The new tax rates can be found here Tax Rates 2022/2023

VAT on goods and services within the hospitality industry.

From 1st April 2022, the VAT rate on most goods and services within the hospitality industry will increase from 12.5% to 20%, reversing the temporary rates that were put in place in June 2020. This will result in a further uplift in next quarters VAT liability. It is important all software and till systems are updated immediately to take account of this VAT change.

If you have any queries, please do not hesitate to contact your Drummond Laurie contact for further guidance.

If your business is VAT registered and does not yet submit VAT returns through Making Tax Digital (MTD), action is required (unless your business falls under an exemption).

Previously, HMRC introduced MTD for VAT for all VAT registered businesses with a taxable turnover of more than £85,000. However, from April 2022, MTD for VAT is mandatory for all VAT registered businesses and organisations, regardless of taxable turnover.

For all businesses, this therefore means following MTD rules. This consists of using MTD-compatible software in order to keep digital records. This compatible software package, or other software (like spreadsheets), should be able to connect to HMRC systems.

The current deadlines for sending your VAT returns will not change after you sign up for MTD for VAT, however, businesses should start keeping digital records for their first VAT return period, starting on or after 1 April 2022, and sign up to MTD at least 72 hours before their first VAT return is due.

All VAT businesses must now take steps to switch to MTD, if they have not already done so. HMRC will be writing to all businesses who have not yet signed up to remind them of the actions they need to take.

If you are a VAT registered business and not yet signed up to MTD, please do not hesitate to contact your Drummond Laurie contact for any further guidance on this.

The Scottish Government have allocated funding to support businesses in close contact settings who are impacted by the requirement for physical distancing and capacity limits and advised to reduce contact within indoor settings that came into force from 9^th December 2021 to 24^th January 2022.

Who is eligible for the funding:

The fund will provide support to businesses in the close contact sectors who own/rent premises with a non-domestic rates (NDR) account, and self-employed close contact service individuals who are registered as one of the following:

• Beauty services
• Hairdressing and hair removal services
• Spa and wellness services

and provide any of the following services:

• Hair washing
• Trimming and cutting
• Setting
• Dyeing
• Tinting
• Waving
• Straightening
• Waxing
• Threading
• Laser hair removal
• Shaving and beard trimming
• Facials
• Nail treatments
• Manicure
• Pedicure
• Exfoliation
• Dermatology& skincare treatments
• Make-up
• Lash extensions
• Spray/application tanning by a person

Level of grant awarded:

£1,000 for self-employed businesses

£1,500 for NDR registered premise business owners

Information required for the application:

1. Bank statements for the full month of December 2021
2. Self-employed businesses should provide their UTR and proof of Self-Assessment documentation (statement/HMRC gateway screenshot)
3. NDR businesses should also supply their NDR rates reference along with a rates bill for 2021/22.

Applications are open now and close on 4^th March 2022.

The application can be found on the Scottish Government website here

Chancellor Sunak delivered his Autumn 2021 budget on 27^th October.  In reality, many of the many headlines had either been announced in advance of the budget or leaked to the press meaning that there was very little of substance revealed on the day.

Unsurprisingly, in the wake of the last 18 months and the cost to the country of fighting the pandemic, the focus for the immediate future is of rebalancing the nation’s budget.  Measures such as freezing personal allowances and the thresholds at which higher rate tax becomes payable are “invisible” tax increases and will have the effect of significantly growing the governments tax take as we see the expected wage inflation over the next few years.  The more blatant revenue raising measures include the planned increase in the main corporation tax rate from 19% to 25% in April 2023 which was announced earlier this year.  It has been speculated that this decision may be at least partially reversed as the government deficit has not reached the levels that were feared, however, as of now there has been no hint from the Chancellor of such an about turn.  The recent agreement reached by all major economies to set a minimum worldwide corporation tax rate of 15% is perhaps giving the UK government the confidence that they will not see a mass exit of businesses from our shores in the event of the planned for increase.

The other major revenue generator which will come into force in April 2022 is the 1.25% increase in national insurance rates, including on employers national insurance, which was announced in September.  All businesses should be sure to include this cost increase in their 2022 budgets, it will be significant to large employers.  At the same time, and of more direct relevance to the vast majority of small business owners, we will see the same 1.25% increase in the dividend tax rates.  The basic rate of tax on dividends will thus increase from 7.5% to 8.75% with the higher going up from 32.5% to 33.75%.  Consideration should be given to bringing dividend income forward to the 2021/22 tax year if at all possible.  Employers should also be aware of the increases to the National Living Wage and National Minimum Wage which have been proposed by the Low Wage Commission and now agreed by the government.  For employees aged over 23 this increase amounts to 6.6%, taking the rate to £9.50/hour, and this will be applicable from 1^st April 2022.  Again, businesses should factor this cost increase into their 2022 budgets where relevant.

There were no general positive measures for business announced as part of the budget.  As a reminder the corporation tax super deduction remains in force and will do so until 31^st March 2023 and we are pleased to see many of our clients taking advantage of this in the last 6 months or so.  There were also some targeted business rates reliefs announced to businesses in England operating in retail, hospitality and leisure for 2022/23.  It is hoped that the devolved governments will at least follow suit and offer this relief in Scotland, Wales and Northern Ireland.

Finally, we had the usual speculation in advance of the budget that capital taxes would be increased up or close to income tax levels.  This duly prompted a flurry of activity from individuals looking to realise gains in advance of the budget, only to find that there will be no change to these capital tax rates in the coming year.  Perhaps the Chancellor is happy to allow this speculation to arise knowing this it will bring forward some capital sales and the accompanying tax.  Or are we just being cynical!

The Scottish executive will be announcing the Scottish income tax rates and bands for 2022/23 on 9^th December as part of the Scottish budget and we will report again then in the unlikely event that anything is included in this which differs significantly from the approach taken by the UK Government budget.

As always, please do not hesitate to call your usual Drummond Laurie contact to discuss any aspect of the attached budget summary.

2021 Autumn Budget Report

Despite COVID and the restrictions it has placed on all our lives over the last 15 or so months we are absolutely delighted that two of our ICAS students have passed their final exams and are now just a few months away from being fully qualified Chartered Accountants.

Jessica and Chloe both came to Drummond Laurie with the same aim but via different routes. Here’s their paths to success!

“I first worked with Drummond Laurie during the summer of 2014 as part of my school work experience programme. I then joined full-time in August 2015, starting the ICAS School Leaver Program in September 2016.
My studies, like all our lives, were impacted by COVID and new ways of working had to be quickly developed. Initial teething problems were soon overcome and my last block of classes and final exam were completed remotely.
I am delighted to say that I have now passed my final ICAS exam and I am looking forward to the next stage of my career and the challenges and opportunities ahead.”
Jessica Wardlaw

“I started my training contract with Drummond Laurie nearly 3 years ago when I finished university.
I chose the route of chartered accountancy through ICAS as I felt the structure of the course was best suited to me. Drummond Laurie were so supportive throughout my exams and were flexible in giving me experience in areas that I felt might help for studying.
Despite being a challenging few years I’ve enjoyed getting involved in different aspects of the business, whether it be audit, tax or accounts preparation. This variety is something which definitely helped when it came to studying.
Now that I’ve passed my final exams and am a few months away from becoming a chartered accountant, I’m looking forward to see what my future at Drummond Laurie brings.”
Chloe Wilson

“Both Jessica and Chloe have been great members of our team over their time with Drummond Laurie and we are all extremely proud of their achievements. They have applied themselves extremely well to the wide variety of work they have been given and as a result have accumulated a fantastic amount of experience between them. Technical skills can be learned, however, work ethic, attitude and the desire to succeed are largely in-built. Jessica and Chloe have these attributes in abundance and this has helped them to come through their ICAS exams successfully at the same time as establishing themselves as valued members of our team. I have every confidence that they will both go on to have successful careers within our profession and I look forward to viewing their progress at Drummond Laurie for many years to come.”
David Wheeler – Managing Partner

HMRC will be writing to a number of businesses from June onwards in respect of Making Tax Digital (MTD) for VAT.  This letter will be sent to businesses who currently pay their VAT by DD, but for whom HMRC do not hold an email address for.

To allow HMRC to comply with UK banking regulations they require an email address in order to take payments by DD.

The letters will inform the business that their VAT DD will be cancelled between July and November, and advising them that, if they want to continue to pay by DD, they will need to set up a new instruction via their Business Tax Account (BTA).

We would advise any businesses that receive such a letter to attend to this as soon as possible to ensure any future VAT payments can be collected as normal.  This will involve updating your contact details and email address in your BTA.  For those businesses who do not have a BTA you will be required to set one up ( https://www.gov.uk/guidance/sign-in-to-your-hmrc-business-tax-account  ). Part of the set up process may involve waiting on an activation code from HMRC in the post which could take up to 10 days to arrive so we would encourage quick attention to any such letters you may receive.

Where businesses have joined the VAT deferral new payment scheme, the DD via which pays the deferred VAT is separate and will continue unaffected by this change.

Please do not hesitate to get in touch with your usual Drummond Laurie contact for any questions or assistance.

Agricultural Wages in Scotland ‘A Guide for Workers and Employers’ was initially produced in 1996 to assist both employers and employees understand the new rules following the simplification of the Agricultural Wages (Scotland) Order (No. 44) 1996. 25 years on and these are still being produced by the Scottish Agricultural Wages Board (SAWB).

From 1^st April 2021 rates and other important changes made through the Agricultural Wages (Scotland) Order (No. 68) 2021 took effect and one of the main changes was the increase in the minimum hourly rate to £8.91 for all employees. It is important to note that there has also been an increase to the dog allowance, additional sum payable to workers with appropriate qualifications and hourly overtime rate.

More on the changes can be found here

The above changes are likely to have an impact on your business in terms of an increase in wage costs. It is therefore important that you plan ahead to ensure that your business can sustain such an increase, as well as ensuring that these increases are factored into future contracts and forecasts.

Should you have any queries on the above or would like to discuss any agricultural related accounting matter please contact Margaret Bunyan on 01324 441266 or via email Margaret Bunyan

Update

Phase 2 of this funding seems to now be available in some local authorities today but they all seem to have different approaches and timescales for this grant.

You can get the link to your own local authority website and find out more here Find Business Support

Falkirk council have said that this fund will support businesses (with up to 250 employees),  facing short term financial challenges and hardship as a direct result of restrictions from October 2020 relating to COVID-19. This fund will provide a one-off payment which will be tiered according to the number of employees in your business.

Applicants who have already been approved within Phase 1 of the Discretionary Fund will automatically be entitled to a top-up grant. There is no need for these businesses to reapply – we will contact you.

Who can apply?

• Limited Company (including Scottish Charitable Incorporated Organisations and social enterprises)
• Sole Traders
• Partnerships
• Trusts
• Community Interest Companies

To be eligible, business income must have been affected by more than 50% due to the restrictions and regulations introduced since October 2020.

Please note funds received via Bounce Back Loans, Job Retention Scheme or Self-Employed Income Support Scheme do not affect your eligibility to apply.

Businesses NOT eligible include:

Any business which has received, or has an application pending, for financial support since October 2020 from another fund. This includes (but is not restricted to):

• Strategic Framework Business Fund (Closure/Restriction Fund)
• Newly Self-Employed Hardship Fund
• Mobile and Home Based Close Contact Services Fund
• Scottish Wedding Industry Fund
• Taxi and Private Hire Support Fund
• Scottish Tour Operators/Guides Funds
• Visitor Attraction Support Funds
• B&B/Small Accommodation/Large Accommodation Funds
• Campervan and Motorhome Rental Operators Fund

How much is the grant?

Grants will be tiered based on the number of employees within a business. You will need to provide evidence during the application process.

This is a one off payment.

You can apply here Falkirk Council Discretionary Fund Phase 2

Applications will be assessed on a first come first served basis and  will close at 5pm on Wednesday 31 March 2021. It may however close earlier if it becomes fully subscribed.

Chancellor Rishi Sunak delivered his 2nd budget on Wednesday 3rd March. Mr Sunak’s task was to establish how he proposes to support the economy through the rest of the pandemic, which mercifully appears to be close to the end. And secondly, to chart a course out of a financial crisis which it is estimated to have permanently wiped out 3% of our GDP. Not an easy conflict to resolve, however, on balance his response was hard to fault. He chose to extend the various pandemic support packages until September, long after the last of the lockdown restrictions are due to be lifted. That made it essential for Mr Sunak to outline his measures to reduce the deficit and to bring the UK borrowing under control.

Pandemic Support Packages

Having originally been introduced in March 2020 as a 2 month emergency measure, the Coronavirus Job Retention Scheme (Furlough) has been extended to September 2021. The scheme will run at its current level where the Government will fund the full 80% paid to the employee until June. In July the employer will contribute 10% whilst in August and September this will increase to 20%. Employees will become eligible as long as they were employed on 2nd March 2021 and an RTI submission had been made to HMRC between 20th March 2020 and then notifying a payment of earnings for that employee.

For the self-employed, the Budget has confirmed details of the 4th and 5th SEISS grants. The first of these will be 80% of average trading profits (similar to the previous 3 grants) and can be claimed from late April 2021. The fifth and final grant can be claimed from late July 2021 and will be turnover related, with a larger grant being paid to those whose income has fallen the most.

Whilst the existing government-guaranteed coronavirus loan schemes, such as Bounce Back and CBILS, are due to come to an end on 31st March 2021, it has been announced that these will be replaced by the Recovery Loan Scheme. These loans can be between £25,000 and £10 million and the government will provide the lenders with a guarantee of 80%. This scheme will be open to those who have already received support under the existing loan schemes.

The temporary 5% reduced rate of VAT for certain areas of the hospitality sector was due to end on 31st March 2021. This has now been extended to 30th September 2021. For those relevant businesses, the rate will then rise to 12.5% before reverting back to the standard rate of 20% in April 2022. This is a most welcome announcement for restaurants, hotels, takeaways, caravan parks, etc. which can hopefully start to generate meaningful revenues again soon in order to benefit from this support.

Tax Changes

Having been re-elected in December 2019 with a manifesto which committed to not increasing income tax, national insurance or VAT rates, the Chancellor may have felt that he was working with one hand tied behind his back in his quest to reduce the annual deficit. As far as raising more tax revenue was concerned he was very much backed into the “Corporation Tax” corner and will raise the basic rate from 19% to 25% in April 2025. This reverses a very long trend of reductions in corporation tax stretching back several decades. The last time this tax was increased in the UK was in 1974, before many of our staff and clients were born! For those companies with profits of less than £50,000 the rate will remain at 19%, whilst for those making between £50,000 and £250,000 the rate will taper up from 19% to 25%. Only those companies (estimated to be less than 10% of all companies in the UK) will pay corporation tax at the full 25%. This increase is expected to bring the Treasury an additional £17 billion per annum.

Whilst he felt unable to increase income tax rates due to the manifesto commitment, the Chancellor has chosen to freeze all significant tax thresholds from next year until the end of this parliament. It is estimated that this will result in 1.3 million more people being drawn into income tax with a further 1 million finding themselves paying the higher rate of tax for the first time – the so-called Fiscal Drag. This “hidden tax” is estimated to bring an extra £8 billion a year to the Treasury in due course.

As we know, many companies have suffered losses over the last year. To support these businesses, they will be allowed to carry back up to £2 million of these losses for up to 3 years (rather than the standard 1 year) in order to obtain a repayment of tax paid. This can be a welcome cash flow boost to those businesses which have suffered the most during the pandemic.

The biggest and most welcome “surprise” in the budget was the announcement of the “Super-deduction”. This applies to limited companies which invest in new plant & machinery between April 2021 and March 2023. This will allow companies to claim allowances of 130% on new plant & machinery investments which would normally qualify for 18% allowances. This is a genuine benefit to companies and, of course, is intended to stimulate investment over a period when we need the economy to get back on its feet again.

Other announcements (and “non” announcements)

The new rates of National Minimum Wage were confirmed with the hourly rate for workers aged 23 and over increasing to £8.91. This takes effect from 1st April 2021, only a few weeks away now.

We have assisted many clients in recent years to make claims under the R & D tax credit scheme and with the corporation tax rate due to rise in 2023 these will become even more valuable. There were a few amendments to the scheme which had been announced previously and which are now confirmed. However, the Chancellor also mentioned that there will be a more widespread consultation process on the current R & D schemes to ensure that they remain fit for purpose and that the UK remains a scientific and technological superpower. He also hinted that the government are not comfortable with how some of the R & D tax “specialists” who prepare claims for companies are conducting their business and so we may see some welcome policing being introduced into this area.

After much speculation on potential changes to Inheritance tax and, in particular, to Capital Gains Tax, none of any significance were announced. This is one area where the government should consider the impact of treasury leaks in advance of future Budgets. We saw many people rush through transactions on business and property sales in advance of anticipated (and leaked) tax changes which did not materialise and which, in hindsight, they may have preferred not to undertake.

You will find more details on the above as well as many other relevant matters in the Drummond Laurie budget report which can be found here.

Please do contact your usual DL advisers to discuss and to get further clarity on any matter which you believe may be of relevance to you and your business.

David Wheeler
Partner