HLAS

In addition to the significant alterations made to research and development (R&D) tax relief effective from April 1, 2023, further amendments are set to come into force from April 1, 2024. Starting April 1, 2024, companies engaging in eligible R&D activities will be eligible for a 20% expenditure credit. This credit is calculated based on the qualifying expenditure amount. Furthermore, qualifying expenditure will now encompass subsidised expenditure from April 1, 2024, although R&D conducted overseas will no longer qualify unless it cannot be feasibly undertaken in the UK. For "R&D intensive" companies incurring trading losses, they will continue to be [...]

A recent case presented before the First Tier Tribunal holds relevance for businesses operating campsites and farmers diversifying into "glamping" with camping pods on their land. According to capital allowances legislation, caravans predominantly used for holiday lettings and movable buildings intended for qualifying activities, such as portacabins on building sites, qualify as plant and machinery. In this recent case, the Tribunal ruled that certain camping pods, not connected to mains drainage, qualified as plant because they were potentially movable buildings. This signifies that limited companies incurring expenses on new pods can benefit from 100% Annual Investment Allowance (AIA) and "full [...]

As outlined in the Spring Budget, the favorable tax treatment enjoyed by furnished holiday lettings (FHLs) will be terminated starting April 6, 2025. Consequently, these businesses will be subject to taxation in line with other residential property ventures. Owners of properties currently classified as FHLs may want to contemplate increasing their spending on equipment like furniture and televisions while the 100% annual investment allowance (AIA) remains in effect. Moreover, the existing capital gains tax reliefs, notably business asset disposal relief (BADR), will also cease from April 6, 2025. Therefore, owners may consider selling their holiday letting properties while the 10% [...]

The implementation of Making Tax Digital for income tax self-assessment is slated to begin in 2026/27 for sole traders and property landlords earning £50,000 or more in gross income. Subsequently, the threshold decreases to £30,000 from 2027/28. The government has recently affirmed that the quarterly returns required will encompass cumulative income and expenses, eliminating the need for an end-of-period statement. HMRC has outlined the specific income and expenditure categories to be reported and clarified that businesses below the VAT registration threshold will only need to submit simplified three-line accounts: total sales, total expenses, and profit or loss for the period. [...]

Significant changes to the method of taxing profits for unincorporated businesses occurred in 2023/24, and this shift will continue into 2024/25. Initially intended to synchronise with the introduction of Making Tax Digital for Income Tax Self-Assessment (MTDITSA), now scheduled for phased implementation starting from 2026/27. Previously, sole traders or partners in a partnership were taxed based on their share of profits from the business's accounting period ending within the tax year. For instance, in 2022/23, profits from the year ending December 31, 2022, were taxed in that tax year. Unless a business alters its accounting date, profits assessed in 2024/25 [...]

Cash accounting was implemented to simplify account preparation for small businesses for tax purposes. Previously, it was applicable only to businesses with a turnover of up to £300,000. However, starting in 2024, it will become the default method for sole traders and partnerships. Notably, it won't apply to partnerships with corporate members or limited liability partnerships. Businesses affected will have the option to opt out of cash accounting and adhere to Generally Accepted Accounting Practice (GAAP), necessitating adjustments for accruals, prepayments, and other variations. Furthermore, businesses will have the flexibility to switch back to cash accounting if desired. Transitional regulations [...]

The adjustments to the High Income Child Benefit Charge (HICBC), as outlined in the Spring Budget, have now been enshrined in the latest Finance Bill and are slated to come into effect from April 6, 2024. The upsurge in the threshold for the tax charge brings some positive news, albeit there have been calls for its complete removal. HICBC aims to recoup child benefit where the higher earner in a partnership possesses adjusted income surpassing £60,000 (£50,000 up to 2023/24). The clawback rate will stand at 1% for every £200 of net income exceeding £60,000, with full recovery of child [...]

In the April edition, we shine a spotlight on some of the notable tax adjustments taking effect at the onset of the new tax year. While many income tax and national insurance thresholds remain frozen, leading to a growing number of higher rate taxpayers, there's a positive uptick in the High Income Child Benefit Charge (HICBC) threshold. Starting April 6th, both employees and self-employed individuals will experience a reduction in national insurance contributions, hinting at a potential future abolition. For the self-employed, significant alterations are on the horizon regarding profit computation, with "cash accounting" becoming the default method unless an [...]

The Department for Environment, Food & Rural Affairs (Defra) and the Forestry Commission have announced a significant uplift in England Woodland Creation Offer (EWCO) payments. The uplift is intended to promote an increase in tree-planting across the country. It takes effect immediately and offers more tailored tree-planting incentives to farmers and land managers, while also protecting food production farmland. Currently the maximum rate per hectare available from additional contributions is £8,000. This will increase to £11,600 – a 45% increase. Further new measures include a new Low Sensitivity Land Payment of £1,100 per hectare. This can be stacked onto the [...]

The Financial Conduct Authority (FCA) have said that they are assessing the extent of a pre-2021 problem with some car finance arrangements. Prior to January 2021, some brokers were permitted by lenders to adjust the interest rates on the car finance they arranged for customers. The rates were linked to the amount of commission that the broker received, and so typically a higher interest rate would mean a higher amount of commission for the broker. This was called a discretionary commission arrangement and naturally led brokers to increase the amount people were charged on their car loan. The FCA banned [...]