Businesses are being advised that time is running out to be able to take advantage of the Corporation Tax super-deduction capital allowance scheme. This allows businesses to claim back 130 per cent on investments made in plant or machinery.

The scheme runs until 31 March 2023 and with Corporation Tax rates set to rise in April 2023 for more profitable businesses, there’s not much time left to take advantage of this generous scheme.

The scheme was an incentive to invest in new assets to aid the recovery of companies after the pandemic.

The measure allows organisations to claim a super-deduction providing an allowance of 130 per cent on most new plant and machinery investments that ordinarily qualify for main rate writing down allowances.

They can also use the first-year allowance of 50 per cent on most new plant and machinery investments that ordinarily qualify for special rate writing-down allowances.

What is classified as plant and machinery?

There are many forms of ‘tangible’ assets used in the day-to-day running of a business. Some examples include:

• Ladders, drills, cranes
• Office furniture
• Refrigeration units
• Electric Vehicle charge points
• Compressors

Certain expenditure is excluded, for example, the acquisition of company cars. To benefit from the relief the assets purchased must also be new and not second-hand or refurbished equipment.

How does it work?

A company incurring £1 million of qualifying investments decides to claim the super-deduction.

Spending £1 million will mean the company can deduct £1.3 million (130 per cent of the initial investment) in working out its taxable profits.

Deducting £1.3 million from its taxable profits will save the company up to 19 per cent of that – or £247,000 on its Corporation Tax bill.

What about unincorporated businesses?

The relief is only available to limited companies, but unincorporated businesses can continue to benefit from the Annual Investment Allowance (AIA), which permits a deduction of 100 per cent for qualifying plant or machinery expenditure up to the threshold of £1 million.

The Government has announced a two-year delay and further changes to the rollout of its Making Tax Digital for Income Tax initiative.

The delayed implementation of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) means it will now be phased in from April 2026 for a smaller number of taxpayers, rather than the original launch date of April 2024.

The move will give self-employed workers, sole traders and landlords more time to prepare for the upcoming changes.

What is changing? 

From the new start date, instead of MTD for ITSA applying to all self-employed workers and landlords with property and/or business income of more than £10,000, it will now only apply to those with income exceeding £50,000.

As per the original plan, they will have to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software.

Those with an income of between £30,000 and £50,000 will also need to comply with this from April 2027. However, all taxpayers will be able to join voluntarily beforehand if they wish to eliminate common errors and save time managing their tax affairs.

What about smaller businesses?

The Government has also announced a review into the needs of smaller businesses originally due to use the system in 2024, particularly those under the £30,000 income threshold.

The review will consider how MTD for ITSA can be shaped to meet their requirements and the best way for them to fulfil their Income Tax obligations. It will also inform the approach for any further rollout of MTD for ITSA after April 2027.

MTD for ITSA will not be extended to general partnerships in 2025, as previously announced. However, the Government says it “remains committed to introducing MTD for ITSA to partnerships in line with its vision set out in the Tax Administration Strategy”.

Under the original plans, MTD would also be extended to Corporation Tax, but the Government is yet to confirm when this final phase will begin.

Landlords are being targeted by HM Revenue & Customs (HMRC) over what appears to be undeclared rental income or income related to residential property. 

HMRC’s Wealthy External Forum sent 606 letters to landlords who have submitted deposits into a tenancy deposit scheme, questioning them about understating their rental income. 

Landlords and letting agents are required by law to protect tenant deposits on rental property in a Government-approved tenancy deposit scheme. 

The Housing Act 2004 law applies to landlords who let under assured shorthold tenancies, usually used to let residential properties. 

Check and correct tax return 

The HMRC nudge letters are based on information received from other Governmental departments, banks or, in this case, the Tenancy Deposit Scheme (TDS). 

HMRC believes it will be able to estimate the total rental income for the year, based on the level of the deposits placed within the scheme.  A deposit usually amounts to four to five weeks of gross rent 

The letter urges the taxpayer to check and correct their 2020/21 tax return, and their 2021/22 return if it has already been submitted.  

The HMRC letter reminds landlords that if they have disposed of the property, they must declare that sale or disposal, and pay capital gains tax (CGT) on any profit they have made. 

The Government approved  tenancy deposit schemes in England and Wales are: 

• Deposit Protection Service 
• MyDeposits – including deposits that were held by Capita 
• Tenancy Deposit Scheme 

These organisations all have privacy policies that allow them to share data with certain Government departments, but the Tenancy Deposit Scheme says it will “submit any details requested by HMRC or other Government agency or local authority under the relevant legislation.”  

HMRC has made such a request to one or more of the deposit protection schemes, and received data about landlords who have placed deposits with those schemes.  

HMRC says the letter does not open a tax enquiry or compliance check, but it does ask the taxpayer to correct their 2020/21 tax return within 30 days. 

Need help with property taxation matters? Contact our team today. 

Millions of new taxpayers will be created by the extended freeze on the income tax thresholds.

In the Autumn Statement, the Government froze the thresholds until 2028 – two additional years on its original plans.

The income tax thresholds for basic (20 per cent) and higher rate (40 per cent) taxpayers will remain unchanged, while the £12,570 personal allowance, the amount you can earn before you start to pay tax will also remain the same.

In addition, for those paying the additional rate of 45 per cent, the threshold has been reduced from £150,000 to £125,140 from 6 April 2023.

In what has been described as a stealth tax, the freeze is likely to lead to many taxpayers being fiscally dragged into higher tax bands by inflation, and with it many individuals’ wages and income.

There are many tax-efficient ways of mitigating what you pay in tax, including:

Pension top up

You can reduce your income tax by topping up your pension using your annual tax-free allowance. Personal pension contributions within the annual £40,000 pension allowance lower your ‘adjusted net income’, which HMRC uses to calculate your tax bill.

ISA allowances

ISAs are a tax-efficient way of saving. You don’t pay income tax or Capital Gains Tax (CGT) on investments inside an ISA, and you can withdraw money whenever you like, tax-free. You can currently invest up to £20,000 in ISAs.

Double your tax allowance

If you’re married or in a civil partnership, your tax allowances can, in some cases, be combined to increase your household’s income tax allowance. For example, the Marriage Allowance lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner if they haven’t used it.

If you are unsure of the tax-saving opportunities available to you, you should seek professional advice.

Planning for the future is essential when running a business and, ideally, you should have a perspective of where you want to be in three to five years.

Goals or targets provide a sense of direction, focus, and motivation. But how do you set aims effectively?

You could try the SMART method. This relies on five key criteria – Specific, Measurable, Achievable, Realistic, and Time-Based – which allow you to create a clear target for success.

What is the plan to get you there?

It may be that small steps are needed before achieving the ultimate goals and could include:

• Establishing your USP. What can you offer that the competition cannot?
• Identifying your ideal customer, do you need to pivot the business to attract new clients?
• Maximising talent. Your staff are your most important asset.

How you can build SMART goals into your business plan:

Specific

A specific goal clearly defines what needs to be achieved, by whom, where and when it is to be achieved (and sometimes why).

Measurable

Measuring draws your focus, and the latest tracking software can measure this accurately.

When you measure, you need to ask certain questions:

• How much?
• How often?
• How many?

Achievable

When you set goals, ensure they’re achievable. It’s a mistake to set unreachable goals because you’re setting yourself up for failure from the beginning.

Realistic

Make sure the goal that you set has long-term importance in what you want to achieve as an individual or an organisation.

Time-based

It sounds obvious but set up a timeframe. A deadline can be an excellent motivator.

Struggle to set goals? Need help monitoring your KPIs? It makes the most sense to seek professional support so you can create a SMARTer approach to working.

Companies House has gone fully digital after the announcement of the closure of its office in London and all filing being transferred online.

It has also permanently shut the public counters in Cardiff, Belfast and Edinburgh.

Online services will be available 24 hours a day, seven days a week.

Changes have taken place with improved security features, which include:

• Multi-factor authentication
• The ability to link your company to your WebFiling account to give you more control over your filings
• Being able to digitally authorise people to file on your behalf on WebFiling, and to remove authorisation
• To view who’s digitally authorised to file for your company
• An option to sign up for emails to help you with the running of your company

WebFiling is an online service that Companies House provides, designed to make the submission of official paperwork easier and paper-free.

Once you’ve linked your company to your account, you will not need to enter your authentication code every time you file online.

Key changes, which form part of the 2020 to 2025 strategy and part two of the Economic Crime Bill, are expected to go through Parliament this spring and will include:

• Filing deadlines will not be shortened at the moment, but legislation will be introduced to facilitate future changes.
• Small companies will no longer have the option to prepare and file abridged accounts and will be required to file both their profit and loss account and directors’ report.
• Micro-entities will also be required to file their profit and loss accounts but will continue to have the option to not prepare or file a directors’ report.
• Dormant companies will be required to file an eligibility statement.
• All companies will be required to file accounts digitally, with full tagging.

The exemption for paying Capital Gains Tax (CGT) is changing.

The CGT annual exemption will fall from £12,300 to £6,000 from April 2023, before being cut in half again to £3,000 from April 2024.

CGT is what you pay on any gains that you make when you come to sell an asset, such as a second home or shares.

However, the annual CGT exemption allows you to make a certain value of gains before you pay tax on any additional gains.

Higher-rate or additional-rate taxpayers pay 28 per cent on gains from residential property and 20 per cent on gains from other chargeable assets.

If you are a basic-rate taxpayer, you will be charged 18 per cent on residential property and 10 per cent on other gains.

Steps that could reduce your CGT liabilities include:

• Ensuring you use your allowance for the current year as soon as possible.
• If you are married or in a civil partnership, you can utilise your partner’s unused allowance. You can transfer your assets into joint names if you are married or in a civil partnership without triggering a tax event. This doubles your £12,300 allowance to £24,600 in one year.
• Utilise tax-efficient investments such as the Enterprise Investment Scheme and Venture Capital Trusts.
• Using Business Asset Disposal Relief when selling a business.

Now is a great time for investors to review their portfolios and decide whether they should transfer or dispose of certain assets before these changes take place.

If you want to take advantage of the current CGT tax rate it is best to seek advice from a qualified tax adviser.