Business & Tax
News & developments
Welcome to the latest edition of Business & Tax news and developments round up presented by Naail & Co.
Interest rate hiked 0.5% to 15-year high
The Bank of England has increased interest rates by 0.5% to 5% as it struggles to bring inflation under control. This was the thirteenth increase in interest rates in just over a year, putting pressure on businesses and mortgage holders. Interest rates are now the highest they have been for 15 years since 2008. An overwhelming majority of the monetary policy committee for the half percent hike with seven to two voting in favour.
UK economy sees slow start to 2023
The UK economy saw slight growth of 0.1% in the first three months of the year, according to data from the Office for National Statistics (ONS), ensuring that the country did not dip into recession.
However, households continued to dig into their savings due to higher food and energy prices having led to higher consumer price inflation and a tightening in financial conditions. The squeeze on households looks set to continue, as the Bank of England raised interest rates to a 15-year high of 5% in June.
Inflation stays stuck at 8.7%
The current rate of inflation has seen no change at 8.7% in May, the same rate it was in April, despite expectations of a fall. According to the Office for National Statistics (ONS), the UK saw no change in the rate of inflation last month, despite economists predicting a slight decrease to 8.4%. The prices for flights and second-hand vehicles resulted in the unexpected figure, on top of the cost of food and energy, which continues to hit UK households hard.
One in 10 people working off books in hidden economy
Nearly six million people are involved in the hidden economy and are not paying millions in taxes on those earnings, mainly as HMRC has no way of identifying them. An estimated 8.8% of the UK adult population – equivalent to 5,925,000 people – were identified as participating in the hidden economy, showed the latest HMRC research. This has nearly doubled since the last hidden economy research was conducted in 2016 when the figure was 4.9%, or 3.2m individuals.
Over 180,000 low earners crippled by HMRC fines
HMRC fined more than 180,000 low earners for not filing their self-assessment returns on time, despite many not even earning enough to pay tax , according to thinktank Tax Policy Associates. In 2020-21, HMRC dished out fines to 184,000 people paid less than £12,500 annually – which is below the income tax threshold – for failing to complete a self-assessment tax return on time. The analysis, by the independent think tank Tax Policy Associates, found that many low-earners experiencing financial hardship often ‘misunderstood’ the initial fine and were sent further penalties, as result – landing them in thousands of pounds worth of debt.
HMRC expands use of COP9 tax investigations
HMRC plans to ramp up the use of Code of Practice 9 – COP9 – powers and has clarified the rules on how taxpayers can report fraud where they have failed to pay the correct tax. In cases where a criminal investigation is not commenced, HMRC can investigate suspected cases of fraud using the Code of Practice 9 (COP9) civil investigation of fraud procedure. COP9 is where, in appropriate cases, taxpayers have the opportunity, to admit tax fraud, pay the tax they owe and significant penalties, and HMRC will not pursue a criminal investigation into the behaviour they disclose.
Under COP9 the individual under investigation and HMRC will enter a contract whereby the individual commits to make a complete, accurate, open and honest disclosure of all deliberate behaviour and all other irregularities in their tax affairs. In return HMRC commits not to open a criminal investigation. This is called the Contractual Disclosure Facility (CDF).
HMRC issues 18k penalties over careless errors
Careless mistakes made on tax returns resulted in penalties for 18,641 taxpayers last year while 1,025 fines were issued for deliberate errors. In addition to penalties for careless mistakes, HMRC also issued 10,703 fines to taxpayers for more serious deliberate errors and levied 1,025 fines for the most serious offence of making deliberate errors and attempting to conceal them from HMRC shows analysis by Thomson Reuters. The value of penalties issued by HMRC relating to mistakes made on tax returns range from between 0-30% of the unpaid tax as a fine for failing to take reasonable care. For deliberate errors, fines range between 20% and 70% of the tax owed and if the error was deliberate and concealed, the penalty will be 30% to 100%.
Companies fined for underpaying minimum wage
Major high street retailers, WH Smith, Lloyds Pharmacy and M&S, are among more than 200 businesses which failed to pay national minimum wage rates to employees. The latest HMRC figures show that 202 businesses failed to pay the national minimum wage rate to 63,000 workers, leaving employees £5m out of pocket. This resulted in fines of £7m, after the government increased the penalties imposed on employers from between 100% and 200% of arrears owed to workers.
HMRC self assessment helplines closed for 3 months
The three-month closure of HMRC’s self assessment helpline underlines the resourcing problems at HMRC and will be a ‘massive inconvenience’ for taxpayers. Following the announced closure of the helpline, the Chartered Institute of Taxation (CIOT), Association of Taxation Technicians (ATT) and ACCA, have warned that this a damaging move. HMRC announced that the phone lines for taxpayers with self assessment problems will be closed from 12 June until 4 September. The three-month closure is supposed to ‘free up advisers’ time’ to take more urgent calls on other lines, HMRC claimed.
Self assessment threshold rises to £150k
HMRC has confirmed that from tax year 2023 to 2024 onwards, the self assessment threshold for taxpayers taxed through PAYE only, will change from £100,000 to £150,000. Affected taxpayers do not need to do anything now as the self assessment threshold for 2022 to 2023 tax returns remains at £100,000. They will receive a self assessment exit letter if they submit a 2022-23 return showing income between £100,000 and £150,000 taxed through PAYE and they do not meet any of the other criteria for submitting a self assessment return.
One in three director bans for bounce back fraud
More than a third of directors struck off the company register in the last 12 months have been involved in fraud related to bounce back loans paid out during the pandemic. The latest figures show that 377 company directors were banned for abuse of bounce back loans, reveals a freedom of information request to the Insolvency Service, but only four directors have gone to court to face criminal prosecutions. This was from a total of 917 director disqualifications in 2022. Up to end December 2022 a total of £127,446.73 had been recovered through compensation orders obtained against disqualified directors related to investigations into abuse of Covid financial assistance. This is against a backdrop of total estimated bounce back loan fraud valued at £3.3bn.
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