Government to publish range of tax consultations

In a recent HM Treasury press release it has been confirmed that the government will publish a number of tax-related consultations and calls for evidence at the end of March. These consultations would usually be published on Budget day but instead will be published on 23 March. This will allow more time for these consultations to be examined.

None of the announcements will require legislation in the next Finance Bill or have an impact on the government’s finances. A number of these consultations relate to the government’s 10-year tax administration strategy, titled ‘Building a trusted, modern tax administration system’.

Financial Secretary to the Treasury Jesse Norman said:

'We are making these announcements separately to the Budget, but still all on a single day, in order to give a range of important but less high profile measures greater visibility among Members of Parliament, tax professionals and other stakeholders, and greater scope for scrutiny by them.'

Announcements which have fiscal implications need to be captured in the OBR’s economic and fiscal outlook, and announcements of measures to be legislated in the Finance Bill, will be made on Budget day in the normal way.

Why keeping adequate accounting records is important

A recent investigation by the Insolvency Service resulted in the sole director of a Leicester clothing manufacturer being jailed for six months after failing to provide adequate company accounting records.

The investigation found that the defendant had not kept adequate accounting records which meant the liquidator could not ascertain where cheque and debit card withdrawals totalling more than £983,000 had been spent.

In addition, the company failed to pay tax liabilities of more than £300,000. This partly related to National Insurance and PAYE payments after it was found the director was taking contributions from employees without passing them on.

As well as the prison sentence, the defendant has been banned from being a company director for a period of five years. The disqualification means that the director cannot be involved, directly or indirectly, in the formation, promotion or management of a company without permission of the court for five years.

This case serves as an important reminder that a company director must ensure that they meet their responsibilities. Directors are duty-bound to keep adequate records to demonstrate their company’s financial position and to prepare accounts. 

Keep your business moving

An interesting press release published jointly by the Department for Business, Energy & Industrial Strategy and Business Minister, Paul Scully has highlighted some important actions that businesses should ensure they undertake now that the UK has left the EU single market and customs union.

In his message to keep business moving, the Minister highlighted six key actions that many firms need to take. 

They are: 

  1. Goods – if you import or export goods to the EU, you must get an EORI number, make customs declarations or employ an agent to do them for you, check if your goods require extra papers (like plant or animal products) and speak to the EU business you’re trading with to make sure they’re completing the right EU paperwork. There are also special rules that apply to Northern Ireland. Hauliers must obtain a Kent Access Permit and have a negative COVID test before they head to port in Kent.
  2. Services – if you deliver services to the EU, you must check whether your professional qualification is recognised by the appropriate EU regulator.
  3. People – if you need to hire skilled staff from the EU, you must apply to become a licensed sponsor.
  4. Travel – if you need to travel to the EU for business, you must check whether you need a visa or work permit.
  5. Data – if your goods are protected by Intellectual Property (IP), you will need to check the new rules for parallel exporting IP protected goods from the UK to the EU, Norway, Iceland and Liechtenstein. You risk infringing on IP rights if you do not follow the new rules.
  6. Accounting and reporting – if your business has a presence in the EU you may need to change how you undertake accounting and reporting to ensure compliance with the relevant requirements.

The government has also launched a series of new on-demand videos to help businesses familiarise themselves with the new rules. Topics include importing and exporting, trade, data, and audit and accounting. Businesses can select which videos to view from the list or can choose their sector and see videos that are recommended for them.

Government help for people in debt

New government proposals have been published that look at further extending debt solutions to help more people suffering from problem debts. The proposals specifically look at increasing the financial eligibility criteria for debt relief orders (DROs), helping more people deal with financial difficulties to get a fresh start.

A DRO is a special way of dealing with debts aimed at those with minimal assets and low income. If an application for a DRO is accepted, the claimant will usually make payments over a specified period (usually 12 months) after which any remaining debts will be written off. An application for a DRO must be made using an authorised debt adviser.

Research has shown that demand for debt advice could increase by up to 60% by the end of 2021.

The government is publicly consulting on changing the eligibility criteria to enter a DRO to:

  • increase the total amount of debt allowable to £30,000 (from £20,000)
  • increase the value of assets owned by the individual to £2,000 (from £1,000)
  • increase the level of surplus income to £100 (from £50) per month

The consultation will run for 6 weeks and, subject to the consultation, any changes are anticipated to be put in place in Spring 2021.

Those who currently meet the conditions can apply for a DRO through an authorised debt adviser, from organisations such as Citizens Advice and StepChange who submit applications on-line to the Official Receiver on their client’s behalf.

Have you paid your Data Protection Fee?

The Information Commissioner's Office (ICO) is the independent regulatory office in charge of upholding information rights in the interest of the public. Under the Data Protection Act 2018, all organisations that process personal information must register with the ICO. 

By law, every organisation or sole trader who processes personal information needs to pay a data protection fee to the ICO, unless they benefit from a very limited exemption. There are currently more than half a million fee payers

The cost of the data protection fee depends on the size and turnover of the business / organisation. There are three tiers of fee ranging from £40 to £2,900, but for most businesses / organisations it will be either £40 or £60. Some organisations only pay £40 regardless of their size and turnover. These are charities and small occupational pension schemes.

Payment can be made by direct debit, credit or debit card, cheque or BACS. The ICO sends an email reminder six weeks before the annual fee expires. 

Budget date announced

The Chancellor of the Exchequer, Rishi Sunak has confirmed that the next UK Budget will take place on Wednesday, 3 March 2021. This will be the Chancellor’s second Budget and will focus on delivering the next phase of the plan to tackle the virus and protect jobs. The timeline for delivering Budgets has seen much change over the last few years as the government has been dealing with Brexit related issues and then with the coronavirus pandemic.

This will be the first Budget following the UK’s trade deal with the EU and we may see many new measures being announced. Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s speech in March.

The Budget will be published alongside the latest forecasts from the Office for Budget Responsibility (OBR. The OBR has executive responsibility for producing the official UK economic and fiscal forecasts, evaluating the government’s performance against its fiscal targets, assessing the sustainability of and risks to the public finances and scrutinising government tax and welfare spending.

Help to Save bonuses

The Help to Save scheme was launched by the government in September 2018 to help those on low incomes to boost their savings. Under the scheme, those eligible could save between £1 and £50 every calendar month and receive a 50% government bonus. The 50% bonus is payable at the end of the second and fourth years and is based on how much account holders have saved.

The first bonus payment has now been paid to savers who created an account and started saving money two years ago. The bonus is paid directly into the account holder’s chosen bank account.

New figures published by HMRC show that more than 60,400 savers have earned their first Help to Save bonus payment, each receiving an average of £378. This means that over £22.8 million in bonuses has been paid to date. The North West had the highest number of savers who have paid into their accounts and received their first bonus payment whilst savers in the South West received the highest average bonus payment, followed by savers in Greater London.

Account holders can continue saving under the scheme for a further two years and receive another final bonus at the end of four years. This could see those on low incomes receive a maximum bonus of up to £1,200 on savings of £2,400 for 4 years from the date the account is opened. The scheme is open to most working people who receive Working Tax Credits or Universal Credit.

Child Trust Fund court fees waived

Children born after 31 August 2002 and before 3 January 2011 were entitled to a Child Trust Fund (CTF) account provided they met the necessary conditions. These funds were long term saving accounts for newly born children. The first of these children who qualified began turning 18 years of age from 1 September 2020.

For most young adults, the process is straightforward. However, if a young person lacks mental capacity and as a result cannot handle their finances, a parent or guardian must apply to the Court of Protection to allow them to manage these funds. This ensure that vital safeguards for vulnerable young people remain in place.

A new fee remission, to waive court fees, can be granted to parents or guardians of children who lack mental capacity when seeking access to a Child Trust Fund. The issue mainly arises when an application to the Court of Protection is made after the account holder’s 18th birthday. The Ministry of Justice (MOJ) is therefore strongly encouraging families to make an application before the dependant’s 18th birthday. The MOJ and HM Treasury are working with CTF providers to ensure parents are aware of this and will also work to issue refunds to those who have already paid court fees.

Around 6.3 million CTF accounts have been set up since the scheme was launched in 2002, roughly 4.5 million by parents or guardians and a further 1.8 million set up by HMRC where parents or guardians did not open an account.

Internal Market Bill becomes law

The UK Internal Market Act 2020 received Royal Assent on 17 December 2020 and came into force on 1 January 2021 following the end of the Brexit transition period. The new Act ensures that businesses can continue to trade seamlessly across all four parts of the UK as the EU’s internal market rules have come to an end. 

The UK Internal Market Act 2020 establishes 2 principles (the Market Access Principles) that apply to goods and services, ensuring the UK's shared internal market continues to operate effectively:

  • the principle of mutual recognition (MR) ensures regulations from one part of the UK are recognised across each of the others
  • the principle of non-discrimination (ND) supports companies trading in the UK, regardless of where in the UK they are based, by preventing unreasonably discriminatory regulation

It has also been confirmed that a new Office for the Internal Market (OIM) will monitor the running of the UK Internal Market. The OIM will provide independent, technical advice to all four administrations and their legislatures and sit within the Competition and Markets Authority. The OIM will began operating later in 2021, once the appointments process has been completed by the Business Secretary.

While the appointments process takes place, the government will continue to monitor and protect the UK’s internal market in cooperation with the devolved administrations.

Outcome of EU trade negotiations

Despite many expectations to the contrary, the Prime Minister, Boris Johnson announced on Christmas Eve that the UK and EU had agreed an EU trade deal after four and a half years of strenuous negotiations. This is the first agreement the EU has ever reached allowing zero tariffs and zero quotas and went into effect at 11pm on 31 December 2020. This means there will be no tariffs or quotas on the movement of goods we produce between the UK and the EU and covers some £660 billion of trade.

The agreement also includes provisions to support trade in services (including financial services and legal services) and helps support the mobility of UK professionals. The UK and EU also finally settled other contentious issues including UK sovereignty over fishing waters and continued co-operation on law enforcement. The agreement also removes the role of the European Court of Justice and means there are no requirements for the UK to continue following EU law. This returns control of legal power to the UK with laws being made by Parliament and interpreted by the UK courts. The details of the 1,246 page agreement continue to be pored over by interested parties.

The government has committed to continue meeting high labour environment and climate standards and to develop a modern subsidy system to replace EU State Aid.