HM Revenue & Customs (HMRC) has announced that it is having to prioritise its essential services by temporarily closing some of its telephone hotlines, following a surge in enquiries during and since the pandemic.

It has said that it is focusing on stabilising its phone service and tax credits/child benefits service at the start of this year and must take extra steps to meet its targets and support those customers most at risk.

During December, the tax authority ran a test on closing their Corporation Tax (CT) and VAT helplines (except bereavement) to assess the impact across three Fridays – using the time gained to clear a backlog of other enquiries.

Based on the success of these tests the CT and VAT telephony lines will see a further “telephony shuttering exercise” on Fridays between the following dates:

• CT – 25 February to 25 March 2022
• VAT (excluding bereavement) – 25 February to 25 March 2022 (excluding 4 March).

Businesses that are reliant on these phone lines need to be aware of this change and prepare for it if they need to contact HMRC about CT and VAT matters on these days.

Whether you are setting up a new business, or already have a successful, well-established company, there are many ways that you can save money through tax reliefs and allowances.

Certain tax initiatives even allow business owners to save money that can be invested in their company.

Enhanced Capital Allowance (ECA)

Enhanced Capital Allowance (ECA) schemes encourage businesses to invest in efficient technologies. The scheme lets your business claim 100 per cent first-year allowances, i.e., tax relief, on investments in certain technologies and products.

If you buy an asset that qualifies for first-year allowances you can deduct the full cost from your profits before tax.

You can claim first-year allowances in addition to the Annual Investment Allowance (AIA) – they do not count towards your AIA limit.

What qualifies

• Some cars with low CO2 emissions
• Energy-saving equipment that’s on the energy technology product list, for example, certain motors
• Water-saving equipment that’s on the water-efficient technologies product list, for example, meters, efficient toilets and taps
• Plant and machinery for gas refuelling stations, for example, storage tanks, pumps
• Gas, biogas, and hydrogen refuelling equipment
• New zero-emission goods vehicles.

You cannot normally claim on items your business buys to lease to other people or for use within a home you let out.

Annual Investment Allowance

This measure remains temporarily increased from £200,000 to £1,000,000 for qualifying expenditure on plant and machinery incurred during the period from 1 January 2022 to 31 March 2023.

This measure is intended to deliver positive outcomes for businesses by supporting and encouraging business investment, and by simplifying the tax relief for such investments.

R&D tax credits

You may be eligible for R&D tax credits, even if your small business is running at a loss.

The HM Revenue & Customs (HMRC) definition is broad, and you don’t have to be engaged in laboratory work to benefit from this incentive.

Software developers, architects and many other professionals have all successfully claimed R&D tax relief because of this incentive.

Repairs and renovations to property

The business renovation allowance will give SMEs a tax break.

If the building your business plans to use has been empty for more than a year and was previously used in a different capacity, you may be eligible for a 100 per cent tax incentive on any renovations you might carry out.

Reduce NICs with the Employment Allowance

You can claim Employment Allowance if you’re a business or charity and your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year.

Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to £4,000.

You’ll pay less employers’ Class 1 National Insurance each time you run your payroll until the £4,000 has gone or the tax year ends (whichever is sooner).

You can only claim against your employers’ Class 1 National Insurance liability up to a maximum of £4,000 each tax year. You can still claim the allowance if your liability was less than £4,000 a year.

In some cases, a company can eliminate their Employer’s NIC bill as a result. Note, it is not possible to claim the allowance if your company only has one employee/director.

According to a new survey from the Federation of Small Business (FSB), more than 440,000 small businesses could fail because of a new late payment crisis.

The national small business organisation has called for the Government to step in and take urgent action to improve how companies are paid.

According to the FSB study, 30 per cent of small businesses have seen the late payment of invoices increase over the last three months, of which almost eight per cent said that the problem was so bad that it might force them to close.

While smaller companies wait to get paid, they must continue to pay their suppliers, tax bills and staff wages.

The effect of persistent overdue payment problems is that it has a ripple effect throughout the wider economy, forcing other companies to close their doors as well.

The FSB estimates that more than 400,000 small firms have shut during the pandemic, with late payments being a key factor in the failure of many companies. However, it predicts that up to 440,000 SMEs may be forced to close this year due to late payments.

FSB National Chair, Mike Cherry, said: “Late payment was destroying thousands of small businesses even before the pandemic hit – the pandemic has made matters worse. In the past, the Government has rightly identified greater board accountability as key to spurring change in this area, but delivery has been slow.”

The FSB wants to see every business and Government agency abide by the existing prompt payment code.

They argue that 30-day payment terms should be “the norm for those who are committed to environmental, social and governance best practice”.

However, it has gone further saying that every big UK corporation should have a dedicated director that is focused on improving payments to small businesses.

Link: UK’s late payment ‘crisis’ risks future of 440,000 small firms

A pilot scheme using software in preparation for the next phase of HM Revenue & Customs’ (HMRC) Making Tax Digital (MTD) initiative has seen a slump in users.

Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax and Self-Assessment (ITSA) from 6 April 2024.

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of the live pilot project to evaluate and develop the MTD service for ITSA.

However, research reported in the Financial Times has discovered that only nine people are currently taking part in the trial, a figure confirmed by HMRC.

The number peaked at around 900 users in the 2018-2019 period and may have since been affected by the pandemic.

Many accountants are now concerned that the system, which covers 4.3 million self-employed businesses, partnerships, and landlords, many of whom will be unaware of what is happening, may not be ready for the switchover.

Currently the self-employed must file just one end-of-year tax return but MTD ITSA will involve having to submit updates quarterly every three months and an end-of-year statement, plus a “finalisation return” (now called a tax return) each year. This means six reports to HMRC in total replacing the current single annual Self-Assessment tax return.

On top of this, the self-employed and landlords will have to license accounting software from approved providers, with the Government offering discounts of up to £5,000 for small businesses to rent software.

Link: Just nine people trialling digital tax for self-employed

Two company directors have been banned for a total of 21 years after they fraudulently claimed £100,000 in bounce back loans.

Following an investigation by the Insolvency Service, Aamer Aslam from Huddersfield and Razwan Ashraf from Keighley were disqualified for 11 and 10 years respectively after they fraudulently claimed Bounce Back Loans (BBL).

The disqualifications prevent both from directly, or indirectly, becoming involved in the promotion, formation, or management of a company, without the permission of the court.

The duo were co-directors of Scholars Academy Ltd, which is a specialist tuition centre for children in West Yorkshire.

In May 2020 Aslam applied for a BBL by providing an estimated company turnover of £200,000. Scholars received the loan of £50,000 but went into voluntary liquidation in January 2021, which triggered the investigation by the Insolvency Service.

At the time of liquidation, the directors listed the company’s liabilities to the bank as £7,000, but the bank later notified the liquidator that it was owed £50,000 by the company due to the BBL.

The investigation found that the duo was inflating the company’s turnover with Scholars’ bank statements actually showing a maximum monthly income of just £640, which means their turnover was only £7,680 and did not meet the criteria to apply for a BBL.

It was also found that Aslam and Ashraf used the money to make monthly payments to four family members of Ashraf. All four received £2,000 a month after the duo received the loan money.

Aslam and Ashraf told the Insolvency Service that these payments were genuine business expenses, but they were unable to provide evidence to support this.

Alongside this, Ashraf was also the sole director of another educational company, Progress First Ltd, and in May 2020 he applied for a BBL and fraudulently declared in the application form that annual turnover in 2019 was £200,000, when Progress’ bank statements showed that turnover was £38,973.

This resulted in Progress receiving the full loan of £50,000, when it would only have been entitled to a loan of £9,927.

Ashraf claimed that the money was used to pay for company expenses, however, regular payments were made to three individuals, and no evidence was produced to show that these payments were genuine business expenditures.

Ashraf has since repaid £35,000 to the liquidator to settle claims against him for the Progress loan, and a further £25,000 in settlement of claims against both directors about the loans taken out by Scholars.

COVID crackdown

This is the latest in a number of bans issued by the Insolvency Service against directors who have misused the COVID support schemes.

The Insolvency Service has been given new powers to investigate, disqualify and potentially prosecute company directors who abuse the company dissolution process.

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act will also help tackle directors dissolving companies to avoid repaying Government-backed loans taken out during the Coronavirus pandemic.

Under the terms of the Act, the Insolvency Service, on behalf of the Business Secretary, will be able to investigate and tackle ‘unfit’ directors who place their firm in administration to avoid paying subcontractors and suppliers.

If misconduct is found, directors can face sanctions, including being disqualified as a company director for up to 15 years or, in the most serious of cases, prosecution.

The Business Secretary will also be able to apply to the court for an order to require a disqualified director of a fraudulently dissolved company to pay compensation to creditors who have lost out due to their actions.

In addition, the Insolvency Service will be able to investigate live companies where there is evidence of wrongdoing, such as misuse of COVID support.

Link: Bans for two directors who abused Bounce Back Loan scheme

It was recently announced that the Government would reform business rates relief for owners of second homes – resulting in some holiday let owners facing additional costs of up to £1,000 a year.

The Department for Housing, Communities and Local Government wants to close what it sees as a loophole in the current business rates system that prevents some second homeowners from paying council tax.

Michael Gove, Secretary of State for Housing, Communities and Local Government, confirmed that new rules next year will only allow second homeowners to register for business rates relief if they can prove they rent out their properties for at least 70 days per year.

What exactly is changing?

As the rules stand, second homeowners pay business rates, which are cheaper than council tax, if they make their property available for letting for 140 days in the coming year.

But once the change takes place in April next year, homeowners will have to prove they are let for at least 70 days a year or be forced to pay council tax instead.

Is the change necessary?

The move comes following a surge in the number of holiday lets in England, with around 65,000 residential units currently registered, up from 50,960 in 2019.

The Department for Levelling Up, Housing and Communities (DLUHC) also says that there is currently ‘no requirement’ to produce evidence that a second home has been let out – not just left empty.

The DLUHC says the move would protect ‘genuine’ small holiday letting businesses and ensure second-home owners paid a ‘fair’ contribution towards public services.

Mr Gove’s plans come after a consultation launched in 2018 and threats last year by the Treasury to close the loophole.

According to reports, the number of holiday lets in England has been increasing year on year from 50,960 in 2019 to 65,000 now.

The COVID pandemic is said to have fuelled the trend, as London and other city dwellers sought to escape to the countryside.

Link: Gove closes tax loophole on second homes

It’s a new year and many people who may have lost their jobs during the pandemic or have decided to take their life in a new direction, will be looking to start up a business.

It could be a full-time endeavour or a part-time business looking to make a bit of extra income to cope with the current cost of living crisis.

The upside is that we appear to be over the worst of the pandemic, and it is in the Government’s interests to get the economy on the move again, so help will be available.

There are so many ideas for business start-ups, but insurance broker Simply Business has researched some of the most popular small business ideas that might be worth exploring for 2022.

After analysing new business insurance policies taken out, a number of key areas came up as the most popular for starting up this year.

They include:

Craft stall

According to Simply Business, craft stalls were the fastest-growing small business trade in 2021, experiencing a 237 per cent growth.

If you have a hobby like candle making, pottery or needlework, opening a craft stall to sell your wares could be a venture worth pursuing this year.

Market trader

COVID restrictions, as well as people feeling less comfortable in indoor spaces, have seen outdoor businesses thrive since 2020.

It’s no surprise, then, that market trading was the second-fastest-growing small business idea in 2021, with a 113 per cent increase.

Online retailer

According to Simply Business, the number of new online retailers increased by 62 per cent in 2021.

When it comes to selling goods online, the key is to do your research and select the right type of product.

Some of the products that have traditionally sold well online include homeware, tech gadgets and accessories, exercise gear and clothing.

Photographer

The number of freelance photographers in the UK increased by 56 per cent in 2021, making it the fourth-fastest-growing small business.

This could be the ideal year to launch a freelance photography business, especially if you specialise in wedding photography.

The number of weddings is expected to increase significantly this year because of all the postponements.

Handyman or handywoman

One of the impacts of the pandemic is that many people have been spending more time at home.

Not surprisingly, many have been finding issues with the current state of their properties and have been looking to make improvements or upgrades.

The result has been an increase in demand for repair people, with a 44 per cent rise in this type of business in 2021.

Catering

Catering businesses witnessed a 39 per cent rise in 2021.

If you have a passion for cooking, throwing parties or event planning, catering could be a great small business to consider starting this year.

Teaching/tutor

Research by Simply Business shows that the number of businesses in this sector was up 21 per cent in 2021 and teaching or tutoring (in person or online) could be a great small business idea for people who have teaching experience.

Home baking

People have been cooking and baking more at home during the pandemic.

Not surprisingly, some have looked to use their cooking and baking skills to provide income.

As a result, the number of UK home baking businesses saw an increase of 24 per cent between 2020 and 2021.

Dog walking

Millions of Brits have bought pets since the start of the pandemic.

This means that the demand for pet walkers is now higher than ever. New dog walking businesses have increased by 22 per cent year on year.

If you love dogs, starting a dog walking business could be a great way to make some cash this year.

Every year employers across the UK submit an end-of-year report to HM Revenue & Customs (HMRC) outlining the benefits provided to each employee and director, which were not included in their wages.

This report is sent using the P11D form, which must be submitted by 6 July following the end of the tax year. At the same time, you must also provide employees with a copy of the P11D and tell HMRC the total amount of Class 1A National Insurance you owe using form P11D(b).

This can be quite an onerous task and lead to penalties if it isn’t completed on time or correctly. You will also be charged additional penalties and interest if you’re late paying HMRC.

Do I have to complete a P11D each year? 

Unbeknownst to many employers, you can now payroll benefits you provide to your employees so that you do not have to produce a P11D each year.

You can do this as long as you register with HMRC before the start of the tax year to let them know that you intend to payroll staff benefits. You can do this online here.

By choosing to payroll your benefits, the cash equivalent of the employees’ benefits is added to their taxable pay, which is charged to them through the real-time payroll process.

This system is much easier for employers as they do not have to produce P11Ds each year, but they must continue to calculate the Class 1A National Insurance contributions and complete form P11D(b) by the 6 July following the end of the tax year.

If you miss the registration deadline, you can ask HMRC to informally payroll benefits by writing to the Complex Caseworker Team at HMRC’s National Insurance Contributions and Employer Office.

If you choose to use this option, you must still complete form P11D at the end of the tax year and mark each report as ‘payrolled’.

HMRC should then stop collecting tax that has already been deducted from your employees.

The benefit of this system, beyond the need to produce detailed reports, is that employee tax will be collected in real-time, rather than being collected using an adjusted tax code in the following tax year.

This approach may be unsuitable for some businesses, so professional advice should be sought from a trusted accountant.

Taxpayers who are unable to pay their Self-Assessment (SA) bill can use the option of paying by instalments with a Time to Pay arrangement with HM Revenue & Customs (HMRC).

If you cannot pay a Self-Assessment tax bill you can make your own Time to Pay arrangement using your Government Gateway account, if you:

• Have filed your latest tax return
• Owe less than £30,000
• Are within 60 days of the payment deadline
• Plan to pay your debt off within the next 12 months or less.

The limit for a self-serve time to pay arrangement, which was increased during the pandemic, remains at £30,000 tax due.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “We understand some customers might be worried about paying their SA bill this year, and we want to support them.”

What you will need to make a Time to Pay arrangement

• The relevant reference number for the tax you cannot pay, such as your unique tax reference number
• Your VAT registration number if you are a business
• Your bank account details
• Details of any previous payments you have missed

HMRC will ask you:

• How much you can repay each month
• If you can pay in full
• If there are other taxes you need to pay
• How much money you earn
• What you usually spend (including bills and entertainment) each month
• What savings or investments you have.

If you have savings or assets, HMRC will expect you to use these to reduce your debt as much as possible.

If you have received independent debt advice, for example from Citizens Advice, you may have a ‘Standard Financial Statement’. HMRC will accept this as evidence of what you earn and spend each month.

The amount you will be asked to pay each month is based on the money you have left after you pay any rent, food or utility bills and fixed outgoings, like subscriptions.

You will usually be asked to pay around half of what you have left over each month towards the tax you owe.

If taxpayers owe more than £30,000, or need longer to pay, they should phone the self-assessment payment helpline on 0300 200 3822 to make an arrangement.

Link: If you cannot pay your tax bill on time

Whether it is down to the spread of the Coronavirus or just a general trend to a more cashless society, card payments have boomed in the last couple of years.

While restrictions were in place, hardly anyone accepted cash and it is a trend that looks like it will continue with more and more payments being made through card readers.

According to figures from UK Finance, a trade association for the UK banking and financial services sector, in 2020 over half of all payments in the UK were made using cards.

While overall card payments in 2020 declined during the lockdown, their share of payments increased with over half (52 per cent) of all payments being made by cards in 2020.

This was due to many retailers encouraging card and contactless use, along with many people opting to shop online while physical stores were shut.

So, businesses must be properly prepared with the right equipment to process these transactions.

Security is vital both for customers and businesses and there is a whole range of different debit and credit card machines to choose from. There are three types, a desktop or countertop reader, a portable card reader and a mobile device.

What are the benefits of each device?

Countertop machines are fixed points in your store or restaurant and offer good connectivity.

The portable device is linked to Wi-Fi and is ideal for places like restaurants or pubs, where staff can take payments at the table.

Mobile card readers are battery-powered devices that use a GPRS signal but can link to Wi-Fi to take payments while on the move at places like outdoor markets or hospitality events.

If businesses are choosing card payment facilities, there are several platforms on the market to consider, including:

• TakePayments
• Tyl (by Natwest)
• Paymentsense
• Shopify WisePad Reader 3
• SumUp Air
• Zettle Reader 2
• Square Reader
• MyPOS Go
• Dojo Go
• Barclaycard Anywhere

What do they cost?

The costs include the device and the cost of payment processing fees. Mobile readers cost between £15 and £30, while desktop or countertop card machines cost between £150 and £200.

You can either buy the device outright or rent the device for a monthly cost. This changes from provider to provider.

What fees will the business have to pay?

Transaction fees are taken by your card payment provider as a percentage of every payment made through your card machine. They are typically between 1.5 per cent and 2 per cent of the value of the transaction.

So, if the customer buys an item costing £50 and your transaction fee is 1.75 per cent, you will be charged around 87p by your provider.

Card payment providers will also advertise a ‘card not present’ (CNP) transaction when neither the cardholder nor their card are present for the transaction – for instance, an online or phone payment, or a recurring payment.

CNP fees are usually around 2.5 per cent. They are higher for the simple reason that there is a greater risk of fraud during these kinds of payments.