Date	What’s Due
1 October	Corporation tax for year to 31/12/22 unless paid by quarterly instalments
5 October	Deadline for notifying HMRC of chargeability for 2022/23 if not within Self-Assessment and receive income or gains on which tax is due. i.e. to register for Self-Assessment.
19 October	PAYE & NIC deductions, and CIS return and tax, for month to 5/10/23 (due 22 October if you pay electronically)
1 November	Corporation tax for year to 31/01/2023, unless quarterly instalments apply
19 November	PAYE & NIC deductions, and CIS return and tax, for month to 5/11/23 (due 22/11 if you pay electronically)

Recent Tribunal decisions in favour of employing companies and against HMRC has caused many organisations in similar circumstance to make protective claims for the recovery of National Insurance Contributions (NIC) in respect of car allowances paid to employees using their own cars or vans for business journeys.

Many employers have a policy of only reimbursing the fuel costs associated with those business journeys (for example at 15p per mile) rather than paying the maximum HMRC Approved Mileage Allowance Payments (‘AMAP’) rates (currently 45p/25p per mile) on a tax and NIC free basis. The employee can then make a claim for the difference between the 45p allowance and the amount received from the employer as a deduction from their employment income.

The recent Upper Tribunal decisions (which HMRC have confirmed they will not appeal) have held that the amounts paid by the employer in respect of business mileage are exempt from NIC and consequently employers should consider making a claim for repayment from HMRC.

Please contact us if you think you may be entitled to make such a repayment claim.

In the weeks before any Budget or Autumn Statement there are always leaks and rumours. Normally, in the run up to a General Election there are also tax give aways in an attempt to re-elect the incumbent political party. One rumour that has been circulating in the press concerns the possible abolition of inheritance tax (IHT). That would certainly be very popular amongst wavering Conservative voters as it would enable them to retain more wealth within the family.

This rumour may have the effect of causing families to delay estate planning pending an announcement. Tax planning can only be based on the tax rules that exist at the time, and should not be based on speculation over future law changes. A further uncertainty concerns tax changes resulting from a possible change in the political party in government. The Labour Party have history for increasing capital taxes and strengthening the rules concerning the use of trusts in tax planning.

The now disbanded Office of Tax Simplification produced 2 reports in recent years concerning the simplification of IHT and the complicated interactions with capital gains tax (CGT). The Chancellor may decide to take some of those suggestions on board or possibly abolish IHT and extend CGT to certain transfers on death.

As always please contact us to discuss your future plans concerning the transfer of your business and family assets. We will of course keep you informed of any changes in tax legislation that may affect those plans.

The Treasury has announced that the Office of Budget Responsibility (OBR) will produce a report on the state of the UK Economy in time for the Chancellor Jeremy Hunt to present his Autumn Statement on Wednesday 22 November.

Last year the Chancellor announced a number of significant changes, reversing many of the proposals in the Kwarteng/Truss mini Budget the previous September. This time we are not expecting too many surprises. However, the leaks and rumours have already started with suggestions that there will be no significant tax cuts. There is also likely to be a General Election within the next 13 months so there may be a few tax sweeteners. The Prime Minister’s statement on 20 September on progress to Net Zero suggests that there may be a number of announcements concerning green energy measures affecting individuals and businesses. Another suggestion has been the possible abolition of inheritance tax which may encourage traditional Conservative Party voters to stay loyal (see below)

In order that we can help predict your taxable profits and tax liabilities we need up to date profit figures and projections. One of the advantages of keeping your business accounts in a computerised form, ideally on the Cloud, is that we can review your latest financial position and help you prepare more reliable profit forecasts to estimate your tax bills.

Unincorporated Businesses
Reliable profit forecasts are particularly important at the moment, with the changes to the taxation of sole traders and partnerships from 2024/25, and the complicated transitional rules that apply in 2023/24. The transitional rules may result in higher tax bills if your business does not have a 31 March or 5 April year end. If we have reliable profit forecasts for your business we can determine whether or not changing your business year end would be beneficial, and also determine the timing of that change.

Limited Companies
From 1 April 2023 the rate of corporation tax that a company pays depends on the level of the company’s profits and the number of “associated companies”. “Associated companies” are those under common control, which may include companies controlled by close relatives under certain circumstances.

Assuming a company has no “associated companies” then the 19% corporation tax rate continues to apply where profits are no more than £50,000 and the 25% corporation tax rate applies where profits exceed £250,000 a year. The £50,000 and £250,000 limits are divided by the number of “associated companies”.
In between the limits there is marginal relief to achieve the transition between 19% and 25%. The marginal tax rate between £50,000 and £250,000 is 26.5% and thus tax planning can be particularly effective.
For example buying new equipment or paying additional pension contributions on behalf of the directors would potentially save 26.5% corporation tax. Timing of expenditure is critical here, as the expenses would need to be incurred before the year end. We would recommend a review at least 2 months before the company’s year-end, with reliable profit forecasts available to allow time for pre-year-end planning.

When are companies associated?

“Associated companies” for corporation tax purposes are those under common control. The most obvious situation is where one of the companies has control of the other, or both of the companies are under the control of the same person or persons. In determining control, the rights and powers of an individual’s associates, broadly close relatives, may be taken into consideration, but only where there is substantial commercial interdependence between the two companies. This could be financial, economic, or organisational interdependence and will depend on the facts of each case. An example would be where a brother and sister each have their own limited companies and there is a large loan or significant trading between them, such that one is dependent upon the other.
This is not a straightforward matter and we can of course advise you on whether or not it impacts your company.

Larger companies are required to pay tax quarterly

Although not a new measure, where a company has profits in excess of £1,500,000 a year it is required to estimate and pay corporation tax quarterly during the year, rather than 9 months after the end of its accounting period. What has changed since 1 April 2023 is that the £1,500,000 threshold is divided by the number of “associated companies” in the accounting period, as defined above. Thus, if a company has two associated companies, if any of them has profits in excess of £500,000, quarterly instalments of corporation tax will be required. If that company has a 31 March 2024 year end, it needs to pay its estimated corporation tax liability according to the following schedule:
• 25% of its estimated liability by 14 October 2023
• 50% of its estimated liability by 14 January 2024
• 75% of its estimated liability by 14 April 2024
• 100% of its corporation tax liability by 14 July 2024
As mentioned above, accurate profit forecasts are required in order to compute the quarterly payments.

Note that this is a significant acceleration of tax payments compared to the normal 9-month payment interval. Consequently, there is a one year “grace period” that applies for the first year the threshold is breached. You might also wish to consider minimizing the number of associated companies to avoid this cash flow disadvantage.

Date	What’s Due
1 September	Corporation tax for year to 30/11/22 unless paid by quarterly instalments.
19 September	PAYE & NIC deductions, and CIS return and tax, for month to 5/9/23 (due 22 September if you pay electronically).
1 October	Corporation tax for year to 31/12/22 unless paid by quarterly instalments.
5 October	Deadline for notifying HMRC of chargeability for 2022/23 if not within Self-Assessment and receive income or gains on which tax is due.
19 October	PAYE & NIC deductions, and CIS return and tax, for month to 5/10/23 (due 22 October if you pay electronically).

The table below sets out the HMRC advisory fuel rates from 1 September 2023. These are the suggested reimbursement rates for employees’ private mileage using their company car.

Where the employer does not pay for any fuel for the company car these are the amounts that can be reimbursed in respect of business journeys without the amount being taxable on the employee.

Engine Size	Petrol	Diesel	LPG
1400cc or less	13p		10p
1600cc or less		12p
1401cc to 2000cc	16p (15p)		12p
1601 to 2000cc		14p
Over 2000cc	25p (23p)	19p (18p)	19p (18p)

 

Where there has been a change the previous rate is shown in brackets.

You can also continue to use the previous rates for up to 1 month from the date the new rates apply.

Note that for hybrid cars you must use the petrol or diesel rate. For fully electric vehicles the rate is 10p (9p) per mile.

Draft legislation released for consultation on 18 July indicates that business and individual taxpayers will be required to provide more information to HMRC in the next few years.

It is proposed that from 2025/26, employers will be required to provide more detailed information on employee hours worked via real time information (RTI) PAYE reporting. The information to be reported will be set out in separate regulations.

From 2025/26 shareholders in owner-managed businesses will also be required to provide additional information via their self- assessment tax returns. These shareholders will be required to disclose the amount of dividends received from their own companies separately from other dividend income, as well as the percentage shareholding that they hold in their own companies.

Self-employed individuals will be required to provide information on the start and end dates of their businesses via their self-assessment returns.

Currently, where an individual pension holder dies before age 75, drawdown pensions paid to a successor can generally be received free from income tax. Where the pension holder dies over the age of 75, then the amounts drawn by the successor are taxed at their marginal income tax rate. Note also that the current tax rules provide that the value of the fund passes free of inheritance tax to the successor and thus forms an important part of estate planning.

Policy documents published in July 2023 include draft legislation to abolish the pension lifetime allowance and associated income tax charge. These were previously announced as part of Budget Day measures to lure workers aged over 50 back into work and are generally welcomed. However, the policy documents regarding changes to the taxation of pensions also included a suggestion that certain beneficiaries of pensions of members who died under age 75 may become subject to income tax as part of future tax changes, possibly from 2024/25. This would align with the tax position for beneficiaries of pensions where the member dies over age 75.

The government have issued draft legislation for consultation on the proposal to merge the two forms of corporation tax relief for expenditure on research and development (R&D)

For expenditure incurred on or after 1 April 2024, it is proposed that the two schemes providing for R&D relief – R&D expenditure credit (RDEC) and Credit Relief for SMEs, will be merged and replaced with a single unified scheme. This will operate alongside a new scheme to provide additional relief for “R&D intensive” SME companies.

It is suggested that this merged scheme will operate in a similar manner to the existing RDEC scheme, rather than the SME scheme. The merged scheme will offer a taxable credit, based on a percentage of R&D expenditure, that can be offset against the company’s tax liability. The rate of relief under the proposals is 20% of R&D expenditure. This translates into a net benefit of 15%, assuming a company pays tax at the 25% main rate of corporation tax.

The exception to this would be for loss-making “R&D intensive” SMEs. These companies would be able to continue to claim an additional deduction for R&D expenditure, and where that deduction produces or contributes to a loss, claim a payable credit for that loss.

“R&D Intensive” SME companies

It is envisaged that the current SME relief will effectively continue for loss-making R&D intensive companies. An R&D intensive company is broadly defined as being where R&D expenditure is 40% of the company’s total expenditure for the purposes of calculating profits chargeable to corporation tax. For those companies, the additional deduction will remain at 86%, with the rate of payable credit for surrenderable losses being 14.5%. This would provide a repayable credit of £26.97 for every £100 spent on qualifying R&D.