Legislation Day: Response to tax measures by Henry Pettitt

Henry Pettitt of Stephenson Smart

3rd August, 2021, Henry Pettitt

What is Legislation Day?

Dubbed as ‘Legislation Day’ the announcements made by HM Treasury on 20 July included draft legislation, consultation updates and promises of future tax measures as a build-up to Finance Bill 2022.

Nothing announced will have immediate effect, but the various documents do give a good sense of the direction of travel for future changes to the tax system. The key announcements include proposals to reform income tax basis periods, clamp down on promoters of tax avoidance schemes and introduce a requirement for larger businesses to notify HMRC about uncertain tax treatments.

The full list of tax measures can be found on the .

Below is a summary of the key areas that I feel may have the potential to bring about the biggest change.

Legislation Day: Sole traders and partnerships

One of the proposals was that sole traders and partnerships will be taxed by reference to profits earned in a tax year, rather than taxed by reference to the profits of an accounting period where that period does not coincide with the tax year ended 5 April, from 2023.

For example, if a business draws up accounts to 30 June every year, currently the income tax for 2023/24 would be based on the profits in the business’s accounts for the year ended 30 June 2023, subject to basis period rules. The proposed reform would mean income tax for 2023/24 would be based on: 3/12 of year end 30 June 2023, plus 9/12 of year end June 2024. So, there is an acceleration in profits being assessed and taxed.

It is felt that setting tax year 2023/24 as the year of change (with year 2022/23 as a transitional year) is very ambitious and it may be that the speed of change is linked to Making Tax Digital for Income Tax Self-Assessment, as this is scheduled to be mandatory from April 2023.  Another move towards real-time tax reporting and payment for the self-employed.

We have been anticipating this change to how business profits are quantified and encouraging clients to consider their year ends and utilising overlap profits.

Legislation Day: Pensions

There was draft legislation released relating to pensions.

Of interest is a proposed increase in the normal minimum pension age from 55 to 57 in April 2028.

Where a pension scheme annual allowance charge of at least £2,000 arises, the scheme member can request that the liability is met from their pension fund under the “scheme pays” rule. The deadline for doing this is currently 31 July in the year following the end of the tax year. However, where an annual allowance charge is triggered retrospectively, because of retrospective amendment to their pension input amount (as could be the case with the government’s planned remedy for addressing the age discrimination found in the 2015 public service pension reforms), the taxpayer may be out of time to request that the scheme meets their liability.

To address circumstances where a scheme member is informed of a retrospective change to their pension inputs by the scheme administrator, draft legislation extends the deadline to the earlier of three months following the date that the scheme administrator provides that information and six years following the end of the tax year in question.

Legislation Day: Tax avoidance

HMRC published a summary of responses to its proposals made earlier this year for measures to clamp down on promoters of tax avoidance. Four new measures are being introduced:

  • A new power for HMRC to seek freezing orders that would prevent promoters from dissipating or hiding their assets before paying the penalties that are charged as a result of breaching anti-avoidance obligations.
  • New rules that would enable HMRC to make a UK entity that facilitates the promotion of tax avoidance by offshore promoters subject to a significant additional penalty.
  • A new power to enable HMRC to present winding-up petitions to the courts for companies operating against the public interest.
  • New legislation that would enable HMRC to name promoters, details of the way they promote tax avoidance and the schemes they promote, at the earliest possible stage, to warn taxpayers of the risks and help those already involved to get out of avoidance arrangements.

 

Other areas of note published on legislation day:

Capital allowances

An amendment to allowance statement for structures and buildings allowance.

Insurance premium tax

Draft legislation has been published to move the criteria for determining the location of a risk for insurance premium tax into primary legislation.

VAT

As announced on 23 March, the government will not be taking forward any changes to VAT grouping but has now published a summary of the responses to the call for evidence on VAT grouping establishment, eligibility and registration.

 

Legislation Day: Next steps

Once all the consultations have ended in September, there will be a Finance Bill in the Autumn, possibly to accompany an Autumn Budget and a Spending Review.

However, it has been reported in the media that the Budget may be deferred until Spring 2022 to reflect more on the economic impact of the pandemic.

 

If you would like to discuss how any of the proposed changes may affect you or your business, please

Profile:

Related Articles:  

End of business relationship after 53 years

David King and Neil Gayton

7th July, 2021, Melanie Harriss

Well-known local painter and decorator, David King is putting down his brushes and retiring from his business after 53 years.

Throughout that time David has been a client of Stephenson Smart’s, who have supported him with his accounts and tax returns. Having such a long relationship with the firm has meant that David has been looked after by many, now retired partners including Morris Harcourt, Douglas Shinn and Keith Turner. Most recently he has been supported by manager, alongside current partner, .

As well as Stephenson Smart helping David, David also undertook some decorating at their and can even remember passing by the office of one of the firm’s founders, Robert Stanley Smart on one of his very first jobs in 1968.

One of David’s other jobs in his early days was at Park House in Sandringham, which was then still the residence of a young Lady Diana Spencer.

The relationship between decorator and accountant also led to David’s son doing work experience with another retired partner, Peter Lofting. His son went on to train as an accountant and became a finance director of a large firm.

Neil said: “It has been a pleasure to work with David over the last few years.  I wanted to mark his retirement, and the end of our working relationship, by presenting him with a hamper, as a token of appreciation for his custom all these years.”

David said: “I have always been looked after very, very well by the whole team. I got to know everyone in my time as a client and they have always been very helpful.

We thank Stephenson Smart for all their help and guidance over the last 53 years – always ready to answer any query with promptness, expertise and patience.”

David is a keen supporter of Narborough Cricket Club and looks forward to spending his retirement with his wife, Hazel visiting their children in Essex and Gloucestershire, gardening, and getting away to Tenerife, when they can.

New era at King’s Lynn office

Dan Jastrzebski, Michael Clunan, James Taylor and Jenna Noble of Stephenson Smart

13th May, 2021, Melanie Harriss

It’s a new era for Stephenson Smart’s office as long-serving partner, takes on the role of Managing Partner, after the retirement of company stalwart Clive Dodds.

Also, has been made partner, while Jenna Noble, James Taylor and Michael Clunan have been promoted to managers, forming a new team, working under Dan.

Mike Andrews joined Stephenson Smart as a trainee in 1991 and made partner 21 years ago. He is responsible for the firm’s audit compliance and practice assurance matters and specialises in audit, corporate structuring and taxation. His responsibilities also extend outside of the company as a director of King’s Lynn Festival Too and a co-opted governor of the College of West Anglia.

He said: “The firm is in the best place I could hope for and all credit to Clive for leaving us in such a strong position. The plan now is to continue its growth. In the last few years we have expanded more than three times in size and there are lots of opportunities to move forward even further. One of the focuses will be on IT enhancements, the major impact of MTD and how we embrace that.

We are the largest and longest standing office here in Lynn, so to have Dan on board with a relatively young management team behind him is very exciting as we are investing in the next generation of Stephenson Smart.

I also have a forward-thinking team and coupled with the support of our other existing partner it gives us a new dynamic and fresh perspective for the future.”

Dan, a chartered accountant and tax advisor, joined the company in 2018 and the board of directors in April 2020.

He has a breadth of experience in all areas, specialising in inheritance tax, trust and estate work.

His role sees him take over Clive’s existing client base as well as supporting James and Mike, both 27, and Jenna, 30, in their new positions.

He said: “It has been a tricky transition period due to Covid, but I am hoping to be able to organise more face-to-face meetings now. I’m really excited about working with my new team and taking the business forward.”

Covid-19: A notice from Stephenson Smart

Covid-19 Update

6th January, 2021, Melanie Harriss

Following the announcement to impose another lockdown, we have taken the decision to close our offices to visitors.

We are at our busiest time of year but know that we are more than able to support our clients remotely through email, telephone, and video calling. Our teams are being fully supported to work from home and our IT infrastructure is robust enough to allow this to happen securely.

Our main concern is the health and wellbeing of our staff, clients, and communities.

We encourage the dropping off/collecting of records by prior arrangement, by who usually oversees your accounts.  We can also make arrangements for the signing of important documents.

We will continually review our situation, in accordance with government guidance, and update you as and when the situation changes.

Keep safe and well – Stephenson Smart

It’s a Dad’s Life with Neil Gayton: Brexit

Neil Gayton: It's a Dads Life

17th December, 2020, Neil Gayton

There’s no denying that 2020 has been a strange year, and already it’s nearing the end.

People keep talking about us flying through it, but I suspect others would agree that it has been one of the most challenging and difficult periods of our generation.

Thankfully, there is a light at the end of the tunnel and now is the time that we make the most of the time we are being given to reunite with our families this Christmas.

The countdown has already begun for the boys, and as usual they are beside themselves with excitement.

Everything is on the list from a Playstation to Lego.

Samuel has requested a hoverboard. But let us be realistic – with his track record, it will only end in tears. So, a new scooter it is.

Oh, and Oliver wants a sausage dog bedding set. Where we are meant to get that from is anyone’s guess.

We will also have the usual antics with trying to sneak all the presents under the tree without either of them coming down and being caught red handed. They seem to have ears like elephants even when they are asleep.

This year I may resort to crawling across the floor. Apparently my footsteps in socks are too noisy.

And while we clink glasses to celebrate the end of 2020, it will also signal the end of the Brexit transition period.

After December 31st anyone trading with countries in the EU should be aware of changes to customs procedure and VAT reporting.

Any goods crossing the UK/EU border and customs declarations for imports or exports will have to be submitted to HMRC.

Traders who are new to customs can apply for up to £1,000 of support with the initial costs of basic customs training. Grants are also available.

I’ve wrapped that up in a nutshell but now is the time to digest all these changes ready for the new year.

Thank you for sticking with me. I’ll attempt to be witty in 2021.

Related articles:

Profile:

Page 1 of 3

Stephenson Smart News