Business News England March 2023
Are you buying or trading Crypto?
If you are thinking about buying cryptoassets (“crypto”) you need to know the basics and understand the risks before jumping in. And remember, if you decide to invest in crypto then you should be prepared to lose all the money you have invested.
The range and accessibility of crypto have grown rapidly in the last few years, accompanied by a surge in speculative trading – which means people trading just because they have heard it may rise in value, rather than seeing evidence to support a potential rise. A number of people invest simply for fun!
Crypto can be thought of as ‘digital representations of value or rights’ that are secured by encryption and typically use some type of ‘distributed ledger technology’ (DLT). DLT allows data to be recorded and stored across a network of participants. This keeps the data secure and means there is no one single central data storage point or one central authority that grants participants permission to access and participate in the network.
The way some cryptoassets are created and operated makes them very different from what some people would class as ‘tangible’ assets (meaning things that you can physically see and touch) like gold or cash. So called ‘unbacked’ crypto have no tangible assets that sit behind them. Their price can increase or decrease depending on whether other people are willing to buy them. If people stop buying, the price could fall dramatically.
Whereas central banks – like the Bank of England – issue and oversee the money we use daily (fiat currencies), cryptoassets are developed and run by groups, individuals, or companies. Publicly available information about some of these groups/individuals can be vague, and as crypto activity is not regulated yet in the UK, there is no safety net if things go wrong.
Currently, using crypto as a means of payment is very limited – they’re accepted by certain IT and travel companies, for example, but you probably won’t be doing your weekly shop or paying your 5-a-side football subs with crypto. The reason for this is that cryptoassets tend to be very volatile, so it’s hard to pinpoint their value from one day to the next, which makes them unreliable as a payment method. However crypto that are are linked to fiat currency can be less volatile and more stable and have the potential to provide faster, cheaper and more efficient payments in the future. Some investors take the view that crypto could possibly one day be accepted in everyday transactions but this is some way off.
Investing in crypto comes with all kinds of risks, some of which you might not even have thought of. For example, converting crypto to fiat currency can prove challenging and holders must keep a record of their digital keys. Capital gains tax can apply to exchanges and other disposals of crypto, even if fiat currency has not been realised. In 2022, crypto lender, Celsius, filed for bankruptcy and owed its users $4.7 billion, meaning many investors could not get their money out and did not get anything back.
Following the surge in people’s interest in crypto over the last few years, scammers have been increasingly active in targeting potential investors. Remember - if something sounds too good to be true then it probably is. Find out how to protect yourself and others from investment scams on the ScamSmart site.
If you are trading in crypto be aware HMRC expects you to keep detailed and accurate records of your purchases and sales. In 2021 they published their internal Cryptoassets Manual which outlines how they measure any profit or loss on trading and details the records required. You can see this here: Cryptoassets Manual - HMRC internal manual - GOV.UK (www.gov.uk). It has just been announced in Budget 2023 that new boxes will appear on the self-assessment tax return to prompt crypto disclosures next year.
Anyone trading in Crypto needs to be aware of their tax obligations and when transactions need to be included in their tax return. Please make sure you tell us about any transactions (even if fiat currency has not been received) so that we can assist and include the appropriate amounts in your self-assessment tax return, as required.
UK Budget Summary
Last week, Jeremy Hunt, Chancellor of the Exchequer, revealed his first Spring Budget. There was a focus on managing inflation and government debt, encouraging those who have left their jobs to return to the workforce, and increasing business investment.
Here are some of the key measures announced in the Spring Budget that will affect businesses and individuals across the UK:
- The Main rate of corporation tax, paid by businesses on taxable profits over £250,000 has been confirmed to increase from 19% to 25%. Companies with profits below £50,000 will pay at 19% and companies with profits between £50,000 and £250,000 will pay at an effective marginal rate that is between 19% and 25% from 1 April 2023.
- There are changes to Research and Development Expenditure Credit (RDEC) available and, for non-SME companies, RDEC will be increased from 13% to 20%. For many SME companies, the R&D tax relief enhancement will be reduced from 230% to 186%.
- The Annual Investment Allowance (AIA), giving 100% tax relief to unincorporated businesses and companies investing in qualifying plant and machinery, is now permanently set at £1million. The super-deduction, which gives enhanced 130% relief for new qualifying plant and machinery acquired by companies, will end on 31 March 2023.
- From 1 April, companies can fully deduct investment in new qualifying plant and machinery to lower their taxable profits. In addition, a 50% first year allowance will be available for integral features.
- From 6 April 2023, the Company Share Option Plan (CSOP) employee share options limit will increase from £30,000 to £60,000. Additionally, restrictions on the types of shares eligible for CSOP options will be lifted.
- The Government will establish 12 ‘Investment Zones’ across the UK, including a promise to have at least one each in Scotland, Northern Ireland, and Wales.
- The Government is increasing the availability of the Seed Enterprise Investment Scheme for start-up companies. The amount of investment that companies will be able to raise under the scheme will increase from £150,000 to £250,000. The gross asset limit will be increased from £200,000 to £350,000 and the investment must be made within 3 years (increased from 2 years) of trade commencing. In a bid to support these changes, the annual investor limit will be doubled to £200,000. The changes take effect from 6th April 2023.
- Fuel duty freeze – A freeze on fuel duty and the 5p reduction will remain in place for another year.
- Alcohol taxes are to rise in line with inflation from August, with new reliefs for beer, cider and wine sold in pubs.
- Pension tax reform – The pensions annual tax-free allowance will increase from £40,000 to £60,000 and the Lifetime Allowance will be abolished to encourage highly skilled individuals to continue working for longer.
- The Energy Price Guarantee which caps how much suppliers can charge per unit of energy used will stay in place until June 2023.
- 30 hours of free childcare to be provided for one and two-year-olds to help parents in England return to work, this will eventually cover all children from the age of nine months. This will be rolled out in stages from April 2024.
Combined with the many mini-budgets and statements made towards the end of 2022, this Budget brings change; good, bad, and often to be determined with time. What is clear is that 2023 remains a year of opportunity and we are here to work alongside you and help you grow!
Tax Planning opportunities ahead of the new tax year
The new tax year starts 6 April 2023, so you have limited time to consider your options and once we pass this date, the majority of the tax planning options for Income Tax and Capital Gains Tax purposes will cease unless actioned this month.
Do you fall into any of these categories?
- You have or are thinking about a change in your personal status (single, married, separating, joining or dissolving a civil partnership);
- You are thinking about selling a capital asset, such as shares or a property. From 6 April 2023 the Capital Gains Tax annual exempt amount reduces from £12,300 to £6,000;
- You or your child’s other parent claims Child Benefit and the income of either parent is likely to exceed £50,000 for the first time during tax year 2022-23;
- Your annual income is approaching or above £100,000;
- You have not yet topped up your pension contributions for tax year 2022-23;
- You are self-employed with a 31 March 2023 year-end;
- You are self-employed and are thinking about the purchase of equipment or vehicles; or
- You are the director and/or shareholder of a limited company and have not yet considered voting final dividends or bonuses for 2022-23.
If you do, we can help you discuss your options ahead of the April deadline!
The above list is not comprehensive, and we specialise in helping clients with all taxes including PAYE, NIC, VAT, Corporation, Capital Gains, Income, and Inheritance tax. Please contact us now!
New VAT penalties and interest payments
The new penalties will impact businesses who submit their VAT returns or pay their VAT late. The first monthly returns and payments affected by the penalties are due by 7 March 2023.
The late payment penalties and points-based late submission penalties were introduced from 1 January 2023, replacing the VAT default surcharge, and apply to accounting periods which start on or after that date.
The penalties for late VAT returns also apply to businesses that submit nil returns and repayment returns. Changes have also been made to how interest is calculated.
The changes to VAT penalties and interest payments are:
Late submission penalties
These work on a points-based system. For each VAT return submitted late, HMRC customers will receive a penalty point until they reach the penalty point threshold – at which stage they will receive a £200 penalty. A further £200 penalty will also apply for each subsequent late submission while at the threshold, which varies to take account of monthly, quarterly and annual accounting periods.
Late payment penalties
If a VAT payment is more than 15 days overdue, businesses will pay a first late payment penalty. If the VAT payment is more than 30 days overdue, the first late payment penalty increases and a second late payment penalty will also apply. To help customers get used to the changes, HMRC will not charge a first late payment penalty on VAT payments due on or before 31 December 2023, if businesses either pay in full or a payment plan is agreed within 30 days of the payment due date.
Payment plans
HMRC will help businesses that cannot pay their VAT bill in full. HMRC customers may be able to set up a payment plan to pay their bill in instalments. After 31 December 2023, if a HMRC customer proposes a payment plan within 15 days of payment being due and HMRC agrees it, they would not be charged a late payment penalty, provided that they keep to the conditions of the payment plan. Late payment penalties can apply where proposals are made after the first 15 days, but the agreement of the payment plan can prevent them from increasing.
Interest calculations
HMRC has introduced both late payment and repayment interest, which will replace previous VAT interest rules. This brings the new regime in line with other taxes.
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