Middle East conflict

On 7 October Hamas, a terrorist group based in Gaza, killed over 1,300 Israelis in a surprise attack. Since then Israel has retaliated by bombing and moving troops into Gaza to try to wipe out Hamas.

This is not the first time this has happened but there has been a relatively peaceful period prior to the attack.

I totally condemn the attack by Hamas on unarmed women and children and civilians in general.

Similarly I condemn the killing of civilians in Gaza although I do understand why Israel has taken a hard stance to try to eradicate the terrorists on their border.

Despite Israel’s advance into Gaza, Hamas continues to send rockets into Israel and of countries in the region are starting to look at getting involved in the conflict.

Conflict in the Middle East can send tremors through the world because the region is a crucial supplier of energy and a key shipping passageway. The Arab-Israeli war of 1973, which led to an oil embargo and years of stagflation in industrial economies, is the clearest example. Other conflicts had a more limited impact, even when the human toll was high.

The Middle East's significance in global oil exports has diminished over the past 50 years, currently accounting for approximately 30 per cent of the world's oil supply, down from 37 per cent in the 1970s. In case the Israel-Hamas conflict intensifies, policymakers in developing countries will need to formulate strategies to cope with a potential rise in inflation and interest rates.

Today’s world economy looks vulnerable. It’s still recovering from a bout of inflation exacerbated by Russia’s invasion of Ukraine. Another war in an energy-producing region could rekindle inflation. Broader consequences could extend from renewed unrest in the Arab world, to next year’s presidential election in the US, where gasoline prices are key to voter sentiment.

We can only hope that the conflict comes a speedy end and that the world economy does not take a big hit. Rising fuel prices and inflation will only cause more pain and austerity in the UK.

As a business owner you should prepare for the worst and hope for the best. Make sure your processes are suitable for their purpose and that you have reserves in case of future problems.

In this month’s round up:

Filing your Self-Assessment return
Rumours that inheritance tax may be abolished
Check what your tax code means
Postage prices have gone up
When are companies associated?
Christmas and New Year holidays

Autumn statement date set for 22 November

National living wage to increase to minimum £11 per hour

The Chancellor told delegates at the Conservative Party conference that he plans to increase the hourly national living wage to at least £11 from next April.

This means that the rate for workers over 23 would go up from the current £10.42 an hour to at least £11.

This would mean a pay rise of over £1,000 per year for someone who works 35 hours a week.

‘Since introducing the national living wage, I want to make sure that work continues to pay, today I take a step forwards. The current rate is £10.42 an hour and this will be increased,’ Chancellor Jeremy Hunt said.

‘I am waiting for recommendations from the Low Pay Commission and will follow their recommendation, but whatever it is, I will increase the national living wage to at least £11 an hour next year. That’s a pay rise for almost two million workers.’

He did not talk about any tax cuts, stressing that achieving the Prime Minister’s target of halving inflation to 5% was a priority for the Treasury. The current inflation rate is 6.7%.

‘We will always protect public services but we are honest about the taxes that pay for them,’ he said, taking a dig at uncosted Labour policies.

He also pointed to changes to the tax system that mean low earners could earn more money tax-free.

Working from home and the £6 per week allowance

During the COVID pandemic the government relaxed the conditions to enable those working from home to be paid £6 a week tax free by their employer, or, where that was not paid by the employer, they could claim relief for £6 a week against their employment income for a tax refund from HMRC. Those relaxed rules applied for 2020/21 and 2021/22.

Many employers and employees may not be aware that from 6 April 2022 the rules reverted to the strict statutory position. Employees can claim tax relief if they have to work from home under a homeworking agreement, for example because:

• their job requires them to live far away from the office,
• their employer does not have an office, or
• the office is closed every Friday and employees are required to work from home that day.

Tax relief cannot be claimed if the employee chooses to work from home.

See: Claim tax relief for your job expenses: Working from home - GOV.UK (www.gov.uk)

When are companies associated?

“Associated companies” for corporation tax purposes are those under common control. The most obvious situation is where one of the companies has control of the other, or both of the companies are under the control of the same person or persons.

In determining control, the rights and powers of an individual’s associates, broadly close relatives, may be taken into consideration, but only where there is substantial commercial interdependence between the two companies. This could be financial, economic, or organisational interdependence and will depend on the facts of each case. An example would be where a brother and sister each have their own limited companies and there is a large loan or significant trading between them, such that one is dependent upon the other.

This is not a straightforward matter and we can of course advise you on whether or not it impacts your company.

It is necessary to be aware of the number of associated companies as the number reduces the levels at which various tax thresholds come into play. Perhaps the most obvious one is the rate at which corporate tax changes from 19% to a marginal rate of 26.5%.

For a single company the level of profits at which the rate changes is £50,000. With just one associated company this level halves to £25,000. With 2 associated companies the level is £16,667.

Whilst we aim to talk to all of our clients about this when preparing accounts knowing in advance can mean that some tax planning can take place. Talk to us if this concerns you.

Do you have a side income?

If you do then you are probably aware of the requirement to disclose this on your Self-Assessment tax return. It is important to record any side income accurately and HMRC is going to be able to see exactly how much income you receive when using a digital platform from 1 January 2024.

HMRC have new powers which means that anyone in the UK who makes money selling goods or services online will have their incomes recorded on the digital platform that they use and HMRC will have direct access to this.

Digital platforms include apps and websites which facilitate the provision of goods and services such as the provision of taxi and private hire services, food delivery services, freelance work, and the letting of short-term accommodation.

HMRC will have access to the digital records of businesses such as Airbnb, Fiverr, Upwork, Uber, Deliveroo, Etsy and other online businesses. The change is part of a wider plan for HMRC to keep a more accurate eye on people adding to their existing income through side profits or freelancing and they will be checking tax returns to ensure the figures tally with the records from the platforms themselves.

From 1 January 2025, certain UK digital platforms will be required to report information to HMRC about the income of sellers of goods and services on their platform. HMRC will then exchange the information with the other participating tax authorities for the jurisdictions where the sellers are tax resident.

Under the Organisation for Economic Co-operation and Development (OECD) rules, digital platforms in participating jurisdictions will be required to provide a copy of the information to the taxpayer to help them comply with their tax obligations.

If you are not currently filing a tax return then you can check how to register for Self-Assessment here: Check how to register for Self Assessment - GOV.UK (www.gov.uk)

Please talk to us if you have any questions about a side income and how to declare this on your tax return, we have considerable experience in helping our clients comply with the complex HMRC disclosure requirements.

The Treasury has announced that the Office of Budget Responsibility (OBR) will produce a report on the state of the UK Economy in time for the Chancellor Jeremy Hunt to present his Autumn Statement on Wednesday 22 November.

Last year the Chancellor announced a number of significant changes, reversing many of the proposals in the Kwarteng/Truss mini Budget the previous September. This time we are not expecting too many surprises. However, the leaks and rumours have already started with suggestions that there will be no significant tax cuts. There is also likely to be a General Election within the next 13 months so there may be a few tax sweeteners.

The Prime Minister’s statement on 20 September on progress to Net Zero suggests that there may be a number of announcements concerning green energy measures affecting individuals and businesses. Another suggestion has been the possible abolition of inheritance tax which may encourage traditional Conservative Party voters to stay loyal (see below)

HMRC to contact agents where they think there are potential discrepancies in 2022 tax returns

We have been advised that HMRC will start sending letters to agents in the week commencing October 2023. The letter will advise the agent that HMRC will be contacting them after three weeks (unless the agent makes contact before then) to share details of the clients where it believes there are discrepancies.

The discrepancy could be between a client’s 2021/22 self assessment return compared to information submitted by their employer(s), or with child benefit information held on HMRC’s systems.

HMRC hopes to resolve these cases in advance of the busier season leading up to the 31 January 2024 filing deadline for 2022/23 returns.

If any discrepancies are discovered and voluntary amendments are made by 31 January 2024, HMRC will not charge a penalty. However, if no voluntary amendment is made by 31 January 2024, then HMRC will review and consider making a discovery assessment and charging a penalty. Where an amendment results in an underpayment of tax, interest will apply from the original due date.

We prepare self assessment return on the basis of information provided to us by our clients. We would ask all clients to check the information provided for their 2022 tax returns to ensure that the correct information has been included in the return. In particular we would ask that you check the correct information has been included for salaries (P60), benefits in kind (P11d) and child benefit payments. If there are errors then these can be amended with no penalties as long as the corrections are submitted by 31 January 2024. Interest on late payments will still be charged.

Christmas and New Year holidays

The Christmas season has a big impact on most businesses and employees in the UK. It will be a time when there is likely to be extra demand for products, services, and sales in some businesses whilst others may experience a quiet period or may shut for the Christmas holidays.

This year, Christmas Day, 25 December 2023 falls on a Monday and Boxing Day, 26 December 2023, falls on a Tuesday. New Year’s Day also falls on a Monday.

The Advisory, Conciliation and Arbitration Service (ACAS) has useful guidance for both employers and employees on their website about holiday entitlement.

See: Holiday, sickness and leave | Acas

Stewart & Partners Property Group

The Stewart & Partners Property Group is for clients who have an interest in the property sector, be it buy to let, property investment or construction.

Our web site pages give an overview of the property industry including buy to let, property investment and property development.

The major resource for all our property clients and contacts are the many helpsheets we have produced which give initial advice an many areas where clients need help. Check out the pages for yourself.

We also produce a monthly newsletter dedicated to the property industry. If you are interested then sign up to receive the newsletter.

How to Grow your Business

We have written a booklet titled How to Grow Your Business which offers ten strategies you can use to take your business to the next level.

We can help − Just ask us

Are you considering starting a new arm to your business or do you have a query about tax planning? Do you need advice about financing or cashflow, maybe you just need help in accessing a loan.

We have a broad range of experience that goes far beyond just preparing accounts and tax returns. We also have access to a broad range of tools that will help with providing answers. Get in touch as we will probably have an answer to help you with your challenges.

Even if you just want help planning for the future with all the proposed tax changes, we are here for you.

And finally….

Winter is approaching and it will be getting cooler. Make sure you have a good energy supplier and your rates are as keen as you can make them. I have recently sent out an e-mail about a new service we are offering with Reducer. If you are interested in seeing if they can help your business by cutting costs then just let me know.

Stay safe if you are taking part in a fireworks show,

If you have any queries you can book a free 15 minute zoom meeting with me.

Finally, don’t forget to make time for yourself and do not let your business run you, you should run your business.