A further increase on interest paid to HMRC for late payment of taxes will hit taxpayers who are not up-to-date, warns Blick Rothenberg
Nimesh Shah, CEO at the firm said: ‘Following another Bank of England base rate to 1.75%, HMRC has confirmed that it will raise its interest rates on late tax bills to 4.25% on 23 August – a level not seen since January 2009.’
He added: ‘Since the start of 2022, the HMRC’s interest rate has increased by 1.5% – that’s the equivalent of an extra £225 per annum on a £15,000 tax liability. On the same £15,000 tax liability, you would suffer almost £650 of interest per annum.
‘With continuing rising costs rising across the board, HMRC have hiked up interest on late tax payments at the latest opportunity. It sets a worrying trend for some taxpayers who are struggling to pay their outstanding taxes, against the backdrop of other rising costs.
The threat of further interest rate rises this autumn, coupled with rising inflation, will likely see further increases in HMRC rates.
Shah said: ‘The worst is yet to come on this front, with some economists projecting the Bank of England could decide to increase the base rate to 2.5% by the end of 2022 – this could see HMRC increasing their interest rate on late paid tax to 5% by the end of the year.
‘Taxpayers who have outstanding tax liabilities should be mindful to settle as much as they can afford before there are further rate rises.
‘HMRC have also finally increased the repayment supplement rate by 0.25% to 0.75% – the first increase in this rate in over a decade. It’s quite shocking that HMRC have quickly increased the rate on late paid tax by six times the amount the equivalent repayment interest rate has gone up by this year.
‘HMRC’s meagre 0.75% repayment supplement rate means there is not any great incentive for HMRC to release repayments. There continues to be one rule for money owed to HMRC and another for taxpayers who are due a refund. Many taxpayers have seen significant delays to repayments over the last 12 months, but HMRC can continue to drag their heels with little cost to the Treasury.’
In the drive to catch bounce back loan fraudsters, bankruptcy restrictions totalling 48 years have been given to five individuals who took £198,894 in Covid-19 financial support
In each of the five cases, the bounce back loans were either wrongfully obtained through overstating their businesses turnover, or on behalf of a company that had already ceased trading prior to the pandemic, or were simply misused for personal use rather than legitimate business spending, the Insolvency Service said.
Charlene Wilson was a self-employed beauty therapist based in Jarrow. She received a £50,000 bounce back loan by overstating her turnover and spent around £15,000 on personal expenses. She has accepted bankruptcy restrictions for eight years.
Georgiana Cercel ran a beauty business from her home in Lincoln while studying full-time. She received a £50,000 bounce back loan by overstating her business turnover, and gave £10,000 to her sister. She is subject to bankruptcy restrictions for 10 years.
Florin Bodale worked as a building contractor through his company Varga Construction. He obtained a £50,000 bounce back loan by overstating his turnover, although he told investigators he believed he had been asked for total turnover for the previous three years. However, this amount would still have been less than half the turnover he stated. He has accepted a 10-year bankruptcy restrictions undertaking.
Sarah Sweeting ran a farm shop home delivery service from October 2020. She obtained a £22,000 bounce back loan despite not being eligible as businesses had to have been trading prior to March 2020. Of the £22,000, she transferred around £14,000 to her husband. She has accepted a 10-year bankruptcy restrictions undertaking.
Abbas Moradmand ran a tyre business from 2018 to 2019 then worked as a taxi driver. After a short closure the business re-opened and continued to trade under new ownership. However, Moradmand secured a bounce back loan of £26,894 to which he was not entitled as it was based on an application on behalf of his former tyre business. He has accepted a 10-year bankruptcy restrictions undertaking.
Their bankruptcy restrictions mean none of the individuals are able to borrow more than £500 without disclosing their bankrupt status. They also cannot act as a company director without permission from the court.
In each of the above cases the local official receiver is working on potential recovery action.
Kevin Read, official receiver at the Insolvency Service, said: ‘In all of these cases it was obvious, or it should have been obvious, that they either misused the bounce back loan for personal benefit, took a larger loan than they were eligible for, or weren’t eligible for a bounce back loan at all.
‘This is taxpayers’ money they have abused and we will not hesitate to impose bankruptcy restrictions in these circumstances.’
he level of financial distress in companies jumped by 37% in the last quarter compared to the same period last year
Bars and restaurants, retailers and construction sectors were the main sectors affected by tough trading conditions, with year-on-year rises of 70%, 48% and 36% respectively.
The latest Red Flag alert from Begbies Traynor showed that the number of companies rated as being in ‘critical financial distress’ continued to rise, increasing by more than a third in Q2 2022 – edging up 3% compared to Q1 2022.
Julie Palmer, partner at Begbies Traynor, said: ‘Having emerged from the pandemic, many companies were hoping for an economic boom but that has simply fizzled out, as supply chain issues and the invasion of Ukraine have taken their toll by driving up raw material and energy costs and reducing both business and consumer confidence.
‘We are now in a very high inflationary environment that’s piling pressure on businesses that were already weakened by the shock of the pandemic.
‘Sectors most exposed to discretionary consumer spending – bars and restaurants, and general retailers – are feeling the pain most.’
SMEs are also affected, with more than 582,000 companies in significant financial distress, although this figure was unchanged from the previous quarter.
Businesses continue to be impacted by rising inflation, far exceeding the official rate of more than 9%. With high labour, material and energy prices and faltering consumer and business confidence, companies are facing a difficult economic backdrop.
Palmer added: ‘I am also particularly concerned for those SMEs who operate in energy-intensive sectors, such as manufacturing, as some could simply become unviable. Without the benefit of an energy price cap, business energy tariffs have at least trebled, and for many it will be much worse.’
Evidence of this financial distress comes from county court judgement (CCJ) data, which revealed 46,235 rulings in the first six months of 2022, up 5% on the first quarter, as creditors tried to recover debt – there were 59,042 CCJs during the whole of 2021.
CCJs are leading indicators of insolvency, and as the courts return to normal, there are fears this number could rise much further.
Sectors with the highest number of critically distressed businesses include construction, real estate, general retailers and restaurants, automotive and industrial transportation.
Ric Traynor, executive chairman of Begbies Traynor, said: ‘The combination of macro-economic risks is now taking its toll on UK businesses, as evidenced by this latest Reg Flag Alert data.
‘With inflation nearing 10%, and showing little sign of abating, there can be no doubt that things are going to get worse for UK businesses before they get better. This, combined with a deteriorating geo-political landscape, is likely to have serious consequences for the UK economy.
‘Rising insolvency rates, combined with our own evidence from speaking to the directors of distressed companies, highlight the impact of rising costs on businesses. The very same directors, who benefited from government-backed Covid support loans to get them through the pandemic, are now telling us that they are simply unable to repay these debts, plus they are having to deal with rising wage demands and higher input costs.’
At the height of the wedding season, HMRC is reminding married couples and people in civil partnerships to sign up for the marriage allowance tax break
Marriage allowance allows married couples or people in civil partnerships, including those who have been together for many years, to share their personal tax allowances if one partner earns below the personal allowance threshold of £12,570, and the other is a basic rate taxpayer.
Eligible couples can transfer 10% of their tax-free allowance to their partner, which is £1,260 in 2022/23. It means couples can reduce the tax they pay by up to £252 a year. They can apply any time and, if eligible, could backdate their claims for up to four previous tax years to receive a payment of up to £1,242.
Marriage allowance is one of a number of benefits and reliefs available to boost family finances at a time when many are concerned with the rising cost of living.
Angela MacDonald, HMRC’s deputy chief executive, said: ‘We want to ensure people are receiving vital financial support at a time when they need it most. Married couples or those in a civil partnership could potentially receive tax relief worth up to £1,242, meaning extra cash in their pockets.
‘To find out if you are eligible and how to apply search ‘marriage allowance’ on gov.uk.’
More than two million couples currently benefit from marriage allowance, but there could be thousands more who are eligible to claim.
Even if couples do not qualify for marriage allowance when they first get married, a change in circumstances years later could mean they become newly eligible. These include:
- one partner retiring and the other remaining in work;
- a change in employment;
- a reduction in working hours which means their earnings fall below their personal allowance;
- maternity, paternity, or shared parental leave;
- unpaid leave or a career break; and
- one partner studying or in education and not earning above their personal allowance.
If a spouse or civil partner has died since 5 April 2018, the surviving person can still claim by contacting the income tax helpline.
Marriage allowance claims are automatically renewed every year. However, couples should notify HMRC if their circumstances change.
HMRC has confirmed plans to modernise its direct debit payment system for employer PAYE so a recurring direct debit can be set up for the first time
Currently employers can only set up a direct debit to collect a single payment, but not a recurring direct debit.
As part of its payment modernisation programme, HMRC is going to offer a recurring direct debit to employers. This is part of a wider project to create a consistent set of payment methods for all taxpayers across the tax authority, rather than the current limited service, which varies depending on the type of tax payable.
The service will be available from mid-September this year, HMRC said.
Once available, there will be a change to the business tax account (BTA) and the employers’ liabilities and payments screens. There will be a new link for ‘set up a direct debit’. This will allow client companies to set up a direct debit instruction once, authorising HMRC to collect directly from their bank account based on their return submissions.
After an employer has set up a direct debit, the link will change to ‘manage your direct debit’ and an employer will be able to view, change or cancel the direct debit online.
Payments which will be covered by direct debit will show within employers’ liabilities and payment screens for both employers and agents.
This service is not available for agents and only employers will be able to create, view, amend and cancel a direct debit.
Employer PAYE liabilities and payments viewer update
HMRC also confirmed that it has been extending employer PAYE for the agent online service on a rolling basis and that the expansion is ‘progressing well’. This service allows agents to see employer liabilities and payments records held by HMRC.
All previous restrictions will be removed by the end of July and in future all agents will be able to access the service. This will include those with the assistant as well as administrative roles.
The government has set out details of how the £400 energy bill subsidies will be paid to customers and is trying to get them classified as discounts
This is part of the £11bn energy support package announced in the spring when energy prices started to escalate with the price cap breaking £2,000.
Millions of households across the country will receive non-repayable grants on their energy bills this winter over a six-month period starting in October. The money will be credited to bills by energy providers in six payments of £65 for two months, then £67 for four months from December to March.
The original plan launched by former Chancellor Rishi Sunak in May was to pay the grants in a single payment in October 2022.
Kwasi Kwarteng, business secretary, said: ‘People across the country are understandably worried about the global rise in energy costs, and the pressure this is placing on everyday bills.
‘While no government can control global gas prices, we have a responsibility to step in where we can and this significant £400 discount on energy bills we’re providing will go some way to help millions of families over the colder months.’
The £11.7bn scheme will help around 29 million households across the UK.
Repayment meter customers will be given an energy bill discount voucher in the first week of each month, issued via email, SMS text or post. These will have to be redeemed at top-up points.
Nadhim Zahawi, Chancellor, added: ‘This £400 off energy bills is part of our £37bn of help for households, including eight million of the most vulnerable households receiving £1,200 of direct support to help with the cost of living.’
The scheme will also apply to tenants renting properties with domestic electricity contracts from landlords where energy costs are included in their rental charges. Landlords must pass on the discount received to each tenant, and comply with Ofgem’s maximum resale price rules.
Further funding will also be available to provide support of £400 for the 1% of households who will not be reached through the scheme, including those who do not have a domestic electricity meter. Further details will be announced this autumn.
The government will work with Ofgem and suppliers ahead of the scheme’s implementation from October. This will include a strict reporting requirements for suppliers, which will be published in the near future.