Rates rise to pile more pressure on SMEs
UK business groups have described the Bank of England’s interest rate rise as ‘ill timed’ as it will only pile on more pressure to SMEs already struggling with debt repayment burdens
The Federation of Small Businesses (FSB) and the British Chamber of Commerce (BCC) have both expressed concern over the announcement from the Bank of England (BoE) yesterday, which increased interest rates to 0.75%.
The groups stated that the move will mean higher debt costs for many businesses as they try to continue to fight through the economic consequences of the pandemic with the BCC stating that the move was ‘ill-timed against a backdrop of growing domestic and global headwinds’.
In a statement released by the FSB, national chair Martin McTague stated that SMEs were being constantly ‘undermined by a vicious cycle of rising costs’ as they try to make up for the time lost over the last two years of the Covid-19 pandemic.
The BCC stated that while interest rates remain low ‘by historic standards’ the latest rise will be viewed by many as a further step in the ‘prolonged period of aggressive monetary tightening’ at a time when consumers and businesses are struggling as increasing the interest rate will do ‘little to curb the global causes behind this inflationary surge’.
The BCC added that the move will only ‘damage confidence’ and ‘deepen the financial squeeze on consumers and businesses.
In a statement released by the FSB, McTague said: ‘A lot of small firms have had no choice but to increase prices in response, but this isn’t always an option, especially in sectors still trying to entice customers back, such as hospitality and tourism, and their suppliers.
‘At the same time, consumer confidence has plunged and the cost-of-living squeeze has intensified, with record fuel prices and sky-high utility bills meaning loss of disposable income.
‘Small businesses increasingly feel that the Government is indifferent to the cost pressures they face.
‘The planned hikes to national insurance and dividend taxation taking effect in a matter of days, alongside an income tax threshold freeze, will, for many, be the final straw.’
Both the FSB and the BCC have urged the Chancellor to consider this when he releases his Spring Statement next week with the BCC stating that it is vital for the Chancellor to priorities ‘the escalating cost of doing business’.
The BCC called on the Chancellor to delay the National Insurance Increase (NIC) and to introduce a temporary energy price cap for small businesses.
Suren Thiru, head of economics, at the BCC: ‘This would give firms the headroom to keep a lid on prices, protect jobs and make an investment that is so vital to sustaining our economic prospects.’
As well as support for rising energy costs, the FSB calls for an increase in the Employment Allowance and a rise in the business rates relief threshold on rates.
The FSB also stated a ‘pay as you grow’ option on other state-loan-backed schemes to allow businesses to spread the pressure of their debt repayments.
McTague concluded: ‘We urgently need to see the Chancellor ease the pressure on the five and a half million small firms and sole traders on which our recovery will depend.’
- Published in Business Rates
HMRC late payment interest rates revised
HMRC has increased its late payment interest rates to 0.75% after the Bank of England increased their base rates
The tax authority revised its interest rates for late payments after the Bank of England (BoE) increased the base rate from 0.5% to 0.75%.
HMRC confirmed that the repayment interest rate will rise to 0.75% with the rises due to come into effect shortly The repayment interest rate will remain at 0.5%.
The changes to late payment interest will come into effect on:
- 28 March 2022 for quarterly instalment payments; and
- 5 April 2022 for non-quarterly instalments payments.
HMRC’s interest rates are linked to the Bank of England’s base rate, and due to the base rate increasing HMRC automatically increases rates.
- Published in HMRC
Treasury collects £4m extra a day in fuel VAT
Since the beginning of 2022, the Treasury has collected nearly £4m extra a day in fuel VAT due to the increasing price of petrol which totals an extra £270m so far this year
The data, compiled by former Office National Statistics (ONS) statistician Jamie Jenkin and provided by RAC, shows that as the average price of petrol has increased to 161.06p per litre since the beginning of 2022.
Jenkin highlighted in a Twitter thread that over half of what is paid at petrol pumps goes to the UK government in tax with 57.98p being fixed for every litre and 20% of the setting price being taken in VAT. If this price goes up by 10p then the government gets an additional 2p.
Jenkin stated that due to the fact that petrol prices have increased by 14p since the beginning of January and that 133m litres of petrol are purchased each day, the current fixed rate and VAT means that the Treasury is estimated to be taking at least an extra £3.7m each day. This means that over the 73 days so far this year, the Treasury has brought in an extra £270m in VAT from fuel.
According to data released by the Department for Business, Energy, and Industrial Strategy (BEIS) shows that the increase between 28 February and 7 March was the sharpest in 18 years, with the average price of a litre of petrol rising from 149.2p to 153.0p, the average diesel price rose from 153.4p to 158.6p.
With the ongoing crisis in Ukraine, the cost of fuel is expected to continue to rise significantly over the coming few weeks.
Jenkins told Accountancy Daily: ‘As fuel prices rise, the Treasury receives an extra £3.7m a day since the beginning of January.
‘The VAT take for fuel is rising and with the added cost for families, this is an area where the Chancellor could temporarily cut back next week. There are a few areas he can also look to help out families with the cost of living.
‘A temporary cut in fuel duty, or a suspension of the green levy on household energy bills would be a welcome boost with costs soaring. With extra money coming in through VAT on these increased fuel bills, he has some room for manoeuvre.’
Many are urging Rishi Sunak to act on the increased cost of living in next week’s Spring Statement, with the RAC calling on the Chancellor to cut VAT on fuel and to reduce fuel duty.
A spokesperson from the RAC said: ‘Prices at the pumps have been breaking records on a daily basis and to make matters worse the price increases have been seriously steep recently. We believe the Chancellor must take immediate action by cutting VAT on fuel to at least 15% to give drivers some instant respite and to protect them from future increases.
‘The Chancellor could also temporarily reduce fuel duty, which is currently levied at 58p per litre, reducing this would help both businesses and consumers.’
Last week, the RAC promoted a petition which has gathered increased momentum due to the impact the Russian invasion of Ukraine has had on the price of fuel.
According to the petition: ‘The government should reduce the cost of fuel through a reduction of 40% in fuel duty and VAT for two years. This can effectively offset the rise in fuel prices since 2020.
‘We believe people may understand to a degree the need for tax following the pandemic however prices of £1.50 or more per litre will cancel out any understanding. The government has the ability to sacrifice some revenue to appease the British public.’
- Published in Fuel Rates, VAT
570k scams hit self assessment taxpayers, HMRC warns
HMRC is warning self assessment taxpayers to be on their guard following the tax return deadline after more than 570,000 scams were reported to HMRC in the last year
At this time of year, self assessment taxpayers are at increased risk of falling victim to scams. They can be taken in by scam texts, emails or calls either offering a ‘refund’ or demanding unpaid tax, thinking that they are genuine HMRC communications referring to their self assessment return.
Criminals try and steal money or personal information, using phone calls, texts and emails to try and dupe citizens, and often mimic government messages to make them appear authentic.
In the 12 months to January 2022, nearly 220,000 scams reported to HMRC offered bogus tax rebates. The tax authority responded to 572,423 referrals of suspicious contact from the public.
There were also hundreds of telephone numbers identified as faking HMRC to try to scam taxpayers. HMRC has been working with the telecoms industry and Ofcom to remove more than 920 phone numbers being used to commit HMRC-related phone scams.
The number of phone scams has escalated in the last year with 267,671 reports of phone scams in the last year. In April 2020 HMRC received reports of only 425 phone scams while by January 2022 this had soared to 3,995.
The internet is another minefield with more than 6,160 malicious web pages taken down over the 12-month period.
The various government covid schemes also provided fertile territory for fraudsters. Since March 2020, HMRC detected 463 Covid-related financial scams, mostly disseminated by text message and it worked with internet service providers to take down 443 Covid-related scam web pages.
Myrtle Lloyd, HMRC’s director general for customer services, said: ‘If someone contacts you saying they’re from HMRC, wanting you to transfer money or give personal information, be on your guard.
‘Never let yourself be rushed, and if you’re in any doubt then check our ‘HMRC scams’ advice on gov.uk.’
Following the extension of the self assessment deadline to 28 February 2022, taxpayers have until 1 April to pay their outstanding tax bill or set up a time to pay arrangement to avoid receiving a late payment penalty. Interest has been applied to all outstanding balances since 1 February.
Taxpayers should report suspicious phone calls using the form on gov.uk and forward suspicious emails claiming to be from HMRC to email@example.com and texts to 60599.
HMRC has a dedicated team working on cyber and phone crimes. They use innovative technologies to prevent misleading and malicious communications from ever reaching the taxpayer. Since 2017, these technical controls have intercepted 500 million emails. More recently, new controls have prevented 90% of the most convincing SMS messages from reaching the public and controls have been applied to prevent spoofing of most HMRC helpline numbers.
HMRC is also reminding people to double check websites and online forms before using them to complete their 2020/21 tax return. People can be taken in by misleading websites designed to make them pay for help in submitting tax returns or charging to connect them to HMRC phone lines.
HMRC’s advice to the public:
- Take a moment to think before parting with your money or information.
- If a phone call, text or email is unexpected, don’t give out private information or reply, and don’t download attachments or click on links before checking on gov.uk that the contact is genuine.
- Do not trust caller ID on phones. Numbers can be spoofed.
- It’s ok to reject, refuse or ignore any requests – only criminals will try to rush or panic you.
- Search ‘scams’ on gov.uk for information on how to recognise genuine HMRC contact and how to avoid and report scams.
- Forward suspicious texts claiming to be from HMRC to 60599 and emails to firstname.lastname@example.org. Report tax scam phone calls on gov.uk.
- Published in Self Assessment
HMRC asks businesses to label NIC rise on payslips
HMRC has emailed employers ‘strongly encouraging’ them to label the increased National Insurance contributions (NICs) rate on their employee’s payslips as ‘for the NHS’
Last month the tax authority sent out a statement in its emails and bulletins to all registered employers asking them to consider highlighting the increase in order to help employees to understand what the increase would be funding.
The statement released by HMRC said: ‘We are therefore requesting that employers include a message for affected employees on all payslips between 6 April 2022 and 5 April 2023, explaining the increased National Insurance contribution. The message should read: 1.25% uplift in NICs funds NHS, health and social care’.
The email also stated that HMRC had been in contact with payroll software providers to request that they include the message in their software and wider support models.
From 2023 the rate for NICs will return to the current level and the Social Care Levy will be highlighted on payslips.
HMRC confirmed that the suggestion had been made, however it was not mandatory for employers to include the message, but it was ‘strongly encouraged’.
An HMRC spokesperson said: ‘We have asked employers to include a generic statement on all payslips from April 2022 to help employees understand the changes they will see to their contributions and that the increase will be used to fund the NHS, health, and social care.’
In response to the request, many business owners took to Twitter to express their frustration about the email with one tweeting that the tax authority was using ‘payslips as propaganda’, stating ‘if you can’t sell it to the public, don’t expect us to’.
The former executive chair Edward Troup of HMRC in 2016-17 also tweeted that ‘it was questionable whether the request to businesses fell within HMRC’s legal powers’ as the department had asked employers ‘to push a political narrative despite it supposedly being politically neutral’.
Despite the backlash over the increase, which was announced in parliament in September last year, the government has stated multiple times that it is to continue with the move despite the current concerns over the cost of living crisis.
A large number of thinktanks, economic groups, and business bodies as well as parliamentary committees including MPs across multiple parties and members of the House of Lords, have come forward calling the government to scrap it. The Institute of Directors also launched a petition in January which received more than 180,000 signatures supporting the call for the tax rise to be abandoned.
- Published in HMRC
HMRC to end payments via Post Office accounts
HMRC is reminding about 7,500 tax credits, child benefit and guardian’s allowance customers they have just one month left to switch their Post Office card account
From 5 April 2022, HMRC will stop making payments to Post Office card accounts so customers must notify HMRC of their new account details, so they do not miss out on vital payments.
In November 2021, HMRC extended the deadline to the end of the financial year. The one-off extension to the contract meant customers could temporarily continue to receive their payments into their Post Office account, giving them extra time to set up new accounts and notify the department.
Nearly 138,800 customers have already switched their accounts and provided HMRC with updated bank account details. Time is running out for the remaining 7,500.
Customers can choose to receive their benefit payments to a bank, building society or credit union account. If they already have an alternative account, they can contact HMRC now to update their details.
Myrtle Lloyd, HMRC’s director general for customer services, said: ‘We want to make sure that no customer misses out on the benefit payments they are entitled to. If you still need to switch your Post Office card account, contact HMRC to update your bank account details by 5 April.’
Child benefit and guardian’s allowance customers can use their personal tax account to provide revised account details, change their bank account details via gov.uk or by contacting the child benefit helpline on 0300 200 3100. Tax credits customers can change their bank account details by contacting the tax credits helpline on 0345 300 3900. If customers cannot open a bank account, they should contact HMRC.
If the 5 April deadline is missed, payments will be paused until the customer notifies HMRC of their new account details.
The Money Helper website, provided by the Money Advice and Pensions Service, offers information and advice about how to choose the right current account and how to open an account.
HMRC has been contacting customers recently to encourage them to take action and will continue to contact them to remind them.
- Published in HMRC
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- Published in Virtual Accountancy Services
Research & Development Tax Credits.
Research and Development (R&D) reliefs support companies that work on innovative projects in science and technology. It can be claimed by a range of companies that seek to research or develop an advance in their field. It can even be claimed on unsuccessful projects.
You may be able to claim Corporation Tax relief if your project meets our definition of R&D.
Tax Credits Explained
In order to encourage Research and Development the UK Government introduced R&D Tax Credits in 2000.
This has proved highly popular with 86,000 UK companies claiming back almost £7.4bn in tax relief in 2020. R&D Tax Credits are a very niche part of the UK tax code that could bring your company thousands of pounds in tax relief.
- A government incentive aimed at advancing science and technology within UK companies
- Launched in the year 2000
- Rewards innovation, risk taking, and research and development
- You can backdate your claim up to two financial years.
Who is eligible?
Companies of all sizes can claim R&D Tax Credits.
The size of your business will determine which R&D Tax Credits scheme you are eligible for and ultimately what proportion of your spend you can claim back, but every business registered in the UK is eligible.
Eligible R&D activities:
- Overcoming technical challenges
- Creating and testing prototypes
- Streamlining processes
- Trialling new or substituting materials
- Developing bespoke software
- Trial and error
- Industry firsts
What can be claimed back?
R&D Tax Credits are calculated based on enhancing expenditure for research and development work, as the UK Government aims to reward innovation for SMEs and large companies.
- Staff wages and other related costs
- Payments made to sub-contractors and external workers
- The cost of materials consumed
- Software licensing costs
- Payments to clinical volunteers
- Light, heat, power and other utility costs.
- Published in Research & Development