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Manufacturers are calling for an emergency, pre-recess package of business support measures including extension of temporary tax reliefs to support companies from escalating costs

The call comes on the back of the Make UK/BDO Q2 Manufacturing Outlook survey which shows growth and orders slowing significantly, exports almost at a standstill and, investment falling as companies cut or postpone their plans in order to maintain cashflow.

According to Make UK, the seriousness of the situation and, the prospects for the next six months, means that industry cannot wait for the promised help in the autumn which the Chancellor made in the Spring Statement. It is calling for urgent actions before MPs go on their summer break.

Make UK has made a number of recommendations for measures government can introduce now to address rising business costs including the following:

  • waive or reduce business rates for the next 12 months;
  • implement VAT deferrals for larger businesses and waive completely for SMEs;
  • temporarily freeze the Climate Change Levy and, if energy costs continue to rise, remove it completely;
  • Review the efficacy of the business interruption loan schemes introduced during the pandemic and deploy a successor scheme by Q3;
  • Extend the 130% super-deduction tax break, due to end in March 2023; and
  • make the increase in the Annual Investment Allowance permanent.

In addition to immediate measures, Make UK also stressed that the government must move away from short-term, gesture politics. Instead, it must focus on demonstrating to business and, foreign investors, that it has the capacity to operate in a serious manner with a long-term strategy.

Stephen Phipson, chief executive of Make UK, said: ‘Whilst industry has recovered strongly over the last year we are clearly heading for very stormy waters in the face of eyewatering costs and a difficult international environment.

‘Clearly some of the factors impacting companies are global and cannot be contained by the UK government alone. However, given the rate at which companies are burning through their balance sheets just to survive, it must take immediate measures to help shield companies from the worst impact of escalating costs and help protect jobs.’

Richard Austin, head of manufacturing at BDO, added: ‘Manufacturers have shown their ability to overcome a wave of challenges over the last couple of years to remain competitive. The question is when fatigue will overcome resilience. The tipping point where the shorter term need to retain cash outweighs investment is starting to be reached and could have significant implications for future growth.

‘Rapidly rising input costs, ballooning energy bills and in some cases inflation-busting pay settlements have hit margins and frozen investment plans. There is now a strong case for government action to help UK manufacturers weather the immediate storm and incentivise investment for long-term growth.’

According to the survey, investment intentions dropped sharply from +27% in Q1 to just +5% as companies cut or postpone their plans in response to rapidly escalating costs.

Two thirds of companies (67.8%) said rising energy costs were causing major disruption, almost three quarters (71.9%) cited increased raw material costs posing a similar threat and, two thirds (66.8%) cited rising transport costs.

Manufacturers expect to continue to increase their UK and export prices substantially in the next quarter to +69% and 63% respectively, with both these figures dwarfing previous record levels in the survey’s 30-year history.

Wednesday, 22 June 2022 / Published in National Insurance

he Treasury has launched an online tool to show how take home pay will be affected by the upcoming changes to the National Insurance threshold from July

The tax cut represents a £6bn cut to National Insurance effective from 6 July and is worth an average £175 a year to taxpayers and will go some way towards offsetting the 1.5% increase introduced through the social care levy, which came into effect on 6 April.

The online checker will use salary information for employees who are paid through PAYE system, giving personalised estimates of how much they could save because of the government’s changes. All you have to do is enter your current salary before tax and it calculates the estimated saving depending on earnings.

The cut, which will see the point at which people start paying National Insurance rise to £12,570, is worth up to £330 and seven in 10 workers will pay less National Insurance even after accounting for the health and social care levy, the Treasury said.

From July, employees who earn £36,600 or under will pay less National Insurance. For example, a taxpayer earning average salary of £31,285 will pay £185 less over the nine-month period.

Everyone who pays National Insurance will see a tax cut, and the tool will show that employee earning up to £51,000 will see this cut more than offset the impact of the health and social care levy. This means the majority of working people will see a boost to their take home pay.

The tool estimates how much National Insurance an employee paid from July 2021 to June 2022 at the old rate and compares it with how much they will pay from July 2022 and June 2023. However, it is not suitable for every situation and does not provide a calculation of an individual’s National Insurance contributions liabilities.

Chancellor Rishi Sunak said: ‘With our historic £6bn National Insurance tax cut just weeks away, this new tool will show hard-working Brits how much more of their pay will be going directly into their pocket.

‘This tax cut, combined with £400 off energy bills and direct payments of £1,200 to eight million families, will help shield people from rising prices.’

Alongside this tool, the government has also launched a new financial support and benefits checker tool. It enables people to answer 10 simple questions to find out what support they might be eligible for by cross-checking against 25 individual benefits and support offers. This should help people find out what support they may be eligible for that they may currently not be accessing and is part of the government’s drive to help people manage the increased cost of living.

This first version of the financial support and benefits checker tool includes a selection of benefits and other sources of financial support, such as childcare support, job seeker’s allowance, budgeting loans and housing benefit. However, it does not include information about pension credits which are underclaimed by an estimated 1.3m pensioners.

A wider range of options will be included in another version in the next few months.

Tuesday, 14 June 2022 / Published in HMRC, Tax Fraud

Three people were arrested after HM Revenue and Customs (HMRC) officers visited businesses across the country in a day of action after new powers were introduced in the fight against till fraud

Businesses involved in making, supplying or promoting electronic sales suppression (ESS) systems that help users hide or reduce the value of till sales, now face fines of up to £50,000 and criminal investigations. Users also face fines as HMRC increases efforts to target the tax evasion practice.

HMRC investigations visited 30 businesses on 18 May including shops, takeaways and restaurants, across nine counties to tackle ESS and two men and a woman were arrested in Nottinghamshire as part of a criminal investigation into the alleged supply of ESS software.

The men, aged 43 and 58, were arrested along with a 56-year-old woman on suspicion of fraud offences and cheating the revenue.

A search warrant was executed by HMRC officers at three addresses and computers, digital devices and paperwork were seized. All three suspects have been released under investigation.

Financial Secretary to the Treasury, Lucy Frazer, said the overwhelming majority of businesses are paying their taxes and rightly want to see HMRC stepping in where needed to ensure a level playing field for all.

“Tax crime does not stand still and neither do we – the new powers available to HMRC allow them to clamp down on ESS and help recover tax revenues to fund our vital public services,” she said.

Marc Gill, HMRC’s director of individuals & small-business compliance, said electronic sales suppression gives the appearance a business is trading legitimately, when in fact they’re really just stealing money from taxpayers.

“We encourage anyone using, supplying, making or promoting ESS to report via our disclosure facility. Making a disclosure is not only the right thing to do it could also lead to a reduction in financial penalties,” he said.

ESS users will either have access to specialist software or will configure their electronic point of sale (EPOS) device in a specific way that allows them to consciously hide true sales and the resulting tax that is due.

Sales processed through the till give the impression they have been recorded as normal, however the end-of-day report is deliberately manipulated behind the scenes to reduce reported takings.

As part of investigations into ESS HMRC can also recover tax evaded and launch investigations that could result in criminal convictions.

HMRC has a voluntary disclosure facility and would encourage anyone using, making, supplying or promoting ESS to contact them. By making a disclosure now those using or benefiting from ESS could see their financial penalties reduced.

Tuesday, 31 May 2022 / Published in Stamp Duty

New homeowners are being warned about cold calls from rogue tax repayment agents advising them to make speculative stamp duty land tax (SDLT) refund claims, which could leave them with large tax bills

The warning comes after a recent spate of stamp duty refund claims to HMRC failed to meet very specific criteria.

The agents have been known to call new property owners after finding them through Land Registry records and property search websites, promising money back on ‘unknowingly overpaid’ stamp duty.

In a recent example, a letter from a rogue agent suggested a homeowner may have overpaid £60,000 worth of stamp duty. The agent claimed the home could be designated as two properties, despite it clearly being one. This is not an isolated example – other cases include:

a claim that a bedroom could be a separate dwelling and in line for claiming ‘multiple dwellings relief’ because it had an en-suite and a built-in wardrobe which could be a kitchen if you added a microwave and a kettle;

an individual who claimed their house was not wholly residential because a paddock behind the garden was used occasionally to keep a neighbour’s horse. The agent advised that they were due lower stamp duty rates because the presence of the paddock made the transaction a mix of residential and non-residential property, which would incur a lower stamp duty payment; and

a new owner of a six-bedroom house claimed it was not a wholly residential property because a room above a detached garage was used as an office.

Recent analysis undertaken by HMRC suggests that up to a third of claims for multiple dwelling relief refunds were incorrect.

HMRC raises enquiries on these claims, but sometimes that is after the agent has taken their fee, leaving the homeowner to pick up the difference. Incorrect refund claims must be repaid with interest, with some potentially facing penalties as well.

HMRC collected £11.6bn in SDLT in 2019 to 2020 and this is set to rise as average UK house prices continue to soar after the pandemic. The average UK house price was £277,000 in February 2022, which is £27,000 higher than this time last year. This figure is £530,000 in London.

Nicole Newbury, HMRC director for wealthy and mid-sized business, said: ‘We are seeing obviously spurious refund claims that are never going to succeed; but will lead to an unnecessary bill for the customer.

‘So we are warning new homeowners not to get caught out by tax repayment agents promising easy money on a ‘no win, no fee’ basis. If it sounds too good to be true, it probably is. We want to help people get it right and avoid unnecessary tax bills, so treat promises of easy money with real caution.’

Anyone approached about a stamp duty refund claim should check with their original conveyancer, take independent professional advice and check HMRC’s guidance by searching ‘stamp duty land tax’ on gov.uk or contact the HMRC helpline on 0300 2003 510.

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