Category Archives: Latest News

Taxes on the rise: A certainty, not a possibility

The new UK Government has been formed. Despite the Labour Party’s campaign and pledges around keeping tax rises to a minimum, expert opinion suggests that future rises are inevitable.

The inevitability of higher taxes

For the foreseeable future, the freeze on most tax thresholds is likely to remain in place.

The thresholds’ freeze means that even moderate pay rises push taxpayers into higher brackets, effectively increasing their tax burden without any formal rise in tax rates.

This stems not only from the specific pledges of the main parties but also from the broader economic assumptions that have been made.

Many anticipated spending cuts have been factored into budget forecasts, which will likely boost the Government’s need for higher tax revenues.

Without significant economic growth in the short term, the new Government will face a tough decision between making deep spending cuts or raising taxes.

The trilemma

One may wonder why this scenario must be the case and whether it might be avoided. However, as the Institute for Fiscal Studies put it before the election any Government would face the same “trilemma”.

Speaking to the BBC, Paul Johnson, Director of the IFS, said: “Huge decisions over the size and shape of the state will need to be taken, that those decisions will, in all likelihood, mean either higher taxes or worse public services”.

The IFS says that only three options exist for the Government: “Raise taxes by more than they have told us in their manifesto. Or implement cuts to some areas of spending. Or borrow more and be content for debt to rise for longer.”

Preparing for the future

Regardless of the election outcome, tax liabilities look poised to increase – by how much is now the question.

As accountants, our role is to help you navigate these changes, ensuring you’re properly informed and prepared.

Please get in touch for more information or tailored guidance on this issue. 

Inside the private equity boom

Private equity investment has been a significant force in the financial world for some time.

However, the nature of private equity has changed considerably in the last few years and it’s worth knowing how this may affect your business.

Background                             

Traditionally, private equity involved investment firms raising funds from investors to acquire stakes in companies.

These firms work to improve the value of these companies before eventually selling them for a profit.

Historically, large institutional investors and wealthy individuals dominated this sector but that’s no longer entirely the case.

Advancements in technology and regulatory changes have made private equity more accessible.

Crowdfunding platforms and secondary markets now allow smaller investors to participate in private equity deals.

Private equity firms are also no longer limited to buyouts and are exploring a range of strategies, including growth capital, venture capital, and distressed asset investment.

What you need to know

Given these changes, it is essential to keep several key points in mind as you think about private equity investments.

Firstly, be aware of the due diligence process, as private equity firms will thoroughly research your company before acquiring a stake.

Understand their investment strategy, the types of companies they target, and how they add value.

This knowledge will help you assess whether partnering with a particular firm aligns with your goals.

It’s also important to understand the implications of private equity involvement because, while private equity can provide significant capital and expertise, it also comes with expectations.

Investments are often illiquid, meaning changes in ownership structure could tie up resources for several years.

Additionally, the success of these partnerships often hinges on the firm’s ability to improve the value of your company, which is not guaranteed.

You’ll also want to consider whether private equity fits into your long-term business strategy.

Be prepared to commit to a relationship that could last five to 10 years.

Seek professional advice

Your accountant is there to help you make sense of private equity and guide you through the intricacies of acquisitions.

Contact our team for advice and information. 

Labour’s election win – Understanding its impact on your finances

As the sun rose on Friday morning, Labour began its celebration of a significant victory, claiming a majority that fell short of its last landslide success in 1997.

With a manifesto focused on change, its proposals for the next five years of Parliament are far-reaching, but not revolutionary.

Now in power, it is important to review their plan in more detail to understand the impact their ideas, if delivered, could have on you and your business in the years to come.

Our experienced team have been busy dissecting and analysing Labour’s proposals, to explore their intentions and potential outcomes, so that you can plan effectively for the future.

While the manifesto is Labour’s plan for the country, it is important to remember that, even with a significant majority, it may not be possible to deliver on each promise and each proposal may be subject to change in the future.

The economy

Labour has undoubtedly inherited a struggling economy, with poor public finances, which it makes very clear in its manifesto.

The new Government has promised to “turn the page on this economic chaos” by implementing two key fiscal rules:

• The current budget moves into balance so that day-to-day costs are met by revenues
• Debt must be falling as a share of the economy by the fifth year of the parliament

Both objectives will be hard to meet, especially as Labour has said it does not intend to “return to austerity.”

Instead, its economic plan is focused on prioritising investment for the future balanced with the need to rebuild public finances.

Personal finances

With the cost-of-living crisis affecting the finances of many people across the UK and driving poor economic growth due to individuals cutting back, Labour has said it will act, by:

• Bringing down the cost of energy, in part through the launch of its own publicly owned green energy investment company – Great British Energy – which will receive an £8.3 billion investment
• Reduce food prices by removing barriers and costs to businesses
• Expand access to childcare to help people be more productive, including the introduction of free breakfast clubs in every primary school
• Increase the availability of more affordable housing

Labour also wants to help people with their mortgages, by bringing down inflation, but plans in this area are less clear at the moment, apart from their continued support of an independent Bank of England.

Personal tax allowances

Labour has pledged to keep “taxes on working people” as “low as possible,” as such it will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.

However, they have also confirmed that they will not change the current freeze of tax rates, which is due to remain in place until 2028.

This effectively means, with the impact of inflation, that many people will be taxed more as their wages and income increase.

That means that taxpayers will still need to address this issue with careful tax planning to make sure they make the most of the allowances and reliefs available to them.

Non-domicile status

Before the election, in the Spring Budget, the former Chancellor Jeremy Hunt announced the abolition of non-dom status in the UK and the eventual removal of the remittance basis, under a transitional process.

At the time, Labour was up in arms about the policy as it mirrored its pledges at the time.

However, in response, the new Government is to double down on its plans announcing a “modern scheme” intended only to support people “genuinely in the country for a short period.”

The transitional arrangements due to be in place from April 2025, will not be retained under Labour’s plans and they have confirmed that they intend to end the use of offshore trusts to avoid Inheritance Tax.

This will, they say, ensure “that everyone who makes their home here in the UK pays their taxes here.”

Non-doms who are concerned about the changes that Labour might introduce and how they might affect them, should watch this space carefully and seek professional advice at the earliest opportunity.

Tax compliance

Labour has been quite critical about HM Revenue & Customs’ (HMRC’s) performance in relation to tax avoidance.

They have pledged to invest in the tax authority to help it modernise. As part of this, it will increase report and registration rules, make a significant investment in technology and enhance HMRC’s powers.

Labour hasn’t been shy in outlining where these efforts will be focused, saying that it wants HMRC to have a “renewed focus on tax avoidance by large businesses and the wealthy.”

This is part of the promise to eliminate unfairness in the UK’s tax system, by closing gaps and making sure that “everyone pays their fair share.”

Given the party’s discussion around the tax system and rules, it is likely that we will see further legislation introduced and a tougher approach by HMRC, which may mean a rise in the number of investigations it launches.

This stands to highlight the importance of tax compliance in the years to come and the value of robust and reliable accountancy services.

Business taxation

Labour has said that it wants to provide certainty to businesses following 14 years where the Corporation Tax rules have changed 26 times.

As such, the party has pledged to cap the current top rate of tax at 25 per cent for the entire life of the Parliament – although they will act if the rate makes the UK less competitive internationally.

The Full Expensing scheme and Annual Investment Allowance introduced by the last Government will be permanently retained but could be subject to further change.

For those uncertain of their eligibility for these reliefs, the Government will provide “greater clarity on what qualifies for allowances to improve business investment decisions.”

Finally, in England, Labour will replace the current business rates system to “level the playing field between the high street and online giants.”

Further details on this policy are vague, but Labour says it hopes to support entrepreneurs, revitalise high streets and improve the environment for investment.

Some of the areas of business taxation outlined by Labour remain unclear, but we are likely to learn more about their plans in the weeks and months to come.

Small business support

Labour’s specific plans for small businesses and sole traders aren’t significant, although its tax and economic policies, will support SMEs.

However, they have promised to assist with:
• Late payments: Labour plans to implement measures to ensure that small businesses and the self-employed receive timely payments. This initiative could significantly improve cash flow and reduce financial pressures related to delayed payments if delivered well.
• Exporting: The party has committed to enhancing guidance and simplifying the process for small businesses looking to export. This could open new markets for products and services and is a great opportunity to expand business reach internationally.
• British Business Bank reform: Labour proposes to reform the British Business Bank to provide more robust support for growth across all regions. This reform aims to make it easier for SMEs to access the capital needed for expansion and innovation.

Investment

Labour plans to establish a £7.3 billion National Wealth Fund, which will look to encourage private investment by pledging public money to a number of important projects, including:

• £1.8 billion to upgrade ports and build supply chains across the UK
• £1.5 billion to new gigafactories so our automotive industry leads the world
• £2.5 billion to rebuild our steel industry
• £1 billion to accelerate the deployment of carbon capture
• £500 million to support the manufacturing of green hydrogen.

A new 10-year infrastructure strategy will also be implemented to end short-termism and a new public body, the National Infrastructure and Service Transformation Authority, will be introduced to bring together the expertise from a wide range of existing agencies.

To support businesses and investment, Labour also plans to reform the current planning laws to make it easier for projects to get underway.

Businesses may benefit from these investments in several ways, including improved productivity and connectivity as a by-product, or directly through the supply chains that will be required to deliver this ambitious plan.

Fiscal events

As part of its bid to improve financial certainty, Labour has said it aims to only hold one fiscal event each year, where possible.

For some time, the Government has relied on both a Budget and Statement to outline its plans for the economy, but this may no longer be the case under the new Government.

This should provide some stability to the ever-changing tax rules if Labour’s plans are achieved.

Labour will also reform the Office for Budget Responsibility (OBR) so that every change to taxation or spending will be subject to an independent OBR forecast.

This change should help businesses and individuals to plan more effectively each year and remain compliant with changes as they are introduced at a slower pace.

Employment law and pay

Within the next 100 days, Labour plans to launch its “Plan to Make Work Pay: Delivering a New Deal for Working People”.

This will:

• Implement a real living wage that is adequate for living costs, altering the Low Pay Commission’s remit to include the cost of living alongside median wages and economic conditions
• Remove age-based wage differences under the National Minimum Wage scheme to benefit all adult workers
• Empower the Single Enforcement Body and HMRC with the necessary tools to enforce wage compliance, including penalties for non-compliance
• Promote flexible working arrangements as the default from day one.
• Abolish zero-hour contracts
• Guarantee contracts reflect actual hours worked based on a 12-week reference period, ensuring fair employment practices
• End fire and rehire practices.

Change is also on the slate for workplace pensions, with Labour adopting reforms that ensure that schemes utilise consolidation and scale, to deliver better returns.

Where will tax rise?

Despite their ambitious plans, Labour has tried to avoid discussions around tax rises, but taxes will have to rise in certain areas to meet the funding requirements of the manifesto.

Here are the key areas in which tax is slated to increase:

• VAT and business rates to apply to private school fees
• Carried interest tax loophole to be closed for private equity-related performance pay
• An increase in Stamp Duty of 1 per cent for non-UK residents purchasing residential properties
• A further windfall tax on oil and gas giants.

Of course, its decision to increase HMRC’s powers to crack down on tax avoidance, if successful, will also reduce the current tax gap.

What’s next?

Like many of us, you are still trying to digest the events of the election and the implications of the new Labour Government.

We aren’t likely to see many of these initial proposals fleshed out in more detail for the next few weeks.

Parliament will soon enter its summer break and Sir Keir Starmer is currently assembling his cabinet.

It is early days, but we are more than likely to see a Budget of some form in the autumn so that the Government can enact its reforms.

We will continue to bring you updates in the months ahead as and when new policies and proposals are announced.

However, in the meantime, if you have any questions, please feel free to contact us.

Rotherham Taylor Chartered Accountants smash fundraising goal in 100 Mile Challenge for Parkinson’s UK

Rotherham Taylor Chartered Accountants is delighted to announce that its team has completed the “Walk 100 Miles in May” challenge and has raised over £1,000 for Parkinson’s UK.

This achievement not only highlights the dedication and commitment of our staff but also their passion for making a positive difference in the community.

Throughout May, a team of ten enthusiastic members from Rotherham Taylor walked, ran, and hiked to reach, and surpass, the collective 100-mile target set by the challenge.

The efforts of this Preston-based firm were aimed at raising awareness and crucial funds for Parkinson’s research, contributing to the ongoing search for new treatments and a potential cure for the disease.

Rebecca Bradshaw, a Director at Rotherham Taylor, expressed her pride in the team’s accomplishment. She said: “We are incredibly proud of our team’s efforts in not only meeting the 100-mile challenge but also in exceeding our fundraising target.

“This shows our firm’s strong commitment to supporting important causes like Parkinson’s UK. We are grateful for the generous donations from the community and thank everyone who supported us.”

The money raised by Rotherham Taylor will go directly to Parkinson’s UK, helping to fund vital research and support services for those affected by Parkinson’s disease.

The success of this event also underscores the importance of community involvement and corporate social responsibility, values that are deeply embedded in the culture at Rotherham Taylor.

“I would like to extend our deepest thanks to all who donated and supported our initiative. The firm continues to encourage the community to stay engaged and support such significant causes,” said Rebecca Bradshaw.

For more information about the event and to keep supporting Parkinson’s UK, please click here.

Are you ready for changes to LLP salaried member rules?

HM Revenue & Customs (HMRC) has issued its updated guidance on salaried members in limited liability partnerships (LLPs), in relation to capital contributions.

Currently, LLPs incorporate elements of both partnerships and limited companies, limiting the liabilities of each partner to the amount of capital they put into the business.

Partners are typically considered to be self-employed owners of the business rather than employees, but LLPs do allow for certain partnership members to be treated as employees – known as salaried members.

Defining employees

In an LLP, salaried members must meet the following conditions:

  • At least 80 per cent of the amount payable by the LLP to the individual takes the form of ‘disguised salary’ – not variable or affected by the financial performance of the business.
  • They do not have significant influence over the affairs of the LLP.
  • Their capital contribution is less than 25 per cent of their disguised salary.

Targeted anti-avoidance rules (TAAR)

The TAAR is designed to stop individuals from intentionally avoiding classification as a salaried member.

The rule states that: “In deciding whether an individual is a salaried member, no regard is to be had to any arrangements the main purpose, or one of the main purposes of which, is to secure that the individual (or that individual and other individuals) is not a salaried member.”

This means that, when determining if someone should be considered a salaried member, any plans or agreements that are set up primarily to prevent that classification will not be considered. This ensures that the decision is based on the actual job conditions and responsibilities.

What has changed?

HMRC has updated its guidance on salaried members, particularly concerning the alteration of capital contributions.

Members of a partnership may try to change their individual capital contributions to ensure they do not exceed the limit of 25 per cent of disguised salary.

For example, if an individual’s expected disguised salary rises, they may contribute additional capital to avoid being classed as a salaried member.

However, updated rules state that the TAAR can still be applied even when avoidance measures constitute a genuine contribution to the partnership by the individual.

In this case, the additional capital would not be counted, and the individual could be classed as a salaried member.

Why is this important?

Whether an individual is classed as a partner in an LLP, or a salaried member determines how their income will be taxed.

An employee will be taxed via PAYE and the partnership must pay Class 1 employers National Insurance.

By contrast, a partner must report their income via Income Tax Self-Assessment (ITSA) and is responsible for the payment of tax on any income earned via the partnership.

We can advise you on structuring your business in a tax-efficient way while remaining compliant with the latest legislation. For further support, contact a member of our team.

New accounting practices outlined for LLPs

The Consultative Committee of Accountancy Bodies (CCAB) has released the 2024 edition of its Statement of Recommended Practice Accounting (SORP) for Limited Liability Partnerships (LLPs).

CCAB is appointed by the Financial Reporting Council (FRC) to oversee the SORP for LLPs, ensuring that such businesses can present financial statements and accounts similar to those of other businesses, such as limited companies.

LLPs can present a challenge as they incorporate elements of limited companies and general partnerships.

Partners bear financial responsibility for the business, but only up to the value of the capital that they have contributed.

For this reason, CCAB regularly issues updated guidance for accounting rules for LLPs – with new rules applying to accounting periods (APs) beginning from 1 July 2024.

Remuneration changes

The most recent changes include guidance on sharing group profits and post-retirement payments for partnership members.

The latest SORP for LLPs dictates that, where an LLP has members who provide capital to the business, but where some do not provide ‘substantive services’ to the business, the automatic right to a share of the LLP’s profits should be treated as a return on capital – i.e. a share in future profits of the LLP.

Additionally, the SORP confirms that, if a former member is classed as an employee, post-retirement payments are covered by Section 28 of FRS 102.

It further outlines that LLP obligations towards members post-retirement are covered by FRS 102 and 103, including:

  • Insurance contracts – Contracts which carry varying liability, for example when the total amount payable by the LLP is significantly affected by the longevity of the retiree.
  • Share-based payments – Where a contractual obligation meets the definition of a share-based payment, this will fall in the scope of Section 26. For example, a retiree with an equity interest in the business may be entitled to a specific percentage of disposal proceeds if the LLP is sold.

 

Reporting requirements

With regard to financial reporting, new disclosure requirements have been included in the latest SORP, particularly for notes to the accounts, which must include:

  • A decision on where loans and debts due to members sit concerning other unsecured creditors in the event of a winding-up petition
  • Protections afforded to creditors which cannot be revoked by members
  • The amount of debts owed to the LLP by members
  • Policies which relate to members contributing funds to the LLP and to repayments by the LLP

 

LLPs must also detail their policy for drawings on account and divisions of profit.

For further advice on accounting rules for LLPs, contact our team today to discuss your needs.

Using an iPhone? Keep an eye out for tax refund scammers

HM Revenue & Customs (HMRC) has warned that a new wave of fraudulent text messages is targeting taxpayers using iPhones, claiming that recipients are owed tax refunds and must supply personal information to receive them.

Some recipients are also being asked to follow a link to access their refund, which is disguised to appear legitimate.

This latest incident comes as HMRC-related scam messages rise sharply, growing by 36 per cent per annum between January 2022 and January 2023.

Recognising an incident

HMRC is aware of the issue and is working to tackle it. It has urged taxpayers to be cautious and be on the lookout for any fraudulent communications purporting to be from HMRC.

This includes text messages, as well as emails, phone calls, social media and WhatsApp messages, both on Apple and other devices.

HMRC has also warned recipients of these messages to exercise caution when asked to act quickly or send personal details via text message – as these are common warning signs of fraudulent activity.

Finally, it has confirmed that it avoids using methods of communication commonly used by fraudsters, particularly steering clear of requesting personal details via text message.

If you are concerned about communications relating to a tax refund, contact your accountant for advice.

Reporting an attack

The issue that many taxpayers are facing with this new campaign of scam messages is that it is difficult to report and block the number.

Fraudsters are using legitimate business phone numbers or Apple accounts to send messages, meaning they often cannot be blocked by the recipient.

Many recipients are also facing issues in reporting scam messages to Ofcom’s designated anti-spam line because they are often sent from legitimate business numbers.

For further advice on tax, tax refunds and staying safe as a taxpayer, please contact our team today.

The increase to Companies House fees: What you need to know

As of 1st May 2024, Companies House has implemented revised fees, marking a significant change in the cost structure for various services.

This adjustment stems from the Economic Crime and Corporate Transparency (ECCT) Act, introducing measures that inevitably increase operational costs for Companies House.

Understanding the impact

The fee revisions encompass a range of services, each carrying its own implications for businesses.

Notably, the fee for an annual confirmation statement, when submitted digitally, has surged to £34, compared to the previous rate of £13.

This increase represents a substantial adjustment and demands careful consideration from businesses, especially those accustomed to the previous fee structure.

Strategic considerations

Given the recent changes, businesses are urged to assess their filing schedules and plan accordingly.

For a comprehensive breakdown of the prices that have taken effect from 1 May 2024, businesses can refer to the official source provided by Companies House: Changes to Companies House Fees.

This resource serves as a valuable reference point for understanding the specific fee adjustments and their implications for businesses of varying sizes and industries.

Seeking expert guidance

Navigating these fee adjustments and the broader implications of the ECCT requires a nuanced understanding of company law and compliance obligations.

As such, businesses are encouraged to seek professional advice and support to navigate these changes seamlessly.

Our company secretarial experts are ready to assist businesses in adapting to the revised fee structure and ensuring continued compliance with regulatory requirements, so speak to us.

New advisory fuel rates for electric company cars

HM Revenue & Customs (HMRC) has recently announced new Advisory Fuel Rates (AFRs) that will take effect from 1 June 2024.

These changes include a reduction in the Advisory Electric Rate (AER) for electric vehicles – which can be highly tax efficient.

Many businesses have invested in electric fleets, which presents a slight problem for business owners.

Should you reduce your rates in line with the AER or stick with your current rates? Here’s everything you need to know.

Key changes in the AFRs

Below is a breakdown of the key changes made to the rates – these are advisory, however, so you have no obligation to follow them to the letter.

  • Electric vehicles: The AER has been reduced from 9 pence per mile (ppm) to 8ppm. This rate is intended to cover the cost of electricity used for business travel by electric company car drivers.
  • Petrol: Rates have increased by 1ppm for engine sizes up to 2,000cc, and by 2ppm for engines over 2,000cc.
  • Diesel: Rates have increased by 1ppm across all engine sizes.
  • LPG vehicles: Rates remain unchanged across all engine sizes.

How does the AER calculation work

In essence, the AER is derived from data on electricity costs and vehicle consumption rates.

The Department for Energy Security and Net Zero (DESNZ) provides the annual “pence per kilowatt hour” cost, which is then adjusted quarterly by the Office for National Statistics (ONS) Consumer Prices Index for electricity.

This data is combined with vehicle-specific electricity consumption rates and business car sales data to calculate a weighted average cost per mile for fully electric cars.

The Association of Fleet Professionals (AFP) suggests having different rates based on access to home charging and vehicle type (cars versus vans) which could provide a more accurate reflection of actual costs and improve fairness among employees (this is yet to be implemented).

Responding to the changes

You’ll want to review how the new AER compares to the actual costs incurred by your employees for charging their electric vehicles.

If the new rate falls short, consider whether this might lead to dissatisfaction or financial strain for your employees.

It’s important to remember that although HMRC sets the advisory rates, businesses can set their own reimbursement rates.

So, if the new AER does not cover the true costs, you might want to consider offering a higher reimbursement rate to ensure employees are not out of pocket.

We can provide tailored advice to ensure your reimbursement policies meet both regulatory requirements and the needs of your employees.

For more information, or guidance based on your unique circumstances, please get in touch. 

Three great reasons to file your tax return early

We often find that clients begin to show signs of stress when the Self-Assessment tax return deadline approaches.

This is just one of the reasons we recommend you file your return early, but there are numerous other benefits.

Here are three key reasons to consider submitting your tax return sooner rather than later:

  1. Avoid last-minute stress

As mentioned above, filing your tax return early can significantly reduce the stress associated with meeting the deadline.

Rushing to compile and submit your financial information at the last minute also increases the likelihood of errors and omissions, which can lead to penalties and additional scrutiny from HM Revenue & Customs (HMRC).

By completing your tax return early, you allow yourself ample time to review your documentation, ensure accuracy, and seek professional advice from your accountant.

This preparation time can be invaluable, particularly if your financial situation is complex or if you encounter unexpected issues.

  1. Better financial planning

Submitting your tax return early provides a clearer picture of your financial situation for the year.

This information is crucial for effective financial planning and decision-making. Knowing your tax liabilities well in advance enables you to manage your cash flow and make better-informed decisions about investments, savings, and expenses.

Early filing also allows you to identify potential tax savings opportunities, such as allowable deductions and reliefs, that you might otherwise overlook in a rushed preparation.

  1. Quicker refunds and reduced penalties

If you are due a tax refund, filing your return early ensures you receive it sooner, further improving your cash flow.

Timely refunds can be particularly beneficial for reinvesting in your business or managing personal finances.

Conversely, if you owe tax, early filing gives you more time to create a payment arrangement with HMRC, helping you avoid late payment penalties and interest charges.

Early filing also reduces the risk of missing the deadline and incurring automatic late filing penalties, which can add unnecessary financial strain. Penalties and interest charges can quickly accumulate.

The bottom line

To take full advantage of the above-mentioned benefits, you should speak to your accountant about preparing your tax return well in advance of the deadline.

For help with any aspect of your tax return, please get in touch with one of our team.