BREXIT
HMRC late payment interest rates increase
Today, HMRC announced an increase in its interest rates, due to another increase in the Bank of England base rate, from 4.25% to 4.5%.
The new rates will take effect from Monday, 22nd May 2023, for quarterly instalment payments.
The new rates will take effect from Wednesday, 31st May 2023, for non-quarterly instalments payments.
The two new increased rates of interest are:
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Late Payment Interest which is set at base rate plus 2.5%. This will increase from 6.75% to 7% on 31st May 2023.
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Repayment Interest which is set at base rate minus 1% with a lower limit of 0.5% (known as the ‘minimum floor’). This will increase to from 3.25% to 3.5% from 31st May 2023.
For further information, please click: HMRC late payment interest rates to be revised after Bank of England increases base rate – GOV.UK (www.gov.uk)
Please be aware that the information contained in this article is of a general nature. It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.
UK Tax – Deadline extension for voluntary National Insurance contributions – 31st July 2023
In 2016 the ‘New State Pension’ was introduced. As part of transitional arrangements to the new State Pension, taxpayers have been able to make voluntary contributions in relation to any incomplete years in their National Insurance record between April 2006 and April 2016.
Anyone who is retiring on or after 6th April 2016, under the ‘new State Pension’ rules, requires approximately thirty five qualifying years to claim the full state pension.
The U.K. government has extended the voluntary National Insurance contribution deadline from 5th April 2023 to 31st July 2023. This will allow taxpayers more time to fill gaps in their NI records to maximise the amount they will receive in State Pension.
Therefore, if you’re a man born after 5th April 1951 or a woman born after 5th April 1953 you have until 31st July 2023 to pay voluntary contributions to make up for gaps between tax years April 2006 and April 2016, providing you’re eligible.
Where there are gaps in an individual’s National Insurance record, voluntary NICs can be paid to be eligible for a higher State Pension or entitlement to other state benefits. Therefore, anyone with gaps in their National Insurance record from April 2006 onwards still has time to fill the gaps and increase their State Pension.
After 31st July 2023 you’ll only be able to pay for voluntary contributions for the past six years which may not be sufficient to qualify for a new State Pension if you have less than four qualifying years on your National Insurance record. Normally, you would require at least ten qualifying years in total.
Please be aware that any payments made will be at the lower 2022 to 2023 tax year rates. In other words, where the rates of voluntary National Insurance contributions were due to go to up from 6th April 2023, payments made by 31st July 2023 will be paid at the lower rate.
Actions for taxpayers to take before 31st July 2023:
- Check your NI record. Taxpayers can check their National Insurance record, via the HMRC app or their Personal Tax Account.
- Identify any discrepancies between NI contributions paid and those showing on HMRC’s system.
- Identify any NI credits that are missing from periods in which they should have been received.
- Identify any shortfalls in contributions.
- Confirm that you are eligible to pay voluntary contributions in respect of any gaps.
- Contact HMRC if you think there are any errors.
- Decide whether to make voluntary NI contributions. Establish how much making the voluntary contributions will cost and consider making up any shortfall by 31st July 2023, particularly for the period April 2006 to April 2017 before this opportunity is lost.
To look at your personal tax account to view your National Insurance record and obtain a state pension forecast, without charge, please click link: https://www.gov.uk/check-state-pension
The Future Pension Centre can tell you if paying for extra national insurance years will increase your state pension entitlement. For full details, please click: https://www.gov.uk/future-pension-centre
Based on the information you receive from HMRC, if you have returned to Ireland and you decide to top up your pension contributions before the deadline date, please find link to Application Form: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1102905/CF83.pdf
Please click for full HMRC guidance material which may be relevant to you if you have returned from working in the UK: https://www.gov.uk/government/publications/social-security-abroad-ni38/guidance-on-social-security-abroad-ni38#deciding-whether-to-pay-voluntary-national-insurance-contributions
Why is it so important to act before 31st July 2023?
The ability to buy back years by looking back to 2006 is scheduled to end on 31st July 2023. After the cut-off date, it will only be possible to pay for gaps in your National Insurance record by looking at the past six years. This means that you could lose out on the opportunity to maximise your UK State Pension for gap years before 2017.
Please be aware that the information contained in this article is of a general nature. It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.
UK Budget 2021: First Year Capital Allowances – the Super Deduction & the Special Rate Allowance
As part of the Budget 2021, the Chancellor, Rishi Sunak, has provided for two temporary first-year capital allowances: (i) the Super Deduction and (ii) the Special Rate allowance, to apply over the next two years to boost investment and productivity levels in the UK economy.
For expenditure incurred between 1st April 2021 and 31st March 2023, companies can claim a Super Deduction in the form of a first-year relief of 130% on new plant and machinery fixed assets. This Super Deduction will apply to capital expenditure on “main pool” plant and machinery incurred by companies between 1st April 2021 and 31st March 2023, i.e. on plant and machinery that would usually qualify for 18% writing down allowances on a reducing balance basis. Remember, the Super Deduction is only for companies and cannot be claimed by sole traders or in professional partnerships.
Also, it is not available for items with a long life i.e. more than 25 years, or integral features within a building, or solar panels otherwise known as special rate pool items.
In summary, if a company spends £10,000 on qualifying items of plant and machinery within the specified timeframe, it will be able to reduce its taxable profits by £13,000. It is important to keep in mind that currently the company may be in a position to claim a 100% deduction using the Annual Investment Allowance, therefore, by availing of the Super Deduction Allowance the company will receive an additional benefit of 30% of the qualifying expenditure.
Examples of what might qualify include:
- Tractors, lorries and vans (not cars).
- Furniture and machinery
- Computers, laptops and printers
- Cranes, drills, ladders, etc.
The Special Rate allowance provides relief at 50% of the qualifying cost in the first year. The balance then returns to the normal special rate pool to be written down at the usual 6% rate on a reducing balance basis in future years.
The ‘SR allowance’ covers new plant and machinery including integral features in a building and long life assets. Special rate expenditure broadly includes the following:
- Lifts, escalators and moving walkways
- Air-conditioning and air-cooling systems
- Electrical systems, including lighting
The following restrictions, however, apply:
- It is only available to companies within the charge to corporation tax.
- It is not available for motor vehicles.
- The items must be new and not second hand.
- The items should not be used in a leasing trade.
- the expenditure must be incurred between 1st April 2021 and 31st March 2023.
The £1 million rate of the Annual Investment Allowance will be extended to 31st December 2021. From 1st January 2022, however, it is expected to revert to the previous limit of £200,000. This allowance provides relief of 100% on expenditure qualifying for capital allowances in the tax year of assessment in which the expenditure is actually incurred.
It is important to keep in mind that a company cannot claim the Annual Investment Allowance as well as the Super Deduction on the same amount of qualifying expenditure. The Annual Investment Allowance should be considered in situations where the Super Deduction is not available including the following three scenarios:
- in contracts completed before 3rd March 2021 or
- expenditure incurred before 1st April 2021 or
- certain used or second hand assets purchased.
For all companies in a position to claim it, the Super Deduction will be more financially beneficial than claiming the Annual Investment Allowance with regard to main pool asset purchases.
For smaller companies it may be beneficial to claim the Annual Investment Allowance rather than the Special Rate Allowance on relevant assets, except where the total expenditure incurred on special rate pool assets exceeds the threshold amount of £1m.
Unlike the Annual Investment Allowance, there is no limit on the amount of capital investment that can qualify for either (i) the Super Deduction or (ii) the Special Rate allowance. Therefore, there are clear incentives for businesses to bring forward their investment plans to take advantage of these first year allowances.
When an asset on which a Super Deduction or Special Rate Allowance was claimed is disposed of, the consideration will be subject to a balancing charge. In other words, as the first year allowances are not pooled for capital allowances purposes, the proceeds from the disposal of relevant qualifying assets will be treated as taxable income.
If the disposal of the assets, on which a Super Deduction was previously claimed, occurs in a chargeable period that ends on or before 31st March 2023, the balancing charge will be equal to the disposal value multiplied by the relevant factor of 1.3 i.e. 130% of the sales proceeds. If, however, the disposal occurs on or after 1st April 2023 then the balancing charge will equal the actual sales consideration.
If the chargeable period straddles 1st April 2023 (i.e. where a chargeable period commences before 1 April 2023 and the disposal takes place after 1 April 2023) then the relevant factor is apportioned based on the number of days before 1st April 2023.
Similar rules apply to the 50% Special Rate Allowance.
Finally, if the full deduction cannot be used by the business for offset against its taxable profits then an allowable loss will be generated. This can:
- be carried forward or back under the new temporary three year loss carry back rules.
- It is also possible for the balance to form part of the main pool to be carried forward to future years.