Accounting Newsletter – July 2023

Important Tax Updates: Corporation Tax on Capital Gains, Voluntary NIC Payment Deadline Extension, HMRC’s Action on Pandora Papers, and Claiming the Marriage Allowance

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Introduction

This blog post highlights several key updates related to taxes in the UK. We will discuss the recent changes to corporation tax on capital gains, the extended deadline for voluntary National Insurance Contributions (NIC) payments, HMRC’s actions regarding the Pandora Papers, and the process of claiming the Marriage Allowance. These updates have implications for businesses, individuals, and taxpayers in general.

Changes in Corporation Tax on Capital Gains

Increase in Corporation Tax Rate: The main rate of corporation tax has risen from 19% to 25% for companies with profits over £250,000.

Small Profits Rate: The small profits rate of 19% applies to companies with profits not exceeding £50,000.

Marginal Rate: Companies with profits between the small profits rate threshold and the main rate threshold will be subject to an effective marginal rate of 26.5%.

Treatment of Capital Gains: If a company makes a significant profit (capital gain) from selling an asset that spans the accounting period before and after 1 April 2023, the profits and capital gains need to be apportioned between the two financial years.

Extension of Voluntary NIC Payment Deadline

Background: The government has extended the deadline for paying voluntary National Insurance Contributions (NIC) to fill gaps in NIC records from 5 April 2023 to 5 April 2025.

Applicable NIC Types: Voluntary NIC payments can be made as Class 2 NIC or Class 3 NIC, depending on the taxpayer’s circumstances.

Rates: The voluntary NIC payments can be made at the 2022/23 rates: £3.15 per week for Class 2 NIC and £15.85 per week for Class 3 NIC.

Qualifying Years for State Pension: The extension is particularly relevant to individuals who need to fill gaps in their NIC records to qualify for a full state pension.

HMRC’s Actions on Pandora Papers

Overview of Pandora Papers: The Pandora Papers consist of leaked documents from offshore financial service companies, revealing offshore accounts and assets.

HMRC’s Review: HMRC has reviewed the data and has begun contacting around 600 individuals named in the papers.

Disclosure of Offshore Income or Gains: HMRC requests taxpayers to review their disclosure of offshore income or gains on their tax returns. Penalties for under-declaration could reach up to 200% of unpaid tax, and dishonest disclosures may result in criminal prosecution.

Disclosure Routes: Taxpayers who need to make a disclosure can use the Contractual Disclosure Facility (CDF) and Code of Practice 9 (COP 9) for deliberate misstatements, or the Worldwide Disclosure Facility (WDF) for non-deliberate offshore non-compliance.

How to Claim the Marriage Allowance

Introduction to Marriage Allowance: The marriage allowance allows for the transfer of £1,260 of the personal allowance between spouses or civil partners.

Eligibility and Amount: The recipient of the transferred allowance must be taxed at the basic rate or lower. The marriage allowance reduces the recipient’s tax liability by 20%, equivalent to £252 per year.

Claim Process: The person surrendering part of their personal allowance must make the claim, while the recipient passively receives the benefit.

Claim Methods: The claim can be made through the online personal tax account, on the self-assessment tax return (for the current year), or by using the downloadable form MATCF (to backdate the claim for the previous four years).

Important Tax Dates in July

Key Dates for Employers: Employers need to agree on PAYE Settlement Agreements (PSAs) for 2022/23 and submit the report of expenses and benefits (P11D) and class 1A NIC online. Other dates related to employee share schemes, termination payments, and beneficial loans are also highlighted.

VAT Registration: Businesses newly registered for VAT must show the VAT rate on their invoices, even if the VAT number hasn’t arrived. Simplified VAT invoices for retail businesses are discussed.

Self-Assessment and NIC: Queries related to self-employment and Class 2 NIC counting towards the state pension, as well as changes in business structure and CIS gross payment status, are addressed.

Renewing Tax Credit Claims: Taxpayers are reminded to confirm and renew tax credit claims for the next fiscal year, if necessary.

Conclusion

Staying updated with tax changes and deadlines is essential for individuals and businesses to ensure compliance and make informed decisions. The recent updates to corporation tax on capital gains, the extended voluntary NIC payment deadline, HMRC’s actions regarding the Pandora Papers, and claiming the Marriage Allowance are all significant developments that taxpayers should be aware of. By understanding these updates and meeting the important tax dates, individuals and businesses can effectively manage their tax responsibilities and maximize their financial benefits.