Business & Tax
News & developments - March 2024

Welcome to the latest edition of Business & Tax news and developments round up presented by Naail & Co. 

Hairdresser inflated turnover to secure £50k loan

A unisex hairdresser in north London inaccurately claimed a £50,000 bounce back loan by inflating reported turnover, stating it was five times higher than the actual figure. The individual in question, identified as the sole director of a company based in Winchmore, north London, has been disqualified from directorship for a period of nine years following the commission of bounce back loan fraud. During the pandemic, the individual applied for a bounce back loan, asserting that the business’s turnover amounted to £300,000. However, records indicate that the business earned only £61,659 for the financial year ending 31st March 2020, and £67,193 the previous year.

Care home director jailed over £151k Covid fraud

A director from Chelmsford, operating a care home business, has been sentenced to jail following convictions for defrauding Essex County Council of £151,000 in Covid relief loans. The individual, aged 54, served as the company director of a healthcare group previously known as Hunt Healthcare Group, now listed as Ballagh Care as per Companies House records. She resigned from her position on 22nd February 2024, amidst ongoing legal proceedings. Allegations were made against Hunt for submitting £151,000 worth of fraudulent invoices to Essex County Council between May and October 2020, purportedly for Covid support loans.

HMRC u-turns on ‘misguided’ decision to cut helplines

HMRC has reversed its decision to permanently close helplines within 24 hours of facing backlash. The initial plan included shutting down the self-assessment helpline for six months starting April and limiting the VAT helpline to five days a week. This move drew widespread criticism, especially from tax advisers and accountants who questioned the rationale behind it, given the limited accessibility of HMRC’s online services for resolving tax queries. With more individuals entering the tax system and facing higher tax rates, the demand for expert advice from HMRC officials is expected to rise.

High income child benefit

From 6 April 2024 the adjusted net income threshold at which child benefit will begin to be withdrawn will increase from £50,000 to £60,000, the first rise since 2013. The rate of taper has also been halved compared to where it is now. Where the benefit was previously withdrawn on a tapered basis in an income band between £50,000 and £60,000, this will now only occur between £60,000 and £80,000.

For individuals with income above £80,000, the tax charge will equal the amount of the child benefit payment. For those with income between £60,000 and £80,000, the rate at which HICBC is charged is halved, and will equal 1% for every £200 of income that is more than £60,000.

Bank of England keeps interest rate at 5.25%

The Bank of England has maintained interest rates at 5.25% for the sixth consecutive month, anticipating a decline in inflation to below 2% by June. This month’s vote exhibited greater stability, with eight members of the monetary policy committee opting to retain rates, while only one member advocated for a 0.25% reduction. In contrast, the previous month saw three members dissent, with two advocating for an increase. Despite indications of inflation moving closer to the Bank’s 2% target, there are currently no indications of any relaxation in monetary policy.

SME employee threshold will rise to 500

The Prime Minister, addressing SMEs at the third Small Business Conference, outlined plans to streamline reporting rules, aiming to cut red tape. Rishi Sunak announced deregulatory measures to simplify non-financial and financial reporting for SMEs, potentially saving UK businesses approximately £150 million annually. A significant proposal involves doubling the employee size threshold, elevating it from 250 to 500 employees. This adjustment could classify around 1,000 more large companies as SMEs, aiming to benefit from tailored regulations and support.

Inflation falls to 3.4% as food prices drop

A notable decrease in food prices has contributed to a drop in inflation to 3.4%, marking the lowest rate since October 2021. However, fuel and housing costs experienced an increase in February. This February’s figure marks a decline from 10.4% a year earlier and from January’s 4%, offering optimism that the Bank of England may consider initiating interest rate reductions over the summer as inflation approaches the 2% target. Nevertheless, the UK maintains the highest inflation rate compared to the EU27 at 2.8% and the US at 2.2%, highlighting a persistent trend where the UK lags behind its counterparts in addressing inflation.

Third of calls to HMRC handled by automated service

During the bustling self-assessment period in January, HMRC rerouted more than a third of calls to automated systems, while 841,000 calls remained unanswered. Average wait times escalated to 25 minutes, a surge from 20:21 minutes recorded a year earlier, indicating a decline in service standards. Moreover, 71% of callers experienced waits exceeding 10 minutes to reach an agent, surpassing last January’s 68% figure. This statistic starkly illustrates the decline in service levels, particularly when compared to the 46% average for 2022/23. Anecdotal evidence suggests that members of the public and accountants may endure waits of up to an hour for assistance.

HMRC to launch MTD for income tax pilot on 22 April

Next month, HMRC will initiate the inaugural pilot for agents and accountants to test the Making Tax Digital for Income Tax Self Assessment reporting system. Commencing on April 22, 2024, the pilot aims to engage tax agents and accountants in the first phase of the trial, particularly targeting firms with clients who are self-employed or landlords with an annual income exceeding £50,000. These individuals will be mandated to maintain digital records and provide quarterly updates of income and expenses to HMRC using compatible software starting from April 2026. The system’s scope will expand to encompass individuals with an annual income surpassing £30,000 from April 2027.

Plan to regulate ‘incompetent’ tax advisers

The government is planning to crack down on rogue tax agents with plans to strengthen the regulatory framework and even create an independent regulator

The objective is to drive out ‘a minority of practitioners who are incompetent, unprofessional or unscrupulous who continue to operate, harming their clients and the public finances’, said Nigel Huddleston MP, financial secretary to the Treasury.

GDP up 0.2% after recession fears recede

The fear of recession faded away as GDP rose 0.2% in January with revenue from the accountancy sector revenue increasing by 15.4% in a bumper month

The return to weak growth followed two falls in GDP in a row resulting in a shallow recession. Over a three-month period, GDP was down 0.1% and was 0.3% lower than the same time last year.

Budget 2024 highlights

• High income child benefit charge threshold increased from £50,000 to £60,000 from April 2024
• The Chancellor has increased the current £85,000 VAT threshold to £90,000
• Capital gains tax on sales of second homes and additional residential properties to 24%
• From 1 June 2024, multiple dwellings relief will be abolished
• Furnished Holiday Lettings tax breaks abolished
• The non-dom regime will be abolished from 2025
• Individuals cannot use a company to avoid tax by using a company to transfer assets abroad
• National insurance for self employed cut to 6% from April
• National insurance cut by a further 2p to 8% from the new tax year