Nichola's SME Tax W-update 6 October 2022

Hello, 

You will no doubt have heard about the U-turn on the mini-budget announcement to cut the 45% Income Tax band on Monday, you are less likely, however, to have heard about the decision to change the definition of a 'small' company. 

Companies with up to 500 employees (it was previously 50), may now (this measure is backdated to 3 October 2022), depending on the size of their turnover and net assets, qualify as 'small'. This change is likely to have some considerable knock-on effects, although without more detail we cannot gauge what these will be. It may, for example, mean that with immediate effect the Off-Payroll Working rules cease to apply for some employers. The government is also making changes to the filing requirements at Companies House in its efforts to tackle economic crime and the change will impact those companies that will qualify as small too.

HMRC is reminding people that there is only one month left to sign up for Making Tax Digital (MTD) for VAT. It seems to be having real difficulty communicating this to some 100,000 businesses, but why is that? It is odd because it's not as if HMRC has not been sending out reminders in the post. I would guess that many of the businesses possibly have grounds for claiming the exemption from MTD. With the new, horribly complicated point-based VAT penalty system starting on 1 January 2023, we anticipate that HMRC will allow a soft landing on penalties. Bearing that in mind, we might not uncover details as to the identity of this hard core of late registrants until they appear in the VAT tribunal, and that is unlikely to be until 2024. This will also be when the tribunal gets to fully drive through the penalty legislation too.

If you are still baffled by the tax changes announced in the mini-budget, please read our 'Company Tax: What's new?' for business owners. Further 'What's new' guides are planned in the coming weeks.

More news, updates and cases below.

Back soon, 

Nichola Ross Martin FCA CTA (Fellow)
Tax Director

www.rossmartin.co.uk

Your Virtual Tax Partner® online PRACTICAL support for accountants, tax advisers BY accountants and tax advisers.

Quick News (Freeview) 

Chancellor reverses cut to 45% tax rate
The Chancellor, Kwasi Kwarteng, has announced that the 45% Income Tax top tax rate will remain in place from next April. Interviewed on BBC Radio 4 this morning, he admitted that his uncosted mini-budget proposal had become "a massive distraction".

'Small' definition extended to 40,000 more businesses
The government has announced a change to the small company threshold, increasing the employee number limit from 50 to 500. It is expected that the change will bring a further 40,000 businesses within the definition of 'small'. 

Consultation: Reforming non-domestic rates in Wales 
The Welsh government has published a new consultation ‘Reforming non-domestic rates in Wales’. It looks at improvements to ensure that Welsh ratepayers contribute fairly to the services they receive and that the services ratepayers rely upon are properly funded.

Economic Crime Bill & Companies House: Update 2022
What is the Economic Crime and Corporate Transparency Bill? What new reforms will apply to Companies House and Partnerships? What data needs to be supplied to Companies House in respect of accountant's clients?

Editor's Pick  

Setting up as a tax agent 
What do you need to consider when setting up as a tax agent? What are the steps? How do you register with HMRC?

Super-deduction & First Year Allowances  
UPDATE: New flowchart! What is the new Super-deduction allowance? When does it apply and what is the rate of allowance? What other First Year Allowances (FYAs) are available? What is the SR Allowance? What if I dispose of an asset on which the Super-deduction or SR allowance has been claimed?

Guides & Updates 

Directors & Companies

Company Tax: What’s new? 2022 
UPDATE: A summary of the latest developments in tax for companies and their owners including the mini-budget on 23 September 2022. 

Self-employed

Extracting profits (self-employed)
UPDATE: What tax planning tips will help you to run a tax-efficient business? We review your different options. The majority of businesses in the UK are run by sole traders. This guide looks at profit extraction from the perspective of the unincorporated business. 

Land & property  

Buy-to-let ownership: personal v. company? (Subscribers)
What is the most tax-efficient option to own buy-to-let property? Personally or via a company? What are the income and Corporation Tax, CGT, IHT, ATED, SDLT, or VAT issues? Tips on profit extraction, other planning points, case studies, and links to further guidance.

Employers 

Employment-Related Securities & Share Schemes
UPDATE: What are the tax consequences when a company gives shares to an employee or director? What are employment-related securities? What is best: shares or share options? How do you set up a share scheme?

Tax-free benefits and perks
UPDATE: What are the key tax-free benefits or 'perks' that can be used to incentivise your staff? How should you structure them?

Private Client & Estate Planning 

Client Briefing: Making gifts & IHT
UPDATE: What gifts can you make without triggering Inheritance Tax (IHT)? What are the rules on making tax-effective gifts for IHT purposes?

Do I have to file a tax return?
UPDATE: When does an individual need to file a tax return? In what circumstances do HMRC need to be notified that a tax return is required?

Tax Cases (Freeview) 

FTT: SDLT discovery valid 
In David Wilby v HMRC [2022] TC08589, the First Tier Tribunal (FTT) ruled that a robust HMRC process was sufficient to render a discovery assessment valid following the identification of discrepancies between an SDLT return and Land Registry forms.

Employee not faking it, SSP due   
In White Feather Commercial Cleaning Ltd v HMRC [2022] TC 8611, the First Tier Tribunal (FTT) concluded Statutory Sick Pay (SSP) was due to an employee.  The appellant’s claims that the incapacity was not genuine were dismissed.

VAT Cases & Guides 

Mega Marshmallows are not confectionery for VAT 
In Innovative Bites Limited v HMRC [2022] TC08605, the First Tier Tribunal (FTT) found that ‘Mega Marshmallows’ were not confectionery and so were zero-rated for VAT purposes.

International goods
Special VAT rules apply to goods bought from and sold to non-UK businesses. This guide only considers UK VAT. It does not address Customs duties or other indirect taxes and duties that might apply on goods. This guide also does not consider the position for Northern Ireland.  

Tax Tools 

Tax Tools
Be a winner with our game-changing tax diagnostics tools for Business Asset Disposal Relief, SDLT & annexes/subsidiary properties, Company reorganisations, R & D Zone and TAAR on winding up. Sign up now!

Calendar of tax deadlines and new tax measures
UPDATE: This is a freeview 'At a glance' rolling calendar of common recurring tax deadlines, new tax measures and other tax significant events. 

Tax Queries?

Virtual Tax Partner© Support
Have a tax query? Need a second option? Open a ticket and ask a question. A team of tax experts with a very wide range of expertise: covering direct and indirect tax, as well as accounting, R&D claims, reorganisations and much more. 

CPD for lunch 

Byte-sized chunks of CPD for subscribers

• NEW: CPD: Making Tax Digital
• CPD: Where are we with Crypto?
• CPD: How to avoid the High-Income Child Benefit Charge (HICBC)
• More at CPD Index

Missed last time's Web-update?

Nichola's SME Tax W-update 29 September 2022

• HMRC interest rates rise again 
• Don’t miss the Self Assessment registration deadline 
• Abolition of OTS baffles tax bodies
• HMRC suspends tax refunds to Tax Credits Ltd
• Mini-budget 2022: at a glance
• Agent Update: September 2022
• Employer’s What’s On: 2022/23 
• Double taxation relief allowed under UK/US treaty 
• VAT deregistration denied, penalties upheld 
• Input VAT: payments must be linked to intention to trade
• Dividend tax (subscriber guide)
• SDLT, LBTT, LTT: What's new 2022-23
• Sole trader v. limited company: Tax differences & savings (2022/23)
• Salary 2022/23 (avoiding NICs)
• Personal Service Company (PSC) tax
• CPD: Making Tax Digital ...More 

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