To support the vibrant sector that is the creative industry, the Government offers an array of tax reliefs and expenditure credits.
Author Archive: Muhammad Zia
Don’t get caught out by the R&D Advanced Notification requirement
Many businesses remain unaware of HMRC’s new requirement for submitting their first or infrequent R&D Tax Credit claim.
If you are conducting R&D and have not previously claimed or haven’t made a claim in the last three years, you now need to file an Advanced Notification Form (ANF) with HMRC within six months of your financial year-end.
Managing change
Previously, companies had up to 24 months after their year-end to make an R&D claim. For accounting periods starting on or after 1 April 2023, this timeframe has been drastically reduced to six months for first-time claimants (or those who haven’t claimed in three years).
For example, a company with a year-end of 31 March 2024 must submit its ANF by 30 September 2024.
If the form isn’t submitted in time, the business will not be able to claim R&D Tax Credits for that financial year.
This change has already impacted businesses, leaving some unable to access much-needed tax relief for R&D investment, so you should:
- Act quickly: Review your year-end dates and ensure any necessary ANFs are submitted within six months following your financial year-end.
- Get expert advice: If you’re unsure whether your business qualifies for R&D Tax Credits, seek advice from an R&D specialist. A quick assessment can help clarify eligibility and ensure no opportunities are missed.
Plan to maximise opportunities
By understanding and acting on these changes now, you can safeguard your ability to claim valuable R&D Tax Credits.
Planning ahead and filing the required forms on time will allow your business to continue accessing crucial funding for innovation and growth.
Don’t wait—review your R&D activities today and ensure you’re prepared to meet HMRC’s requirements.
Inheritance Tax rules for pension savers – What is changing?
Significant changes to the way unspent pension funds are taxed after death are on the horizon, and individuals need to start preparing now.
From April 2027, most unspent pension funds will form part of an estate for Inheritance Tax (IHT) purposes. This change could result in substantial tax liabilities for many estates.
What Does This Mean for You?
Under the new rules, unspent pension pots will be added to property, shares, and other assets when calculating an individual’s estate for IHT.
While assets left to a spouse or civil partner will remain tax-free, they will be included in their estate when they pass away, potentially leaving future beneficiaries with a significant tax burden.
For example, an unspent pension fund of £800,000 could face a 40 per cent tax charge (depending on the use of allowances and reliefs), resulting in an IHT bill of £320,000 for beneficiaries.
Why act now?
This change will predominantly affect wealthier individuals, but many more families may now find their estates exceeding the IHT thresholds of £325,000 (or £500,000 with the Residence Nil-Rate Band).
With the nil-rate bands frozen until at least 2030, careful planning is essential to mitigate the impact of these changes and reduce unnecessary tax liabilities.
Strategies to consider
There are several proactive steps you can take to reduce the potential impact of IHT on your pension funds:
- Spend your pension funds earlier: Consider using your pension savings during retirement to reduce the amount left unspent.
- Gifting pension withdrawals: Withdraw and gift portions of your pension to loved ones at least seven years before your passing to potentially avoid IHT.
- Explore alternative estate planning strategies: Tailor your plans to align with your goals and minimise tax exposure.
However, it’s important to strike a balance. Any strategy should ensure you have enough funds for a comfortable retirement while mitigating future tax liabilities.
Who needs to prepare?
Even if you don’t currently consider yourself wealthy, these changes could affect your estate. Rising property values, investment growth, and pension savings mean that more estates may breach the IHT thresholds in the coming years.
Families who previously expected to avoid IHT may now find themselves liable, adding financial strain during an already difficult time.
The changes to pension taxation are a call to action for everyone to revisit their retirement and estate planning strategies.
While pension may provide a good tax-free means of reducing your tax position while working, this will now need to be balanced against the needs to reduce any unspent pension pot left to the new IHT rules.
Whether you’re looking to safeguard your beneficiaries from unexpected tax burdens or maximise the efficiency of your estate, early planning is key.
Our team of specialists is here to help you navigate these changes. By assessing your unique situation and tailoring strategies to your needs, we can help ensure your plans are robust, tax-efficient, and aligned with your long-term goals.
Why paying your taxes on time matters
Paying your taxes on time is crucial for businesses, not just to stay compliant, but also to avoid avoidable fines and penalties.
When payments are late, you can face financial penalties and interest charges that might not only strain your budget but also impact your business’s overall economic health.
What are the benefits of timely payments?
Paying your taxes on time offers several advantages for your business:
- Avoid penalties and interest charges – Timely payments help you avoid costly fines and high-interest fees.
- Maintain a good relationship with HMRC – Staying on top of your payments fosters a positive relationship with HM Revenue and Customs, which can be helpful if any disputes or queries arise.
- Enhance your credit rating – Consistently paying your tax bills on time can improve your business’s credit rating, making it easier to secure loans or funding.
- Avoid unnecessary stress – Abiding by deadlines reduces the risk of last-minute scrambles and financial strain.
Recent changes to interest rates
The Bank of England’s recent decision to lower the base rate to five per cent from 1 August—the first cut in over four years—has prompted a reduction in HMRC interest rates as well.
Starting from 20 August, the late payment interest rate has decreased to 7.5 per cent from 7.75 per cent, and the repayment interest rate has dropped to four per cent from 4.25 per cent.
For businesses, this means slightly reduced financial penalties for late tax payments, which provides some relief, particularly for those who have been grappling with higher rates.
Additionally, the Corporation Tax self-assessment interest rate has fallen to six per cent from 6.25 per cent.
Strategies to ensure timely payments
Automate payments – Setting up automatic payments through your bank or accounting software can ensure your taxes are paid on time.
Keep detailed records - Maintaining up-to-date records of all financial transactions helps streamline tax return preparation and keeps you informed about your tax liabilities well before due dates.
Use reminders - Remember to set up reminders for all upcoming tax deadlines to prevent the last-minute rush. Make sure your reminder is not just on the deadline date – you want to give yourself plenty of time to prepare.
Our experts can assist with your tax returns, ensure timely payments, and help you avoid penalties. Contact us today for more information.
Tax reliefs for start-ups extended until 2035
The Treasury has confirmed the extension of key tax relief schemes for start-ups and investors, providing a significant boost to the UK’s start-up market.
The Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) tax reliefs have been extended until April 2035.
This extension follows the sunset clause that required new legislation to keep these reliefs in place, a move previously planned by the last Government in Budget 2023.
Benefits of the schemes
These schemes were created to make it easier for people to invest in early-stage companies.
By offering generous tax reliefs, they’re designed to spark innovation, create jobs, and drive economic growth.
With the EIS, investors can enjoy up to 30 per cent upfront Income Tax relief and avoid Capital Gains Tax (CGT) on any profits from the sale of shares.
You can invest up to £1 million each year, or £2 million if you’re putting money into research and development-focused companies. It is important to note that shares need to be held for at least two years.
VCTs on the other hand, are listed on the UK stock exchange and let you invest up to £200,000 annually in new VCT shares, with tax-free dividends.
In the 2022-23 financial year alone, these schemes raised £2.9 billion, with 1,280 companies using EIS for the first time.
The extension is anticipated to help keep the momentum going, encouraging even more investment in high-risk, innovative businesses.
Advice for start-ups
If you’re a start-up or an investor, now is an opportune time to explore these tax relief schemes to maximise your financial benefits and support your business’s growth.
Make sure you stay up to date on the latest regulations and seek professional advice to make the most of these extended reliefs.
Contact our experts today to discuss how we can help you make the most of these extended tax reliefs.
Don’t let Self-Assessment become the Grinch that steals your Christmas
Christmas. A time of year for tinsel, turkey, tangerines, and… tax returns?
Planning for tax changes to company cars during their lifecycle
As businesses plan their fleet strategies, recent changes announced in the Autumn Budget are set to impact the tax costs associated with company cars.
Rotherham Taylor’s takeaways from the Budget and its update to Business Asset Disposal Relief
The recent Budget has introduced changes to Business Asset Disposal Relief (BADR), a vital tax relief for business owners looking to reduce their Capital Gains Tax (CGT) liabilities when selling part or all of their business.
What does the abolition of the FHL tax regime mean for your BADR eligibility?
With the planned abolition of the Furnished Holiday Let (FHL) tax regime in April 2025, owners of FHL properties are facing changes to how their properties are taxed.
Employee Ownership Trusts – Your key to a tax-efficient exit?
If you are looking to plan your exit from your business, whether for retirement or to start your next venture, we know you want to achieve this as tax-efficiently as possible.
Employee Ownership Trusts (EOTs) are an increasingly popular way for business owners to exit while securing the future of their company and employees – not least because they offer significant tax savings over other exit strategies.
Understanding EOTs
As an exit strategy, an EOT is created when you sell a controlling interest (51 per cent of shares or more) to a trust set up for the benefit of your employees.
This trust buys and holds shares on behalf of the employees, who do not buy them directly, often financing the sale through future profits made by the business.
Updates in the 2024 Autumn Budget have clarified some points in the legislation around EOTs – meaning you must comply with certain rules to be eligible for Capital Gains Tax (CGT) relief.
The trustees must have paid fair market value for the business and there is now a more stringent ‘trustee independence requirement’, requiring at least half of trustees to be independent of the seller.
In practice, this means that you, or people connected to you, cannot make up more than 50 per cent of the trustees.
In practice, this means there must be at least one other trustee who is not connected to you, or you may be required to pay CGT up to four years after the sale, known as the ‘clawback’ period.
Are they tax-efficient?
EOTs offer several tax efficiencies over other forms of exit, such as a sale to a group or an independent buyer, including:
- CGT exemption – When you sell a controlling interest to an EOT, your gains are exempt from CGT if you meet certain requirements, allowing you to keep the full value of your shares.
- Inheritance Tax – Assets transferred into an EOT are excluded from your estate for Inheritance Tax purposes, making EOTs particularly handy for retirement.
- Income Tax benefits – EOTs are tax-efficient for employees too, offering tax-free bonus allowances of up to £3,600 per year.
Providing you abide by the latest regulations, EOTs can be a tax-efficient way of exiting your business.
