was announced that the Energy Price Guarantee cap of £2,500 would be extended for the next three months until 30 June 2023. From 1 July 2023 (rather than 1 April 2023 as previously announced), this guarantee will change so that the typical household will pay on average £3,000 a year (an increase of £500).

Also, from 1 July 2023, the government will adjust the Energy Price Guarantee premium that over 4 million households pay for their prepayment meter. This will bring their charges into line with comparable customers who pay by direct debit.

Duties on fuel frozen
The proposed 11p rise in fuel duty will be cancelled thus maintaining last year’s 5p cut for another 12-months.

Draught Relief
Draught Relief has also been significantly extended from 5% to 9.2%, so that the duty on an average draught pint of beer served in a pub, from 1 August 2023, will be up to 11 pence lower than the duty in supermarkets. The commitment to duty on a pub pint being lower than the supermarket has been termed the “Brexit Pubs Guarantee” by the Chancellor, and this change will also be enjoyed by every pub in Northern Ireland thanks to the Windsor Framework.

Access to employment reforms
Major set of reforms to support people into work, removing barriers that stop those on benefits, older workers, and those with health conditions who want to work.

OUR SUMMARY

One thing is for sure, our tax code and the supporting business regulations are becoming more complex in spite of the promoted changes towards simplifying matters.

We encourage readers who are concerned or interested in more information on any of the announcements described in this short update, to pick up the phone to discuss how you may be affected.

Source:HM Treasury| 14-03-2023

New UK Data Protection rules

13th March 2023 by fpdteam

The Data Protection and Digital Information Bill was first introduced last Summer and paused in September 2022 so ministers could engage in a co-design process with business leaders and data experts – ensuring that the new regime built on the UK’s high standards for data protection and privacy, and seeks to ensure data adequacy while moving away from the ‘one-size-fits-all’ approach of European Union’s GDPR.

Data-driven trade generated 85% of the UK’s total service exports and contributed an estimated £259 billion for the economy in 2021.

The improved bill will:

Introduce a simple, clear and business-friendly framework that will not be difficult or costly to implement – taking the best elements of GDPR and providing businesses with more flexibility about how they comply with the new data laws.
Ensure our new regime maintains data adequacy with the EU, and wider international confidence in the UK’s comprehensive data protection standards.
Further reduce the amount of paperwork organisations need to complete to demonstrate compliance.
Support even more international trade without creating extra costs for businesses if they’re already compliant with current data regulation.
Provide organisations with greater confidence about when they can process personal data without consent.
Increase public and business confidence in AI technologies by clarifying the circumstances when robust safeguards apply to automated decision-making.

These data reforms are expected to unlock £4.7 billion in savings for the UK economy over the next 10-years and maintain the UK’s internationally renowned data protection standards so businesses can continue to trade freely with global partners, including the EU.

Source:Other| 12-03-2023

Corporation tax from 1 April 2023

9th March 2023 by fpdteam

Barring any unforeseen changes being announced at next week’s Budget, the Corporation Tax main rate will increase to 25% from 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% will also be introduced from the same date for companies with profits of up to £50,000, ensuring these companies pay Corporation Tax at the same rate as currently.

Where a company has profits between £50,000 and £250,000 a rate of Corporation Tax will apply that bridges the gap between the lower and upper limits. The lower and upper limits will be proportionately reduced for short accounting periods of less than 12-months and where there are associated companies.

The effect of marginal relief is that the effective rate of Corporation Tax gradually increases from 19% where profits exceed £50,000 to 25% where profits are more than £250,000.

The amount of Corporation Tax to pay will be found by multiplying profits by the main rate of 25% and deducting marginal relief. For the fiscal year 2023, the marginal relief fraction will be 3/200.

Source:HM Revenue & Customs| 06-03-2023