Originally written by Timothy Adler on Small Business
Small business and the self-employed should get a tax refund to cover their Covid losses, an influential Treasury select committee has recommended.
Under a “loss carry-back” scheme, any business, whether it’s a limited company or a sole trader, would get a cheque back from HMRC reimbursing them for Covid losses, providing they paid tax in Britain for three years before the pandemic.
A similar policy was adopted during economic crises in 1991 and 2008.
>See also: Restart Grant for your small business – what is it and where to claim
The Government should also look favourably on a further extension of the Annual Investment Allowance – which provides tax relief for expenditure on most plant and machinery – and possibly keep it permanent at the current level.
In its Tax After Coronavirus report, the select committee says that now is not the time for tax rises or clawing money back post pandemic. That said, significant fiscal measures, including revenue raising, will possibly be needed in the future, MPs said.
A moderate increase in corporation tax could raise revenue without damaging growth, the committee agreed.
Rishi Sunak is reportedly going to announce a stepped increase in corporation tax from 19 per
Tag Archive for Accounts & tax
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Rishi Sunak eyes hiking corporation tax even higher to 25%
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Rishi Sunak is eyeing increasing corporation tax from 19% to 25% in the Budget next Wednesday, March 3.
Previously, it was thought the Chancellor was only considering going as high as 24 per cent.
The chancellor needs to raise money to help start paying off the staggering £394bn deficit the UK economy is facing because of Covid-19, not least the £71bn the Government has spent supporting businesses.
>See also: Self-employed to be offered fourth and final £7,500 grant in Budget
Each percentage point hiked on corporation tax rates raises another £3.3bn in revenue. This implies that the chancellor could raise nearly £20bn if he increases corporation tax to 25%.
Mr Sunak is also getting political cover to do this because his US counterpart, Janet Yellen, said recently that US corporation tax might rise from 21 per cent to 28 per cent. This would mean that the UK could still claim to have the lowest level of corporation tax in the G7 group of developed nations. According to the Times, the first increase is likely to be in the autumn budget, with subsequent rises.
Also, corporation tax revenue overwhelmingly comes from a number of enterprise-level companies and corporates, as opposed
Hot Business News Today
Rishi Sunak eyes hiking corporation tax even higher to 25%
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Rishi Sunak is eyeing increasing corporation tax from 19% to 25% in the Budget next Wednesday, March 3.
Previously, it was thought the Chancellor was only considering going as high as 24 per cent.
The chancellor needs to raise money to help start paying off the staggering £394bn deficit the UK economy is facing because of Covid-19, not least the £71bn the Government has spent supporting businesses.
>See also: Self-employed to be offered fourth and final £7,500 grant in Budget
Each percentage point hiked on corporation tax rates raises another £3.3bn in revenue. This implies that the chancellor could raise nearly £20bn if he increases corporation tax to 25%.
Mr Sunak is also getting political cover to do this because his US counterpart, Janet Yellen, said recently that US corporation tax might rise from 21 per cent to 28 per cent. This would mean that the UK could still claim to have the lowest level of corporation tax in the G7 group of developed nations. According to the Times, the first increase is likely to be in the autumn budget, with subsequent rises.
Also, corporation tax revenue overwhelmingly comes from a number of enterprise-level companies and corporates, as opposed
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SME borrowing problems as HMRC creditor status changes
by Chris Williams • • 0 Comments
Originally written by Chris Williams on Small Business
SME borrowing problems lie ahead as HMRC is now a preferential creditor who will be paid ahead of floating charge or unsecured creditors in the event of a company insolvency.
What does this mean for businesses trying to raise working capital finance?
Previously, under the Enterprise Act 2002, creditors of an insolvent business were paid out of available funds by a liquidator in the following order:
Fixed charge creditors
Ordinary preferential creditors (effectively employees)
Secondary preferential creditors (FSCS)
Prescribed part carve out
Floating charge creditors
Unsecured creditors (incl HMRC)
From 1 December 2020, the Finance Act 2020 means HMRC is now a ‘secondary preferential creditor’ to be paid before floating charge creditors. This is important, because HMRC is often one of the largest creditors in an insolvency. Businesses collect various taxes (PAYE, NI, VAT) paid by their customers and employees, on behalf of HMRC, so if a business fails it usually fails with substantial amounts owed to HMRC in taxes collected, but not yet paid over.
Before the change, HMRC may not recover this tax revenue if there were also amounts owed by the insolvent business to floating charge creditors. This is because there would often be no funds left for distribution to
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How to avoid paying £130,000 in VAT registration fees if you export to EU
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Businesses selling goods into Europe face having to pay for VAT registration in all 26 EU countries, costing up to £130,000.
Britain left the EU on January 1 and small businesses now have to register for VAT in each country they sell directly to customers in. Plus they will need to have a physical business representative in each country, and not just be brass-plate company.
Given that it costs between £3,000 and £5,000 to register for VAT per EU country, small businesses could be left with a bill of £130,000 just for the right to pay VAT in each territory.
>See also: Local authorities blame government for slow release of Covid-19 grants
Sean Glancy, VAT and indirect taxes partner at accountant UHY Hacker Young, said: “The risk here is that a UK business moving goods to consumers in, for example, Germany, Italy and Austria would have to register for VAT in all of these countries. If that multiplies across Europe, that is a lot of registrations, time, resource, and cost.”
The good news is that this is only until July 1, when the EU will bring in a one-stop-shop for VAT registration throughout Europe, which means UK businesses
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Self-employed should pay equal tax with employees, says top thinktank
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
The self-employed and small business owners should pay as much tax as the employed, influential think-tank the Institute for Fiscal Studies argues.
The current tax system does not really work for anybody, says the IFS in its report published today. The self-employed pay National Insurance and income tax at lower levels than their employed counterparts – often when they are doing the same job for companies.
The government is losing £15bn in tax revenue annually through the self-employed paying less tax, said the IFS.
>See also: You should file your tax return by January 31, despite HMRC extension
“There is a large, unjustified and problematic bias against employment and labour incomes and in favour of business ownership,” said the report. “The differential tax rates create inefficiency, unfairness, complexity and revenue loss.”
The IFS report said that for a job earning £40,000, a full-time employee could pay up to £4,300 more in tax than if the same work was done by someone with their own company.
And if you’re a self-employed partner in the financial services industry on a £308,000 average salary, you pay £20,000 less tax each year than someone doing the same job as a full-time employee.
Tax policy
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Treasury eyes hitting self-employed gig workers with VAT charge
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Self-employed Uber drivers, those who make a living renting out rooms on Airbnb, and other gig economy workers could find themselves having to pay VAT.
The Treasury is eyeing slapping VAT on self-employed gig workers and others in the sharing economy, as it tries to claw back cash to pay for the Covid pandemic.
What this means is that Uber fares or Airbnb stays could cost 20 per cent more.
>See also: Treasury to discuss COVID-19 grant for company directors
The Treasury has issued a call for evidence as concern grows that as much as £20bn could be lost as tax revenue as activity shifts online. According to PwC, the total value of the UK sharing economy will be £140bn by 2025 compared with £7bn in 2016.
For example, plumber call-out firm Pimlico Plumbers charges 20 per cent VAT to customers, but a plumber found on Taskrabbit does not because most sole traders fall below the VAT threshold of £85,000 of turnover. Similarly, accounting firms charge VAT to clients on billable hours but a freelance accountant found on Upwork may not.
Although the government has pledged not to raise the rate of VAT under the “triple tax lock”, there
Hot Business News Today
Treasury eyes hitting self-employed gig workers with VAT charge
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Self-employed Uber drivers, those who make a living renting out rooms on Airbnb, and other gig economy workers could find themselves having to pay VAT.
The Treasury is eyeing slapping VAT on self-employed gig workers and others in the sharing economy, as it tries to claw back cash to pay for the Covid pandemic.
What this means is that Uber fares or Airbnb stays could cost 20 per cent more.
>See also: Treasury to discuss COVID-19 grant for company directors
The Treasury has issued a call for evidence as concern grows that as much as £20bn could be lost as tax revenue as activity shifts online. According to PwC, the total value of the UK sharing economy will be £140bn by 2025 compared with £7bn in 2016.
For example, plumber call-out firm Pimlico Plumbers charges 20 per cent VAT to customers, but a plumber found on Taskrabbit does not because most sole traders fall below the VAT threshold of £85,000 of turnover. Similarly, accounting firms charge VAT to clients on billable hours but a freelance accountant found on Upwork may not.
Although the government has pledged not to raise the rate of VAT under the “triple tax lock”, there
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1m self-employed face having to pay tax bill larger than what they earnt
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
One million of the UK’s 4.5m self-employed face having to prepay tax bills higher than what they actually earned this year.
Many freelancers pay self-assessment tax bills on account twice a year, with the first prepayment falling due this January.
This is despite the Covid pandemic decimating many self-employed profits since March.
>See also: MPs to fight Sunak over move to hike national insurance for self-employed
The problem is that prepayments are based on the previous year’s profits, in this case what the self-employed earned in 2019-20 – before the pandemic hit.
TaxScouts, an online self-assessment tax service provider, estimated 1m people could be hit with an inflated tax bill because payment on account is based on the previous year’s earnings.
“While this is well and good in normal times, it doesn’t take into consideration the huge loss of earnings that so many of the self employed will have faced during the pandemic,” said TaxScouts.
However, anticipating the problem, HMRC has allowed the self-employed to defer payment on account and to request a reduction in their tax bill if they are facing financial difficulty and know their earnings will be down.
>See also: MPs urge Government to do more to help
Hot Business News Today
1m self-employed face having to pay tax bill larger than what they earnt
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
One million of the UK’s 4.5m self-employed face having to prepay tax bills higher than what they actually earned this year.
Many freelancers pay self-assessment tax bills on account twice a year, with the first prepayment falling due this January.
This is despite the Covid pandemic decimating many self-employed profits since March.
>See also: MPs to fight Sunak over move to hike national insurance for self-employed
The problem is that prepayments are based on the previous year’s profits, in this case what the self-employed earned in 2019-20 – before the pandemic hit.
TaxScouts, an online self-assessment tax service provider, estimated 1m people could be hit with an inflated tax bill because payment on account is based on the previous year’s earnings.
“While this is well and good in normal times, it doesn’t take into consideration the huge loss of earnings that so many of the self employed will have faced during the pandemic,” said TaxScouts.
However, anticipating the problem, HMRC has allowed the self-employed to defer payment on account and to request a reduction in their tax bill if they are facing financial difficulty and know their earnings will be down.
>See also: MPs urge Government to do more to help