Twelve months ago, I wrote a short article on these very pages and the content was dominated by Government Grants & support for employers, the self-employed and other business support. Shortly after that June/July edition was published most support for business, provided during the pandemic ceased.
As we now look ahead to a summer, where we feel more confident about the likely impact of the Covid virus, we are faced with continuing global uncertainty, rising costs, increasing interest rates and tax hikes. Underlying this is a feeling that the taxman will be also looking to recoup the financial support given over the last two years.
Employment Taxes
Employers, Employees and the Self-Employed, since April 6th, have been contributing additional tax to the social care pot through temporary increases to National Insurance. From next year this will be a stand alone levy to support the UK’s increasing requirement to meet shortfalls in the NHS.
VAT for the hospitality sector
The VAT rate for hospitality businesses was reduced during the pandemic. In July 2020 the rate was cut from 20% to 5%. In September 2021 this rate ended and was increased to 12.5%. From April 2022 the rate has reverted to 20%
VAT on compensation and cancellation fees
The law has been a bit of a mess, but HMRC has laid down firm guidance on how termination fees should be treated for VAT purposes from 1 April 2022. From this date any fee paid on the early termination of a contract should follow the VAT treatment of the main supply under that contract.
Where your business charges cancellation fees, say for gym membership, hiring of rooms or restaurant tables, you need to review your VAT policy to ensure that it is in line with the new HMRC guidance.
Cryptoassest are taxable
In uncertain times people instinctively look for alternative ways to invest and some may choose cryptoassets such as Bitcoin and non-fungible tokens.
HMRC does not consider cryptoassets such as Bitcoin to be a form of money or currency, so the special tax rules that apply to holding and lending money do not apply to cryptoassets. Where cryptoassets are lent or ‘staked’ (lent to a platform which lends on to various borrowers) the return provided to the asset owner is not ‘interest’ but it is taxable either as sundry income or a capital gain.
HMRC is unlikely to consider transactions in cryptoassets as trading, so by default the transactions are capital and any profits must be taxed.
Making Tax Digital
For all VAT registered businesses, MTD is now mandatory. The smaller businesses with sales less than £85,000 per annum are now required (From April 2022) to keep and file returns digitally.
For Landlords and the Self-Employed April 2023 will present a new challenge in that MTD will be compulsory. Landlords and small businesses will need to keep accounting records in a format suitable to be able to file data to HMRC quarterly. At Mostons we are working hard with clients to ensure that they are ready for the change. Expect to see and hear more advertising from accounting software providers over the coming months.
£161m for HMRC to investigate
In the Spring Budget the Chancellor announced additional 5 years of funding for HMRC to ensure that it has the resources to investigate businesses and individuals that are failing to pay tax that is due. The aim is to collect over £3 billion. We are pleased to say that Mostons clients are rarely investigated but should it happen, our clients can protect themselves from additional fees through our fee protection service.
2022 Tax returns – Covid Grants
Limited companies and the self-employed should remember to disclose any Government support in the 2021/22 tax year. Failure to disclose this properly on tax returns will spark an enquiry that requires a 30 day response
Mostons
In these changing times, we are here to help new and old businesses. Prospective clients can always take up a free 30-minute consultation, without further obligation.
Mostons, looking after people businesses and business people.
For more information please get in touch. Call 020 8886 1884 or email [email protected]. You can also visit www.mostons.co.uk
