Business News

The markets have experienced considerable volatility as a result of the ‘Growth Plan’ delivered by the former Chancellor, Kwasi Kwarteng on 23 September.

That made regaining economic confidence an urgent task for the newly appointed Chancellor, Jeremy Hunt, who has delivered a reversal of many of the key tax measures announced in the mini-Budget in a new fiscal statement.

The only big measures to survive were changes to Stamp Duty Land Tax (SDLT) thresholds and the cut to National Insurance due on 6 November.

The new announcements at a glance:

Changed:

Income Tax

As previously announced, the Additional rate of Income Tax will remain in effect.

The Chancellor has now also cMiniancelled the one penny-in-a-pound cut to the Basic rate, which was brought forward by Kwasi Kwarteng from April 2024 to April 2023. It will now remain at 20 per cent indefinitely.

Dividend Tax

The 1.25 percentage point increase that took effect from April 2022 will no longer be reversed from April 2023. This means the current rates of dividend tax will instead remain in effect.

Corporation Tax

As announced by the Prime Minister on Friday, Corporation Tax will not remain at 19 per cent for all companies and instead will be levied at 25 per cent for those with profits of more than £250,000 from April 2023.

Those with profits below £50,000 will continue to pay at 19 per cent, while marginal relief will be available to those with profits between £50,000 and £250,000.

Energy Price Guarantee

The Energy Price Guarantee for households will remain in effect until April 2023, rather than for two years as originally announced. The Energy Bill Relief Scheme for businesses will also be reviewed before April 2023.

HM Treasury will review these policies with a view to reducing the cost of the measure and making business support more targeted.

IR35/Off-payroll Working Rules

The planned reversal of the 2017 and 2021 reforms to the IR35/Off-payroll Working Rules in the public and private sectors from April 2023 will now not take place.

It will remain for employers to determine whether a contractor falls within the scope of the rules and should be taxed similarly to an employee.

Alcohol Duty

The planned freeze in Alcohol Duty rates from 1 February 2023 has been cancelled.

Unchanged:

National Insurance/ Social Care Levy

The cancellation of the increase in National Insurance from 6 November and the Social Care Levy that was to have been introduced from April 2023 remains in effect.

Stamp Duty Land Tax (SDLT)

The changes to the Stamp Duty Land Tax (SDLT) thresholds that took effect immediately after the mini-Budget remain in place and will not be cancelled.

Annual Investment Allowance

This tax relief on plant and machinery will be permanently retained at £1 million, as outlined in the mini-Budget.

Tax-advantageous investment schemes

The Seed Enterprise Investment Scheme and the Company Share Options Plan will also continue to further support business investment having been expanded upon in the mini-Budget.

The Chancellor’s announcements may have significant tax planning implications. Please contact us for advice.

The Prime Minister has announced that the Corporation Tax increase announced by the previous administration and then cancelled by the former Chancellor Kwasi Kwarteng will take place in April 2023.

What does the announcement mean?

Companies with profits of £250,000 or more

For companies with profits of £250,000 or more, the upper profits limit, the rate of Corporation Tax will rise from 19 per cent to 25 per cent.  

Companies with profits of £50,000 or less

For companies with profits of £50,000 or less, the ‘lower profits limit’, Corporation Tax will continue to be charged at 19 per cent.

Companies with profits between £50,000 and £250,000

Companies with profits between £50,000 and £250,000 will receive marginal relief so that the rate of Corporation Tax will rise incrementally until it reaches 25 per cent.

In practice, this means that where companies have profits between £50,000 and £250,000 they will pay Corporation Tax at an effective rate of 26.5 per cent on each pound of profit in excess of the £50,000 lower rate band.

Companies with accounting periods of less than 12 months

The upper and lower profits limits will be reduced accordingly for companies with accounting periods of less than 12 months.

Groups and associated companies

Companies within groups or with associated companies will also see reductions in the upper and lower profits limits.

What should I do now?

The announcement by the Prime Minister means that the Corporation Tax rises that had been scheduled for April 2023 will take place as originally planned.

If you had already planned for the tax rise and had not changed your planning since the mini-Budget in September, you can stick with your existing plans.

If you have not planned for a tax rise, you should consider how you spread investments in your business over the coming years to maximise your tax efficiency.

Tax planning is complicated and comes with a vast array of permutations. Speak to us today for professional advice.

From 11 October, the interest rates on late tax payments rise again in line with the Bank of England’s (BoE) latest base rate increase.

The BoE increased the base rate by 0.5 per cent to 2.25 per cent in September, as a result of inflation.

Due to this, the late payment and repayment interest rates applied to tax debts will rise to:

• Late payment interest rate — 4.75 per cent
• Repayment interest rate — 1.25 per cent

HMRC interest rates are set in legislation and linked directly to the base rate, so the latest rise has been automatically triggered by these changes.

The late payment rate last increased to 4.25 per cent on 23 August – the highest rate since January 2009.

This interest is due on late tax bills for:

• Income Tax
• National Insurance Contributions
• Capital Gains Tax
• Stamp Duty Land Tax

The file and pay rate for Corporation Tax increases to 4.75 per cent with effect from 11 October.

Meanwhile, the interest charged on underpaid quarterly instalment payments increase to 3.25 per cent and the interest paid on overpaid quarterly instalment payments and on early payments of Corporation Tax not due by instalments rose to two per cent from 3 October 2022.

You should be aware that any further increases in the BoE base rate could further drive-up these rates and increase the cost of tax debts.

Link: HMRC interest rates for late and early payments

Two up-and-coming accountants at Romford-based Clemence Hoar Cummings are celebrating after completing their professional qualifications and gaining promotion.

Lizzie Hatch and Shane Barrs have been promoted to Assistant Manager in the Corporate and Tax and Accounting support teams respectively, following the completion of their ACA studies.

Set by the Institute of Chartered Accountants in England and Wales (ICAEW), this professional accreditation is one of the highest within the industry and transfers Chartered Accountant status to those who complete it.

Lizzie and Shane are the firm’s first two successful level 7 Apprenticeship trainees. This apprenticeship offers a more rounded education and training than the previous ICAEW technical exam pass route.

David Belbin, Managing Director at Clemence Hoard Cummings, said: “It’s not often a firm our size gets two students qualifying at the same time and so it is only right that we celebrate and congratulate them on their success.

“The high expectations set by the ICAEW are tough, but it ensures that clients receive a consistently high level of service and technical expertise.

“The new apprenticeship route has worked well for Lizzie and Shane and has given them plenty of practical experience alongside the more academic parts of their studies. We are proud of both of them.”

David added that the development of the firm’s team would help to expand its service offering to an ever-broader range of clients in future.

To find out more about career opportunities at Clemence Hoar Cummings, please visit https://chc.uk.com/

Sterling’s fall to close to parity with the dollar means that the cost of investing in UK businesses is lower than ever, especially for businesses and individuals based in the US or otherwise primarily trading in dollars.

Simply put, their dollars are now worth more pounds, meaning they get more bang for their (literal) buck.

For UK businesses and their owners seeking investors or buyers, this is potentially good news, because it means they may have the opportunity to seek a higher price than they would previously have been able to command.

It could also open the door to a new group of prospective buyers who might not previously have considered international investments or purchases.

Marketing your business for sale or seeking investment is not a straightforward undertaking and needs to be approached strategically.

That means you need to be clear in advance on what you want to achieve, what you feasibly can achieve and the steps you can take to obtain the best deal.

The precise timing of marketing your business and securing a deal for sale or investment is more of a tactical consideration that needs to fit within this broader framework.

It is neither feasible nor desirable to seek an immediate sale to or investment from dollar-based businesses or individuals.

However, with the pound currently at historically low levels and few experts expecting any significant upward swing in the short to medium term, now may be a good time to start the strategic process that needs to underpin the sale of your business.

With a new King at the Palace and a new Prime Minister at Number 10, it was no surprise that the new Chancellor at Number 11 used his first statement to the House of Commons to signal a “new era” for fiscal policy.

It turned out to be a striking change of direction, as the Chancellor opened his speech, saying: “We will be bold and unashamed in pursuing growth, even where that means taking difficult decisions”.

Gone was the Sunak era’s post-Covid emphasis on fiscal responsibility. Instead, in what the Government dubbed its ‘Plan for Growth’, Kwasi Kwarteng set out an approach prioritising tax cuts for individuals and businesses over immediate repairs to the public finances.

The Chancellor’s assumption is that cutting tax rates will boost economic growth and so increase the overall tax take.

Only a day earlier, the Bank of England’s Monetary Policy Committee had raised interest rates sharply by half a percentage point to 2.25 per cent – the highest level in eight years – in a bid to stave off spiking inflation.

Despite being a Fiscal Statement rather than a Budget, the policies trailed in the days and weeks running up to the speech suggested that it might prove to be more significant an event than many full Budgets.

• Income Tax
• National Insurance Contributions/ Health and Social Care Levy
• IR35 off-payroll working rules
• Corporation Tax
• Stamp Duty Land Tax (SDLT)
• Annual Investment Allowance (AIA) and SEIS
• Investment Zones
• Energy Bills
• Conclusions

Income Tax

In a speech full of significant announcements, perhaps the most notable related to Income Tax.

The Chancellor announced that the Additional Rate of Income Tax, which is currently 45 per cent on income over £150,000 will be scrapped entirely from April 2023.

He then moved to bring forward the cut in the Basic Rate of Income Tax to 19 per cent planned for April 2024 to April 2023.

The planned increase in Dividend Tax will be scrapped from April 2023, while the additional rate of Dividend Tax will be scrapped at the same point, in line with arrangements for Income Tax.

As a result, the rates of Dividend Tax in 2023-24 will be 7.5 per cent and 32.5 per cent for ordinary and upper rate taxpayers respectively.

National Insurance Contributions/ Health and Social Care Levy

Another landmark policy of the Johnson Government was the 1.25 per cent Health and Social Care Levy paid by employees and employers to help meet the cost of social care.

The current tax year is a transitional year in which the increase has been applied to National Insurance Contributions and it was to have become a standalone tax from April 2023.

Now, the Chancellor has announced that the charge will be scrapped and will no longer apply from 6 November 2022.

He said the reason for the move was to support smaller businesses, help households and boost economic growth.

IR35 off-payroll working rules

In an unexpected move, the Chancellor announced that the reforms to the IR35 off-payroll working rules in 2017 and 2021 for individual contractors operating via personal service companies in the public and private sectors respectively would be scrapped.

The change means that it will no longer be the responsibility of the organisation engaging contractors’ services to determine whether a contractor should pay tax on the same basis as an employee. Instead, that responsibility will revert to the contractor, as was the case previously.

Cancellation of planned Corporation Tax increase

The last Chancellor but one, Rishi Sunak, had announced a plan to increase the rate of Corporation Tax from 19 per cent to 25 per cent from April 2023 for companies with profits of more than £250,000. Those with profits of between £50,000 and £250,000 would have benefitted from tapered relief, while there would have been no increase for those with profits of £50,000 or less.

In a striking change from the previous Government’s policy, and consistent with the Prime Minister’s leadership campaign pledge, Mr Kwarteng announced that the planned increase will no longer go ahead and Corporation Tax rates will remain at 19 per cent.

He said that the rationale for the change is to encourage the investment needed to help the economy grow.

Stamp Duty Land Tax (SDLT)

In what might prove to become a tug of war between the Treasury and the Bank of England, just a day after many homeowners learned of a painful interest rate rise, the Chancellor offered substantial consolation in the form of a cut to Stamp Duty Land Tax (SDLT).

Indeed, just yesterday, the Governor of the Bank of England wrote to the Chancellor to warn him that tax cuts might mean even sharper interest rate rises.

Undeterred, the Chancellor pressed ahead with a move to double the SDLT threshold from £125,000 to £250,000 with immediate effect. For first-time buyers, the threshold will rise to £425,000 on properties of up to £625,000. The measure will apply permanently.

Annual Investment Allowance (AIA) and SEIS

In another surprise move, the Chancellor announced that the Annual Investment Allowance (AIA) would not fall back to £200,000 in 2023 but would instead remain at its current £1 million level permanently.

Meanwhile, he said there would be a two-thirds increase in the amount companies can raise through the Seed Enterprise Investment Scheme (SEIS) to £250,000 from April 2023. At the same time, the Annual Investor Limit will rise to £200,000.

Investment Zones

The Chancellor also announced the launch of up to 40 Investment Zones. In England, he said the Government is considering time-limited tax incentives for 10 years, including 100 per cent Business Rates relief, 100 per cent first-year allowances for qualifying expenditure of plant and machinery and an enhanced Structures and Buildings Allowance.

He said the Government is also considering zero-rate Employer National Insurance Contributions (NICs) on salaries of new employees in Investment Zones up to £50,270 a year, as well as full Stamp Duty Land Tax (SDLT) relief on land and building bought for commercial or new residential development.

The Chancellor said he will work with the Devolved Administrations to offer similar incentives in Investment Zones across the UK.  

Energy Bills

Following on from the Prime Minister’s announcement on 8 September of the Energy Price Guarantee and the Secretary of State for Business, Energy, Innovation and Skills in relation to business energy costs, the Chancellor reiterated the support being offered.

He said that the Energy Price Guarantee, alongside the £400 credit already announced will cut bills by around £1,400 for a typical household in comparison to the levels they were expected to reach without Government action.

Meanwhile, he confirmed that businesses, charities and public sector organisations will benefit from equivalent relief if they had not locked into a fixed-rate tariff by April 2022. That measure will last for six months from 1 October 2022.

The Chancellor said that the Government’s intervention will reduce inflation by around five percentage points.

Conclusions

The speech was a dramatic statement of the fiscal philosophy being pursued by the new occupants of Number 10 and Number 11 Downing Street. They hope that by reining in energy bills and cutting taxes, consumers will be prompted to spend and businesses will be more likely to invest, ultimately benefitting the public finances through increased tax receipts.

Whether that’s likely to be the case will be a point of serious contention amongst economists and various factions of the Conservative Party, especially given rising inflation and the possible impact on interest rates. Many will see the measures as a serious gamble.

What is certain, however, is that businesses will be more interested in what actually comes to pass than any abstract debate about whether the Government is taking the best course of action.

Link: The Growth Plan 2022

Keeping abreast of the updates to anti-money laundering (AML) laws is one of the key challenges facing organisations.

There are few regulations as important to the financial services sector as those that tackle AML.

Because the financial services industry is ever-changing, so too are the AML regulations.

This poses a significant challenge for businesses.

The recent amendments to the regulations include the addition of additional kinds of activity, like crypto asset businesses, the inclusion of new high-risk factors to be considered when assessing the need for increased due diligence, and the introduction of the requirement for firms to report on discrepancies in beneficial ownership information.

The reach of these regulations stretches from global financial organisations to startups.

How can companies stay compliant

Firms should take a holistic approach when considering the purpose of the AML regime, irrespective of their size.

Having clarity on processes that all staff can access along with clear documentation that all staff understand will certainly help.

That being said, a firm’s policies and procedures need to be in line with the nature, size, and risk profile of the business.

Along with the above, training is a required aspect of compliance.

The content and delivery of this training are both important.

Having practical aspects of training makes it more effective, and at the same time, less academic.

Computerized tests and training logs ensure that you can check staff have understood their training.

Whilst compliance remains an ongoing challenge, having strong leadership and alertness to these updates will stand your company in good stead.

If you need advice on the latest anti-money laundering updates, please contact us.

Part of the wider Economic Crime (Transparency and Enforcement) Act 2022, the ROE necessitates overseas entities that own UK land purchased since January 1999 to declare their beneficial owners or managing officers.

The fact that the Act has such a large retrospective reach has major implications for overseas entities.

Any overseas entity that owns the property and falls within the remit of the ROE must register with Companies House

This initiative is part of a wider Government strategy to combat economic crime. At the same time, it ensures that legitimate businesses will continue to view the UK as a great place to invest.

Who needs to register?  

In general terms, you need to disclose if you are a beneficial owner who:

• Holds more than 25 per cent of the shares and/or voting rights
• Holds the right to appoint and/or remove the majority of the board

• Has the right to exercise significant influence and/or control over the entity

What information needs to be provided? 

The Act specifies that the Overseas Entity must provide the following information when applying for registration:

• Name
• Country of Incorporation

• Service Address

There is also a requirement for more specific information regarding each registerable beneficial owner, including:

• Their name, date of birth, and nationality
• Their usual residential address (this will not be made public knowledge)
• An address for service

If the beneficial owner of the entity is also a trustee, Companies House will also need information about the trust. This information will not be made public.

If you or your clients could be affected by the Register of Overseas Entities, please get in touch with our expert team.