While the Making Tax Digital (MTD) scheme has been in place since April 2019, there were some exclusions. The first phase was registering businesses with an annual turnover of £85,000, while those below the threshold could register voluntarily. As of April 2022, the next phase requires all VAT-registered businesses to sign up to Making Tax Digital, regardless of their annual turnover.

Every VAT-registered business must also register with MTD, keeping VAT records and submitting VAT returns
digitally through the MTD software. Some lower-turnover businesses may already be doing this after registering voluntarily, but for those who aren’t yet, it’s no longer possible to delay.

What is Making Tax Digital?

Most business owners probably dread tax paperwork the most. After replacing the old Government Gateway with HMRC Online Services,
the government is phasing in Making Tax Digital with the aim of simplifying the confusing tax system to make things easier for business owners and accountants.

This modernisation involves either using the MTD software
or connecting their existing software to the MTD portal to file digital VAT records. With an accurate and consistent flow of information, old-fashioned annual tax returns will soon become a thing of the past, replaced by quarterly updates.

Not only should this make it simple to file VAT returns
correctly and on time, but there are also other benefits to digitalising your tax records. The more efficient and scalable system makes financial positions much clearer, aiding in cash flow control, data forecasts, and growth strategies.

How can I sign my business up for Making Tax Digital?

From 1st April 2022 onwards, all VAT-registered businesses must enrol with MTD and use the system to submit all VAT returns this way. If your annual return isn’t due until the end of the accounting period in December 2022, you may not need to sign up for and use MTD
until the beginning of 2023.

It’s best not to wait too long, however, as you must allow time to set up the software and for HMRC to confirm your registration. This can take up to 72 hours, so don’t leave it to the last minute. Even brief delays of a few working days could make returns and payments late, incurring a tax penalty.

Requiring all business on the VAT register to comply with MTD, not just those with an annual turnover above £85k, is only the second phase. In April 2024, we’ll see the introduction of MTD for Income Tax, which will affect landlords and the self-employed with annual income over £10,000. From April 2025, individuals in partnerships will also have to enrol, with more updates to come.

Why should I use Making Tax Digital software?

Many businesses keep their VAT records in spreadsheets, with most using specialist accounting software
like Sage or Xero. If you don’t want to switch to MTD
completely, it’s possible to use compatible bridging software to connect your existing system with MTD, allowing you to submit information digitally in compliance with HMRC rules without having to scrap your current system.

Even if you prefer to stick with bridging software, your business will still benefit from switching to digital VAT submissions. Phasing out manual paperwork should help to reduce errors, keeping records safely in one place where you can access them easily as and when you need to check your data or calculations. As a time-saving solution, MTD should also increase employee productivity.

No more losing receipts or digging through cabinets for poorly organised documents. Stress-free VAT records and returns, instead of a last-minute panic before the annual deadline. What’s not to like? When it comes to software costs, there are plenty of options for businesses at all income levels, plus the Help to Grow: Digital scheme – and you can also claim expenses back under business tax relief.

How can Making Tax Digital help my business?

Small businesses may be wary of the changes that come with digitalisation, but this modern overhaul of the old tax system is long overdue. HMRC has been mailing letters to VAT-registered businesses who are now required to sign up for MTD, but even if you haven’t received these instructions yet, or your small business isn’t currently included, it never hurts to be prepared.

If you’re ready to register and make the most of digital VAT software, you can learn more about HMRC-recognised MTD software on the government website. Should you need help evaluating whether your business is required to enrol or qualifies for an MTD exemption, or need assistance with VAT accounting and relevant software, you can always contact GBAC for expert guidance.

Contact the GBAC team by email at info@gbac.co.uk or by phone on 01226 298 298 today.

The Department for Education (DfE) is introducing new rules for student loan repayments for students starting university from September 2023. This is part of a response to a 2019 review of the higher education system, and an attempt to tackle the problem of soaring national student debt.

With the nation’s student debt currently at £161 billion, and only around 25% of undergraduates starting courses in 2020-2021 expected to fully repay their student loans, the government believes that lowering thresholds and extending schedules will lead to more students repaying loans in full.

More students enter higher education every year, with many taking on debt for low-quality courses that don’t lead to long-term employment opportunities. This means the current loan system isn’t sustainable, but under the new system, an estimated 70% of students will be able to repay in full.

Current student loan repayment rules

The current rules for students in England and Wales give undergraduates a repayment schedule of 30 years. Monthly repayments won’t begin until the graduate earns more than £27,295 a year – if their annual income exceeds this amount, they will start repaying 9% of the excess every month.

Once you begin repaying a student loan under the current rules, any outstanding debt will be wiped after 30 years. With many graduates struggling to find high-paying jobs, even someone earning a good income may not be able to pay off their loans and the accumulated interest within this time.

For current and former students whose loans fall under these rules, there’s no need to stress about retrospective changes. The new rules won’t apply to student loans taken out for academic years prior to 2023-2024. However, the threshold for Plan 2 repayments – which applies for students who went to university in England or Wales from September 2012 – is frozen until 2025 at £27,295.

New student loan repayment rules

The major changes to student loan repayments that will take effect from September 2023 include:

The most contentious change is that future students will have to continue making repayments for 40 years before any leftover debt is wiped. Additionally, they’ll have to begin repaying their loans sooner due to the reduced threshold. This means they’ll have to repay more over a longer period.

However, students starting university between 2023 and 2025 won’t have to worry about higher tuition fees, as they’re frozen at the current rate until then. There’s also the benefit of less interest, so these students may actually pay less over time than those under the current plan, who could be paying as much as RPI + 3% accrued on top of their actual tuition and maintenance loan balance.

Who will be affected by the student loan repayment changes?

As mentioned above, the most recent student loan changes will only affect new students who start a university course in September 2023 or later in that academic year. Undergraduates who plan to complete their course in the 2026-2027 academic year will be the first to experience these effects.

Theoretically, the new student loan repayment system should drastically increase the number of graduates who repay their loans in full before the expiration of the repayment term. In real life, some economists believe this will only have a positive impact on high earners, who could afford to repay their loans anyway, while low to middle earners will be saddled with higher repayments.

Due to the changes in interest rates, higher earners will accrue much less interest and repay faster, while lower earners will repay more over their lifetime. This is a bigger burden for such graduates who are trying to save for their future, limiting their ability to buy a house or invest in a pension.

However, the average graduate salary is still below the new threshold – though it may not seem like much of a plus side that most students won’t be earning more than £25,000 a year after graduating.

It’s worth noting that these changes affect domestic undergraduates only. They will not apply for international students, who can’t access government loans, or for postgraduate students, whose degrees will have different repayment plans. Nor will they apply to student loans in Scotland – where students start repaying at a £25,000 threshold, with a 30-year term and 1.5%
interest rate.

Is taking out a student loan in 2023 worth it?

If you, your child, or a family member plans to go to university in the near future, they might find it beneficial to start a course during the 2022-2023 academic year. After that, they’ll be subject to the new student loan repayment terms, meaning they’ll have to start repaying higher amounts sooner.

Similarly, sixth form college leavers who planned to take a gap year before going to university in 2023 might be better off scrapping those plans to stay within the current system’s repayment rules.

In any case, whenever the university course starts and however much you’ll owe in student loans, taking out tuition and maintenance loans from the Student Loans Company is still better than relying on commercial loans. You can learn more about this in our blog on student debt rules.

If you’d like more information on the changes explored in this article, click through to read the relevant report by the Institute for Fiscal Studies. For graduates already in employment, who may be in need of financial advice
to help manage student loan repayments and arrears, the team at GBAC
is always happy to offer expert guidance. You can get in touch with us whenever you’re ready.

Just as employees must build up National Insurance Contributions (NICs) throughout their working life in order to access state benefits, so must those in self-employment. However, employers usually set up the PAYE system to deduct Class 1 NICs automatically for their workers, while self-employed people must pay Class 2 and/or Class 4 contributions directly to HMRC after submitting a tax return.

Following an announcement last September, the government has introduced a 1.25% increase to NICs from April 2022 – known as the Health and Social Care Levy. Despite this increase, it seems that self-employed people with profits within a certain limit could actually pay less in NICs in 2022.

Let’s look into the latest changes for self-employed NICs
and what they’ll mean for you this year.

How do National Insurance Contributions work for self-employed people?

If you need a quick refresher on the basics of National Insurance Contributions, these are payments that people earning a sufficient amount must pay between 16 years old and state retirement age. You must make a minimum amount of NI contributions throughout your lifetime to access the State Pension, certain unemployment benefits, Maternity Allowance, or Bereavement Support payments.

As mentioned, employees on a payroll will have Class 1 contributions deducted from their wages, while their employers will also contribute Class 1A/Class 1B contributions. As those who are self-employed is unlikely to have a payroll system, they must pay a different class of NICs on their profits.

This means that anyone in self-employment is required to submit an annual self-assessment tax return, which HMRC uses to calculate how much the person owes in Income Tax and National Insurance Contributions for that year. When it comes to NICs, they may have to only pay the Class 2 flat rate, but they may also be liable for the Class 4 higher rate on profits above a particular amount.

Even if your self-employment earnings are below the threshold for Class 2 and Class 4 NICs, or you are eligible for reduced rate NI contributions, you can still choose to make NIC payments if you can afford to. These voluntary contributions are categorised as Class 3, and help you to fill gaps in your NIC record that could otherwise have a negative impact on your eligibility to claim state benefits.

How are Class 2 National Insurance Contributions changing?

Previously, the threshold for fixed-rate Class 2 NI contributions was £6,515, and was due to rise to £6,725 this tax year. After the Spring March Statement, the threshold is now set at £11,908
for the 2022-2023 tax year. It’s then due to align with the Personal Allowance of £12,570 for 2023-2024.

This means that you now won’t have to pay Class 2 NICs
on self-employment earnings above the small profits threshold of £6,725. You’ll only have to make Class 2 NIC payments for any earnings over the lower profits limit of £11,908. The Class 2 NIC rate for 2022-2023 is now £3.15 a week.

If you won’t be making enough profit to pay any National Insurance Contributions, you might have concerns about maintaining your NI record. There’s no need to worry, because anyone with annual self-employment profits between £6,725 and £11,908 can benefit from deemed NI contributions.

You’ll still be building up your NIC record, even though you technically won’t be paying for those contributions. This is especially important to get enough qualifying NICs for the State Pension.

What is happening to Class 4 National Insurance Contributions?

While the 1.25% levy doesn’t apply for Class 2 NICs, it does apply for Class 4. The Class 4 NIC rates
were therefore due to increase from 9% to 10.25% for self-employment profits over £9,880. Like the Class 2 threshold changes, the Class 4 threshold now set at £11,908 instead, and will also align with the Personal Allowance for 2023-2024 (£12,570). The higher rate threshold is frozen at £50,270.

So, if you earn annual profits between £11,908 and £50,270, you’ll be liable for NI contributions at a rate of 10.25%. For profits above £50,270, you’ll now pay a reduced NIC rate of 3.25%
(up from 2% the previous year due to the levy). The threshold boost means fewer people will be liable for both Class 2 and Class 4 contributions, allowing self-employed earners to keep more of their profits.

As a self-employed earner, you’ll no longer have to make Class 2 contributions from the date that you reach State Pension age, just like employees who pay Class 1 NICs. If you’re liable for them, you’ll continue paying Class 4 contributions until the start of the next tax year following this date.

How does this affect my NIC liabilities?

According to the government’s Spring Statement factsheet, the majority of people who pay NICs will pay less than they would have before the changes. Whether they work for an employer or are self-employed, lower earners can keep more of their money whilst still protecting their NIC record.

Here are some examples of the impact of these self-employed NIC changes at various profit levels:

Profits

2021/2022

2022/2023 (Previous)

2022/2023 (New)

£10,000

£197

£176

£0

£15,000

£647

£689

£481

£20,000

£1,097

£1,201

£923

£30,000

£1,997

£2,226

£2,018

If you’re still not sure about your NIC liabilities, or you need professional assistance with self-employment tax management, contact GBAC on 01226 298 298. Our accountants can provide a variety of financial services, from bookkeeping
to tax planning. When you call our team, or email us at info@gbac.co.uk, we can help you to make the most of the changing NIC thresholds in 2022.

It’s no secret that the pandemic has had a huge impact on the UK’s finances, with the government looking to recoup the costs of various COVID-19 economic support packages. At the end of 2020, a newly launched independent think-tank called the Wealth Tax Commission published a report that pushed the idea of a UK wealth tax back into popular discussion.

The Wealth Tax Commission report suggested that restructuring the tax system is the most viable option, and that the government should be taxing wealth and other types of income instead of only increasing taxes on employment earnings.

Many economists think that such a wealth tax could be the solution to the UK’s soaring public debt and financial inequality crises. Yet none of the Chancellor’s budget announcements in the last two years has explored the concept – so what happened to introducing a wealth tax?

What is the wealth tax?

Technically, we do already have forms of wealth tax in the UK, such as Inheritance Tax (IHT) and Capital Gains Tax (CGT). Nonetheless, there are undoubtedly very wealthy people with highly valuable assets that are not being taxed efficiently, if at all.

The idea of taxing wealth has been floating around for decades, but the wealth tax
specifically suggested by the Commission would be a one-off charge that could raise enough funds to offset the estimated cost of the COVID-19 pandemic on the public purse.

The Commission’s recommendation was to apply the wealth tax on an individual basis, at a flat rate of 5% of any wealth over £500,000. This would cover total wealth, including property and pension values, and payable in annual 1% instalments (plus interest) over 5 years.

According to their calculations at the time, over 8 million individuals could be liable for paying this tax, which would raise £260 billion net. However, the latest estimates on public spending during the pandemic are closer to £410 billion – clearly requiring a different model.

Why does the UK need a wealth tax?

Even before the spiralling costs of the pandemic, growing wealth inequality was increasing the gap between the richest and poorest people in the UK. At the same time as the Wealth Tax Commission published its report, the Joseph Rowntree Foundation also published a report on destitution.

This report found that over a million households were unable to afford 2/5 of essentials (food, heating, lighting, clothes, and hygiene) at some point in 2019. Earlier this year, the Office for National Statistics (ONS) published the results of the Wealth and Assets Survey, finding that the wealthiest 10% consistently held almost 50% of the nation’s wealth between 2010 and 2020.

The richest individuals have a median net wealth in the hundreds of thousands, including property and private pensions, with a median bank balance of £90,000. By contrast, the poorest have a median net wealth of zero, with less than 50% owning property or having a pension pot. This means that more than half of the poorest people have significant debts that outweigh their savings.

As the cost of living continues to rise, with inflation outpacing wages, energy prices rocketing, and National Insurance Contributions increasing next month, the growing pressure on the poorest families could push even more people into poverty – but a wealth tax could ease this pressure.

How would a wealth tax affect me?

Initially, the thought of more taxes fills the average taxpayer with dread, but a wealth tax is only likely to target a relatively small percentage of taxpayers. If the government were to implement the Wealth Tax Commission’s proposals, they would only apply to those with more than £500,000 in accumulated wealth, and the tax would only apply to any wealth above this amount.

As the majority of Brits have not amassed £500,000 or more, such a tax would affect most people not in the top 10% by actually easing their financial strain. If the government sourced funding from excess wealth rather than increasing taxes on the limited income of the poor, this could help to prevent the potential poverty crisis that currently looms over most of the British public.

There’s also the issue of fiscal drag or ‘stealth tax’. With Income Tax thresholds frozen until 2026, if wages increase along with inflation then at least a million people could find themselves dragged into a higher tax bracket and suddenly having to pay at least 20% more tax. Without the freeze, the tax thresholds increasing would most likely have kept them in the same tax band as before.

While people tend to be wary when it comes to taxes, the idea of a wealth tax is actually fairly popular amongst Brits. Back in 2020, a poll by global research company Ipsos
found that 41% of respondents ranked a wealth tax as the most preferable option over cutting public services or increasing other taxes instead (such as Council Tax, Capital Gains Tax, Income Tax, or VAT).

Will the UK government introduce a wealth tax?

No UK government has ever implemented a wealth tax, and it does not seem that the current government will, either. The closest this came to happening was in 1974, when the Labour Party promised to introduce an annual wealth tax, but did not do so before leaving office in 1979.

Chancellor Rishi Sunak is against a wealth tax of any kind, but even a one-off tax like the policy suggested by the Wealth Tax Commission could be successful. However, one of the biggest issues with enforcing such a levy is categorising and valuing wealth, because not all assets are liquid.

At any rate, the Conservative Party has made no mention of current or future plans to introduce any kind of UK wealth tax. It would be far more likely for them to increase Capital Gains Tax rates before the end of their current office term (while Inheritance Tax rates will remain frozen until 2026).

If you have any concerns about your income, savings, or taxes, the highly qualified accountants at GBAC
would be happy to help you with financial planning and management. Simply call us on 01226 298 298, send an email to info@gbac.co.uk, or browse our website to learn more about our services. Our accountants in Barnsley, Leeds and Sheffield will be delighted to help.
 

A recent First-Tier Tribunal (FTT) ruling in favour of the taxpayer has challenged HMRC’s belief that renting out a room or piece of land alone is not exempt from VAT. In the case of HMRC vs Errol Willy Salons, the FTT dismissed HMRC’s VAT assessment in support of aggrieved salon owner Errol Willy.

The case started back in 2017, when the salon owner decided to let out two unused rooms. Each room was fairly plain and nondescript, though they both had a sink. The beauticians who rented the rooms provided all the tools of their trade by themselves, controlling their own hours and prices.

Though Errol Willy had little to no involvement in the work of the beauticians, other than collecting a percentage of their monthly takings as rent, HMRC issued a huge VAT bill of £18,649. According to HMRC, the salon supplied taxable rated services – but the owner disagreed, and now so has the FTT.

HMRC’s assessment of room rental VAT

Generally, the supply of a rented room should be exempt from UK VAT, with the exceptions of rooms hired for catering or sleeping accommodation. HMRC had yet to draw a line between what counts as VAT-exempt room hire and when it counts as a supply of services that’s liable for VAT.

In the case of Errol Willy’s salon in Cardiff, HMRC
argued that the room rentals were not exempt from the standard 20% VAT rate because they were part of a larger package of taxable services.

While the beauticians were self-employed and not registered for VAT, they were able to access the staff toilets and break areas, and made use of heating and lighting. They also had minimal use of the salon’s reception and advertising. HMRC judged all of this to be a service package inclusive of rent.

When Errol Willy received the unexpected VAT assessment, he of course decided to challenge it and appeal against HMRC’s decision at a tribunal. The salon owner was not charging the beauticians for use of these basic facilities, but HMRC believed that the situation was similar to a previous case.

In the Byrom case, HMRC successfully proved that self-employed masseuses hiring rooms at a massage parlour were also supplied with services such as a reception desk, a kitchen, showers, linen and towels, and a washing machine – so the standard VAT rate was applicable to the rental income.

However, as the FTT acknowledged, Errol Willy did not
provide such an extensive service package.

The First-Tier Tribunal’s decision on room hire VAT

Luckily for Errol Willy, the FTT did not agree with HMRC
that his case and Byrom’s were comparable.

While the masseuses in the Byrom case received a package of multiple services related to their purpose in hiring the rooms, the additional facilities in the salon that the beauticians had access to were either incidental or inessential to their business. The rooms they hired were more or less bare.

Therefore, the primary supply was simply room hire, and the salon owner was correct in treating these transactions as VAT exempt room hire. The court’s judgement was in the taxpayer’s favour, clarifying that supplying a room to rent is only liable for standard VAT rating if significant additional services are supplied as part of the hire – for example, if they had also supplied hairdressing chairs.

It’s evident that not every case of room hire which coincides with other minimal services qualifies as a supply package. Where the predominant supply is the letting of land, a VAT exemption is valid – so HMRC should judge these situations on a case-by-case basis, according to the specific circumstances.

What does this FTT ruling mean for my business?

You might be wondering how this individual taxpayer’s victory applies to you. If HMRC had won the case against Errol Willy Salons, other businesses letting out spare rooms could also find themselves liable for additional VAT charges at HMRC’s whim – even if any additional services were inessential.

The impact of this FTT ruling means that many small businesses, and even some large ones, have a precedent to refer to if they need to appeal against a VAT assessment like Errol Willy. However, HMRC
should now revise their room hire VAT exemption regulations to avoid a repeat of this issue.

If you would like to read more about the Byrom case and further examples of HMRC’s treatment of VAT liabilities, you can do so by clicking here. Following the Errol Willy Salons case, the government may pursue legislative changes to clarify the VAT rules. The best way to stay on top of these things and prevent similar VAT charges from HMRC is to make sure your account management is in order.

Do you need professional help with VAT returns? Or are you struggling with a tax investigation and need financial experts to handle the HMRC enquiry
on your behalf? In either case, our accountants in the North West would be happy to assist – simply contact GBAC to find out how we can help you.

Following an announcement in 2014 and a consultation in 2021, the government is drafting legislation that will increase the normal minimum pension age (NMPA). This means that the minimum age that most savers can access their pensions will rise from 55 to 57 in April 2028.

The government is changing the NMPA to align with the increase in the State Pension (SP) age, which will be rising to 67 in 2028. These changes are meant to encourage people to keep working and saving for longer before retirement – but what if you want to take your private pension earlier?

What is the normal minimum pension age (NMPA)?

While the State Pension is a type of tax-funded social benefit, many people also pay into private schemes throughout their working life to increase their pension pot on top of the State Pension.

Most private or personal pension schemes are registered with HMRC, with regular contributions collected through PAYE along with the employee’s National Insurance and Income Tax. There are many types of private pensions, but the most common are occupation-based or contract-based.

The normal minimum pension age (NMPA) is the minimum age that a person can access their pension without having to pay a tax charge of up to 55%, unless their early retirement is due to poor health. Claiming your personal pension early is considered an ‘unauthorised payment’ otherwise.

The NMPA was first introduced in 2006 and set at 50 years old. This rose to 55 in 2010, then in 2014 the government announced plans to increase the NMPA to 57 in 2028. When the State Pension age
increases from 67 to 68 years old, it’s likely that the UK government will also raise the NMPA to 58.

Will the new NMPA apply to everyone?

When the NMPA rose to 55 in 2010, the government introduced a protected pension age (PPA) for registered pension schemes – meaning eligible members could keep the existing NMPA and retire between 50 and 55 years old as they pleased. There is also an updated PPA
for the new NMPA.

This means that members of eligible pension schemes could keep a PPA of 55 rather than 57. To qualify for the new PPA, you must have become a member of the registered scheme before 4th November 2021, and the scheme’s rules must have permitted early retirement on or before 11th February 2021. The new PPA will not affect members who already have the previous PPA of 50.

Otherwise, the new NMPA will affect all registered pension schemes in the UK, including the Railways Pension Scheme. Aside from those with a PPA, the only exemptions are public service pension schemes (e.g. police, fire fighters, armed forces), and early retirement from ill health.

What if I don’t have a protected pension age (PPA)?

If you won’t be eligible for the new PPA, and you won’t be retiring until after 5th April 2028, then the new NMPA will prevent you from claiming your personal pension until you’re 57 years old. This will only be an issue if you intended to retire before then, or if you’re retiring earlier but you’ll have remaining benefits to claim after that date. Here’s a quick guide according to when you were born:

Of course, pension scheme administrators will also need to update their systems and records in line with these changes. If you do have a PPA, you should bear in mind that changing jobs, switching pension schemes, or transferring contributions could mean losing it in favour of the new NMPA.

Contact GBAC for business or personal financial advice

The new pension age regime provides opportunities for some and risks for others, so it’s crucial to get professional advice if you’re uncertain about your financial future. You can view HMRC’s paper on their new NMPA
policy online; HMRC does not allow or require individual applications for PPA.

If you believe you should have a protected pension age, or you aren’t sure how the new NMPA will affect your pension and retirement plans, it’s best to seek advice from a qualified financial expert.

Here at GBAC, accountants in Barnsley, our knowledgeable accountants can provide a range of payroll, bookkeeping, tax consultancy, and estate planning services to help you get your retirement savings in order. To discuss your accounting concerns with our team, please call us on 01226 298 298 or email us at info@gbac.co.uk. The experts at GBAC, as well as our accountants in Leeds and Sheffield, are here to help from 9am to 5.30pm, Monday to Friday.

Since the start of the COVID-19 pandemic, the UK government has been supporting small businesses through various loan schemes. Hundreds of billions of pounds were invested into economic support packages to keep employers and their employees afloat during a difficult time for many.

Unfortunately, a small percentage of fraudsters managed to claim some of this money under false pretences, effectively stealing billions of taxpayers’ money. In response, the government formed the Taxpayer Protection Taskforce (TPT) in 2021, which will continue investigating until 2023.

So, what exactly is the TPT doing to tackle COVID-19 fraudsters, and what does this mean for your business if you claimed COVID-19 relief during the pandemic?

What is the Taxpayer Protection Taskforce?

Since its formation and funding last year, the TPT
department of HMRC has been and continues to investigate businesses they suspect of fraudulently claiming COVID-19 relief. The 1200+ strong Taskforce
is aiming to recover at least £1.5 billion from around 30,000 ongoing investigations.

Additionally, the Coronavirus Job Retention Scheme is anticipated to have lost over £5 billion to fraudulent furlough claims, and the Bounce Back Loan Scheme has lost an estimated £18 million. To this end, the Taskforce will be scrutinising suspicious claims under schemes like the following:

While some of the losses will be written off, the Taxpayer Protection Taskforce will continue to investigate and prosecute anyone who has misused any of the pandemic support schemes.

How is the Taxpayer Protection Taskforce investigating businesses?

When the coronavirus support schemes were accepting applications, there were automated digital checks in place that helped the government to block over 100,000 incorrect claims between 2020 and 2021. However, thousands of fraudulent claims managed to slip through HMRC’s net.

To catch these criminals and reclaim the taxpayers’ money, the Taskforce’s ongoing activities include written communications and one-to-one enquiries. Data analysis is helping the team to identify discrepancies, which prompts HMRC to contact the business and request further evidence.

When making the claim, businesses should have been advised that they must keep certain records for up to 6 years in case of HMRC
investigations, so any honest claimant should have documented proof to support their claim. For example, the information HMRC asks for is likely to include:

If the Taskforce flags a claim with a small risk of fraud or an apparently unintentional mistake, they will simply write to the business and ask them to review their claim. This prompts honest claimants to voluntarily disclose overpayments if they discover an accidental error upon checking their claim.

Should they discover a case with complex risks, where they anticipate deliberate fraud, then the Taskforce will take bespoke measures to discuss the claim with the business one-on-one. Their main target is those who purposefully defrauded the schemes, so they won’t investigate every little error.

What if I made an honest mistake when claiming COVID-19 relief?

Of course, HMRC is aware that most businesses have been under a lot of pressure during the pandemic, and that circumstances often changed quickly as variants spread and case numbers rose and fell. This is why the Taskforce is making a proportionate response to each incorrect claim.

The Taskforce will be more lenient towards businesses that inadvertently made a genuine mistake – especially if the business voluntarily discloses the details. According to HMRC, penalties will be reasonable and they will mostly be supportive in such cases of truly accidental overpayments.

If you believe your business may have made an honest mistake and misrepresented your earnings, employee hours, or anything else in your claim, you can report this through the online
HMRC disclosure service. Even if you haven’t been contacted about a compliance check, it’s best to get ahead of things and make a voluntary disclosure. You may need an accountant
to assist you.

Does your business need help with reviewing a COVID-19 relief claim, complying with a HMRC or TPT investigation, or challenging the result of a HMRC enquiry? Our accountants in Barnsley, Leeds and Sheffield could help – just give GBAC a call on 01226 298 298 or email us at info@gbac.co.uk for expert guidance.

Previously called Entrepreneurs’ Relief, the type of CGT (Capital Gains Tax) relief now known as BADR (Business Asset Disposal Relief) is only available for trading companies and groups that carry out primarily trading activities.

Gains from the disposal of company shares may be eligible for a reduced CGT rate of 10%, but only if the activities of the trading company ‘do not include, to a substantial extent, activities other than trading’ – but what qualifies as ‘substantial’?

Those concerned about qualifying for Business Asset Disposal Relief and claiming CGT reductions will be interested to know that the definition of ‘substantial non-trading’ has recently changed.

Upper Tribunal overrules HMRC in Assem Allam case

For a long time, the government’s Capital Gains Manual
has held that the qualifying amount of ‘substantial non-trading’ is 20% of the company’s total activities. However, in the recent case Assem Allam vs. HMRC [2021] UKUT 0291, the Upper Tribunal (UT) did not agree with HMRC’s guidance.

The long-standing guidance took a quantitative view to the eligibility assessment, suggesting that the company’s income, asset value, and expenditure be taken into account. In the 2021 case mentioned, the Upper Tribunal found that HMRC offers no reliable test to produce a specific numeric answer.

According to the Upper Tribunal, which dictates the enforceability of legislation, without a legal 20% test to determine substantial non-trading activity, the existing tests are ‘holistic’ – e.g. they require consideration of the company and its activities as a whole, and HMRC’s list of factors isn’t exclusive.

HMRC updates guidance on non-trading activities

Following the Upper Tribunal’s decision on the Assem Allam case, HMRC has since updated the BADR guidance in the Capital Gains Manual. The suggestion of trading vs non-trading being 80% vs 20% of company activities as the threshold remains, but there is now less emphasis on proving this.

HMRC has made its definition of ‘substantial’ slightly vague, meaning that businesses now have more leeway when it comes to claiming BADR. The manual now suggests that it’s enough for HMRC
to look at non-trading income and non-trading asset values, and if the submitted accounts do not suggest non-trading activities over 20%, they can simply approve the relief without further enquiry.

Get professional advice on business CGT relief

You can find the latest guidance from HMRC in the online manual linked above. However, there are other factors that might be relevant but aren’t mentioned in HMRC’s guidance, even after the recent revision. If you plan to claim Business Asset Disposal Relief and aren’t sure whether your non-trading activities would be classed as ‘substantial’ or not, you may need to seek expert advice.

If you’re looking for accountants in Barnsley to provide business tax consultancy services, audits or business valuations, or manage HMRC enquiries, why not get in touch with us at GBAC? Call us on 01226 298 298 or email info@gbac.co.uk to discuss your company’s trading activities and taxes.

Our accountants in Barnsley are here to help. Our accountants in Leeds and accountants in Sheffield available at your request too.

As businesses continue to recover from the pandemic, the UK government has launched the Help to Grow: Digital scheme. This initiative supports small to medium-sized enterprises (SMEs) to digitalise their businesses, providing impartial advice and discounts on accounting and customer relationship management (CRM) software from approved providers.

Starting from January 2022, eligible businesses can apply for Help to Grow: Digital and its partner scheme Help to Grow: Management. Lack of knowledge and expense are some of the biggest barriers preventing businesses from growing through digitalisation, but these schemes should be a game-changer in accessibility and productivity.

So, how can Help to Grow: Digital boost your business in 2022? This blog explains everything you need to know about Help to Grow, from how it works to how to apply.

What is the Help to Grow: Digital scheme?

First announced ahead of the budget in March 2021, the new Help to Grow: Digital service opened on 20th January 2022. The UK-wide scheme is designed to help businesses manage their finances and boost sales through improved customer services – all thanks to proven digital technologies.

Help to Grow: Digital offers guidance to business owners unsure about which technology is the most suitable or how they would use it for their business. For those eligible, there is also a Help to Grow discount of 50% on one approved software package (up to a maximum of £5,000, excluding VAT).

This helps with the costs of incorporating the software over the first 12 months, giving businesses the tools they need to thrive in a digitally dependent market. In addition to customer and financial management services, further products should be available soon, including e-commerce software.

The scheme runs alongside the separate Help to Grow: Management course, which provides 12 weeks of training at leading business schools around the UK for just £750. This complementary initiative teaches staff new management skills and explores strategies for growing and innovating.

Who is eligible for the Help to Grow: Digital scheme?

All UK businesses can access the Help to Grow: Digital
website for free advice on adopting digital technologies. However, in order to successfully apply for the Help to Grow: Digital discount, your business must meet the following eligibility criteria:

Unfortunately, you cannot access the discount if you have already purchased the software yourself. Only the qualifying business can use the non-transferable discount, and it will not count towards VAT. After successfully applying, you’ll have 30 days to redeem the discount.

Software suppliers can also apply to offer their services to small businesses through Help to Grow: Digital. To qualify, you must be a GDPR-compliant business trading for at least 12 months, with demonstrably effective cyber security and an existing customer base in the UK.

How will Help to Grow: Digital actually help businesses?

Many businesses had to fall back on online services during the pandemic to comply with lockdown and social distancing rules. Those who were able to adapt didn’t just survive the shutdowns – they grew up to eight times faster than other businesses who didn’t have the appropriate digital tools.

The government believes that increasing SME productivity through technological investment will support hundreds of thousands of jobs and lead to billions in revenue and economic output. With the software available through Help to Grow: Digital, businesses can automate processes like:

Reducing time wasted on repetitive manual administration allows businesses to focus on their core operations instead. Fewer mistakes and more free time will allow you to develop and implement new strategies, making smarter and faster decisions to grow and thrive. Not only can you manage your accounts digitally, but you can make the most of selling online and building a customer base.

How to apply for the Help to Grow: Digital scheme

You don’t have to apply to access the business technology guidance – simply visit the Help to Grow: Digital website to explore software solutions for free.

If you believe that your business is eligible for the Help to Grow: Digital discount, you can apply online. Use the ‘compare software’ tool to identify the package you want, then complete the application by providing the required information.

This includes details about your chosen software, your business, and yourself as the applicant. You’ll need to verify your business email address and provide your Companies House or Financial Conduct Authority Mutuals Public Register number.

After passing eligibility and fraud checks, you’ll receive a link to the supplier’s website, where you can view a breakdown of costs and apply the discount to complete your purchase.

Here at gbac, we understand that cloud computing
doesn’t come easy to everyone. This is why our specialist cloud accounting
team is happy to help businesses who may be struggling to implement accounting software such as Sage or QuickBooks.

If you would prefer to outsource your financial management to the experts, we offer a range of bookkeeping
and payroll
services at gbac. To learn more about how we can help your business go digital, GBAC – accountants in Barnsley – are here to help. Please do not hesitate to get in touch on 01226 298 298 if you have any questions. Our accountants in Leeds and accountants in Sheffield are happy to help too.