A recent Accountancy Age article highlighted the increasingly tough attitude being taken by HM Revenue & Customs towards unpaid tax. During 2011/12 there was a 57% increase in winding-up petitions being served by HMRC against limited companies. HMRC seem keen to dispel any image of being a soft touch or that the late payment of taxes should be seen as an acceptable method of manageing working capital. It is therefore important not to give HMRC the impression that trade creditors are being giving preference to tax debts.

This hard line coincides with a reduction in the number of “Time to Pay” arrangements being agreed and a tendancy for HMRC to push for shorter payment periods. It is important that anyone struggling to pay corporation tax, VAT or PAYE contacts HMRC promptly, but they will need to have a workable plan as to how they will be able to pay off the debt.

If you are having difficulties them contact your accountant or an insolvency practitioner for help.

 

 

The Chancellor delivered his Autumn Statement 2012 on 5 December. The negligible growth in the economy and the fall in corporate tax income has meant that government borrowing continues to be higher than forecast.

Mr Osborne acknowledged that the country is in for at least another five years of austerity before government borrowing is reduced to their target level. He therefore announced further reductions in government spending and capped the increase in state benefits to 1%.

Company tax – To help business he announced that the main rate of corporation tax will be reduced by an additional 1%. The rate will be reduced from 24% to 23% in April 2013, and then to 21% in April 2014. The small company rate will remain at 20%.

He also announced that there will be a temporary increase in the Annual Investment Allowance for capital expenditure incurred on or after 1 January 2013 from £25,000 to £250,000 for a period of two years.

The Small Business Rate Relief Scheme will be extended by a further 12 months from 1 April 2013.

Income tax – The personal allowance will increase to £9,440 from April 2013, but the higher rate threshold will only increase by 1% (rather than inflation) in 2014-15 and 2015-16. This means that the higher rate threshold will be £41,865 for 2014-15, and £42,285 for 2015-16.

National Insurance – the upper earnings limit and upper profits limit will increase in line with the income tax thresholds.

Capital Gains – annual exemption: this will be increased by 1% in 2014-15 and 2015-16. This means that the annual exemption will be £11,000 for 2014-15 and £11,100 for 2015-16.

Inheritance Tax – nil rate band: the inheritance tax nil rate band (currently £325,000) will increase by 1% in 2015-16 to £329,000.

Pensions – From 2014-15, the lifetime allowance will be reduced from £1.5 million to £1.25 million. The annual allowance will be reduced from £50,000 to £40,000.

IR35 – the Government is strengthening the current IR35 legislation to put beyond doubt when it applies.

Tackling tax evasion – the Government once again announced their intention to clamp down on tax evasion. Mr Osborne announced additional resources for HMRC target aggressive tax avoidance schemes and to close down tax loopholes.  As previously announced he also intends to introduce the UK’s first General Anti-Abuse Rule. This is supposed to help HMRC to tackle the tax arrangements of large multi-national corporations and offshore evasion, but we must wait to see whether HMRC use it to target smaller taxpayers.

Summary – With the background of high government borrowing, low growth and the euro zone crisis there was little good news in the chancellor’s autumn statement. The cuts in benefits and government spending will continue for the foreseeable future but Mr Osborne has attempted to get some good headlines by increasing the personal allowance by more than originally announced, the reduction in the corporation tax rate and the cancellation of the fuel duty increase. Whether this will be enough to improve consumer and business confidence is doubtful.