HLAS

The State Opening of Parliament took place on 17 July, and the King’s Speech outlined the measures the government intends to introduce in the next parliamentary session. Apart from mentioning the proposal to remove the VAT exemption for private school fees (which we covered in a previous edition of this newsletter), there was little said about measures affecting tax for businesses and individuals. Instead, we must wait for the Labour government’s first budget to learn about their tax plans. The budget is scheduled for 30 October 2024.

Employers may cover the cost of certain social events for staff without creating a tax liability, thanks to a statutory exemption provided certain conditions are met. This used to be a concession but is now enshrined in law. The exemption applies to an "annual party or similar function" as long as it is available to all employees or generally to those at a particular location. During the Covid-19 pandemic, HMRC confirmed that a 'function' could include a virtual party, where employers were unable to host a traditional party with employees physically present. A key condition is that the cost per [...]

Tax-Free Childcare accounts can be utilised to pay for approved childcare for children aged 11 or under, or 16 if the child has a disability. This can include summer holiday clubs or childminders. The account can also cover nursery fees, breakfast or after-school clubs during term-time, and out-of-school activities. Opening a Tax-Free Childcare account is quick and easy and can be done at any time of the year. Families who have not yet registered should check their eligibility and apply online today. For every £8 paid into an online account, they will receive an additional £2 from the government. This [...]

It has recently been reported that over half a million taxpayers paid a marginal income tax rate of 60% in 2022/23, a rise of 23% from the previous year. This marginal rate applies when an individual’s adjusted net income falls between £100,000 and £125,140, where every £2 of income over £100,000 reduces the £12,570 personal allowance by £1, such that it is fully eroded at £125,140. Planning to Mitigate the Problem The definition of "adjusted net income" is the individual’s total taxable income minus personal pension payments and charitable payments under Gift Aid. Such payments can effectively save income tax [...]

The previous government included plans to end non-domiciled tax status at the Spring Budget and replace it with a 4-year foreign income and gains (FIG) regime. The new government have now announced their intention to continue with these plans, while ending some advantages for existing non-domiciled individuals. What the change in tax status will mean Preferential tax treatment based on domicile status will be removed for all new FIG arising from 6 April 2025. This means that foreign income and gains will all be taxable in the UK where you are classed as residing in the UK, not just that [...]

Last week, the government updated the remit for the Low Pay Commission (LPC), now requiring it to consider the cost of living when recommending minimum wage rates. Additionally, the LPC has been directed to reduce the gap between the minimum wage for 18-20-year-olds and the National Living Wage, with a long-term goal of eliminating age bands entirely and implementing a single adult rate. Each October, the LPC provides recommendations to the government on minimum wage rates for the following April. The updated remit retains this schedule, giving businesses time to plan for any wage increases. Along with the cost of [...]

Starting 1 August 2024, Amazon will begin charging VAT at 20% on selling fees for UK vendors. This change results from a shift in the legal entity responsible for charging these fees. Previously, fees were billed by Amazon Services Europe S.a.r.l (ASE), which didn't have a UK establishment, making the fees subject to the VAT reverse charge procedure. However, from 1 August, fees will be charged by Amazon EU S.a.r.l (AEU), which has a UK branch. Consequently, AEU is required to apply VAT at 20% to these fees. VAT-registered vendors can reclaim the VAT, following the usual partial exemption rules. [...]

HM Revenue and Customs (HMRC) have released draft legislation and a policy paper detailing the proposed abolition of the furnished holiday lettings (FHL) tax regime. Originally announced by the previous government, any hopes that this might be delayed under the new administration have now been dispelled. The new measures are set to take effect from 6 April 2025 for income and capital gains tax, and from 1 April 2025 for corporation tax. These changes will eliminate the tax advantages that furnished holiday let landlords currently enjoy over other property businesses, as outlined below: Loan interest will be limited to the [...]

As anticipated, the Bank of England reduced their base interest rate on August 1 from 5.25% to 5%. The decision was a close call, with a majority of five to four voting in favour of the cut. The Monetary Policy Report that accompanies the decision explains that while higher interest rates have helped return inflation to the Bank’s target of 2% and allowed them to make this cut, they are expecting a temporary increase to 2.75% later this year. Why might inflation increase again? The fall in household energy prices has been helping to bring inflation down, however as energy [...]

Last week, Chancellor of the Exchequer Rachel Reeves addressed the House of Commons to present the findings of a Treasury spending audit. She had previously hinted at this during discussions about assessing the public spending legacy. According to the Chancellor, the audit uncovered £22 billion in unfunded commitments inherited from the previous government. These include obligations related to the Rwanda scheme, the Advanced British Standard, and the New Hospital Programme. Additionally, there were shortfalls due to the failure to increase Departmental budgets to accommodate public sector pay settlements. To begin addressing the overspend, the Chancellor announced savings of £5.5 billion [...]