August Tax News

RUMOURS OF THE ABOLITION OF INHERITANCE TAX

There are rumours circulating in the press of the possible abolition of inheritance tax (IHT) in a bid by the Government to secure the support of wavering Conservative voters. This may cause some individuals to delay IHT planning, but remember these are just rumours, and it may not be actually happen.

It should be noted that under the current IHT rules there are a number of generous reliefs and exemptions that would apply, as opposed to speculation of possible future changes. For example, business property relief is available on the transfer of shares in an unquoted trading company during lifetime or on death, such that no IHT would be payable. However capital gains tax potentially applies to a lifetime transfer of shares, subject to a possible claim to hold over the gain.

So, the current rules allow tax planning to be undertaken with an element of certainty, as opposed to speculating about possible future changes. Please talk to us if you would like to discuss inheritance tax planning.

HMRC RAISE INTEREST RATES AGAIN AS BASE RATE INCREASES

HMRC interest rates are linked to the Bank of England base rate. Late payment interest is set at base rate plus 2.5%. Repayment interest is set at base rate minus 1%, with a lower limit – or ‘minimum floor’ – of 0.5%.

The latest increased the Bank of England base rate from 4.5% to 5% means that interest on late paid tax will increase to 7.5% for most taxes and the rate of repayment interest will increase to 4% if you overpay.

These changes came into effect on 11 July 2023.

For those companies required to pay their corporation tax by quarterly instalment payments the rate increased to 6% from 3 July 2023.

If you are late with your self-assessment payment on account for 2022/23 that was due on 31 July 2023 then you should pay as soon as possible to avoid incurring further interest charges. Note that there is a 5% surcharge added to any tax still outstanding at 28 August 2023 unless you have agreed a payment plan with HMRC.

PLANNING A STAFF SUMMER BARBEQUE?

Employers may meet the cost of certain social events for staff without creating a tax liability. This used to be a concession but is now a statutory exemption provided certain conditions apply.

The exemption applies to an “annual party or similar function” provided it is available to all employees or available generally to those at a particular location. During the Covid-19 pandemic HMRC confirmed that a ‘function’ could include a virtual party, where employers were unable to host a traditional party at which employees would have been physically present.

A key condition is that the cost per head of the party or function must not exceed £150, inclusive of VAT. If an event costs more than £150 then it is taxable in full, not just on the excess over £150.

If you have already held a Christmas Party for staff it may be possible have another event, and for that to also be exempt from tax, provided the combined cost per head is no more than £150 a year. If the combined cost exceeds £150 for the year the employer can designate which ones should be taken into account to make best use of the exemption. If, for example, the cost per head of the Christmas party was £100, and the Summer event was £70 the employer can nominate the Christmas party to be covered by the exemption, but the £70 Summer Event would be taxable (not just the excess £20)

Rather than the employee being taxed on the £70 the employer can deal with the tax and national insurance on the employees’ behalf by way of a PAYE settlement agreement.

DIARY OF MAIN TAX EVENTS

AUGUST/ SEPTEMBER 2023