Business & Tax
News & developments - October 2024

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

HMRC Call Response Issues in August

In August, 2.4 million calls were made to HMRC, with 1.7 million requesting assistance from an adviser. However, fewer than 75% of these callers were able to speak to an adviser, leaving over 426,000 taxpayers without support.

Over the year, 62.3% of 15.1 million calls were answered, meaning 3.8 million taxpayers had unresolved inquiries to date.

Following criticism, HMRC has reduced average wait times to 17 minutes and 24 seconds, down from 28 minutes and 34 seconds in April. Additionally, the proportion of callers waiting over 10 minutes has improved from 75% in July to 62%.

Top 100,000 Taxpayers Contribute One-Fifth of UK Tax Revenue

In 2022/23, total capital gains and income tax receipts reached £262.6 billion. Of this, the top 100,000 taxpayers contributed over £53 billion, covering one-fifth of the total. Notably, the top 100 earners alone paid £3.93 billion—around 1.5% of the total tax revenue—with each contributing an average of £39 million. The remaining 34.6 million taxpayers paid nearly £209 billion.

HMRC Warns Against Using LLPs for Disguised Employment Schemes

HMRC has issued a warning to companies against using pseudo limited liability partnerships (LLPs) to pay directors and disguise regular employment income as part of a tax avoidance scheme known as the “Partnership Model.” This arrangement, marketed to LLPs, aims to avoid corporation tax and PAYE deductions for income tax and National Insurance contributions (NICs).

Under this scheme, employees enter agreements that alter their contracts and receive compensation payments through an LLP, which conceals employment income to reduce tax liabilities. HMRC has clarified that this approach is ineffective, as these payments should still be treated as taxable employment income.

Londoners Contribute 27% of UK Income Tax

London and the southeast of England contribute over a third of the UK’s annual income tax, with Londoners alone paying £60 billion of the total £222 billion paid by 32.7 million taxpayers. The borough of Kensington and Chelsea, with only 68,000 taxpayers, contributes £4.9 billion, accounting for 2.2% of the national income tax total.

FCA Targets Social Media Influencers for Promoting Financial Services

The Financial Conduct Authority (FCA) is cracking down on social media influencers, or “finfluencers,” who promote financial and tax advice and investment platforms. The FCA is interviewing 20 influencers under caution for allegedly promoting financial services illegally and has issued warnings to 38 social media accounts for similar activities.

Research shows that 62% of 18-29-year-olds follow influencers, with 74% trusting their financial advice, leading many to make risky financial decisions. Some finfluencers, with substantial followings and hundreds of promotional videos, target inexperienced investors who may not realize the risks, including potential total loss of funds.

Companies House to Roll Out ID Verification for Directors in 2025

Starting in early 2025, Companies House will introduce identity verification for over seven million company directors and persons with significant control (PSCs) on its register. This requirement aims to reduce fraud and abuse by mandating proof of identity before directors can file information. The ID verification initiative is part of the Economic Crime and Transparency Act 2023 reforms, which granted Companies House enhanced powers to remove fraudulent entries from the register.

Quick Tax Claims Fined £120k for Unlawful Spam Messages

Manchester-based Quick Tax Claims has been fined £120,000 by the Information Commissioner’s Office (ICO) for sending nearly five million spam text messages promoting paid tax refund services that are free through HMRC. Between February and May 2023, the company sent 4,983,499 unsolicited messages, leading to 66,793 complaints—with 93% noting no opt-out option, and 50 complainants receiving multiple messages.

Inflation Falls to 1.7%, Below Bank of England Target

Inflation has dropped to 1.7%, the lowest in over three years and below the Bank of England’s target rate. Economists had anticipated a rate of 1.9%, making this decline unexpected and sparking hopes for a 0.25% interest rate cut from the current 5% at the Bank’s November meeting. The reduction in inflation was largely due to lower fuel and transport costs, especially airfares. However, food and soft drink prices, particularly dairy and fruit, rose by 1.8%, adding upward pressure on inflation.

PM Redefines ‘Working People,’ Excluding Landlords and Asset Owners

The Prime Minister’s new definition of ‘working people’ as those receiving a monthly paycheck has sparked backlash from business owners and landlords. Sir Keir Starmer confirmed that income tax, National Insurance, and VAT will not increase for those in this category. However, those who own assets, including business owners, landlords, and shareholders, are excluded, potentially opening the door for tax increases on asset-rich individuals.

UK GDP Grows by 0.2% in August, Led by Construction

Following a stagnant July, GDP rose by 0.2% in August, driven mainly by growth in construction and manufacturing. The construction sector expanded by 0.4%, with a 3.4% increase in private new housing projects and more repair work, hinting at positive effects from recent planning reforms and a slight easing in mortgage costs. However, there are concerns about potential inflation risks this autumn.

Global Businesses Commit £63bn Investment in UK

International investors across sectors, from technology to energy, plan to invest £63 billion in the UK, reflecting strong business confidence in the new government. At a recent investment summit in London, global companies pledged to boost the UK economy with this substantial investment and create 38,000 jobs—more than double the £29 billion secured at last year’s summit.