Author Archive: Muhammad Zia

AAT success for Trainee Accountant underlines Rotherham Taylor’s commitment to developing young talent

There was cause for celebration for Trainee Accountant Natasha Atkinson, who recently passed her AAT exams, the next step in her goal of becoming a Chartered Accountant.

Natasha, who works for Preston-based accountancy firm Rotherham Taylor, is an example of the firm’s long-standing track record of developing staff and bringing them through the ranks.

“Passing the AAT qualification is a big achievement in my professional career, and I am looking forward to the next chapter of working towards becoming a chartered accountant,” said Natasha.

“I am really appreciative of everyone at Rotherham Taylor who has provided me with support throughout the AAT qualification.”

Rebecca Bradshaw, Director at Rotherham Taylor, who also started off as a Trainee Accountant at the firm, praised Natasha’s achievements: “We are all immensely proud of Natasha for earning her AAT qualification. She’s put a lot of hard work into passing her exams and deserves this recognition.

“We are always keen to promote from within, and the best way to do that is to give our staff the best training possible. Natasha is the latest in a long line of trainees at Rotherham Taylor who have seen their careers progress positively.

“Natasha will now be working towards her ACA qualification, and we will continue to give her the support she needs as she continues her journey to becoming a Chartered Accountant.”

How do Gifts to the Nation impact Inheritance Tax?

You might be aware of how gifting part of your estate to charity impacts Inheritance Tax (IHT) but what happens if you gift assets to the nation?

There are two schemes which outline significant tax advantages if pre-eminent objects or collections are left to the public.

Pre-eminent objects, or collections, include assets that are of interest to the nation or have scientific, historic or artistic interest.

This could include works of art, books, manuscripts, land, scientific objects, etc.

If you have assets that could be national treasures, you should consider gifting them to the nation in your Will, in order to qualify for the Acceptance in Lieu scheme.

What is the Acceptance in Lieu (AiL) scheme?

The AiL scheme allows those liable for IHT to pay it by transferring important cultural, scientific or historical objects to the nation.

These items are then allocated to public collections to preserve the nation’s cultural heritage.

The items offered in lieu of tax are independently valued by The Acceptance in Lieu Panel, and if accepted, are considered as satisfying tax due to the value of the accepted item.

The total taxable amount of the estate is also reduced, as the value of the item is excluded from the estate’s valuation.

For your assets to be considered for the AiL scheme, you must outline your wishes in your Will.

The total tax reduction from this scheme is capped at £30 million.

What is the Cultural Gifts Scheme?

The Cultural Gifts Scheme offers a tax reduction when assets are donated to the public, although this does exclude land.

Similarly to the AiL scheme, the Acceptance in Lieu Panel will advise on the value of assets.

However, this relief is applicable to gifts to the nation provided during the lifetime.

At the time of donation, this provides a tax relief (Income Tax, Capital Gains Tax or Corporation Tax) that is proportionate to the value of the asset. The tax reduction can be spread over five years.

Once gifted to the public or nation, this is then exempt from IHT as it is no longer considered part of the estate.

Before deciding whether to gift items to the nation, it is essential to understand the impact on the estate and beneficiaries, as well as the potential liabilities.

To navigate these complex decisions, it’s wise to seek advice from professional tax advisors with expertise in this area.

Contact our probate experts for advice on tax planning matters such as this.

Inflation and increased interest rates – What does it mean for businesses?

Office for National Statistics (ONS) data revealed that the Consumer Price Index (CPI) – the official measure of inflation – only fell to 8.7 per cent in the 12 months to May 2023.

While the rate of inflation is not as high compared to previous months, where it peaked at 10.4 per cent in February, many economists had predicted a significantly lower rate of inflation.

As inflation is falling at a slower rate, the Bank of England (BoE) has attempted to curb this by increasing the base interest rate further to five per cent.

High inflation and the ever-increasing base rate are having a significant impact on many businesses in a number of different ways including:

Increased costs

Higher prices and costs are feeding the current rate of inflation. As the cost of raw materials, labour, and operational expenses rise, businesses are squeezing their profit margins.

While larger businesses may have the capacity to deal with these increased costs, small and medium-sized enterprises (SMEs), often operating on tighter budgets can find this situation particularly challenging.

Some businesses facing increased costs are mitigating this by raising the prices of their products or services.

This move needs to be handled carefully, however, as if prices are increased too much then it could drive customers away and cause a loss in revenue, while also feeding into inflation.

Equally, SMEs need to explore how they can drive existing costs down where possible by reviewing arrangements with suppliers and service providers.

Difficulty borrowing

Interest rate increases naturally mean that taking out loans will be more costly for businesses looking to borrow and will also affect any existing loans that are not on a fixed rate.

Increased interest rates can be a significant worry for businesses carrying a substantial amount of variable-rate debt, as higher interest rates ultimately mean higher borrowing costs.

While the current five per cent base rate is the highest it has been since 2008, economists predict that interest rates could peak at six per cent by the end of 2023 – something businesses should consider as they plan their budgets for the next 12 months.

The higher rates of interest have also affected access to finance, as lenders adjust their approach to lending due to concerns about businesses servicing their debts. Many are, therefore, applying more stringent credit and affordability checks.

HMRC debts 

Tax debts to HM Revenue & Customs (HMRC) track the BoE base rate. In its simplest form, this means that the rate of interest for the late payment of taxes is calculated as the base rate plus 2.5 per cent.

The rate of interest paid by HMRC on the overpayment of tax is also calculated as the base rate minus one.

There are various other rates of interest charged by HMRC, which can be found here. As the rate of interest increases, so does the cost of late tax payments.

Although inflation rates are currently higher than predicted, the BoE has stated that the increase in interest rates will see the inflation rates fall in the coming months, as they attempt to push it down to the two per cent national target.

If you are a business owner who would like assistance navigating the current economic climate, please contact our expert team today.

HMRC sets its sights on SMEs over UK tax gap

The tax gap in the UK – the difference between the amount of tax owed and the amount that has been paid – remains wider than anticipated due to SMEs, according to HM Revenue & Customs (HMRC).

The tax authority’s figures for 2021/22 show that small and medium-sized enterprises (SMEs) contribute significantly to the national tax gap, with 56 per cent (£20.2 billion) of the total gap (£36 billion) accounted for by underpayments or non-payments by these businesses.

HMRC attributes much of this gap to careless errors made by SMEs, which is why ensuring compliance can help to narrow this gap and prevent SMEs from being hit by easily avoidable tax penalties and investigations.

Understanding tax obligations

Businesses need to have expert knowledge of the different taxes they are liable for. These include Corporation Tax, VAT, Income Tax and National Insurance Contributions via PAYE.

According to HMRC, Corporation Tax, Income Tax, National Insurance Contributions and Capital Gains Tax together account for 65 per cent of the total tax gap.

Organisation and meeting deadlines

SMEs need to remain organised and keep meticulous records of all financial transactions. A lack of sufficient care was responsible for almost a third (30 per cent) of all underpayments of tax.

It seems an obvious observation but ensuring that all tax returns and payments are submitted by the relevant deadlines will mean SMEs avoid penalties for late submission.

Delays in payment or submission can also increase the chances of errors as a last-minute rush often leads to carelessness.

Stay up to date with tax laws and changes

Tax laws are subject to change and being unfamiliar with any updates could lead to errors in your tax reporting that result in penalties, fines and investigations.

SMEs should ensure that they are up to date with the latest changes in tax laws, rates, and deadlines.

Maintain good communication with HMRC

If SMEs do find themselves to be in a position where they’re unable to pay their taxes on time, they should reach out to HMRC and explain the situation. They might be able to offer a payment plan or provide other solutions.

With HMRC intensifying its focus on non-compliance by small businesses, SMEs must pay close attention to their tax obligations.

If you are an SME business owner and would like assistance with your tax obligations, our expert team of tax professionals are here to help.

The hidden economy: What income should you declare?

The number of individuals participating in the UK’s ‘hidden economy’ is increasing according to recent research.

A surge in additional income streams, from moonlighting to online trading, has led to millions of taxpayers failing to declare additional earnings to HM Revenue & Customs (HMRC).

HMRC’s latest figures highlight the extent of this issue. They showed that an estimated 8.8 per cent of the UK adult population – equivalent to nearly six million individuals – are involved in the hidden economy. This figure has nearly doubled since 2016.

While most of this undeclared tax is considered low-level, with only 1.1 per cent estimated to have earned over £5,000 of undeclared income, this group alone represents a significant £3.36 billion of tax-free earnings.

Participants in the hidden economy include those who supplement their taxed income with cash work (moonlighters), accounting for 65 per cent of the total and those who do not declare any earnings at all, which represent 35 per cent. Some businesses also contribute to this problem by failing to register for VAT.

While it is clear that some of these activities are deliberate and knowingly entered into, HMRC’s survey suggests that there is also a distinct lack of knowledge about tax obligations.

As an example, 28 per cent of those surveyed believed that if they were already paying tax, they did not need to inform HMRC about any additional forms of income as long as this did not place them into a higher tax band.

For those with more than one source of income, it is vital to declare all earnings to HMRC, regardless of whether this means being pushed into the next tax band or not.

This includes casual work, selling goods or services, rental income, and trading on platforms such as eBay.

Consequences of non-declaration

Non-declaration of additional income can carry significant implications for those involved.

These penalties vary in severity and those found guilty can face anything from a hefty fine to a prison sentence. Individuals need to ensure that they declare any additional income.

How to declare additional income

To declare additional income to HMRC, individuals can use the Self-Assessment tax return system.

This system requires taxpayers to report their income for each tax year, which runs from 6 April one year to 5 April the next, by 31 January of the following year.

If individuals have only recently started earning additional income, they must notify HMRC by 5 October following the end of the tax year in which they began to receive the additional income in order to register for Self-Assessment.

If you are worried that you may have earned additional income and have not declared this to HMRC, our expert tax advisors are on hand to assist.