Tax

With several tax changes due to come into force from April 2023, we look at a few last-chance opportunities available now to both individuals and companies, to save money in the coming months.

Last-chance Opportunities – Income Tax

Where income is expected to be between £125,140 and £150,000 in 2023/24, bringing income into 2022/23 could mean the difference between being taxed at 40% in 2022/23, rather than being taxed at 45% in 2023/24; or between 41% and 47% in Scotland. There are a variety of ways that this may be done, and we can help you review the possibilities in your circumstances.

CGT Exemptions

A phased reduction in the capital gains tax (CGT) annual exemption is on the horizon.

Currently £12,300, the exemption falls to £6,000 from 6 April 2023. A further reduction takes effect from 6 April 2024, when it drops to £3,000. A key component of any such planning is to make use of the annual exemption. It is possible to transfer assets between you and your spouse on a no gain/no loss basis in order to make best use of the exemption. It is essential to get the detail of any transfer correct. Do please discuss any disposal with us first to make sure that it is effective for tax purposes.

ISA Accounts

ISAs are sometimes referred to as a tax ‘wrapper’ for investments: they allow you to make a tax-efficient investment, rather than dealing directly in the investment market and facing the associated tax consequences. The tax benefits are considerable.

ISAs are free of income tax and capital gains tax and do not impact the availability of the savings or Dividend Allowance. ISA limits cannot be carried into future years. Use it before 5 April 2023, or lose it.

ISA Subscription Limits

Looking forwards, once the capital gains tax annual exemption falls from 6 April 2023, ISAs become an even more important tool for tax planning.

HMRC’s Corporation Tax Super-Deduction Comes to an End 31/3/2023. Should my Company Take Advantage?

HMRC’s Corporation Tax super-deduction scheme finishes on 31 March 2023. The super-deduction allowed companies to cut their taxes by up to 25p for each pound invested.

Simultaneously, the rate of corporation tax will increase from 19% to 25% for many companies from 1 April 2023. To benefit from an accelerated tax saving with a capital purchase, action should be taken now to determine if action should be taken before that date.

For companies in the following situations, the consequences of purchasing an asset in March 2023 as opposed to April 2023 could be of even greater benefit to the company:

• Where profits are being made below the £250,000 limit (adjusted for associated companies)
• Where a company is in a taxable loss position

Additional Information

If you have any questions regarding the forthcoming changes to UK corporation tax, please get in touch with your usual contact at the Dixcart office in the UK or e-mail: advice.uk@dixcart.com.

Tax

Dixcart UK can help your business raise funding through the use of the Enterprise Investment Scheme (EIS) or the Seed Enterprise Investment Scheme (SEIS).

EIS fund raising is designed to help your company raise money to grow your business. It does this by offering tax reliefs to individual investors who buy new shares in your company.

Up to £5 million each year, and a maximum of £12 million in your company’s lifetime, can be raised through the use of EIS. This includes amounts received from other venture capital schemes.

Comprehensive advice regarding the scheme rules will ensure that your investors claim and retain EIS tax reliefs relating to their shares and we can also manage the whole process, from pre-approval to the issue of the EIS certificate.

The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are very similar schemes which offer substantial tax incentives to investors in qualifying companies.

The tax incentives for SEIS and EIS investments are intended to encourage investment in high-risk, small, unquoted companies that may find it difficult to raise finance without the tax incentives being offered. Dixcart UK is a tech sector specialist and also offer expertise on the different rules that are available for knowledge-intensive companies that carry out a significant amount of research, development or innovation.

Details are complex, but we can offer advice for you to progress through the process as smoothly as possible.

You can also view the EIS/SEIS Guide PDF here.

Raising Finance through SEIS and EIS

SEIS focuses investment in the very early stage, for new businesses that may face particular difficulties in raising finance as they are seen as being very high risk. EIS is also intended for small companies but they can be a little larger and a little older than those for which SEIS is intended. The schemes are very similar and are designed to facilitate seamless growth through financing being raised first through SEIS and then further, follow on financing, being raised through EIS.

The company must first meet the conditions required by the SEIS / EIS legislation to become a qualifying company and it must then issues shares which need to meet stringent requirements to be qualifying shares. Advance assurance can be sought from HMRC, before the share issue, to gain comfort that the conditions will be met. The investor subscribes for the shares either directly, or in some cases through an approved investment fund, and then the investor applies to HMRC for the tax reliefs available.

 From the investor’s point of view, the process for claiming the tax relief is quite straightforward, as it simply involves following a few steps which are detailed on the scheme certificates. The more difficult aspect rests with the company and its ability to meet all of the prescribed conditions.

The Reliefs available to Investors

Before an investor can make a decision to invest and/or before the company can consider if raising funds though EIS would be appropriate, an understanding of the tax reliefs available to the investor is needed.

Worked examples to compare EIS and SEIS Tax Relief

Three scenarios are demonstrated below to illustrate possible outcomes for an investor investing in a qualifying company under the EIS and SEIS. In the first scenario, the company fails and is wound up; in the second, the company breaks even with no change in the value of its shares; and in the third scenario, the company is successful and the shares double in value.

 It is assumed that the investor invests £10,000, the investor’s marginal rate of income tax is 45%, capital gains tax is charged at 20%, the annual investment limits have not been breached, and income tax relief is not withdrawn or reduced.

Further Information

If you would like more information on either of the EIS or SEIS schemes and how they may be beneficial to you as an investor or a company seeking to raise funds, please get in touch.

 Our specialist team will take all the hassle away from you and you can be confident that your claim will be handled quickly and efficiently to maximise the relief available. Please contact Paul Webb on 0333 122 0000 or email hello@dixcartuk.com to arrange a free no obligation consultation.

You can also view the EIS/SEIS Guide PDF here.

Tax

During the Autumn of 2022, changes to UK corporate tax and personal tax regimes were subject to a number of amendments.

In addition, it is now confirmed that two significant changes are taking place in the near future:

• From 1 April 2023, non-UK resident property companies will be subject to an increased corporate tax rate of 25%, a 6% increase compared to the current rate of 19%, tax year 2021/2022.

• An existing set of rules which, have not been directly relevant for some time, will now definitely need to be taken into account and will see many companies under common control, now being viewed as ‘associated’ with each other. This can have a significant impact on the amount and dates on which UK corporate tax is payable.

The Increase in the UK Corporate Tax Rate

From 1 April 2023, corporate tax rates in the UK will vary between 19% and 25%. The previous single rate having been 19%.

Where a UK resident company has taxable profits of less than £50,000, the 19% small profits rate will apply. UK resident companies with profits of between £50,000 and £250,000 will pay a tapered rate of between 19% and 25%. Above the higher limit of £250,000, the 25% rate will apply to all taxable profits.

These bandings are reduced if there are associated companies, please see further details below.

Where an accounting period spans across the date of 1 April 2023, taxable profit will be split to the period before and after 1 April 2023, with differing rates applied.

Companies Incorporated or Tax Resident Overseas

Companies which are incorporated and/or tax resident overseas and which are subject to UK corporation tax, will pay a flat rate of 25% corporation tax on taxable profits arising after 1 April 2023.

This 25% rate will apply to all UK based property and trading income and to capital gains on all sales of UK investment property.

Action could be taken ahead of 1 April 2023, to mitigate some of the implications of these changes. Any proposed action would, however, need to be assessed to ensure it makes commercial sense and take into account any prevailing case law and HMRC practice. Professional advice from a company such as Dixcart should be taken.

The Option of De-enveloping UK Property Held in a Non-UK Resident Company

If the de-enveloping of UK properties being held by non-UK resident companies is being considered, this should take place as far ahead of 1 April 2023, as possible.

Each situation needs to be considered based on its merits and an evaluation needs to take place as to whether this is the most appropriate action, from both a tax and a wider perspective. Any decision also needs to take into account that it might take some time to put changes in place to achieve the desired end result.

Associated Companies – Changes to the Rules

The current rule of a ‘related 51% group company’; where companies have generally been deemed to be related 51% companies, where there is common corporate ownership greater than 50%, is also due to change on 1 April 2023. As a consequence, companies that previously did not fall within the quarterly instalment payment regime (QIPs), may now do so.

The new definition of associated companies will be significantly broadened to include companies controlled by the same person/s. A ‘person’ includes not only individuals but also trustees of a trust and partners of a partnership.

A simple example is detailed below: a trust holds all the shares (100%), in 8 separate companies. The companies undertake similar activities, and the shares were settled into the trust by the same settlor. Under the pre-1 April 2023 rules there are no 51% group companies, under the new rules there could be up to 8 associated companies.

QIPs: Definition

Most companies pay UK corporation tax within 9 months and 1 day, after their year-end. This is unless they fall under QIPs. As detailed above, whether a company is deemed to be an associated company and the number of associated companies will determine whether a company must pay its UK corporation tax via the QIPs regime.

Generally, QIPs applies, where:

• Taxable profit exceeds £1.5million in two consecutive accounting periods,

OR

• Taxable profit exceeds £10million on any accounting period.

It is very important to note that the taxable limits are divided by the number of associated companies.

QIPs does not increase the tax payable, but it does have a considerable impact on cash flow and missing or underpaying QIPs can result in penalties and/or interest being applied.

Additional Information

If you have any questions regarding the forthcoming changes to UK corporate tax, please contact Paul Webb at: hello@dixcartuk.com.

Tax

Additional amendments to UK R&D tax relief were included in the 2022 Autumn Statement.

From 1 April 2023, we are expecting a number of changes to the UK R&D scheme. This addendum summarises the key points arising from the July 2022 HMRC published draft legislation for R&D tax relief changes, announced in the 2021 Autumn Budget.

These Autumn Budget changes will take effect for accounting periods beginning on or after 1 April 2023. The changes will impact companies claiming under either of the two schemes (SME or RDEC).

The government has a target to raise investment in R&D to 2.4% of UK GDP by 2027 and R&D tax relief forms part of that goal by reducing the cost of innovation for UK companies.

Here are some of the key changes:

Extending Qualifying Expenditure

The good news is that R&D expenditure categories will be extended to include the costs of datasets and cloud computing – however, these costs need to clearly align with direct R&D and cannot be included in R&D claims where these costs only relate to indirect supporting activities.

In addition to this, R&D in pure mathematics will now qualify for relief and can form part of the qualifying R&D activities of the claimant.

Refocusing the Reliefs Towards Innovation Undertaken in the UK

One of the most fundamental changes in the Autumn Budget was to refocus the relief provided to activities performed in the UK or qualifying overseas expenditure.

• UK Expenditure

Relevant research and development must be undertaken in the United Kingdom. As such, subcontracted R&D work, and the cost of externally provided workers (EPWs), will be limited to work undertaken in the UK.

• Qualifying Overseas Expenditure

The exemption to the above, is where work undertaken outside the UK is necessary due to geographical, environmental, or social conditions not present or replicable in the UK. Cost of the work, and availability of workers, are specifically excluded as factors. This list is not exhaustive and, in the short term, is likely to create greater uncertainty as to what could be seen as meeting these criteria.

It is worth noting that, to date, there is nothing in the draft legislation that specifically addresses claims for the cost of staff working on projects in an overseas branch of a UK entity- it is hoped this will be clarified as the Bill goes through the Parliamentary process.

Tackling Abuse

In order to support HMRC’s fight against abuse of the R&D schemes, new due diligence and filing processes will be required through a digital system.

The changes to be introduced to the R&D claims submission process include:

1. claims be made digitally;
2. the categories of qualifying expenditure incurred need to be disclosed, and brief details provided of the R&D activities;
3. claims need to be endorsed by a named senior company officer;
4. the company must inform HMRC in advance of its intention to make a claim within six months of the end of the period to which the claim relates, unless the company has claimed in one of the preceding three accounting periods; and
5. the details of any agent who has advised the company in making the claim needs to be provided.

The most significant change is point 4. The effect of this is that new claimants will now only have a six month window in order to identify that they will make a claim, as opposed to the current two year window of opportunity.

What can your Business do to Help Maintain their R&D Tax Relief Benefits?

On the back of the above proposed changes, businesses that maintain all, or part, of their R&D activities overseas will need to re-evaluate their potential R&D claims. If your business falls into this category, you will need to consider the practical, commercial, and cost implications of maintaining your current structure versus onshoring to the UK. 

We have identified the pros and cons of each scenario below.

Scenario 1: Keeping your R&D Activities Overseas

Benefits of keeping your R&D activities abroad:

• commercial needs,
• expertise,
• most cost-effective option,
• changing something that isn’t broken. You have the right people, infrastructure and processes in place so why change it?

With the introduction of the new rules, the obvious loss is that qualifying overseas expenditure will be disqualified from 1 April 2023.

However, the impact of this depends on the type of business you are. For example, if you have an R&D intensive business with majority of costs arising from overseas activities, you should expect to see a substantial reduction in your R&D tax relief claims as opposed to one that is not R&D intensive.  

Scenario 2: Relocating your R&D Activities to the UK

As discussed above, the notable advantages and sacrifices of keeping your R&D activities overseas are in turn, for the short-term anyway, the opposite if you were to relocate the activities to the UK. This will of course depend on each business.

The main benefit of relocating your R&D activities to the UK is inevitably that it will qualify for R&D relief.

However, the change will effectively be like starting new again. The downside to this is the hassle of finding new suppliers and skilled workers, keeping within the budget, costs of relocating/restructuring, training, legal and tax considerations for both company and any employees relocating, etc.

Again, this largely depends on the business as, for some, this may simply be a matter of finding new suppliers within the UK.

Get in touch

If you would like to discuss the R&D tax relief changes announced in the Autumn Budget, or if you would like professional advice on maintaining R&D tax relief benefits, please get in touch: hello@dixcartuk.com.

Tax

A New Campaign

A new campaign was launched by HMRC, in September 2022, aimed at overseas entities that may not have met UK tax obligations in relation to the UK property that they own.

HMRC have stated that it has reviewed data, from HM Land Registry in England and Wales and other sources, to identify companies who may need to make disclosures for; non-resident corporate rental income, annual tax on enveloped dwellings (ATED), the transfer of assets abroad (ToAA) legislation, non-resident capital gains tax (NRCGT), and, finally, income tax under the transactions in land rules.

What is Taking Place?

Depending on the circumstances, companies will receive letters, accompanied by a ‘certificate of tax position’, recommending that they ask connected UK-resident individuals to re-examine their personal tax affairs, in the light of relevant anti-avoidance provisions.

Since 2019, ‘certificates of tax position’ have been issued to UK residents who receive offshore income.

The certificates typically require a declaration of the recipients’ offshore tax compliance position within 30 days. HMRC has previously noted that taxpayers are not legally obliged to return the certificate, which could expose them to criminal prosecution, if they make an incorrect declaration.

Standard advice to taxpayers is that they should consider very carefully whether they return the certificate or not, regardless of whether they have irregularities to disclose or not.

The Letters

One of the letters concerns undisclosed income received by non-resident corporate landlords and liability to ATED, where applicable.

This will also prompt UK-resident individuals who have any interest in the income or capital of a non-resident landlord, whether directly or indirectly, to consider their position as they may fall within the scope of the UK’s ToAA anti-avoidance legislation meaning that the income of the non-resident company can be attributed to them.

The letter recommends that any such individuals should seek professional advice to ensure their affairs are up-to-date.

An alternative letter is being sent to non-resident companies that have made a disposal of UK residential property between 6 April 2015 and 5 April 2019, without filing a non-resident capital gains tax (NRCGT) return.

Disposals of UK residential property by non-resident companies were subject to NRCGT between 6 April 2015 and 5 April 2019. Where the company purchased a property before April 2015 and the whole gain has not been charged to NRCGT, that part of any gain not charged, may be attributable to the participants in the company.

Such corporates may also be liable to pay UK tax on rental profits, as well as income tax under the transactions in land rules and ATED.

The Need for Professional Advice

We strongly recommend that UK-resident individual participants in these companies should seek professional advice, from a firm such as Dixcart UK, to ensure that their matters are up to date.

The Register of Overseas Entities

This new focus coincides with introduction of the new Register of Overseas Entities (ROE), that came into force on 01 August 2022.

As criminal offences may be committed for non-compliance, with the requirement for overseas entities to register certain details (including those of the beneficial owners) to Companies House. 

Please see below a Dixcart UK article on this topic: Register of Overseas Entities: A Comprehensive Guide to the new Registration Requirements for Overseas

Additional information

If you have any questions and/or would like advice regarding non-resident status and the obligations in relation to tax on UK property, please speak to Paul Webb: at: hello@dixcartuk.com.

Alternatively, if you have any queries regarding the UK public register of beneficial ownership of overseas entities, please contact us at: hello@dixcartuk.com.

Tax

The government published draft legislation week commencing 18 July, for the Finance Bill 2022-23. This includes consultations on changes to; capital gains tax, pensions and R&D tax relief.

Key Points

Capital gains

The divorce of a married couple requires assets to be distributed between the two individuals, often including a share in the value of the family home. Currently such transfers are only free of CGT if they occur within the same tax year of separation. Between that date and the decree nisi the couple are connected persons but not living together, so the CGT no gain/no loss treatment for transfers between married couple/civil partners does not apply.

The proposals will stretch this CGT exempt period to three years for separating couples, and allow any assets which are the subject of a divorce agreement to be transferred on a no gain/no loss basis without time limit.

This will apply for all disposals that occur on and after 6 April 2023, and has been brought about following a recommendation by the Office of Tax Simplification (OTS).

Pensions

Having pension contributions deducted from net pay is not a problem, if the individual is a taxpayer, because he/she gets the same tax relief as if the employer operates a relief at a source scheme. But under auto-enrolment, many low paid employees pay pension contributions although they do not earn enough to pay income tax, so they miss out on the tax relief.

For the tax year 2024/25 onwards, those employees on net-pay schemes will be able to claim a rebate from the government on the tax relief they are due. Why this has not been sorted out earlier is a mystery.

The treatment of regular income paid out of collective money purchase pension schemes, which are being wound, up will also be clarified. This will ensure that those payments are taxed as pensions and not as unauthorised payments. This change will take effect from 6 April 2023.

R&D tax relief

There have been several consultations on strengthening the R&D tax relief scheme to make it less vulnerable to fraud. The Finance Bill proposals go further and suggests that small companies who want to claim R&D tax relief, will have to inform HMRC in advance of their intention to claim within six months of the end of the first period the claim will relate to. A senior officer of the company and the tax adviser will also both have to be named on the claim.  These are currently only proposals and we will keep you informed of any developments.    

Clarifications

Companies who allow their residential properties to be used for the Homes for Ukraine scheme are to be exempt from ATED and the 15% rate of SDLT on those properties.

Consultations

Two new consultations were announced concerning new powers for HMRC to collect data from businesses, and to digitalise business rates, including linking that data to the wider tax system.  We will provide further details once any measures are finalised.

Need Any Help?

If you have any questions regarding the proposed changes detailed above, please get in touch today: hello@dixcartuk.com

Tax

Where a UK resident individual, trustee, personal representative, or partner in a partnership disposes of UK residential property and capital gains tax is due, they are required to report any Capital Gains Tax liability and pay any Capital Gains Tax due, within 60 days of the completion of the sale where there is a liability to Capital Gains Tax.

Non-UK residents are required to report not just disposals of residential property, but all disposals of UK land whether or not they realise a gain, including indirect disposals such as the sale of shares in property rich companies. A company is property rich if 75% or more of its gross asset value derives from UK property.

For a ‘one-off’ disposal, there may be no need to register for Self-Assessment and submit a Self-Assessment tax return, however, for those meeting the requirements of Self-Assessment or who are already in the Self-Assessment system, the property disposal will also need to be reported on their personal Tax Return.

Applicable Transactions and Properties

Reporting, by UK residents, applies to the following disposals:

• A sale of UK property at arms-length
• A gift, transfer or deemed disposal
• A sale at undervalue

Types of Property

• A property never lived in, or only lived in for part of the ownership period, where not a main residence
• A holiday home
• A rental property
• A mixed residential and commercial property.

Payment on Account of Capital Gains Tax (CGT)

The actual capital gains tax liability will be computed once the taxpayer’s Tax Return has been prepared (if relevant).  This will consider an individual’s taxable income for the year and losses realised after the property disposal, that were not reflected in the original tax estimate. The CGT paid is treated as a payment on account, and interest will be charged where the estimated tax payment is less than the actual CGT due.

Filing Requirement

To file the return, you will need to set up a Government Gateway account and create a ‘CGT on UK property’ account. A client can authorise an agent to file, such as Dixcart UK, the return on their behalf and there is a separate agent authorisation process.

Penalties

Where the return is not filed within 60 days of the date of completion, an automatic late filing penalty of £100 will apply.

Returns filed more than 6 months after completion of the sale will also attract a late filing penalty of £300 or 5% of the tax outstanding, whichever is higher. Returns filed more than 12 months after the completion of the sale will also attract a late filing penalty of £300 or 5% of the tax outstanding, whichever is higher.

Enquiry Period

Where an individual is not in Self-Assessment, the return is treated as having been filed on 31 January following the year of assessment in which the disposal takes place.

This is in contrast to someone in Self-Assessment for whom the enquiry window ends 12 months after the submission of the Self-Assessment tax return.

We can Help

For more information on reporting residential property gains, please contact Paul Webb: hello@dixcartuk.com.

Tax

Research and Development (R&D) tax relief can prove an extremely valuable tax relief and, for companies carrying out significant qualifying R&D projects, it may mean not having to pay any corporation tax for many years or even claiming a repayment from HMRC.

Despite the above it still remains a relatively under-claimed relief with companies believing the rules and qualifying criteria to be complex and prohibitive. However this is not the cause. Get in touch today to find out how easy the process is: hello@dixcartuk.com.

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Tax

There are several incentives offered by the Government that small or medium businesses (SME) can access now to help them invest and grow.

1. Claim up to £5,000 with the Employment Allowance

Employment Allowance allows eligible employers to reduce their National Insurance Contribution (NIC) liability each year. Last month, HMRC increased the Employment Allowance from £4,000 to £5,000 to further benefit SMEs, which is a new tax cut worth up to £1,000 for nearly half a million SMEs.

Businesses will pay less Employers’ Class 1 National Insurance each time they run their payroll until the £5,000 has gone or the tax year ends (whichever is sooner), if their Class 1 National Insurance liabilities were less than £100,000 in the previous tax year. To find out if your business is eligible, get in touch today or find out more here.

2. Help to Grow: Get a discount of up to £5,000 on new software

The Government provides two ‘Help to Grow’ programmes to assist SMEs grow their business and build towards reaching its full potential:

• Help to Grow: Digital

This is a UK-wide Government backed scheme which allows businesses to choose, buy, and adopt digital technologies which will help their business develop.

Eligible businesses can receive a 50% discount when buying new software, worth up to £5,000 per SME. Businesses can also access online, free impartial advice and support about how digital technology can boost their business’ performance. 

• Help to Grow: Management

This scheme provides SMEs with access to a 12-week learning course on a range of topics from leadership and financial management to marketing and digital adoption, all designed to fit alongside work commitments.

This management course is 90% funded by the Government so businesses only pay £750, and it is delivered through leading UK business schools and by one-on-one support from expert business mentors.

By the end of the management programme, businesses will have developed a business growth plan to help reach their full potential.

To be eligible, businesses must be a UK-based SME, actively trading for at least one year, and have a total of between 5 – 249 employees.

3. Get up to half off Business Rates – from April 2022

There is a new business rates relief scheme which allows businesses such as small retail, hospitality, and leisure properties worth £1.7 billion in 2022/23, to benefit from 50% off their business rates bills, up to a cash cap limit of £110,000 per business.

The Government will reimburse local authorities that use their discretionary relief powers to grant relief. To find out which properties can benefit from relief, please get in touch or find out more here.

In addition, the business rates multipliers, which are used to calculate how much business’ rates should be paid, have been frozen for another year. For 2022 to 2023 the business rates multipliers are 49.9p for the small business multiplier and 51.2p for the standard multiplier.

From April 2022 there are no business rates due on a range of green technology, including solar panels and batteries, whilst eligible heat networks will receive 100% relief, helping business save around £200 million over the next five years.

4. Invest in your Business: Super-deduction and Annual Investment Allowance (AIA)

• The Super-deduction

For expenditure incurred from 1 April 2021 until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery investments and a 50% first-year allowance for qualifying special rate assets.

Under the super-deduction, for every pound a company invests in any qualifying machinery and equipment (which can include the purchase of computers, most commercial vehicles, and office furniture), their taxes are cut by up to 25p ensuring the UK capital allowance regime is amongst the world’s most competitive.

• Annual Investment Allowance (AIA)

The AIA provides 100% relief for plant and machinery investments up to its highest ever £1 million threshold until 31 December 2021. Originally due to revert to £200,00 at the start of 2022, the extension of the £1 million limit for the Annual Investment Allowance allows businesses to spend up to £1 million on qualifying business equipment and deduct in-year its full cost before calculating taxable profits.

You can only claim AIA in the period you bought the item. The date you bought it is:

• when you signed the contract, if payment is due within less than 4 months, or
• when payment is due, if it’s due more than 4 months later.

You cannot claim AIA on business cars, items owned for another reason before starting the business, and items given to the business or business owner(s).

For more information, please get in touch or find out more here.

5. Fuel Duty

From 23 March 2022, the Government has implemented a 5p per little fuel duty cut on petrol and diesel for 12 months.

This cut, with the additional freeze in fuel duty in 2022 to 2023, will represent a £5 billion saving worth approximately:

• £200 for the average van driver
• £1,500 for the average haulier

Further Information

If you have any further related SME queries, please get in touch and we can give you tailored financial advice for your business. To find out what other support may be available for your business, please contact Paul Webb at hello@dixcartuk.com, or search ‘business support’ on GOV.UK.

Tax

If you own or work for a company with assets of £30 million or less, it may be able to offer Enterprise Management Incentives (EMI).

Companies can grant employees share options, up to the value of £250,000 in a 3-year period. Employees will not need to pay Income Tax or National Insurance if they buy shares for at least the market value of the shares when granted the option.

EMI Share Schemes is a Government approved, tax beneficial and very flexible way of incentivising key staff members. This guide outlines some of the most common options within the scheme to do this, from the Growth Share Scheme to the Phantom Share Scheme.

Click here to download the complete guide.

Companies that work in ‘excluded activities’ are not allowed to offer EMIs. Excluded activities include:

• Banking
• Farming
• Property development
• Provision of legal services
• Ship building

For further information on EMI Share Schemes, please contact Paul Webb, or email hello@dixcartuk.com.

Tax

The tax card outlines the business and individual tax rates for the tax year of 2022/23. All the essential tax facts, rates and figures are provided in one handy PDF, offering an easy point of reference all year round.

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Tax

It is that time of year again – when we are thinking about your P11Ds. We are pleased to provide you with this handy guide on benefits in kind.

What are benefits in kind?

Benefits in kind (BIKs) are benefits that employees or directors receive from their company which isn’t part of their salary package. Under general tax law most benefits are taxable remuneration and have to be reported to HMRC and any tax or NICs paid. 

There is a wide range of benefits in kind – from company cars to private healthcare that need reporting to HMRC.

Taxable benefits

A main list of taxable BIKs, including:

• Company cars
• Fuel for a company car for the employee’s personal use
• Loans for rail season tickets
• Interest free loans to employees/directors over £10,000
• Home phones with personal use
• Private Health Insurance
• Clothing allowance that is not essential for the employee’s job role
• Provision of Living Accommodation

Non Taxable Benefits

A few examples where circumstances may mean no tax is paid include:

• Parties and similar functions for all staff, costing no more  than £150 ‘per head’, including VAT and associated costs such as transport.
• Provision of one mobile phone where the employer contracts directly with the supplier. Any other contract or payment is taxable and NI’able and has specific treatment depending upon who the contract is with and how it is paid.
• Free or subsidised meals available for all employees. Working lunches are also tax free if available to all.
• Subscriptions for an individual who is a member of a professional body approved by HMRC.
• Car parking
• Approved mileage allowance payments for use of an employee’s car on business.

1^st 10,000 miles                                        45p per mile

Excess mileage                                         25p per mile

Motorcycles                                             24p per mile

Bicycles                                                      20p per mile

Passengers                                                 5p per mile

• Business travel but not ordinary commuting. These rules are complex especially for regular travel to a ‘temporary workplace’ and if this lasts more than 24 months.
• Relocation expenses up to a value of £8,000, subject to specific rules.

Trivial Benefits

There is a statutory exemption from tax and NIC for trivial benefits costing £50 or less. This only applies if the following conditions are met:

• The benefit cannot be cash or a cash voucher (Gift Vouchers are allowed)
• The average cost per person does not exceed £50 for each event
• The benefit is not provided through a salary sacrifice arrangement
• The benefit is not provided in recognition of services performed by the employee

To avoid smaller companies taking advantage of this, any benefits provided to directors or other office holders (or their families) have the exemption capped at a total cost of £300 per tax year.

Normal employees do not have this £300 limit but the exemption does apply to family or household members so if there is a function where partners are invited then each employee’s partner can share the £50 trivial benefit for the particular event.

If any of these conditions are not satisfied, the benefit is taxed in the normal way, subject to any other exemption (such as the annual staff function exemption). Importantly, if the cost exceeds the £50 limit, the whole of the benefit is taxed, not just the excess.

The rules around benefits in kind are complex and each example needs to be looked at based on its individual circumstances to see if any tax is payable by the employee and/or your company. There are many limits and exceptions within each of the options.

We will be pleased to assist in the review of the treatment of any expenses payments, which may not be covered above.

Reporting a benefit in kind

Benefits in kind are reported on a P11d form by the employer, not the employee. 

If a company offers their employees any of the taxable benefit in kind examples listed above, they will need to be included on your P11d.

A company will also need to file a P11d(b) form, which summarises the individual P11d forms they have completed for their employees and how much National Insurance will need to be paid. A company has to pay NICs at a rate of 13.8% for the tax year 2021/2022 of the determined values of the benefits in kind.

The P11ds must be filled by 6^th July 2022 for the tax year running 6^th April 2021 to 5^th April 2022.

P11d penalties for late filing

If you miss the deadline of 6^th July your company will incur fines of £100 per every 50 employees per month, or part month, until payment is received. You will also be charged penalties and interest if you are late paying HMRC.

Important Comment

Inform each employee of the details being returned before the form is submitted to HMRC so employees can point out any mistakes.

Further Information

If you do have any further related P11d queries, please get in touch and we can give you tailored advice on what your company needs to do to ensure compliance.

If you would like more information, please contact Edita Rendall or Paul Webb at hello@dixcartuk.com or your usual Dixcart UK contact.

Tax

R&D Tax Relief is a UK Government backed incentive designed to encourage innovation and increase spending on Research and Development activities for companies operating in the UK.

For SMEs:

• A deduction of 230% of the amount spent on R&D can be made from taxable profits, reducing the corporation tax due.

For loss making companies:

• The scheme allows up to 33.35% of a company’s R&D spend to be recovered as a cash repayment.

However, claims are often overlooked.

Business owners often; over-estimate the level of innovation that is required in order to claim, don’t know about the relief, or simply suspect that it is too good to be true!

To find out; what qualifies, how R&D tax relief is calculated and how to apply, please see: R&D Tax Credits

Tax

The reintroduction of the Statutory Sick Pay Rebate Scheme (SSPRS) means that employers with fewer than 250 employees will be able to claim up to two weeks’ SSP per employee for COVID-related sickness absences occurring from 21 December 2021.

Employers will be eligible for this support if they:

• are UK-based;
• employed fewer than 250 employees on 30 November 2021;
• had a PAYE scheme at 30 November 2021; and
• they have paid their employees’ COVID-related statutory sick pay (SSP).

The scheme will cover COVID-related sickness absences occurring from 21 December 2021. There are no details indicating when the scheme will end other than the government will keep the scheme under review.

If an employer made a claim for an employee under the previous scheme, they will be able to make a fresh claim for a new COVID-related absence for the same employee of up to two weeks.

As a reminder, employers must keep records of SSP that they have paid and want to claim back from HMRC. The following records supporting the claim must be kept for three years after the date the employer receives the payment:

• the dates the employee was off sick;
• which of those dates were qualifying days (ie, the days that the employee would normally work);
• the reason they said they were off work due to COVID-19;
• the employee’s national insurance number.

Claims can be made directly by the employer or we can make claims on behalf of our clients. 

If you require additional information on this topic, please contact your usual Dixcart adviser or speak to Paul Webb in the UK office: advice.uk@dixcart.com.

Tax

It is well known that, under current proposals, the sale of cars fuelled wholly by diesel or petrol will be banned by 2030 but perhaps less well known is that a ban on the sale of hybrid cars is then set to follow from 2035.

For business owners and employers who provide their employees with company vehicles there are some substantial tax benefits on offer in the next few years for making the switch to pure electric.

Tax Relief on Acquisition

Businesses that want to buy a zero emissions or electric vehicle can benefit from a 100% corporation tax relief on the purchase price in the year of purchase – provided that the car is new and unused

This is a particularly attractive incentive for owner-managed companies, especially where the company director might be looking for a new electric car for themselves.

If the business leases the vehicle, then the lease payments for an electric car are fully deductible against tax for the employer, although VAT recovery is limited to only 50% of the VAT cost, where the vehicle is used privately by the employee.

Tax Cost for the Employee

Whether the car is bought or leased, the other major benefit of switching to electric – for both employee and employer – is the drastically reduced benefit in kind (the amount on which tax and employer’s NIC is payable).

The percentage for diesel and petrol cars increases the more polluting they are and can go as high as 37%. In contrast, for 2022/23, the percentage for an electric car is a very modest 2% – resulting in a much lower value for the taxable benefit in kind. This results in savings of income tax for the employee and Class 1A NIC for the employer.

Another advantage is that it is still possible for an employee to give up salary for their vehicle via salary sacrifice, without being caught by the Optional Remuneration Arrangements (OpRA) rules. These rules mean that when an employee gets a choice between an amount of salary or a benefit, they are usually taxed on the higher of the cash equivalent of the benefit or the salary forgone. But where the employee gives up some salary for an electric car then the employee can still only pay tax on the cash equivalent of the benefit in kind if this is less than the salary given up.

Fuel or Should that be Charging Up ?

There are also incentives for employers to provide workplace charging facilities so that employees can benefit from the convenience of charging while they are at work.

An employer paying to install electric charging equipment can claim 100% of the cost as a first-year allowance – again receiving immediate upfront tax relief – and they can also recover the VAT where the equipment is installed at their business premises.

There is no benefit in kind for the employee if they charge their company car up at the work premises – even if they then use that charge for private miles. This again compares very favourably to the position where an employee provides diesel or petrol for private use, where the benefit in kind cost for private fuel can be very expensive.

In fact, there is no benefit in kind applied to any employee who can charge up at, or near their workplace, even if the car is the employee’s own electric car rather than a company one, provided the facilities are available to all employees.

Time to Act?

At the present time, the favourable tax treatment as set out above, is set to run until March 2025.

However there is no guarantee how long these benefits will be retained so if employers want to take advantage of them, they should consider doing so sooner rather than later.

If you require additional information on this topic, please contact your usual Dixcart adviser or speak to Paul Webb in the UK office: advice.uk@dixcart.com.