Welcome to BPU's Spring Newsletter 2023
In this issue:
- The UK Shared Prosperity Fund
- VAT News - Latest Updates and Changes
- Tax Update - Reflecting on The Spring Budget, Basis Period Reform Explained, R&D Tax Relief
- BPU Staff News - BPU Corporate Cup, Welcome Toni, Marathon Number 9 for Carolyn, Congratulations Jonathan ATT Qualified
- BPU's IFA Ian Sinclair - Using the Bank of Mum and Dad to Pass Down Wealth
The UK Shared Prosperity Fund
The Government has confirmed that businesses based in South and West Wales will benefit from its £2.6billion UK Shared Prosperity Fund.
The UK Shared Prosperity Fund's main objective is to support local businesses in areas that are said to be most in need as part of its ‘levelling up’ agenda. The Fund aims to improve pride of place and increase life chances across the UK by investing in communities and places, supporting local businesses, people and skills.
Certain local authorities across the UK have been allocated a proportion of the funding and will be responsible for distributing the funding through various initiatives and schemes.
Following the release of funds to the authorities, projects will be launched that will enable businesses to secure funding. Whilst many of these projects are yet to be released, it is worth checking your local authorities’ website over the coming months to see which projects your business may be eligible for.
For further information on the UK Shared Prosperity Fund please visit the HMRC website here;.
The New Penalty Regime - A Reminder
The new points based penalty regime for the late submission of VAT returns came into effect for VAT periods starting on or after 1 January 2023. From this date a penalty point is applied for any VAT return that is submitted late.
Each point received will count towards a VAT penalty points threshold based on the VAT return frequency. Under the new regime points will be applied even when the returns are nil or in a repayment position. The table below shows the thresholds depending on the frequency of the VAT Returns.
| Submission frequency
|| Penalty points threshold
|| Period of compliance
|| 24 months
|| 6 months
A £200 penalty will be charged once the penalty point threshold has been reached, along with an additional £200 for any further late submissions.
Points are reset when all returns and payments are submitted on time for the relevant period of compliance outlined in the table above.
After the relevant payment due date, any payments up to 15 days late will not result in a penalty. Late Payment penalties will not be applied to taxpayers who have entered into a ‘Time To Pay Arrangement’ with HMRC where the arrangement was entered into before the due date.
15 days post due date, any amounts still outstanding will result in a penalty. A balance overdue between 16 and 30 days will incur a penalty of 2% of the balance outstanding at day 15. To allow businesses to get used to the new penalty system penalties will not be applied in respect of payments due on or before 31st December 2023 unless payments are more than 30 days late.
After 31 days or more any payments late will result in a 2% penalty on the amount outstanding at day 15. An additional 2% penalty will be added based on the amount outstanding at day 31.
From day 31, there will be a daily penalty calculated on the amount outstanding at 4% per annum. For example, a VAT liability left unpaid for one year and one month will incur a total of 8% in tax penalties.
In addition to the penalties outlined above, late payment interest will also be applied to any outstanding amounts. This will be calculated using the Bank of England base rate plus 2.5%.
As part of the changes, the VAT repayment supplement provisions were replaced on 1 January 2023 and instead HMRC will now pay repayment interest at the Bank of England base rate minus 1% (minimum of 0.5%) on any amounts of VAT due from HMRC.
HMRC Urges Companies that File VAT Returns Annually to Use Compatible Software
HMRC has urged all VAT registered businesses to use Making Tax Digital for VAT (MTD for VAT) compatible software to keep VAT records digitally and file VAT returns.
From 15 May 2023, businesses that file VAT returns annually will no longer be able to use their VAT online account and instead must use compatible software to file future VAT returns.
HMRC said that businesses that fail to do so may be liable to penalties. If a business is already exempt from filing VAT returns online or if it is subject to an insolvency procedure, it is automatically exempt. Business owners can apply for an exemption if it's not reasonable or practical for them to use computers, software or the internet to follow the MTD for VAT rules.
Information on compatible software and how to submit VAT returns under the MTD for VAT initiative can be found here
Our tax team can offer help and support with any of the above so please get in touch with your usual BPU Adviser or contact:
Ashley Wareham - BPU's VAT & Tax Adviser
BPU Staff News
BPU Raise £2,670 for Cardiff City FC Foundation
But Who Won the Cup?
The first ever BPU Corporate Cup kicked off at the Cardiff City House of Sport on Thursday 9th February with eight corporate teams taking part to raise money for Cardiff City FC Foundation.
Matches took place throughout the day between eight corporate teams including Acuity Law, Barclays Bank, Berry Smith LLP , BPU Chartered Accountants , Dudley’s Aluminium Ltd , React Support Services Ltd, RPA Quantity Surveyors Ltd and Wild Water Group.
The day was a huge success ending in a Cup final - RPA Quantity Surveyors V React Support Services. Congratulations to RPA Quantity Surveyors Ltd on winning the tournament scoring two goals in the last minute!
Thank you to all the companies who took part in the Tournament and everyone who has donated and supported the amazing charity work that Cardiff City FC Foundation do. Cardiff City FC Foundation have a core purpose that is as follows:
Our mission is to use the unique appeal of Cardiff City FC to change lives. We tackle inequality and overcome barriers by helping people to lead healthier more active lives, improving education and employment opportunities, and reducing offending and reoffending. Put simply, ‘Our Club Changes Lives’.
Here is a link to Harry's story this video really encapsulates what Cardiff FC Foundation is all about.
The total raised for Cardiff City FC Foundation to date is £2,670!
The Just Giving Page is still live and BPU and all teams would be so grateful for any further donations - Just Giving Page link: https://www.justgiving.com/fundraising/bpu-charity-football
Thank you to all for a great day and a special thank you to Cardiff City FC Foundation students for volunteering as referees and helping make the day a success.
Watch this space for news on the next event!
Congratulations Jonathan - ATT Qualified !
Congratulations to our Tax Junior Jonathan Lewis who has successfully passed his ATT exams. Jonathan joined the BPU tax department in September 2021 and has worked and studied hard to quickly achieve his qualification. Jonathan is now one of six qualified tax professionals in BPU's growing tax department that is dedicated to providing a range of services to individuals and businesses.
Welcome Toni to BPU!
Toni Duggan has joined BPU as our front of house receptionist and administrator. Toni joins BPU following twelve years experience working in a variety of administration roles. Previously working as a volunteer at the British Trust for Conversation Volunteers (BTCV) helping the unemployed back into work, Toni brings a wealth of IT and administrative skills to BPU. Toni has a natural ability to make clients feel welcome and has quickly become a valued member of the BPU team. Toni has four children and eight grandchildren with another one on the way! Welcome to the team Toni.
Count on Carolyn - Marathon number 9!
Congratulations to our Tax Senior Carolyn Windos who completed the Newport Marathon on Sunday 16th April 2023 in 4hours 18 minutes - well done Carolyn! Carolyn started running 9 years ago at the age of 53 and has never looked back completing her first marathon two years later in 2016. She enjoys running and trains hard every week independently and with her running club and has completed a massive 273 Park Runs to date and 9 marathons! You are an inspiration to us all Carolyn we will continue to try and keep up with you on lunch time walks and runs around the business park!
Martin Knight BPU Director
Reflecting on the Spring Statement
Chancellor Jeremy Hunt delivered a ‘Budget for Growth’ after the Office for Budget Responsibility forecast a stronger than expected performance from the UK economy this year with inflation expected to fall.
Driving Business Investment
The Chancellor announced a £27 billion transformation of capital allowances from April this year, which will include the Full Expensing of investment in qualifying plant and machinery. There was also a £500 million package for research and development intensive businesses. In addition, Mr Hunt announced 12 Investment Zones across the UK with funding for skills and support.
Removing Barriers to Work
Reforms to childcare, which will see expanded free care and subsidies, were key to Mr Hunt’s plans to remove the barriers to work for parents, the disabled and the over-50s. The Chancellor also made changes to the pension system to incentivise doctors and other highly-skilled workers to remain in the labour market. As high energy costs continue, the Chancellor extended the Energy Support Guarantee at £2,500 for another three months while fuel duty was frozen once more.
To view our full Budget Report that provides an overview of the key announcements arising and what is most likely to have an impact upon your business and your personal finance please click here
Additionally, throughout the Report you will find informative comments to help you assess the effect that the proposed changes may have on you personally.
For specific advice on any of the announcements raised in the Budget please speak to your usual BPU advisor or contact Martin Knight directly.
Basis Period Reform Explained
HMRC has introduced Basis Period Reform. This means as of the 2024/25 tax year unincorporated businesses have to use an accounting year end of 31 March for tax purposes. This new measure will affect the following businesses - self-employed traders, including individuals with a profession or vocation; partners in trading partnerships; other unincorporated entities with trading income, such as trading trusts and estates and non-resident companies with trading income charged to Income Tax. This measure will only affect businesses which draw up annual accounts to a date different to 31 March or 5 April (mainly seasonal businesses and large partnerships), and businesses that commence from 6 April 2024.
An unincorporated business that has a different accounting period to the standard fiscal year of 31st March, for example, 1st January to 31st December will use 2023/24 as a transition period to the 31st March 2024. As a result of this transition period businesses will have a 'tax year' that will be longer than 12 months. This is likely to create larger tax bills and HMRC will be offering transitional relief. Any business affected by these changes can choose to make payments for their tax bill period (e.g. six months for a business with an accounting date of 30 September) proportionally across the following five years or can choose to pay over a shorter period of time.
Although businesses affected by the transition will have until 31 January 2025 to file their final tax returns for the transitional tax year, issues such as establishing and evidencing overlap profits could take a lot of time, planning this process is key to avoid potentially increasing work for a business in summer 2024.
Businesses affected by Basis Period Reform do have the option of changing their accounting year end to match the tax year end of the 31st March. This can be done during the transitional year (2023-24) but for some e.g. farmers or seasonal businesses this may not be an option. This needs to be carefully considered, however, as there may be other implications on the business e.g. cash flow. Please note that businesses must claim all remaining overlap reliefduring 2023/24, regardless of whether they are changing their accounting date to coincide with the tax year.
At BPU we strongly advise that you start planning for this change as soon as possible. Every business affected by the new reform will need to manage the process to suit what works best for the business. Please get in touch with you usual BPU advisor for advice on any of the above.
R&D Tax Credits Changes From April 2023 – How It Could Affect your Business?
To help tackle the abuse of the Research and Development (R&D) tax system a number of measures were introduced by the Government on 1 April 2023. Below are the main changes to be aware of and how this could affect your business:
- Rate Changes
The amount of relief granted to SMEs reduced for all expenditure incurred on or after 1 April 2023. The enhanced deduction decreased from 130% to 86% and the cash credit rate decreased from 14.5% to 10%. Simplified this means that for every £1 spent R&D tax credits will reduce from 33p to 19p. For those that claim under the Research and Development Expenditure Credit (RDEC) Scheme, the credit rate pre-tax has increased from 13% to 20%.
- Advance Notification
For accounting periods starting on or after 1 April 2023, HMRC has added a new requirement that companies must notify them before making an R&D claim and within 6 months of the end of the relevant accounting period. This requirement may not apply if you made a claim in one of the three previous accounting periods. This notification must be made online and more detailed guidance on this can be found here.
- Two New Categories for R&D Claims
Cloud computing costs and data licensing are the two new categories of qualifying expenditure for R&D claims. Costs incurred under these two categories can be included in the claim if they are directly involved in R&D.
- No Overseas Subcontractors
Subcontracted spend from outside the UK will no longer be eligible for inclusion in R&D claims. This change aims to bring more R&D activity to the UK. In the Spring Budget 2023, the Government announced that this change will come into effect from 1 April 2024 to give companies more time to find UK subcontractors. Overseas activities will only qualify in extremely limited circumstances.
- R&D Claim Documentation
R&D claims must be made digitally on a Corporation Tax Return. The claim must be supported by a summary which outlines how the company meets the R&D criteria and include evidence such as an overview of how the costs were calculated and how the company meets the R&D criteria. The report must be approved and signed by a senior officer of the company and details of the R&D agent completing the claim must also be provided.
The BPU Tax App - have you tried it yet?
BPU has invested in its very own Tax App to help clients. The App has many useful functions including a Mileage Tracker, Expenses Logger, Tax Calculators, Cloud Portal login to Sage, Xero, QuickBooks and lots more. To downloads this free app in apple click here or for android click here.
For further information on any of the above please contact:
Martin Knight, Director
Using the Bank of Mum and Dad to Pass Down Wealth
Recent research has highlighted the importance of The Bank of Mum and Dad in helping young people start their adult lives, marriages and, most commonly of all, get themselves on the property ladder. However, passing down wealth through the generations takes careful planning. Here we look at how long-term objectives for family finances can be met.
Billions of gifts and loans
Parents in the UK gift or loan their children an estimated £17 billion each year, mostly to help with buying a house or as a wedding present, according to recent research from the Institute for Fiscal Studies (IFS).
Most transfers come from parents aged over 50 to children in their late 20s and early 30s. Around 30% of young adults receive at least one substantial transfer (of £500 or more) over any eight-year period.
The majority of this transfer comes in the form of gifts while £3.3 billion is in the form of loans, although these are frequently lent with very favourable terms and low expectation of them being repaid.
The property ladder
Half of the value of gifts received was used for property purchases or improvement. Those using transfers for this purpose received over £20,000, on average. Those in the least wealthy third are relatively more likely to report using gifts for the purchase of a new car, to pay off debts or for educational expenses.
Whatever the purpose of a gift or loan, it can attract the attention of the tax authorities with the potential for inheritance tax (IHT) or capital gains tax (CGT) liabilities.
Many smaller or regular lifetime gifts are exempt from IHT, while larger gifts may become exempt after seven years, so a strategy of making gifts in your lifetime can substantially reduce your taxable estate on death.
You can also take out life insurance to cover any IHT which might be due following your death within seven years of making larger gifts. However, potential CGT must be taken into account with this option.
IHT is currently payable where a person's taxable estate is in excess of £325,000. Therefore, if you own your own house and have some savings, your estate could be liable.
The good news is that there are a number of allowances and strategies that may help to reduce your liability to IHT. This may include utilising the residence nil-rate band, which was introduced with the intention of enabling a 'family home' to be passed tax-free on death.
It could be said that the art of IHT planning is to give away as much as possible during your lifetime, while still keeping enough to ensure that you and your spouse can live a comfortable and fulfilling retirement.
The full rate of tax is 40% on the estate value in excess of £325,000. Taxable gifts made up to seven years before death are added back into your estate and tax is calculated on the inclusive value. But to the extent that such lifetime gifts made between three and seven years before death exceed the tax threshold, the associated tax is discounted by up to 80%.
In addition, the 'residence nil-rate band' (RNRB) applies where a residence is passed on death to direct descendants, such as a child or a grandchild. The RNRB is set at £175,000 for 2022/23.
Trusts allow you to make gifts without giving the recipient complete control over the asset and/or the income it generates. Gifts into trust may result in an IHT liability, depending on the nature, timing and terms of the gift and the value of other chargeable gifts in the preceding seven years. Ten-yearly and exit charges may also arise.
You can also create a discretionary trust in your Will to allow your trustees to decide how your assets should be distributed, giving a (non-binding) letter of wishes and taking into account all relevant circumstances at the time. This option has the advantage of deferring all CGT charges.
How we can help
Since establishing BPU Financial Solutions Ltd in 2012, we now manage over £45million of client monies via a wide range of investment, retirement and inheritance tax planning solutions using independently sourced portfolios of investment funds to diversify risk and maximise returns for clients.
You will find a good variety of investment information in the Your Money section on our website but if you think you could benefit from personalised independent financial advice about your savings and investments, please get in touch with me.
Ian Sinclair DipPFS
Independent Financial Adviser
BPU Financial Solutions Ltd
T: 02920 734100