It’s been a busy period in the world of HMRC and tax, with a number of notable changes and updates that affect sole-traders, incorporated businesses, and partnerships alike, we thought it was about time we summarised all the recent changes, and how they’ll affect your business.
Change of HMRC basis periods for sole traders and partnerships
We’ve written before on the topic of basis periods and the planned HMRC reform that moves the calculation of business profits from the ‘current year’ basis to a ‘tax year’ basis. Now that it’s financial year 23/24, we’re in the transitional period, before the change takes effect for financial year 24/25.
This means that if your financial year ends before 5th April 2024, the additional profits taken in the period from the end of your financial year, up until 5th April, will also be brought into this year’s tax charge – bringing your basis period in line with the tax year.
For further explanation and examples, read our in-depth article on the reform of basis periods. It’s also important to note that the changes affect non-incorporated businesses (so partnerships and sole traders, it’s time to prepare).
New charities newsletter from HMRC
HMRC published their first charities newsletter on 5 June 2023 and will use it to keep charities updated on developments that may affect them.
This edition covers
- A restriction of tax reliefs for non-UK Charities registered in the UK. From 15th March 2023, only UK charities will be able to claim tax relief and exemptions. Non-UK charities who registered with HMRC before 15th March 2023 will be able to claim relief up until 5th April 2024 only
- HMRC has now also launched a 12-week consultation on Charities Tax Compliance, with the aim of tackling ‘non-compliance and protecting the integrity of the charity sector.’ You can learn more about the consultation and how to take part on the Government’s website
- Future of Gift Aid: HMRC are looking at how the Gift Aid service can be improved and would like to speak to users
- Guidance updates and reminders
You can subscribe to the newsletter here.
Qualifying businesses can now set up VAT payment plans with HMRC
Good news for some of our clients – as of May 31st this year, certain businesses are now able to set up a VAT payment plan with HMRC, through a new online service. These payment plans are also known as ‘time to pay’ agreements. You qualify for this service if your business:
- Doesn’t use the VAT Cash Accounting scheme or the Annual Accounting scheme;
- Doesn’t make VAT payments on account;
- Has filed its latest VAT return;
- Owes £20,000 or less;
- Is within 28 days of the payment deadline;
- Plans to pay off its debts within the next six months;
- Doesn’t have any other payment plans set up with HMRC
Application process for Marriage allowance is simplified
HMRC has now released a downloadable postal form for those wishing to apply for Marriage Allowance. The previous system required applicants to write a letter, whereas now the form can be downloaded, printed off, and posted. You can also apply on the phone, online, or through your self-assessment tax return.
Deadline for missing NIC payments extended
On 12th June this year, the government announced that the deadline for eligible individuals to retrospectively fill gaps in their national insurance contributions (for the period covering April 2006 – April 2016, and including tax years 16/17 and 17/18), has been pushed back again to 5th April 2025.
All voluntary payments will be due in line with those applicable in 22/23. The aim of this is to ensure that men born after 5th April 1951 and women born after 5th April 1953 have ample opportunity to maximise their state pension entitlement.
If you have a personal tax account set up digitally with HMRC you should be able to view your NIC history and work out how much is owed, but payments at this point still require you to call HMRC for a reference number, so that payments sent can be attributed to your account. The hope is that in the future, these payments will be able to be made online once the system is fully digitised.
We regularly encounter clients who aren’t aware there is a deadline in the first instance, so it’s worth checking that your NIC payments are up to date.
UK Trader Scheme replaced by UK Internal Market Scheme
As of September, this year, the UK Trader Scheme will be replaced by the UK Internal Market Scheme, a new system which will allow those transporting goods from Great Britain to Northern Ireland, to demonstrate that the goods aren’t intended for the EU. In a nutshell, the new scheme will mean the following:
- The creation of a ‘green lane’ which allows traders moving goods from GB to Northern Ireland, to do so with the submissions of a simplified commercial dataset
- A reduction in unnecessary paperwork, checks, and duties for traders moving goods
- Allowing traders who are authorised under the new scheme, to deem certain goods ‘not at risk’ for sale in the EU
- Duty will be charged on goods entering Northern Ireland from Great Britain, if they’re not already in free circulation, in Great Britain
- Traders must apply for authorisation under the new scheme, if they want to use the ‘green lane’ and the application portal is now open
- From 30th June, traders will also be able to claim for reimbursement of duties paid, under the Duty Reimbursement Scheme, on goods moved to NI that were not sold or used in the EU
This should be good news for businesses who trade in Northern Ireland – simplified paperwork and no routine physical checks. It should also reduce the friction that currently exists between Great Britain and Northern Ireland trade, as part of the Northern Ireland protocol.
HMRC advisory fuel rates
These rates apply when employees are reimbursed for business travel in their company car, or they need to repay the cost of fuel used for private travel to the company. Reviewed quarterly, these are the current rates applicable as of 1st June and will stand until the next review on 1st September. Please note that hybrid cars are treated as petrol vehicles for the purposes of fuel rates:
|Petrol / Diesel rate per mile
|LPG rate per mile
|1400cc or less
|1401cc to 2000cc
|(Diesel) 1600cc or less
|(Diesel) 1601cc to 2000cc
Electric car rates
For those driving a fully electric company car, the rate is 9 pence per mile.
HMRC interest rates rise again
Following the June increase to the Bank of England base rate, HMRC has increased its rates for late payments and repayment of tax. HMRC rates for late payment interest are set at Bank of England base rate plus 2.5%, and repayment interest set at base rate minus 1%, so a further 0.25% increase to the HMRC rates is expected following the rise in the base rate on 3rd August.
HMRC’s current rates are as follows:
- 7.5% for interest on the late payment of taxes, from 11 July 2023 2023.
- 4% for interest paid by HMRC on the overpayment of tax, from 11 July 2023 2023.
- 6% for interest on underpaid quarterly instalments of corporation tax, from 3 July 2023.
4.75% for interest on overpaid quarterly instalments of corporation tax, from 3 July 2023. However, the official rate of interest applying to beneficial loans (overdrawn directors/shareholders loan accounts) is still only 2.25% from 6 April 2023. This means that if your company has surplus cash, it is highly likely borrowing from the company will be cheaper than from a third-party lender. Loans must be repaid within 9 months of the company year-end to avoid s455 Corporation Tax implications – call us for advice before taking any action.
HMRC webinars and online learning resources
Are you aware of HMRC’s online learning resources for businesses? The government now has a selection of webinars, videos, and email updates available on its website, as well as a community forum for business owners. Topics include importing and exporting, self-assessment, VAT, alcohol duty, and more. You’ll find them all here.
Contacting Foxley Kingham – the next steps.
But don’t forget, if you’re in need of detailed advice to get in touch with our team, we offer free consultation, call 01582 540800.