Good news to start the New Year

The Government borrowing figures for December fell to £7.8billion, the lowest December figure since 2019. Interest payments dropped from £14.1billion in December 2022 to a mere £4billion last month as the effects of falling inflation were seen. This good news came soon after inflation figures showed a slight rise to 4.0% from 3.9% the month previous.

The USA Presidential Election season has well and truly started, but already it is looking like The Donald will return for a second attempt to beat current President Joe Biden. One of Trump’s main competitors, Ron DeSantis dropped out on Sunday, leaving Nikki Hayley as the only alternative candidate, who promptly lost in New Hampshire.

Well at least the Republicans are going through the process, Biden’s Democrats have not even put him on the ballot paper due to internal fighting. Despite that he polled over 53% of votes in the same state to win with ease. As always in USA, you cannot make it up!

Domestic energy prices will fall by 16% in April, according to a prediction by consultancy Cornwall Insight, bringing some relief to billpayers. It said the annual household bill when using a typical amount of gas and electricity was expected to drop from £1,928 to £1,620. Households have endured two years of high prices, but predictions suggest there could be a further fall in the summer, although bills would still be higher than the pre-crisis norm.

RESEARCH & DEVELOPMENT CLAIMS POSSIBLE FRAUD ALERT

We spoke to a client recently who announced they had a Research & Development (R&D) claim in with HMRC. Imagine our surprise when a couple of days later we received a letter from HMRC Fraud department regarding the claim. We contacted the client who went back to the provider. Needless to say the response was nothing to worry about!

Now obviously I cannot name names at present for legal reasons, but my own research, along with liaising with fellow professionals indicates there may well be a problem either with the particular company as a whole or some rogue operator within it. From my knowledge I would offer these as possible warning signals:

  • They do not ascertain who your accountant is so we cannot work together;

  • They take an authority for any tax refunds to go to them first;

  • The contract provides for all HMRC correspondence to be shared with them only;

  • When things go wrong they claim system errors or blame third parties.

To sum up, if you receive an approach from someone claiming to be able to obtain R&D credits for you please advise them you will check in with us first. If they are genuine, they will not have an issue with this. We already have a trusted R&D claims company we work with and from dealing with them, we are always involved in making the actual claims on the corporation tax returns.

SELF ASSESSMENT DEADLINE TIME

Earlier this week and with only one week to go until the self assessment deadline, one in four taxpayers still have to file their annual tax return or face a £100 penalty.  HMRC has warned that 3.8million people still have to file their tax return by 31 January, up on last year’s figure of 3.4million at the same date. An estimated 12.1milion taxpayers have to file under self assessment rules, and so far 8.3million have filed online for the 2022-23 tax year.

It is important to file by the deadline or face an automatic £100 penalty, which was paid by an estimated 2.7million taxpayers last year. When this story came out on Tuesday, I checked our own statistics. Whilst our numbers indicate this figure is representative, just over half of our clients who have not yet filed, only have to sign and return their paperwork to us. If this is you, please get the signed form back to us over the weekend. I suspect this will be the case for most of our fellow accountants.

TAX RETURN HEADACHE FOR SAVERS

Soaring interest rates have resulted in a significant increase in the number of savings accounts that have earned enough interest to warrant a tax bill. Last year, 3.94million accounts met this criteria, up from 3.3million in April and just 257,000 in September 2022.

Basic-rate taxpayers can earn up to £1,000 tax-free, while higher-rate taxpayers can earn up to £500. Those who exceed their allowance may need to file a tax return and pay tax on the difference. The rising interest rates, coupled with frozen income tax thresholds, have pushed more people into paying tax on their savings. Anna Bowes from the Savings Champion website said: “The personal savings allowance has quite simply been ignored since inception. And the £20,000 annual ISA allowance has also not been increased for seven years. Let’s not be coy, this is yet another stealth tax to add to the mix.”

What does this mean for you? Probably nothing as you are already in the Self Assessment system. However, it may well affect family members and particularly pensioners. We have just completed a tax return for one of our long standing clients who is now retired. This year for the first time since she retired from business, she has a tax bill as her interest receipt exceeded the £1,000 nil rate band.

HMRC automatically receive details of interest paid from the banks and building societies. I can foresee a situation later in the year where brown envelopes fall on doormats advising people they failed to declare taxable interest. With the potential number being so large, I can also foresee some media publicity. Not quite a Post Office scandal but nevertheless a problem looming. If you think family members may be affected, then call us for advice and support.

HOLIDAY PAY REFORMS

Coming into force from 1 January 2024, the Working Time Regulations, as amended by The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, introduced reforms that simplify holiday pay and entitlements.

Following Brexit, any European laws that were retained in the UK automatically expired on December 31 unless legislation was brought in to keep them. The Employment Rights Regulations 2023 do just that and are applicable across the UK. As well as reinstating some EU laws, these regulations make several changes to existing laws. These reforms include changes that affect rates of holiday pay and annual leave. They also cover handling irregular hours and part-year workers, accrual of COVID-19 carryover of leave, and rolled-up holiday pay.

The Regulations define what an irregular hours or part-year worker is and makes changes for how their holiday entitlement for holiday years beginning 1 April 2024 and onwards are accrued. Employers will need to calculate holiday entitlement for such workers at 12.07% of the hours worked in any pay period. This does not apply to the calculations for regular hours workers.

The Regulations specify that all full-year workers are legally entitled to 5.6 weeks of paid statutory holiday entitlement per year. These are split into two pots.

  • Four weeks – the original EU leave entitlement – must be paid at the employee’s ‘normal’ rate of pay and the regulations now specify that this includes overtime pay, commission and allowances.•

  • The remaining 1.6 weeks – an addition made by the UK – only have to be paid at the employee’s ‘basic’ rate of pay.

The Government has produced guidance containing examples and calculation methods based on the legal minimums set out in the Regulations. Of course, many workers have contracts that entitle them to holiday that exceeds the statutory minimum. Or the changes may make the standard holiday clauses used in an employer’s employment contract no longer legal. Businesses are therefore encouraged to first check individual employment contracts, and if necessary, seek independent legal advice.

If you need any help with running your payroll, please get in touch with us. We will be very happy to help you!  The guidance can be found on the link below:

https://www.gov.uk/government/publications/simplifying-holiday-entitlement-and-holiday-pay-calculations/holiday-pay-and-entitlement-reforms-from-1-january-2024

AND FINALLY …..

Today, with issues still with the safety of Barton Hill flats in Bristol (used as Nelson Mandela House), it reminded me of the riots in Peckham and how Del got home safely.

https://www.youtube.com/watch?v=rmAktKBjY9E