News
| 02-09-2024
Tax-efficient gift-giving is an essential aspect of estate planning that can significantly reduce your inheritance tax (IHT) liabilities while benefiting your loved ones. By carefully planning and utilising the available allowances and exemptions, you
| 02-09-2024
Research and development (R&D) tax credits are a crucial incentive designed to encourage businesses to innovate and invest in new technologies, processes and products. Yet, despite their significance, many businesses
| 20-08-2024
The latest annual update to Student Loan interest rates was made last week by the Department for Education.
| 14-08-2024
The first of the 2024 Sustainable Farming Incentive agreements for 2024 are now live. A tool is available that can help you find out about grants and funding that
| 14-08-2024
Last week, the Rural Payments Agency (RPA) announced that 98% of eligible farmers have now received their first instalment of the new delinked payments.
| 14-08-2024
The Bank of Englandâs decision to reduce the base rate to 5% means that HM Revenue & Customs (HMRC) will also reduce their interest rates. The interest rates charged by HM Revenue and
| 14-08-2024
Chancellor Rachel Reeves visited the US and Canada last week, and during an interview with Bloomberg was asked whether she was considering increasing capital gains tax. She replied: âWeâve got a budget on October 30 and we will set out our policy
| 06-08-2024
Draft legislation has now been published for the governmentâs plan to end the VAT exemption for private school fees.The government is also legislating to remove private schools from being eligible for business rates charitable rates relief.
| 06-08-2024
The previous government included plans to end non-domiciled tax status at the Spring Budget and replace it with a 4-year foreign income and gains (FIG) regime. The new government have now announced their intention to continue with these
| 06-08-2024
The government made changes last week to the remit for the Low Pay Commission (LPC) that will mean it takes the cost of living into account when recommending minimum wage rates. The LPC have also been instructed to narrow the gap
| 06-08-2024
From 1 August 2024, selling fees charged by Amazon to UK vendors will be subject to VAT at 20%. This is because of a change in the legal entity that charges the fees. Previously, fees were charged by Amazon Service Europe S.a.r.l (ASE), which did not have a UK establishment,
| 06-08-2024
HM Revenue and Customs (HMRC) have published draft legislation and a policy paper outlining the proposal for the abolition of the furnished holiday lettings (FHL) tax regime. This was originally announced by the previous
| 30-07-2024
Losing a job can be a very challenging and stressful experience. However, if your employer has become insolvent and cannot pay you money that you are owed this adds even further to your stress.
| 30-07-2024
The Institute of Chartered Accountants in England and Wales (ICAEW) have reported that HM Revenue and Customs (HMRC) are contacting taxpayers they believe may have overclaimed Business Asset Disposal Relief.
| 30-07-2024
The Kingâs Speech detailed proposals for a number of areas of new legislation that are likely to affect small employers. The Federation of Small Businesses (FSB) subsequently reported that nine-in-ten employers surveyed by them
| 30-07-2024
The Chancellor, Rachel Reeves, has announced a significant review aimed at enhancing pension investments, increasing pension pots, and reducing waste in the pensions system. The review was highlighted in the
| 15-07-2024
From 5ââââââ Augustââââââ 2024, any request to change your VAT registration details should be made using the VAT online account, and not by using the VAT484 form or any other postal or electronic means. Using the digital route is quicker, more secure and will avoid any unnecessary delays.
| 15-07-2024
HM Revenue & Customs have released a new tool designed to help businesses find out what VAT registration would mean for their business. The new HMRC tool can help you to estimate what VAT might be owed or reclaimed by your business if you were to register for VAT.
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Strategic planning of gifts to minimise tax liabilities
Tax-efficient gift-giving is an essential aspect of estate planning that can significantly reduce your inheritance tax (IHT) liabilities while benefiting your loved ones. By carefully planning and utilising the available allowances and exemptions, you can ensure that more of your wealth passes on to your family and less is lost to taxes. At our practice, we believe that understanding the rules around gift-giving is key to making informed decisions. In this guide, weâll walk you through the essentials of tax-efficient gift-giving for the 2024/25 tax year.
Understanding the basics of tax-efficient gift-giving
When we talk about tax-efficient gift-giving, we refer to the strategic planning of gifts to minimise tax liabilities, particularly IHT. For tax purposes, a gift is any transfer of money or assets to another person without receiving anything of equal value in return. This could include cash, property, shares or other valuable assets.
The current UK tax rules provide several ways to give gifts without incurring immediate tax liabilities. However, these giftsâ timing, structure and documentation are vital to ensuring they remain tax-efficient. As of the 2024/25 tax year, IHT is charged at 40% on estates above the nil-rate band, which remains at ÂŁ325,000 (there is also a âresidence nil rate bandâ of ÂŁ175,000 per person, subject to certain restrictions). Properly planned gifts can reduce the taxable value of your estate, potentially saving your beneficiaries a significant amount in IHT.
Annual gift allowances
One of the simplest and most effective ways to give tax-efficient gifts is by utilising the annual gift allowance. For the 2024/25 tax year, you can give away up to ÂŁ3,000 each year without it being added to the value of your estate for IHT purposes. This is known as the annual exemption.
If you didnât use your ÂŁ3,000 allowance in the previous tax year, you can carry it forward, allowing you to give away up to ÂŁ6,000 tax-free in the current year. However, this carry-forward can only be used for one year, so planning your gifts is important.
The annual exemption can be used to make gifts to any number of individuals, but itâs worth noting that this is the total amount you can give away tax-free each year, not the amount per recipient. For example, you could give ÂŁ1,000 to three people or the entire ÂŁ3,000 to one person.
Exempted gifts
In addition to the annual gift allowance, certain gifts are completely exempt from IHT. These exemptions provide further opportunities for tax-efficient gift-giving.
Small gifts exemption
You can give away up to ÂŁ250 to any number of individuals each tax year, provided that the recipient doesnât also receive part of your ÂŁ3,000 annual exemption. The small gifts exemption is particularly useful for making regular small gifts to friends and family without affecting your estateâs IHT position.
Gifts to spouses or civil partners
Gifts between spouses or civil partners are completely exempt from IHT, as long as both individuals are UK-domiciled. This means you can transfer any amount of money or assets to your spouse or civil partner without it being subject to IHT. This exemption is one of the most effective ways to manage the tax impact of your estate.
Gifts to charities and other exempt organisations
Gifts to registered charities, political parties and certain national institutions are also exempt from IHT. If youâre charitably inclined, this exemption allows you to support your favourite causes while reducing the taxable value of your estate. Additionally, leaving 10% or more of your estate to charity can reduce the IHT rate on the remainder of your estate from 40% to 36%.
Potentially exempt transfers (PETs)
A potentially exempt transfer (PET) is a gift that becomes exempt from IHT if you live for seven years after making the gift. PETs are a powerful tool for reducing the taxable value of your estate, but they require careful planning and documentation.
When you make a PET, the value of the gift is immediately removed from your estate for IHT purposes. However, if you pass away within seven years of making the gift, it may still be subject to IHT. The rate of tax applied to a PET that becomes chargeable within seven years is reduced on a sliding scale, known as taper relief. For example, if you survive three to seven years after making the gift, the IHT rate progressively reduces from 40% to 8%.
This sliding scale makes it beneficial to make large gifts as early as possible. Even if youâre unsure about living for the full seven years, the potential reduction in IHT liability can still make PETs a valuable part of your estate planning strategy.
Regular gifts from surplus income
One often overlooked exemption is the ability to make regular gifts from your surplus income. These gifts are exempt from IHT as long as theyâre made from your income (not capital), are regular and donât affect your standard of living.
To qualify, you must demonstrate that the gifts are part of a regular pattern and that you have sufficient income to cover your living expenses after making the gifts. Common examples include regular payments to children or grandchildren, contributions to someoneâs living costs or paying for life insurance premiums.
Keeping detailed records is essential to proving that these gifts qualify for the exemption. You should document the source of the income, the amounts gifted and evidence that your standard of living hasnât been affected. If done correctly, this exemption allows you to reduce the value of your estate over time without triggering an IHT liability.
Gifts for weddings and civil partnerships
Weddings and civil partnerships provide another opportunity for tax-efficient gift-giving. You can give tax-free gifts to someone getting married or entering a civil partnership, with the amount varying depending on your relationship with the couple.
- parents can give up to ÂŁ5,000
- grandparents can give up to ÂŁ2,500
- anyone else can give up to ÂŁ1,000.
These gifts must be given on or shortly before the wedding or civil partnership ceremony to qualify for the exemption. They are a straightforward way to provide financial support to a loved one on their special day while also reducing the value of your estate for IHT purposes.
The importance of record-keeping
Accurate record-keeping is a critical component of tax-efficient gift-giving. Without proper documentation, you may find it difficult to prove to HMRC that your gifts qualify for the various exemptions and allowances.
For each gift you give, you should keep detailed records that include:
- the date of the gift
- the recipientâs details
- the value of the gift
- the type of gift (for example, cash, property)
- any relevant exemptions or allowances applied.
For regular gifts from surplus income, you should also maintain records of your income and living expenses and how you calculated that the gifts didnât affect your standard of living. This documentation will be invaluable if HMRC questions your estate after your death, ensuring that your gifts are correctly accounted for and exempted from IHT.
Gifting property and other high-value assets
Gifting property, shares or other high-value assets can have significant tax implications, particularly with respect to capital gains tax (CGT). When you gift an asset that has increased in value since you acquired it, you may be liable for CGT on the gain.
However, there are strategies to minimise CGT liabilities when making such gifts. For example, you could transfer assets that have not appreciated significantly or utilise the CGT annual exemption, which allows you to make gains of up to ÂŁ3,000 (for the 2024/25 tax year) without incurring CGT.
Gift Hold-Over Relief, on the other hand, essentially allows the individual to gift an asset and not have to pay any capital gains on the gift (with the recipient instead paying it when they sell the asset). The gift has to be business assets (which can include shares, but they must be unlisted).
To further minimise CGT, if an individual has exhausted their annual exemption, they could transfer the asset to their spouse, who can then gift it, utilising their own exemption. Similarly, for the ÂŁ3,000 annual gift exemption and wedding gift exemptions, if more needs to be given, assets can be transferred to a spouse, who can then re-gift to the intended recipient, effectively doubling the exemptions by using both spouses’ allowances.
If youâre considering gifting high-value assets, itâs advisable to seek professional advice to explore the most tax-efficient way to do so. We can help you navigate the rules and ensure that your gift achieves the desired tax benefits.
The role of trusts in tax-efficient gifting
Trusts can be valuable in tax-efficient gift-giving, particularly for managing large gifts or protecting family wealth across generations. By placing assets into a trust, you can reduce the value of your estate for IHT purposes while retaining some control over how the assets are used.
There are different types of trusts, each with its own tax implications.
- Discretionary trusts: These allow trustees to decide how to distribute the trustâs income and capital among the beneficiaries. These can be useful for providing for future generations while maintaining flexibility.
- Bare trusts: In a bare trust, the beneficiaries have an absolute right to the trustâs assets. The assets are held in the trusteeâs name, but the beneficiaries have the right to the income and capital.
Trusts can be complex, and setting one up requires careful consideration of your goals and the tax implications. It is essential to work with an adviser who can guide you through the process and ensure that the trust is structured to achieve your objectives.
Seeking professional advice
While the principles of tax-efficient gift-giving are straightforward, the rules can be complex and mistakes can be costly. Professional advice is invaluable when planning significant gifts or complex arrangements, such as trusts or gifting high-value assets.
Our firm specialises in helping clients navigate the rules around gift-giving and estate planning. We can work with you to develop a personalised strategy that maximises the tax benefits of your gifts while ensuring that your wealth is preserved for your loved ones.
In summary
Tax-efficient gift-giving is essential to estate planning, allowing you to pass on your wealth while minimising tax liabilities. By understanding the available allowances and exemptions, keeping accurate records and seeking professional advice when needed, you can ensure that your gifts are both generous and tax-efficient.
Whether youâre looking to make small gifts to family members, transfer high-value assets or set up a trust, weâre here to help. Contact us today to discuss your estate planning needs and learn how we can help you and future generationsUnlock the benefits of R&D tax credits for your business
Research and development (R&D) tax credits are a crucial incentive designed to encourage businesses to innovate and invest in new technologies, processes and products. Yet, despite their significance, many businesses either arenât aware of their potential benefits or arenât fully utilising them.
We explore what R&D tax credits are, who can claim them, and how businesses can maximise their potential.
What are R&D tax credits?
R&D tax credits are government incentives designed to encourage businesses to spend more on R&D activities. The purpose is simple: by reducing a companyâs tax bill or providing a cash lump sum, these credits make it easier for businesses to reinvest in innovation. Theyâre available to a wide range of companies, from large corporations to small and medium-sized enterprises (SMEs), regardless of their industry.
Who can claim R&D tax credits?
One of the most common misconceptions about R&D tax credits is that they are only for companies involved in scientific research or high-tech industries. This isnât the case. Any company undertaking a project seeking to advance science or technology can potentially claim R&D tax credits. This includes activities such as developing new products, processes or services and significantly improving existing ones.
Eligible projects
To qualify for R&D tax credits, a project must meet certain criteria set out by HMRC. It should:
- aim to create an advance in science or technology
- attempt to overcome scientific or technological uncertainties
- not be readily available or easily deducible by a competent professional in the field.
Importantly, these projects donât need to succeed to qualify. Even if the project fails or the company doesnât fully achieve its objectives, the R&D expenditure could still be eligible for tax relief.
How R&D tax credits work
The process for claiming R&D tax credits can seem complex, but it essentially revolves around calculating the companyâs eligible R&D expenditure and applying the relevant tax relief. The calculation differs slightly depending on whether the company is an SME or a large business.
R&D tax credits for SMEs
For SMEs, R&D tax credits are particularly generous. To qualify as an SME, a company must have fewer than 500 employees and either an annual turnover under âŹ100m or a balance sheet total under âŹ86m.
R&D expenditure credit for large companies
Large companies that donât qualify as SMEs can claim R&D tax relief through the R&D expenditure credit (RDEC) scheme. The RDEC offers a credit of 20% of qualifying R&D expenditure, which is taxable, resulting in a net benefit of 15%. While this rate is lower than the SME scheme, it still represents a significant incentive for larger companies to invest in R&D.
This scheme can also be used for SMEâs whose expenditure doesnât qualify for the SME scheme (e.g. the expenditure was covered by grant funding or was âcustomer-ledâ).
Notable changes to the rules
The UK Government has announced it will be merging the SME and RDEC R&D tax relief schemes into a single, streamlined scheme from April 2024 (although elements of the SME scheme still remain for R&D-intensive companies in the form of the enhanced scheme).
This new approach will follow the RDEC model but retain some SME benefits. While the consolidation aims to simplify the process, it may result in reduced relief for certain SMEs, especially those that don’t qualify for the enhanced R&D intensive scheme. The merger also introduces changes such as subcontracting rules and relief caps, making the claims process more complex and reinforcing the importance of seeking specialist advice. The HMRC website is regularly updated with relevant information.
Common misconceptions about R&D tax credits
Despite the availability of R&D tax credits, many businesses miss out on claiming them due to common misconceptions.
Misconception 1: R&D tax credits are only for large, high-tech companies
As mentioned earlier, this is not true. Companies of all sizes and across various sectors can claim R&D tax credits. Whether a business is involved in manufacturing, construction, agriculture or even creative industries, thereâs a good chance that R&D tax credits are relevant.
Misconception 2: The application process is too complex
While the process of claiming R&D tax credits involves detailed documentation and a clear understanding of what qualifies as R&D, itâs not as daunting as it seems. Many companies choose to work with specialist advisers who can guide them through the process, ensuring that all eligible activities are identified and accurately claimed.
Misconception 3: We didnât achieve our project goals, so we canât claim
One of the biggest benefits of the R&D tax credit scheme is that it rewards innovation, even when projects donât go as planned. If your company attempted to resolve a technological or scientific uncertainty, it could still qualify for relief, regardless of the outcome.
How to maximise your R&D tax credit claim
Given the significant financial benefits, businesses should approach the R&D tax credit claim process with a well-planned strategy. Here are some tips to ensure youâre getting the most out of your claim.
1. Keep detailed records
Accurate and comprehensive records are crucial for a successful R&D tax credit claim. This includes documenting project objectives, methodologies, time spent by staff and all related costs. The more detailed your records, the easier it will be to substantiate your claim and maximise the benefit.
2. Identify all qualifying activities
Itâs easy to overlook certain activities that qualify as R&D. Beyond obvious R&D work, consider whether your company has been involved in process improvements, software development or even trials and testing that attempted to solve scientific or technological challenges. An experienced R&D tax adviser can help identify these activities.
3. Understand the scope of eligible costs
R&D tax credits cover a wide range of costs, not just direct R&D expenses. Qualifying costs can include:
- staff salaries, wages and other associated costs like employer NICs and pension contributions
- costs of materials and consumables used in R&D
- utilities like power and water which are used in R&D processes
- software costs directly related to R&D activities
- payments to subcontractors and external agencies, provided they relate to R&D (Note: For the accounting period starting 1 April 2024, the subcontractor needs to be based in the UK).
By thoroughly understanding the scope of eligible costs, you can ensure that your claim is as comprehensive as possible.
4. Work in âprojectsâ
It is helpful to think of your R&D activities as distinct projects, each representing its own area of innovation. HMRC typically prefers claims to be split into projects, so keeping detailed records for each project throughout the year will help ensure a well-organised and comprehensive claim.
5. Review past claims
R&D tax credits can be claimed for previous years, typically up to two years from the end of the accounting period in which the R&D expenditure occurred. If your company has overlooked R&D tax credits in the past, it might be worth reviewing previous periods to see if thereâs potential for a claim.
6. Work with a specialist adviser
While handling R&D tax credit claims internally is possible, working with a specialist adviser can significantly increase the likelihood of a successful and maximised claim. Advisers have the expertise to identify all qualifying activities and costs, and they can help navigate the intricacies of HMRCâs requirements.
Significant changes have recently been made and continue to be made to the schemes, making claims even more complex, further justifying the need for an adviser. Furthermore, historically, HMRC enquired for further detail on 1% of claims, but to reduce fraudulent claimants abusing the scheme, now look into 20% of claims.
The impact of R&D tax credits on business innovation
R&D tax credits are more than just a tax relief; theyâre a catalyst for innovation. For many companies, the financial relief these credits provide makes the difference between pursuing and shelving a new idea due to cost concerns.
According to HMRCâs statistics, for the tax year 2021 to 2022, over 90,315 companies claimed R&D tax credits, amounting to ÂŁ7.6bn in tax relief. This represents a significant investment in the future of UK businesses, helping to drive forward new technologies, products and services.
Encouraging growth and competitiveness
By lowering the financial barriers to innovation, R&D tax credits help businesses of all sizes remain competitive. They enable companies to take risks on new projects, invest in research and develop cutting-edge solutions that might otherwise be unaffordable. This, in turn, strengthens the UK economy by fostering a culture of continuous improvement and technological advancement.
Supporting SMEs and large businesses alike
While large companies often have the resources to dedicate entire teams to R&D, SMEs may find allocating funds to innovative projects more challenging. R&D tax credits level the playing field by making it more feasible for smaller companies to invest in research and development. As a result, SMEs can compete on a global scale, bringing new products and services to market and driving economic growth.
Donât miss out on R&D tax credits
R&D tax credits are an invaluable resource for UK businesses, providing financial support that can be reinvested into further innovation. Whether your company is a small startup or a large enterprise, engaging in activities that advance science or technology could make you eligible for significant tax relief.
To ensure youâre making the most of this opportunity, keep detailed records of your R&D activities, identify all eligible costs and consider seeking advice from a specialist. With the right approach, R&D tax credits can provide the boost your business needs to stay ahead in a competitive market.
Get in touch with us today to learn more about how we can help your business innovate and grow.
The latest annual update to Student Loan interest rates was made last week by the Department for Education.
Different rates and thresholds apply depending on the type of student loan and the new rates will apply from 1 September 2024 to 31 August 2025.
Those running payroll may want to be aware that the rates are changing in case of queries from staff with student loans who notice a change in their deduction in their September pay packet.
For details of the rates, see: https://www.gov.uk/government/news/student-loans-interest-rates-and-repayment-threshold-announcement–5
The first of the 2024 Sustainable Farming Incentive agreements for 2024 are now live. A tool is available that can help you find out about grants and funding that you may be eligible for.
The tool can be found here – https://www.gov.uk/find-funding-for-land-or-farms
The tool doesnât confirm your eligibility, but it is a good way of tracking down actions that you may be able to get paid for.
If you need any help finding funding that you may be eligible for, please feel free to give us a call and we would be happy to help.
See: https://www.gov.uk/government/news/first-sustainable-farming-incentive-agreements-live-for-2024
Last week, the Rural Payments Agency (RPA) announced that 98% of eligible farmers have now received their first instalment of the new delinked payments.
The second instalment is due to be paid from 30 September. This is earlier than originally planned. According to RPA Chief Executive Paul Caldwell, the payment has been brought forward âto make sure farmers are paid promptly to improve cash flow during this challenging period.â
Farmers will receive support via delinked payments until 2027.
The delinked payments are based on the average BPS payment received by the farm for the 2020 to 2022 scheme years. Progressive deductions will be applied when calculating the delinked payments each year from 2024 to 2027.
If you were expecting a delinked payment and have not received your first instalment, please feel free to get in touch and we will be happy to help you.
See: https://www.gov.uk/government/news/first-instalment-of-new-delinked-payments-issued-to-businesses
The Bank of Englandâs decision to reduce the base rate to 5% means that HM Revenue & Customs (HMRC) will also reduce their interest rates.
The interest rates charged by HM Revenue and Customs on late tax payments, as well as the rates they pay on repayments are linked to the Bank of Englandâs base rate. Late payment interest is charged at base rate plus 2.5%. Repayment interest is paid at base rate minus 1%, subject to a minimum of 0.5%.
The reduced rates will apply from:
- 12 August 2024 for quarterly instalment payments; and
- 20 August 2024 for non-quarterly instalments payments.
If you need help with your tax or are concerned about being able to pay a tax payment, please get in touch. We can work with you to make a payment arrangement with HMRC.
See: https://www.gov.uk/government/news/hmrc-late-payment-interest-rates-to-be-revised-after-bank-of-england-cuts-base-rate
Chancellor Rachel Reeves visited the US and Canada last week, and during an interview with Bloomberg was asked whether she was considering increasing capital gains tax.
She replied: âWeâve got a budget on October 30 and we will set out our policy then, but itâs always important when youâre deciding tax policy to strike the right balance. Of course, you need to bring in the revenue to fund public services, but weâve also got to grow the economy. I wonât do anything that makes it harder to achieve that economic growth and prosperity.â
The Chancellor has ruled out raising VAT, income tax rates or National Insurance rates, but this has added speculation on whether other taxes will be increased.
Last year, Ms Reeves told the BBC that she had no plans to increase capital gains tax. However, since the Labour party came into office, she has claimed that there is a ÂŁ22 billion shortfall in public finances this year. She has identified some savings, but it seems likely that the gap will also be plugged by raising taxes somewhere.
In addition to changing the rates of capital gains tax, the government could also remove some reliefs to increase their tax take.
Whether there will be any changes to capital gains tax, and what they might be, is difficult to predict, but it may be telling that Ms Reeves refused to rule it out.
If you are thinking about disposing of an asset and would like to know the likely tax cost under the current rules, please get in touch. We would be happy to help you.
See: https://www.bbc.co.uk/news/articles/c9v880z470lo
Draft legislation has now been published for the governmentâs plan to end the VAT exemption for private school fees.
The government is also legislating to remove private schools from being eligible for business rates charitable rates relief. Because business rates policy is devolved, the business rates policy change will only affect private schools in England. VAT policy, however, is reserved and so the VAT changes will affect private schools across the UK.
The current situation for VAT
Currently, private schools, as regulated education providers, qualify as exempt from VAT. This means no VAT is currently charged on private school fees. Private schools also cannot recover any VAT they incur on expenditure.
What will change?
From 1 January 2025, all education services and vocational training supplied by a private school, or a âconnected personâ, for a charge will be subject to VAT at the standard rate of 20%. Any boarding services that are closely related to this supply will also be subject to VAT at 20%.
For parents this means a likely increase of 20% in private school fees beginning next year. However, since private schools will now be able to claim back the VAT on expenditure they incur. This might provide some latitude for the school to be able to absorb some of the increase.
What if a pupil is being funded by the Local Authority?
In some cases, pupils are in a private school because their needs cannot be met in a state run school and the Local Authority funds this. Where this is the case the Local Authority will be compensated for the VAT they incur. If this is your situation then you should see no change.
Can I pay fees in advance to save VAT?
Unfortunately not. As an anti-forestalling measure, any fees paid from 29 July 2024 that relate to the term starting in January 2025 and onwards will be subject to VAT.
Does this apply to nurseries?
The intention is that nurseries, whether standalone or attached to a private school will remain exempt from VAT.
It will be the fees for children who turn compulsory school age that will become taxable. So, this means that VAT will start to apply when a child begins their first year of primary school.
How about sixth form?
Education and vocational training provided by standalone private sixth form colleges or ones attached to a private school will also be subject to VAT.
However, further education colleges that are classified as public sector institutions will not be subject to VAT.
Is there any change for state schools and academies?
No, state schools, including academies, will continue to be exempt from VAT for education and boarding.
How about other goods and services supplied by private schools?
Outside of boarding, a private school will also often provide school meals, transport and books and stationery. The government has confirmed that other closely related goods and services other than boarding which are for the direct use of the pupils and necessary for delivering the education to the pupils will remain exempt from VAT.
This opens the possibility that a school might limit the amount of VAT they charge by assigning a high value to these VAT exempt goods and services and a low value to the VATable education and boarding services. However, the government have confirmed their awareness of this, and any such practice will be challenged.
The additional fly in the ointment with having a mixture of taxable and exempt supplies is that it can affect the amount of VAT that can be recovered by the school on its expenditure. Partial exemption calculations are needed, and HM Revenue and Customs (HMRC) have said they will provide specific guidance for schools on how to do this.
Itâs also been confirmed that VAT will need to be charged on any education after school hours or during the holidays. However, before or after school childcare, or childcare holiday clubs, that just consist of childcare will remain exempt from VAT.
When will private schools need to register for VAT?
Any private schools that are not already VAT registered will need to register from 1 January 2025.
Schools that donât already make any taxable supplies will be able to register from 30 October. Schools that do currently make taxable supplies, such as hiring out facilities, can choose to voluntarily register early.
If you are involved in running a private school and would like help on what these VAT changes will mean to you or would like training or advice on how to deal effectively with VAT, please call us and we would be happy to help.
See: https://www.gov.uk/government/publications/vat-on-private-school-fees-removing-the-charitable-rates-relief-for-private-schools
The previous government included plans to end non-domiciled tax status at the Spring Budget and replace it with a 4-year foreign income and gains (FIG) regime. The new government have now announced their intention to continue with these plans, while ending some advantages for existing non-domiciled individuals.
What the change in tax status will mean
Preferential tax treatment based on domicile status will be removed for all new FIG arising from 6 April 2025. This means that foreign income and gains will all be taxable in the UK where you are classed as residing in the UK, not just that included under the remittance basis.
A relief will be available for new arrivals
New arrivals to the UK will have 100% relief in their first four years of tax residence, as long as they have not been a UK tax resident in any of the 10 consecutive years prior to arriving.
Transitional measures
As a transitional measure, it was previously announced that there would be a 50% reduction in foreign income subject to tax for the first year for those losing access to the remittance basis. However, the government has said this will not now happen.
The government has also outlined transitional arrangements to cover FIG that arose before 6 April 2025 and remitted to the UK afterwards â it will be taxed when remitted as per the current rules. A new Temporary Repatriation Facility (TRF) will also be available that allows for paying a reduced tax rate on a remittance for a limited time period after the remittance basis ends.
Changes to inheritance tax included
The government plans to replace the existing domicile-based system for inheritance tax (IHT) with a new residence-based one from 6 April 2025.
The basic test they are proposing for whether non-UK assets are within the scope for IHT will be whether a person has been resident in the UK for 10 years prior to the tax year in which the chargeable event happens. A person will also be kept within scope for 10 years after leaving the UK.
There are also plans to end the use of Excluded Property Trusts that keep assets out of the scope of IHT. Confirmation of how the rules relate to this and how existing trusts are affected will be provided at the Budget on 30 October.
If you are concerned about how these changes will affect you and the tax you pay, please call us at any time and we will be happy to discuss this with you.
See: https://www.gov.uk/government/publications/2024-non-uk-domiciled-individuals-policy-summary
The government made changes last week to the remit for the Low Pay Commission (LPC) that will mean it takes the cost of living into account when recommending minimum wage rates.
The LPC have also been instructed to narrow the gap between the minimum wage rate for 18-20 year olds and the National Living Wage. The longer term objective is to remove the age bands altogether and have a single adult rate.
Each October the LPC makes recommendations to the government on the minimum wage rates to apply from the following April. The new remit keeps this process and timeline in place, allowing for businesses to plan for uplifts.
As well as the cost of living, the LPCâs remit will continue to look at the impact on business, competitiveness, the labour market and the wider economy.
See: https://www.gov.uk/government/publications/national-minimum-wage-and-national-living-wage-updated-low-pay-commission-remit-2024
From 1 August 2024, selling fees charged by Amazon to UK vendors will be subject to VAT at 20%.
This is because of a change in the legal entity that charges the fees. Previously, fees were charged by Amazon Service Europe S.a.r.l (ASE), which did not have a UK establishment, so the fees were subject to the VAT reverse charge procedure. From 1 August, fees will be charged by Amazon EU S.a.r.l (AEU), which has a UK branch. This means that AEU must charge VAT at 20% on fees.
Vendors who are VAT-registered will be able to reclaim the VAT, subject to the usual partial exemption rules. Those who are not VAT-registered will see their selling fees increase by 20% because they cannot claim the VAT.
Generally, such increases in VAT are largely borne by the consumer, as vendors pass the increased costs onto their customers.
For more information, see: https://sellercentral.amazon.co.uk/seller-forums/discussions/t/fe8e800e-d95c-42ae-a98b-e6e682547f90
HM Revenue and Customs (HMRC) have published draft legislation and a policy paper outlining the proposal for the abolition of the furnished holiday lettings (FHL) tax regime. This was originally announced by the previous government and any hopes that this may be stalled by the new government are now laid to rest.
The new measures are proposed to take effect on or after 6 April 2025 for income and capital gains tax, and from 1 April 2025 for corporation tax.
The proposed revisions will remove the tax advantages that furnished holiday let landlords have over other property businesses, as follows:
- Loan interest will be restricted to the basic rate for Income Tax.
- Capital allowance rules for new expenditure will be removed and replaced with the replacement of domestic items relief available to other property businesses.
- Capital gains tax reliefs based on disposing a business asset will no longer apply to furnished holiday lets.
- Furnished holiday let income will no longer be included within relevant UK earnings when calculating maximum pension relief.
There are some specific transitional rules that will apply to these changes.
If you own properties that currently qualify for the FHL tax regime, we recommend that you review the effects that the change in legislation will have on you so that you can determine if you need to take any action. If you need any help with this, please do not hesitate to contact us, we would be pleased to help you.
See: https://www.gov.uk/government/publications/furnished-holiday-lettings-tax-regime-abolition
Losing a job can be a very challenging and stressful experience. However, if your employer has become insolvent and cannot pay you money that you are owed this adds even further to your stress.
If you are in this situation, the latest Annual Report from the Insolvency Service highlights some important information about the support available that may be available to you through the Redundancy Payments Service (RPS).
Hereâs what you need to know.
Key Figures and Support
In 2023-2024, the RPS received 85,592 claims for redundancy payments. Funded by National Insurance Contributions, the service disbursed a total of ÂŁ494 million to individuals who had been left in financial distress due to their employers’ insolvency. This means that there is substantial support available to help you get back on your feet.
Quick Processing of Claims
The report shows that on average, claims for redundancy payments are processed within 10 days. This is good news as it means you can expect to receive financial support relatively quickly, which may help to alleviate some of the immediate financial pressures you might have following a job loss.
What Can You Claim?
The RPS covers a variety of payments you might be owed, including:
- Redundancy Pay: This is compensation based on your length of service, age, and weekly pay.
- Unpaid Wages: Any wages you are owed by your former employer.
- Holiday Pay: Payment for any accrued but unused holiday.
- Statutory Notice Pay: If you didnât receive the notice period pay you were entitled to.
- Protective Awards: Compensation if your employer didnât consult you before making you redundant.
For example, last year, nearly 10,000 former employees of the high street chain Wilko received ÂŁ53.7 million in redundancy and statutory notice pay, with claims processed within 24 hours. Additionally, protective awards included payouts to over 400 former employees of Debenhams and more than 700 former employees of Norwegian Air Resources UK Limited.
How to Apply
If you need to apply for redundancy payments, the process is straightforward and can be completed online. Here are the steps to follow:
- Check your rights: The Insolvency Service provide guidance on this at https://www.gov.uk/government/publications/redundancy-payments-links-to-further-information-and-guidance/redundancy-payments-links-to-further-information-and-guidance. From here you will be able to find out what your rights are, what you can apply for and the types of payments that can be made.
- Prepare your details: Youâll need to provide some details about yourself and your employment. The online application (see below) includes a list of the items youâll need to have on hand. Youâll need a CN number to make an application. If you donât have one, then you can contact the insolvency practitioner who is handling your employerâs insolvency, and they will provide you with this.
- Submit your application: There are 2 applications to complete, and these must both be completed online. To claim for redundancy and other money youâre owed by your employer, see: https://www.gov.uk/claim-redundancy. To claim for loss of notice pay, see: https://www.gov.uk/claim-loss-notice.
- Understand the calculation: You may find it helpful to review what payments you can expect and when you can expect to receive them. For this see: https://www.gov.uk/government/publications/redundancy-payments-from-the-insolvency-service/explaining-your-redundancy-payment.
- Await your payment: The Insolvency Service aim to process claims and make payments within 6 weeks. Although as indicated in the report, your waiting time may be shorter than this.
Recovering Funds
It’s worth noting that the RPS also works to recover money from insolvent companies, which helps to cover some of the costs it pays out. Last year, ÂŁ29 million was recovered, a worthwhile contribution to the support system.
Conclusion
If youâve lost your job due to your employerâs insolvency, the Redundancy Payments Service is designed to provide financial support and help you through this difficult time. Understanding your rights and the support available can make a significant difference as you navigate the challenges of job loss. For more detailed information and to start your application, visit the governmentâs RPS website.
See: https://www.gov.uk/government/news/people-who-lost-jobs-in-business-failures-thrown-vital-lifeline-by-insolvency-service
The Institute of Chartered Accountants in England and Wales (ICAEW) have reported that HM Revenue and Customs (HMRC) are contacting taxpayers they believe may have overclaimed Business Asset Disposal Relief.
What is Business Asset Disposal Relief (BADR)?
BADR, which was formerly known as entrepreneurâs relief, is a tax relief thatâs designed to encourage business owners to sell or dispose of their business assets by offering a reduced rate of capital gains tax. However, there is a lifetime limit to the amount of gains that can qualify for BADR. As of 2024, this limit is ÂŁ1 million.
Why are HMRC writing to taxpayers about this?
ICAEW report that HMRC is writing to taxpayers who claimed BADR on their 2022/23 tax return where they believe the taxpayer has either exceeded the lifetime limit before 2022/23, and so the claim on the tax return should be removed, or the claim on the tax return has taken the taxpayer over the limit, and so the claim needs to be reduced in line with the limit.
This may be an issue for some taxpayers because the lifetime limit for disposals was reduced from ÂŁ10 million on and after 11 March 2020. Taxpayers not aware of this reduction therefore may have made a claim they believe is valid but isnât actually in line with the reduced limit.
What should you do if you receive a letter?
If you receive such a letter, then itâs important to promptly check your claim. Where an adjustment is needed then you can simply amend your tax return. If you believe that your claim is in fact valid then HMRC need to be contacted within 30 days using the details contained in the letter.
Failing to do anything is likely to mean that HMRC will amend the return to discount the claim or open an enquiry into the return. If they then find any additional tax is due to be paid during the course of the enquiry, HMRC may charge a penalty.
Where we prepared your tax return, please simply hand the letter to us and we will be pleased to contact HMRC on your behalf. Whatever the case, if you are not sure about what to do, please feel free to contact us and we will be happy to help you.
See: https://www.icaew.com/insights/tax-news/2024/jul-2024/taxpayers-may-have-exceeded-badr-limit
The Kingâs Speech detailed proposals for a number of areas of new legislation that are likely to affect small employers.
The Federation of Small Businesses (FSB) subsequently reported that nine-in-ten employers surveyed by them had said they have concerns that the costs and risks associated with employing people would be increasing.
The FSB also noted that there was no legislation announced to tackle the poor payment practices of big businesses toward their small suppliers. FSB Policy Chair Tina McKenzie said late payment âhampers cashflow and stifles investment, and we call on the Government to look again.â
See: https://www.fsb.org.uk/resources-page/fsb-weekly-brief-newsletter-friday-19-july-2024.html
The Chancellor, Rachel Reeves, has announced a significant review aimed at enhancing pension investments, increasing pension pots, and reducing waste in the pensions system. The review was highlighted in the King’s Speech, confirming a new Pensions Bill that could significantly benefit UK pensioners and the broader economy.
Here’s an analysis of what the review could mean.
Key Highlights of the Pensions Review
- Boost to Pension Pots: The new Pensions Bill has the potential to increase pension pots by over ÂŁ11,000 for savers in defined contribution schemes. The bill also emphasises further consolidation and broader investment strategies to deliver higher returns.
- Economic Impact: An investment shift in defined contribution schemes could introduce ÂŁ8 billion of new productive investment into the UK economy. The review will also look at how to unlock the investment potential of the Local Government Pension Scheme (LGPS), which manages ÂŁ360 billion in assets and is the seventh largest pension fund in the world.
- Reducing Fees: The review will address the ÂŁ2 billion annual expenditure on fees within the LGPS, aiming to cut down on waste and improve efficiency.
Industry support
The announcement has received strong support from various industry leaders: For instance, António SimÔes, CEO of Legal & General Group, welcomed the initiative, noting that driving pensions capital into areas like science and infrastructure can support better returns for savers and stimulate long-term economic growth.
Timing
The first stage of the review will report in the next few months and will look at further measures that can support the proposed Pensions Bill.
The Chancellor’s landmark pensions review aims to unlock significant investment into the UK economy while enhancing retirement outcomes for millions of pension savers. The review should bring good news for pension savers, but we watch to see whether good intentions can turn into secure retirements for all.
See: https://www.gov.uk/government/news/chancellor-vows-big-bang-on-growth-to-boost-investment-and-savings
From 5ââââââ Augustââââââ 2024, any request to change your VAT registration details should be made using the VAT online account, and not by using the VAT484 form or any other postal or electronic means. Using the digital route is quicker, more secure and will avoid any unnecessary delays.
For customers that are unable to access and use the digital services such as those who are digitally excluded or need assistance with digital services, HMRC will always provide a service to meet their needs, continuing to offer support through non-digital channels such as the phone, which includes our ‘needs extra support’ service.
HMRC are aware that some customers will still need to apply for a change to their details via post on a VAT484 form if they are digitally excluded or, for example, notifying us of taking over someone elseâs VAT responsibilities. These customers can contact HMRC to ask for a form.
Updated guidance will be available at ‘Change your VAT registration details from August 2024
HM Revenue & Customs have released a new tool designed to help businesses find out what VAT registration would mean for their business.
VAT registration becomes mandatory if:
- your total taxable turnover exceeds ÂŁ90,000 over the previous 12 months.
- you expect your taxable turnover to go over ÂŁ90,000 in the next 30 days.
- you’re based outside the UK and supply goods and services to the UK.
Taxable turnover refers to the total value of everything you sell except for anything that is exempt from VAT.
It is also possible to register for VAT voluntarily even if your annual taxable turnover is below ÂŁ90,000.
If the majority of customers for your business are VAT registered then there is no increase in costs for them, and so voluntary VAT registration can be worthwhile so that you can claim VAT back on the purchases you make.
The new HMRC tool can help you to estimate what VAT might be owed or reclaimed by your business if you were to register for VAT. You are free to use the tool to explore multiple âwhat-ifâ scenarios so that you can compare various situations and how you might be affected.
To use the tool, please see: https://www.gov.uk/guidance/check-what-registering-for-vat-may-mean-for-your-business
