Mike Tombs's Blog

This blog provides information about tax, accounting and other issues affecting small owner-managed businesses in the UK. It is intended as a general source of information but you should not assume that everything applies to your specific circumstances. We are always happy to discuss providing tailor-made solutions to suit your individul needs. Visit www.tlaservices.co.uk to sign up for our free monthly Tax Tips and News newsletter.

Category Archives: Startups

HMRC launch further Help-to-Save consultation

Following an earlier period of consultation, HMRC have published draft legislation along- side a further technical consultation document, setting out proposals for the main features, processes and requirements of the new Help-to-Save accounts scheme, which is set to commence in 2018.

Help-to-Save will be targeted at working families on low incomes to help them build up their savings. The scheme will be open to around 4 million individuals who either receive universal credit and have minimum weekly household earnings equivalent to 16 hours at the national living wage, or receive Working Tax Credit (WTC).

Help-to-Save will work by providing a 50% government bonus on up to £50 of monthly savings into a Help-to-Save account. The bonus will be paid after two years, with savers able to continue saving for a further two years, meaning people can save up to £2,400 and benefit from total government bonuses worth up to £1,200. Along similar lines to Lifetime ISAs, bonuses on Help-to-Save accounts will be exempt from income tax.

Accounts will be available through the government’s chosen account provider, National Savings and Investments (NS&I). Customers will register for an account through the gov.uk portal. HMRC will carry out the necessary eligibility checks (using Tax Credits and Universal Credits data) and will pass the customers through to NS&I to set up an account if they are eligible. Eligibility queries will be handled by HMRC.

Help-to-Save accounts will usually mature after four years. Once an account matures it will automatically rollover into a successor account which will not attract a further Help-to-Save bonus. However, an account may mature earlier if the account holder dies or becomes terminally ill, with the bonus paid at this point.

The consultation will run until 27 October 2017. Responses will then be reviewed and the draft regulations will be revised as appropriate before they are laid before Parliament.

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Making Tax Digital for Business: update

In July, the Government confirmed that the Summer Finance Bill would be published in September, with the measures dropped from the pre-election Finance Bill being reintroduced in more or less the same form, from the initially planned commencement dates. Clauses dropped from the pre-election bill and expected to be brought back include those on Making Tax Digital (MTD), although the implementation date for income tax is being postponed.

There is widespread agreement that Making Tax Digital for Business is the right approach for the future. However a number of concerns about the pace and scale of change have been raised. As a result the government has announced that the roll out for Making Tax Digital for Business has been amended to ensure businesses have plenty of time to adapt to the changes.

Businesses will not now be mandated to use the Making Tax Digital for Business system until April 2019 and then only to meet their VAT obligations. This will apply to businesses who have a turnover above the VAT threshold – the smallest businesses will not be required to use the system, although they can choose to do so voluntarily.

This change means that no business will need to provide information to HMRC under Making Tax Digital for business more regularly than they do now. VAT has been online since 2010 and over 98% of VAT registered businesses already file electronic returns.

HMRC have confirmed that they will start to pilot Making Tax Digital for VAT by the end of this year, starting with small-scale, private testing, followed by a wider, live pilot starting in Spring 2018. This will allow for well over a year of testing before any businesses are mandated to use the system. No business will be mandated before 2019.

From April 2019, businesses above the VAT threshold will be mandated to keep their records digitally and provide quarterly updates to HMRC for their VAT.

Double glazing salesmen was self-employed

Employment status tax cases often make the headlines in the professional press and the June 2017 case of Tomlinson was no exception. In this case, the First-tier Tribunal found that a double glazing salesman (Mr Malcolm Tomlinson) was self-employed and not an employee as he had claimed.

As with most employment status cases, this case focused on the details of the terms on which Mr Tomlinson was engaged with the company.

Many facts of the case pointed towards a self-employed status, including the fact that there was no written contract in place and Mr Tomlinson was not required to give notice of leaving. He was paid on a commission-only basis and did not receive holiday pay, sick pay or pension contribution payments. He provided his own car, mobile phone and other equipment. However, many other factors emerged which tended towards employed status. These included authority to sign initial customer contracts on behalf of the company; an expectation for working in the company showroom approximately two days a week; an expectation to complete a holiday request form; appearances in company advertisement; and an expectation that Mr Tomlinson would not work for competitors.

The First-tier Tribunal (FTT) worked its way through various factors which have historically been used to determine employment status cases. Such factors include control, equipment, financial risk and payment terms, personal service and exclusivity, mutuality of obligation, benefits provided, integration within the company’s business, and intention.

In concluding its review of the overall effect of all such factors, the FTT found that the details of this case did not clearly point towards either employment or self-employment. However, looking at the overall picture, the FTT’s view was that Mr Tomlinson was in business on his own account and was not therefore, an employee. The FTT concluded that it was decisive that both Mr Tomlinson and the company intended and believed that Mr Tomlinson was self-employed and had operated on that basis for almost 25 years.

As Mr Tomlinson had not discharged the burden of proof showing on the balance of probabilities that, during the period in question, he was employed under a contract of service, the decision that Mr Tomlinson was self-employed stood good.

Paying Class 2 NICs

Whether or not Class 2 National Insurance Contributions (NICs) can be paid depends on whether an individual falls within the definition of a ‘self-employed earner’ for NIC purposes, and if so, whether profits are in excess of the existing small profits threshold (£6,025 for 2017/18).

The definition of a self-employed earner is defined as someone ‘who is gainfully employed in Great Britain otherwise than in employed earner’s employment (whether or not he is also employed in such employment)’ (SSCBA 1992, s 2(1)(b)). A person who is regarded as self-employed for income tax purposes, and who is taxed on the profits from their trade, profession or vocation, is generally, but not always, regarded as a self-employed earner for NIC, which means they will be required to pay Class 2 and Class 4 NICs where applicable. By contrast, a person who receives investment income is not liable to pay NICs on that income.

Being liable to pay Class 2 NICs can be quite advantageous as contributions give access to certain contributory-based benefits for a relatively low outlay – £2.85 per week for 2017/18. For example, where NICs are not otherwise payable, it may advantageous for a landlord to consider turning ‘investment’ letting into a business to bring it within the scope of Class 2 NICs, which in turn will enable him to build up an entitlement to state pension.

Self-employed people are currently required (subject to certain conditions) to pay both Class 2 and Class 4 NICs. Class 4 NICs are, broadly, calculated by reference to the payee’s profits. For 2017/18 they are payable at the rate of 9% on profits between £8,164 (the Lower Profits Limit (LPL)) and £45,000 (the Upper Profits Limit (UPL)), and at 2% above £45,000.

From April 2018, however, Class 2 contributions will be abolished and the Class 4 contributions system will be reformed to include a new threshold (the Small Profits Limit (SPL)). Although we do not yet know what the individual thresholds will be, we do know that people with profits between the SPL and LPL will not be liable to pay Class 4 contributions, but will be treated as if they have paid Class 4 contributions for the purposes of gaining access to contributory benefits. All those with profits at or above the Class 4 SPL will gain access to the new state pension, contributory Employment and Support Allowance (ESA) and Bereavement Benefit. Those with profits above the LPL will continue to pay Class 4 contributions.

The abolition of Class 2 will have adverse consequences for those with profits below the current small profits threshold, who are not obliged to pay Class 2 but are doing so voluntarily in order to build up their contributions record. If they wish to continue to secure contributory benefits by paying NICs after April 2018, they will instead have to pay voluntary Class 3 contributions, currently payable at the rate of £14.25 per week – five times the Class 2 contribution rate, and a difference of £592.80 based on 2017/18 rates.

Self-employed individuals should be encouraged to check their NIC record for the last few years – this can be done online through the Gov.uk website. Those wishing to protect their state pension entitlement should ensure that they have paid, and continue to pay, as many Class 2 contributions as they need to before abolition in April 2018. A total of 35 years of contributions paid or credited are currently needed to secure entitlement to the full state pension. The minimum needed to secure any state pension is 10 years.

Salary v dividend

The questions surrounding the issue of how best to extract profits from a company in a tax-efficient manner remain as popular as ever. Despite the introduction of the dividend allowance, and the personal savings allowance, extraction by remuneration and by way of dividend remain the two most widely used methods. The tax effects of these methods may be broadly contrasted as follows:

  • Provided the amount is justifiable, remuneration is generally allowed as a deduction in arriving at the taxable profits of the company. The recipient is taxed on the remuneration through the PAYE system at the date of payment including a charge to NIC.
  • Dividends are not deducted in arriving at the taxable profits.

The main point to note is that the question of how best to extract profits from a company is rarely straight-forward and will be different in nearly every case. Seeking advance professional advice is always highly recommended.

It must be remembered here that payment of a salary will give rise to a liability to National Insurance Contributions (NICs), whereas payment of a dividend does not.

In considering the options, a number of other factors should also be taken into account:

  • A full NIC contribution record must be maintained to ensure maximum social security benefits. Therefore, a reduction in salary may have the knock-on effect for reducing future entitlement to certain earnings-related social security benefits.
  • The lack of a salary charge in the accounts may increase the value for capital gains tax (CGT) and inheritance tax (IHT) purposes of holdings valued on the basis of earnings. In addition, a higher dividend payment will increase the value of a holding calculated on a dividend yield basis, although it is unlikely to affect the valuation of a major interest.
  • Dividends are payable rateably to shareholders in proportion to their holdings in the company, which may not necessarily correspond to the relative efforts of the directors in earning the profits. Dividend waivers may assist in these circumstances, but care must be taken – always seek advice on such matters.
  • Dividends can only be paid out of distributable profits whereas, in theory, salaries may be paid out without reference to the level of profits.
  • The national minimum wage legislation should be considered, as this applies equally to directors under contracts of employment as it does to employees.

Given that dividends are treated as distributions of profits (after taking into account payments of salaries and wages), payment of a reasonable salary may be considered before thinking about a potential dividend payment. The situation will vary from company to company and there is no set rule. Seeking professional advice is recommended before any action is taken.

In deciding how profits are to be extracted, the following aspects should be considered:

  • The rates applicable to dividend income are currently the 7.5% ordinary rate, which applies up to the basic rate limit, the 32.5% dividend upper rate, and the dividend additional rate of 38.1% on dividends above the higher rate limit.
  • From 6 April 2016, 10% tax credit attaching to dividends was abolished and the new dividend allowance took effect. This means that the first £5,000 of dividends will be tax-free in the hands of the recipient. Whilst these changes mean that most taxpayers will thereby pay less tax, people with a share portfolio valued at £140,000 or more (according to the Treasury) will pay more. This forms part of the government strategy to reduce the incentive to incorporate businesses and take remuneration in the form of dividends.
  • Individual needs of shareholders may differ – some may require income, others may be more interested in capital appreciation. These conflicting interests may be met by the issue of separate classes of shares with differing distribution rights.
  • For the financial year 2017, the main rate of corporation tax is 19%, which means that the rate of tax payable on retained profits is potentially lower than current income tax rates.

For income tax purposes, and within family-owned companies, it is generally desirable to spread income around the family to fully utilise annual personal allowances and to take full advantage of nil and lower rate tax thresholds, wherever possible. The term ‘family’ includes all individuals who depend on a particular individual (e.g. the owner of the family company) for their financial well-being. This may include not only the spouse, civil partner and children but also aged relatives, retired domestic employees, etc. Care must be taken in this area not to fall foul of the ‘settlements’ legislation and other anti-avoidance measures in force at the time. Once again, professional advice is always recommended in advance of making any payments.

Distributions (usually dividends) from jointly owned shares in close companies are not automatically split 50/50 between husband and wife, but are taxed according to the actual proportions of ownership and entitlement to the income.

Possible methods of spreading income around the family include employing a spouse and/or children, waiving salary (to increase profits available as dividends) or dividends (to increase the amounts available to other shareholders), and transferring income-producing assets.

Some distributions of income to family members will not be beneficial for tax purposes. The following points require careful consideration:

  • salaries and wages paid to spouse, civil partner, children or other dependants will be a tax deductible expense of the company only if they can be justified in relation to the duties performed;
  • a salary paid to spouse, civil partner, children or other dependants will attract a liability to NIC if it is above the lower earnings limit; and
  • the investment income of an infant child (i.e. an unmarried child below the age of 18) is taxed on his parents, where it arises from a gift by them.

In the longer term, there is a risk that, at some future date, the relative advantages of each extraction method might be reversed at a time when the flexibility to switch between the two methods is restricted. Currently though, using a mixture of salary, benefits and dividends, which can be varied according to individual circumstances, remains the most sensible option.

HMRC clarify pre-registration of VAT policy

HMRC have recently published Brief 16 (2016), entitled Treatment of VAT incurred on assets that are used by the business prior to VAT registration. Broadly, the brief aims to clarify when, and to what extent, VAT is deductible and what to do if the correct treatment has not been applied.

A business registering for VAT may recover tax incurred on goods and services before their effective date of registration(EDR). This allows the recovery of VAT against goods and services as long as they are used by the taxable person to make taxable supplies once registered.

Services must have been received less than six months before the EDR for VAT to be deductible. This time limit is a simplification of the rules and means that detailed calculations of the use before and after EDR are not required. This excludes services that have been supplied onwards. VAT on services received within the relevant time limit can be recovered in full.

Goods have a four-year time limit for deduction that is consistent with the general VAT ‘capping’ provisions. Again, this excludes goods that have been supplied onwards or consumed before EDR. However, VAT on fixed assets purchased within four years can be recovered in full.

HMRC believe that the word ‘consumed’ has been interpreted inconsistently over time, particularly in relation to business assets and HMRC. The purpose of Brief 16 is therefore to clarify the policy position, which HMRC stress, has not changed. The policy is as follows:

Subject to the normal rules on VAT deduction:

  • VAT on services received within six months of EDR and used in the business at EDR is recoverable in full;
  • VAT on stock is deductible to the extent that the goods are still on hand at EDR (for example apportionment may be required);
  • VAT on fixed assets purchased within four years of EDR is recoverable in full, providing the assets are still in use by the business at EDR.

Full recovery only applies if the business is fully-taxable. Businesses who are partly-exempt, have non-business activities, or need to restrict VAT deduction for any other reason, will need to take that into account when calculating deductible VAT.

HMRC will accept corrections for overpayment of VAT in the following circumstances:

  • the business has reduced the VAT it deducted on fixed assets, to account for pre-EDR use;
  • HMRC have raised an assessment of tax to account for pre-EDR use of fixed assets;
  • HMRC have reduced a repayment claim to account for pre-EDR use of fixed assets.

HMRC will consider claims for repayment of penalties and interest charged as a result of assessments.

Caps on income tax relief

In general terms, providing a business is undertaken on a commercial basis with a view to making a profit, tax relief should be available for trading losses incurred. It is usually possible to offset the loss against other taxable income from the same year, or the previous year. Other taxable income may include for example, a former employment (where tax was deducted under PAYE) or a pension.

This relief may be particularly beneficial for someone who is self-employed on a part-time basis. For example, where an individual earns £30,000 a year from employment, and makes a £2,000 loss from his or her part-time business, their tax bill for the year will be based on income of £28,000.

Where a loss is incurred in any of the first four tax years of a new business, the amount of the loss can usually be carried back and offset against total income of the three previous tax years, starting with the earliest year. Therefore, where an individual has paid income tax in any of the previous three years, he or she is likely to be entitled to a repayment of tax. The maximum amount must be offset each year – it is not possible to offset a proportion of the loss in order to spread the loss across three years to take advantage of beneficial tax rates. Again, relief will not be available unless the individual was trading on a commercial basis with a view to making a profit within a reasonable timescale. In practice, this requirement may be difficult to prove in the case of a new business and HMRC may want to see a viable business plan to support a claim.

It is worth noting that the income tax legislation sets out various specific reliefs that may be deducted in the calculation of income tax liability, including reliefs which can be relieved against general income. Before 6 April 2013 there was generally no upper limit on the amount of income tax relief which could be claimed. However, from 6 April 2013 certain restrictions apply to the amount of loss relief available. The primary reliefs affected by the cap are the trade loss reliefs outlined above, property loss reliefs that can be relieved against general income, and qualifying loan interest relief. A small number of other reliefs will also be affected. The cap is set at £50,000 or 25% of income, whichever is greater.

‘Income’ for the purposes of the new cap will be calculated ‘total income liable to income tax’. This figure will then be adjusted to include charitable donations made via payroll giving and to exclude pension contributions – this adjustment is designed to create a level playing field between those whose deductions are made before they pay income tax, and those whose deductions are made after tax. The result, known as ‘adjusted total income’, will be the measure of income for the purpose of the cap.

The cap will apply to the year of the claim and any earlier or later year in which the relief claimed is allocated against total income. The limit will not apply to relief offset against profits from the same trade or property business.

Anyone wishing to make a claim for loss relief needs to be aware of the time limits for doing so -HMRC must be informed within 12 months following 31 January after the end of the loss-making business year.

The Autumn Statement 2016

This is aimed at those who didn’t receive our client newsletter – that is still available at http://eepurl.com/cqcb0b. If you do read them both, let me know which version you prefer:-)

Summary

Chancellor Philip Hammond has delivered his Autumn Statement 2016, which is the first major review of government finances since the EU Referendum, and Mr Hammond’s first major statement since taking responsibility for the work of the Treasury in July 2016. As previously speculated, this will be Mr Hammond’s only Autumn Statement as it was confirmed that the government is to move to a single major fiscal event each year. This means that following the Spring 2017 Budget and Finance Bill, Budgets will be delivered in the Autumn, with the first one scheduled to take place in Autumn 2017. However, the Office for Budget Responsibility (OBR) is required by law to produce two forecasts a year – one of these will remain at the time of the Budget, the other will fall in the Spring and the government will therefore respond to it with a new ‘Spring Statement’. This change means that we can expect a Finance Bill in Spring/Summer 2017 following the 2017 Budget. The effect of this new approach is that Finance Bills will be introduced following the annual Budget in Autumn, with the desired aim of reaching Royal Assent in the following Spring, before the start of the new tax year. This change in timetable is designed to help Parliament to scrutinise tax changes before the start of the tax year where most will take effect.

In addition to the Budget timetable changes, it has also been confirmed that, from next year, HMRC will publish customer service performance data more regularly and in greater detail. This will include the monthly publication of digital, telephony and postal performance data, as well as new customer complaints data.

Regarding tax, highlights from this Autumn Statement include:

  • confirmation of the government’s commitment to raising the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the Parliament. From that point the personal allowance will rise in line with the Consumer Prices Index (CPI);
  • affirmed commitment to the ‘business tax road map’, which sets out plans for major business taxes to 2020 and beyond, including cutting the rate of corporation tax to 17% by 2020, the lowest in the G20, and reducing the burden of business rates by £6.7 billion over the next 5 years;
  • fuel duty will be frozen from April 2017 for the seventh successive year. This will save the average driver around £130 a year, compared to pre-2010 fuel duty escalator plans;
  • certain changes will be implemented to promote fairness in the tax system, including:
    • to tackle tax avoidance, the government will strengthen sanctions and deterrents and will take further action on disguised remuneration tax avoidance schemes;
    • to ensure multinational companies pay their fair share, following consultation, the government will go ahead with reforms to restrict the amount of profit that can be offset by historical losses or high interest charges;
    • Insurance Premium Tax will rise from 10% to 12% in June 2017; and
    • to promote fairness and broaden the tax base, the government will phase out the tax advantages of salary sacrifice arrangements.

This newsletter provides a summary of the key tax points from the 2016 Autumn Statement based on the documents released on 23 November 2016. The overview of legislation in draft, providing further information on all tax changes and updates on all tax consultations, will be published on 5 December 2016. Draft Finance Bill clauses, explanatory notes, tax information and impact notes, and responses to consultations will also be published on this date. We will keep you informed of any significant developments.

Individuals

Personal allowance and basic rate limit for 2017-18

The personal allowance for 2017-18 will be increased to £11,500 (£11,000 in 2016-17), and the basic rate limit will be increased to £33,500 (£32,000 in 2016-17). The additional rate threshold will remain at £150,000 in 2017-18. It was announced that the allowance will rise to £12,500 by the end of Parliament.

The marriage allowance will rise from £1,100 in 2016-17 to £1,150 in 2017-18.

Blind person’s allowance will rise from £2,290 in 2016-17 to £2,320 in 2017-18.

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2017-18.

Dates for ‘making good’ on benefits-in-kind

As announced at Budget 2016 and following a period of consultation, Finance Bill 2017 will include provisions to ensure an employee who wants to ‘make good’, on a non-payrolled benefit in kind will have to make the payment to their employer by 6 July in the following tax year. ‘Making good’ is where the employee makes a payment in return for the benefit-in-kind they receive. This reduces its taxable value. This will have effect from April 2017.

Assets made available without transfer of ownership

Existing legislation is to be clarified to ensure that employees will only be taxed on business assets for the period that the asset is made available for their private use. This will take effect from 6 April 2017.

Termination payments

As announced at Budget 2016, from April 2018 termination payments over £30,000, which are subject to income tax, will also be subject to employer NICs. Following a technical consultation, tax will only be applied to the equivalent of an employee’s basic pay if their notice is not worked, making it simpler to apply the new rules. The government will monitor this change and address any further manipulation. The first £30,000 of a termination payment will remain exempt from income tax and National Insurance.

Company car tax bands and rates for 2020-21

To provide stronger incentives for the purchase of ultra-low emissions vehicles (ULEVs), new, lower bands will be introduced for the lowest emitting cars. The appropriate percentage for cars emitting greater than 90g CO2/km will rise by 1 percentage point.

Cars, vans and fuel benefit charges

The company car fuel benefit charge multiplier will be £22,600 for 2017-18 (rising from £22,200 in 2016-17).

The van fuel benefit charge will rise from £598 to £610 for 2017-18.

The van benefit charge will rise from £3,170 to £3,230 for 2017-18.

Life insurance policies

Finance Bill 2017 will contain provisions regarding the disproportionate tax charges that arise in certain circumstances from life insurance policy part-surrenders and part-assignments. This will allow applications to be made to HMRC to have the charge recalculated on a ‘just and reasonable’ basis. The changes will take effect from 6 April 2017 and are designed to lead to fairer outcomes for policyholders.

NS&I Investment Bond

From Spring 2017, National Savings and Investments (NS&I), the government-backed investment organisation, will offer a new three-year Investment Bond with an indicative rate of 2.2%. The bond will offer the flexibility for investors to save between £100 and £3,000 and will be available to those aged 16 or over.

Personal Portfolio Bonds

As announced at Budget 2016 and following a period of consultation, the government will legislate in Finance Bill 2017 to take a power to amend by regulations the list of assets that life insurance policyholders can invest in without triggering tax anti-avoidance rules. The changes will take effect on Royal Assent of Finance Bill 2017.

ISA, Junior ISA and Child Trust Fund investment limits

The annual subscription limit for Junior ISAs and Child Trust Funds are to rise in line with the Consumer Prices Index (CPI) to £4,128 from 6 April 2017.

As previously announced, the ISA subscription limit will also rise from 6 April 2017, from £15,240 to £20,000.

National Living Wage and National Minimum Wage increases

From April 2017, the National Living Wage (NLW) for those aged 25 and over will increase from £7.20 per hour to £7.50 per hour. The National Minimum Wage (NMW) will also increase from April 2017 as follows:

  • for 21 to 24 year olds – from £6.95 per hour to £7.05;
  • for 18 to 20 year olds – from £5.55 per hour to £5.60;
  • for 16 to 17 year olds – from £4.00 per hour to £4.05;
  • for apprentices – from £3.40 per hour to £3.50.

The government announced that £4.3 million is to be spent on helping small businesses to understand the rules, and cracking down on employers who are breaking the law by not paying the minimum wage.

Consultation on reducing money purchase annual allowance

The pension flexibilities introduced in April 2015 gave savers the ability to access their pension savings flexibly, as best suits their needs. Once a person has accessed pension savings flexibly, if they wish to make any further contributions to a defined contribution pension, tax-relieved contributions are restricted to a special money purchase annual allowance (MPAA).

As announced in the Autumn Statement, a consultation has been launched relating to government proposals to reduce the MPAA to £4,000, with effect from April 2017. The consultation will run until 15 February 2017.

Foreign pensions

The tax treatment of foreign pensions is to be more closely aligned with the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones. The government will also close specialist pension schemes for those employed abroad (‘section 615′ schemes) to new saving, extend from five to ten years the taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief, align the tax treatment of funds transferred between registered pension schemes, and update the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes.

Cracking down on tax avoiders and those who help them

A new penalty is to be introduced for those helping someone else to use a tax avoidance scheme. Significant penalties may be imposed where HMRC successfully defeat avoidance schemes. The new penalty will ensure that those who help tax avoiders participate in avoidance schemes also face the consequences. In addition, tax avoiders will not be able to claim as a defence against penalties that relying on non-independent tax advice is taking reasonable care.

The taxation of different forms of remuneration

Employers can choose to remunerate their employees in a range of different ways in addition to a cash salary. The tax system currently treats these different forms of remuneration inconsistently and sometimes more generously. The government will therefore consider how the system could be made fairer between workers carrying out the same work under different arrangements and will look specifically at how the taxation of benefits in kind and expenses could be made fairer and more coherent. Proposed changes in this area are as follows:

  • Salary sacrifice – following consultation, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars. This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021;
  • Valuation of benefits in kind – the government is currently reviewing how benefits in kind are valued for tax purposes – a consultation on employer-provided living accommodation, and a call for evidence on the valuation of all other benefits in kind, will be published at Budget 2017;
  • Employee business expenses – at Budget 2017, the government will publish a call for evidence on the use of the income tax relief for employees’ business expenses, including those that are not reimbursed by their employer.

Legal support

From April 2017, all employees called to give evidence in court will no longer need to pay tax on legal support from their employer. This will help support all employees and ensure fairness in the tax system, as currently only those requiring legal support because of allegations against them can use the tax relief.

Non-domiciled individuals

As previously announced, from April 2017, non-domiciled individuals will be deemed UK-domiciled for tax purposes if they have been UK resident for 15 of the past 20 years, or if they were born in the UK with a UK domicile of origin. Non-domiciled individuals who have a non-UK resident trust set up before they become deemed-domiciled in the UK will not be taxed on income and gains arising outside the UK and retained in the trust.

From April 2017, inheritance tax will be charged on UK residential property when it is held indirectly by a non-domiciled individual through an offshore structure, such as a company or a trust. This closes a loophole that has been used by non-domiciled individuals to avoid paying inheritance tax on their UK residential property.

The government will change the rules for the Business Investment Relief (BIR) scheme from April 2017 to make it easier for non-domiciled individuals who are taxed on the remittance basis to bring offshore money into the UK for the purpose of investing in UK businesses. The government will continue to consider further improvements to the rules for the scheme to attract more capital investment in British businesses by non-domiciled individuals.

Inheritance tax reliefs

From Royal Assent of Finance Bill 2017, inheritance tax relief for donations to political parties will be extended to parties with representatives in the devolved legislatures, as well as parties that have acquired representatives through by-elections. This measure is designed to ensure consistent and fair treatment for all national political parties with elected representatives.

Social Investment Tax Relief (SITR)

From 6 April 2017, the amount of investment social enterprises aged up to 7 years old can raise through SITR will increase to £1.5 million. Other changes will be made to ensure that the scheme is well targeted. Certain activities, including asset leasing and on-lending, will be excluded. Investment in nursing homes and residential care homes will be excluded initially, however the government intends to introduce an accreditation system to allow such investment to qualify for SITR in the future. The limit on full-time equivalent employees will be reduced to 250. The government will undertake a review of SITR within two years of its enlargement.

Offshore funds

UK taxpayers invested in offshore reporting funds pay tax on their share of a fund’s reportable income, and capital gains tax (CGT) on any gain on disposal of their shares or units. The government will legislate to ensure that performance fees incurred by such funds, and which are calculated by reference to any increase in the fund’s value, are not deductible against reportable income from April 2017 and instead reduce any tax payable on disposal of gains. This equalises the tax treatment between onshore and offshore funds.

Reduction in Universal Credit taper

Under the Universal Credit system, as a person’s income increases, their benefit payments are gradually reduced. The taper rate calculates the reduction in benefits as a person’s salary increases. Currently, for every £1 earned after tax above an income threshold, a person receiving Universal Credit has their benefit award reduced by 65p and keeps 35p. From April 2017, the taper will be lowered to 63p in the pound, so the claimant will keep 37p for every £1 earned over the income threshold.

National Insurance Contributions

As recommended by the Office of Tax Simplification (OTS), the Class 1 secondary (employer) NIC threshold and the primary (employee) threshold will be aligned from April 2017, meaning that both employees and employers will start paying NICs on weekly earnings above £157.

As announced at Budget 2016, Class 2 NICs will be abolished from April 2018, simplifying National Insurance for the self-employed. The Autumn Statement confirmed that, following the abolition of Class 2 NICs, self-employed contributory benefit entitlement will be accessed through Class 3 and Class 4 NICs. All self-employed women will continue to be able to access the standard rate of Maternity Allowance. Self-employed people with profits below the Small Profits Limit will be able to access Contributory Employment and Support Allowance through Class 3 NICs. There will be provision to support self-employed individuals with low profits during the transition.

For 2017-18, Class 2 NICs will be payable at the weekly rate of £2.85 (rising from £2.80) above the small profits threshold of £6,025 per year (rising from £5,965 in 2016-17).

Class 3 voluntary contributions will rise from £14.10 to £14.25 per week for 2017-18.

For 2017-18, the lower profits limit for Class 4 NICs will be £8,164 and the upper profits limit will be £45,000. Contributions remain at 9% between the two thresholds and at 2% above the upper profits limit.

Businesses

Simplifying PSAs

As announced at Budget 2016 and following a period of consultation, Finance Bill 2017 will include provisions to simplify the process for applying for and agreeing the Pay as You Earn Settlement Agreement (PSA) process. Broadly, a PSA allows an employer to make one annual payment to cover all the tax and National Insurance due on small or irregular taxable expenses or benefits for employees. Further details will be published in due course. The changes will have effect in relation to agreements for the 2018-2019 tax year and subsequent tax years.

Capital allowances: first-year allowance for electric charge-points

From 23 November 2016, businesses will be able to claim a 100% first-year allowance (FYA) in relation to qualifying expenditure incurred on the acquisition of new and unused electric charge-points. The allowance will be available until 31 March 2019 for corporation tax purposes and 5 April 2019 for income tax purposes.

The measure complements the 100% FYA for cars with low carbon dioxide (CO2) emissions, and the 100% FYA for cars powered by natural gas, biogas and hydrogen.

Employee shareholder status

The income tax reliefs and capital gains tax exemption will no longer be available with effect from 1 December 2016 on any shares acquired in consideration of an employee shareholder agreement entered into on or after that date. Any individual who has received independent advice regarding entering into an employee shareholder agreement before the 23 November 2016 will have the opportunity to do so before 1 December (but not later) and still receive the income and CGT tax advantages that were known to be available at the time the individual received the advice. The effective date is to be the 2 December where independent legal advice is received on 23 November prior to 1.30pm. Corporation tax reliefs for the employer company are not affected by this change.

New tax allowance for property and trading income

As announced at Budget 2016, the government will create two new income tax allowances of £1,000 each, for trading and property income. Individuals with trading income or property income below the level of the allowance will no longer need to declare or pay tax on that income. The trading income allowance will now also apply to certain miscellaneous income from providing assets or services.

Expanding the museums and galleries tax relief

The new museums and galleries tax relief is to be expanded to include permanent exhibitions. The new relief, which starts in April 2017, was originally only intended to be available for temporary and touring exhibitions. The rates of relief will be set at 20% for non-touring exhibitions and 25% for touring exhibitions. The relief will be capped at £500,000 of qualifying expenditure per exhibition. The relief will expire in April 2022 if not renewed. In 2020, the government will review the tax relief and set out plans beyond 2022.

Tax deductibility of corporate interest expense

Following recent consultation, the government will introduce rules that limit the tax deductions that large groups can claim for their UK interest expenses from April 2017. These rules will limit deductions where a group has net interest expenses of more than £2 million, net interest expenses exceed 30% of UK taxable earnings and the group’s net interest to earnings ratio in the UK exceeds that of the worldwide group. The provisions proposed to protect investment in public benefit infrastructure are also to be widened. Banking and insurance groups will be subject to the rules in the same way as groups in other industry sectors.

Reform of loss relief

Following consultation, the government will legislate for reforms announced at Budget 2016 that will restrict the amount of profit that can be offset by carried-forward losses to 50% from April 2017, while allowing greater flexibility over the types of profit that can be relieved by losses incurred after that date. The restriction will be subject to a £5 million allowance for each standalone company or group.

In implementing the reforms the government will take steps to address unintended consequences and simplify the administration of the new rules. The amount of profit that banks can offset with losses incurred prior to April 2015 will continue to be restricted to 25% in recognition of the exceptional nature and scale of losses in the sector.

Bringing non-resident companies’ UK income into the corporation tax regime

The government is considering bringing all non-resident companies receiving taxable income from the UK into the corporation tax regime. At Budget 2017, the government will consult on the case and options for implementing this change. The government wants to deliver equal tax treatment to ensure that all companies are subject to the rules which apply generally for the purposes of corporation tax, including the limitation of corporate interest expense deductibility and loss relief rules.

Substantial Shareholding Exemption (SSE) reform

Following consultation, the government will make changes to simplify the rules, remove the investing requirement within the SSE and provide a more comprehensive exemption for companies owned by qualifying institutional investors. The changes will take effect from April 2017.

Authorised investment funds: dividend distributions to corporate investors

The rules on the taxation of dividend distributions to corporate investors are to be modernised in a way which allows exempt investors, such as pension funds, to obtain credit for tax paid by authorised investment funds. Proposals and draft legislation will be published in early 2017.

Northern Ireland corporation tax

The government will amend the Northern Ireland corporation tax regime in Finance Bill 2017 to give all small and medium sized enterprises (SMEs) trading in Northern Ireland the potential to benefit. Other amendments will minimise the risk of abuse and ensure the regime is prepared for commencement if the Northern Ireland Executive demonstrates its finances are on a sustainable footing.

Corporation tax deduction for contributions to grassroots sport

As announced at Autumn Statement 2015 and following consultation, in Finance Bill 2017 the government will expand the circumstances in which companies can get corporation tax deductions for contributions to grassroots sports from 1 April 2017.

Patent Box rules

The government will legislate in Finance Bill 2017 to add specific provisions to the Patent Box rules, covering the case where Research and Development (R&D) is undertaken collaboratively by two or more companies under a ‘cost sharing arrangement’. The provisions ensure that such companies are neither penalised nor able to gain an advantage under these rules by organising their R&D in this way. This will have effect for accounting periods commencing on or after 1 April 2017.

Authorised contractual schemes: reducing tax complexity for investors in co-ownership authorised contractual schemes

As announced at Budget 2016 and following a period of consultation, Finance Bill 2017 will include legislation (to be supported by secondary legislation) to clarify the rules on capital allowances, chargeable gains and investments by co-ownership authorised contractual schemes (CoACS) in offshore funds, as well as information requirements on the operators of CoACS.

Off-payroll working rules

Following consultation, the government will reform the off-payroll working rules in the public sector from April 2017 by moving responsibility for operating them, and paying the correct tax, to the body paying the worker’s company. This reform aims to tackle high levels of non-compliance with the current rules and means that those working in a similar way to employees in the public sector will pay the same taxes as employees. In response to feedback during the consultation, the 5% tax-free allowance will be removed for those working in the public sector, reflecting the fact that workers no longer bear the administrative burden of deciding whether the rules apply.

Bank levy reform

As announced at Summer Budget 2015, the bank levy charge will be restricted to UK balance sheet liabilities from 1 January 2021. Following consultation, the government confirms that there will be an exemption for certain UK liabilities relating to the funding of non-UK companies and an exemption for UK liabilities relating to the funding of non-UK branches. Details will be set out in the government’s response to the consultation, with the intention of legislating in Finance Bill 2017-18. The government will continue to consider the balance between revenue and competitiveness with regard to bank taxation, taking into account the implications of the UK leaving the EU.

Hybrids and other mismatches

The government will legislate in Finance Bill 2017 to make minor changes to ensure that the hybrid and other mismatches legislation works as intended. The changes will have effect from 1 January 2017.

Annual Tax on Enveloped Dwellings

The annual charges for the Annual Tax on Enveloped Dwellings (ATED) will rise in line with inflation for the 2017-2018 chargeable period.

Clarification of tax treatment for partnerships

Following consultation, the government will legislate to clarify and improve certain aspects of partnership taxation to ensure profit allocations to partners are fairly calculated for tax purposes. Draft legislation will be published shortly for technical consultation.

Tax-advantaged venture capital schemes

The rules for the tax-advantaged venture capital schemes (Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs)) are being amended to:

  • clarify the EIS and SEIS rules for share conversion rights, for shares issued on or after 5 December 2016;
  • provide additional flexibility for follow-on investments made by VCTs in companies with certain group structures to align with EIS provisions, for investments made on or after 6 April 2017; and
  • introduce a power to enable VCT regulations to be made in relation to certain shares for share exchanges to provide greater certainty to VCTs.

In addition, a consultation will be carried out into options to streamline and prioritise the advance assurance service.

The government will not be introducing flexibility for replacement capital within the tax-advantaged venture capital schemes at this time, and will review this over the longer term.

Gift Aid digital

As announced at Budget 2016, intermediaries are to be given a greater role in administering Gift Aid, with the aim of simplifying the Gift Aid process for donors making digital donations.

VAT

Tackling aggressive abuse of the VAT Flat Rate Scheme

A new 16.5% VAT flat rate for businesses with limited costs will take effect from 1 April 2017.

The VAT Flat Rate Scheme (FRS) is a simplified accounting scheme for small businesses. Currently businesses determine which flat rate percentage to use by reference to their trade sector. From 1 April 2017, FRS businesses must also determine whether they meet the definition of a limited cost trader, which will be included in new legislation.

Businesses using the scheme, or thinking of joining the scheme, will need to decide whether they are a limited cost trader. For some businesses – for example, those who purchase no goods, or who make significant purchases of goods – this will be obvious. Other businesses will need to complete a simple test, using information they already hold, to work out whether they should use the new 16.5% rate.

Businesses using the FRS will be expected to ensure that, for each accounting period, they use the appropriate flat rate percentage.

A limited cost trader will be defined as one whose VAT inclusive expenditure on goods is either:

  • less than 2% of their VAT inclusive turnover in a prescribed accounting period;
  • greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1000).

Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:

  • capital expenditure;
  • food or drink for consumption by the flat rate business or its employees;
  • vehicles, vehicle parts and fuel (except where the business is one that carries out transport services – for example a taxi business – and uses its own or a leased vehicle to carry out those services).

These exclusions are part of the test to prevent traders buying either low value everyday items or one off purchases in order to inflate their costs beyond 2%.

Updating the VAT Avoidance Disclosure Regime

As announced at Budget 2016 and following consultation, legislation will be introduced in Finance Bill 2017 to strengthen the regime for disclosure of avoidance of indirect tax. Provision will be made to make scheme promoters primarily responsible for disclosing schemes to HMRC and the scope of the regime will be extended to include all indirect taxes. This will have effect from 1 September 2017.

Penalty for participating in VAT fraud

As announced at Budget 2016, Finance Bill 2017 will introduce a new and more effective penalty for participating in VAT fraud. It will be applied to businesses and company officers when they knew or should have known that their transactions were connected with VAT fraud. The penalty will improve the application of penalties to those facilitating orchestrated VAT fraud. The new penalty will be a fixed rate penalty of 30% for participants in VAT fraud. This will be implemented following Royal Assent of the Finance Bill 2017.

Power to examine and take account of goods at any place

The government will introduce legislation in Finance Bill 2017 to extend the current customs and excise powers of inspection. This will amend the Customs and Excise Management Act 1979 and enable officers to examine goods away from approved premises such as airports and ports, to search goods liable for forfeiture and open or unpack any container. This will take effect from Royal Assent of the Finance Bill 2017.

Retail Export Scheme

The government is to consult on VAT grouping and provide funding with a view to digitising fully the Retail Export Scheme to reduce the administrative burden to travellers.

Tackling exploitation of the VAT relief on adapted cars for wheelchair users

The government is to clarify the application of the VAT zero-rating for adapted motor vehicles to stop the abuse of this legislation, while continuing to provide help for disabled wheelchair users.

Indirect taxes

Landfill tax

As announced at Budget 2016, the definition of a taxable disposal for landfill tax purposes is to be amended in order to bring greater clarity and certainty. This will come into effect after Royal Assent of Finance Bill 2017, on a day to be appointed by Treasury Order

.

Insurance Premium Tax increase

Insurance Premium Tax (IPT) will increase from 10% to 12% from 1 June 2017. IPT is a tax on insurers and it is up to them whether and how to pass on costs to customers.

Air Passenger Duty (APD): regional review

A summary of responses is to be published shortly relating to a recent consultation on how the government can support regional airports in England from the potential effects of APD devolution. Given the strong interaction with EU law, the government does not intend to take specific measures now, but intends to review this area again after the UK has exited from the EU.

Freeplays in Remote Gaming Duty

Following the consultation announced at Budget 2016, the government will legislate in Finance Bill 2017 to bring the tax treatment of freeplays for remote gaming more in line with the treatment for free bets under General Betting Duty. The changes will take effect for accounting periods beginning on or after 1 August 2017.

Tobacco Illicit Trade Protocol: licensing of tobacco machinery and the supply chain

Following consultation the government will legislate in Finance Bill 2017 to introduce a licensing scheme for tobacco machinery to allow officials to quickly determine whether machines are being held legally. Applications for licences will be accepted from January 2018 and the scheme will come into force on 1 April 2018.

Implementation of the Fulfilment House Due Diligence Scheme

As announced at Budget 2016 and following a consultation on the scope and design of the scheme, the government will legislate in Finance Bill 2017 to introduce a new Fulfilment House Due Diligence Scheme in 2018. This will ensure that fulfilment houses play their part in tackling VAT abuse by some overseas businesses selling goods via online marketplaces. The scheme will open for registration in April 2018.

Soft Drinks Industry Levy

Draft legislation for the Soft Drinks Industry Levy will be published on 5 December 2016.

Tax evasion and compliance

Emerging insolvency risk

HMRC intend to develop their ability to identify emerging insolvency risk, using external analytical expertise. HMRC will use this information to tailor their debt collection activity, improve customer service and provide support to struggling businesses.

Offshore tax evasion

A new legal requirement is to be introduced to correct a past failure to pay UK tax on offshore interests within a defined period of time, with new sanctions for those who fail to do so.

Requirement to register offshore structures

The government intends to consult on a new legal requirement for intermediaries arranging complex structures for clients holding money offshore to notify HMRC of the structures and the related client lists.

Hidden economy and money service businesses

The government will legislate to extend HMRC’s data-gathering powers to money service businesses in order to identify those operating in the hidden economy.

Tackling the hidden economy

Following consultation, the government will consider the case for making access to licences or services for businesses conditional on them being registered for tax. It will also develop proposals to strengthen sanctions for those who repeatedly and deliberately participate in the hidden economy. Further details will be announced in Budget 2017.

Tax administration

Making Tax Digital

In January 2017, the government will publish its response to the Making Tax Digital consultations and provisions to implement the previously announced changes.

Tax Enquiries: Closure Rules

The government will legislate to provide HMRC and customers earlier certainty on individual matters in large, high risk and complex tax enquiries.

Tax Avoidance

Disguised remuneration schemes

Budget 2016 announced changes to tackle use of disguised remuneration schemes by employers and employees. The government will now extend the scope of these changes to tackle the use of disguised remuneration avoidance schemes by the self-employed. Further, the government will take steps to make it less attractive for employers to use disguised remuneration avoidance schemes, by denying tax relief for an employer’s contributions to disguised remuneration schemes unless tax and National Insurance are paid within a specified period.

HMRC counter avoidance

The government is investing further in HMRC to increase its activity on countering avoidance and taking cases forward for litigation, which is expected to bring forward over £450 million in scored revenue by 2021-22.

Self-assessment and disclosure

Finance Act 2016, which became law on 15 September 2016, contains provisions designed to help clarify the time allowed for making a self-assessment.

The time limit is four years from the end of the tax year to which the self-assessment relates. This is the same time limit as for assessments by HMRC. The provisions will have effect on and after 5 April 2017, although there are transitional arrangements for years previous to this, as follows:

  • for tax years prior to 2012/13, taxpayers have until 5 April 2017 to submit a self- assessment;
  • for 2013/14, the deadline is 5 April 2018;
  • for 2014/15, the deadline is 5 April 2019; and
  • for 2015/16, the deadline is 5 April 2020.

The four-year time limit applies to everyone and those that are currently outside the time limit have notice to put in their self-assessment by 5 April 2017.

The concept of ‘finality’ is a key feature of the self-assessment system. The time limit for HMRC to make enquiries into information given in a return is generally linked to the date it was submitted. For personal tax returns delivered by the filing date (generally 31 January following the end of the tax year), the enquiry window closes 12 months after the delivery date. Once this date has passed a taxpayer can usually assume that his affairs for that year are final.

However, finality of a return within the above timeframe can be jeopardised if HMRC discover a loss of tax. In cases of where there has been careless or deliberate behaviour resulting in the loss of tax, the normal four-year window may be extended to 20 years.

Many taxpayers are not aware of HMRC’s discovery powers and even where they are aware of the possibility of discovery outside the enquiry window, they need to be aware that the subject of disclosure is itself not entirely free from doubt and may still be in a state of evolution.

The basic condition for a discovery assessment to make good a loss of tax is that an HMRC officer discovers income or gains which have not been assessed, or an insufficient assessment, or an excessive tax relief. However, this power is restricted in its application. Firstly, if the taxpayer has delivered a tax return containing an error or mistake, HMRC cannot make a discovery assessment if the return was based on the practice generally prevailing when it was made. Secondly, HMRC cannot make a discovery assessment unless one of the following conditions is satisfied:

  • the loss of tax, etc. was caused by careless or deliberate behaviour by the taxpayer or a person acting on his behalf; or
  • when HMRC can no longer enquire into the return, the officer could not have been reasonably expected from the information previously available to be aware of the matter giving rise to the discovery.

The taxpayer has the right of appeal against a discovery assessment on the ground that neither of the above conditions has been satisfied.

Taxpayers are required to exercise their judgment in providing the necessary level of disclosure. HMRC encourage submission of the minimum necessary, yet warn that ‘Information will not be treated as being made available where the total amount supplied is so extensive that an officer ‘could not have been reasonably expected to be aware’ of the significance of particular information and the officer’s attention has not been drawn to it by the taxpayer or taxpayer’s representative.’

In the case of returns where discovery is a possibility, taxpayers must give careful thought to the question of disclosure.

Accounts and record keeping

Statutory accounts

All companies irrespective of their size must file statutory accounts each year.

They are prepared using the information found in a company’s financial records at the end of each financial year.

All companies in the UK are legally obliged to send copies of their statutory accounts to:

  • their shareholders
  • anyone who can go to their annual general meeting
  • HMRC
  • Companies House (unless they send abbreviated accounts).

All statutory accounts must include a balance sheet that shows the value of everything the company owns, what it owes and how much it is owed.

They should also include:

  • a profit and loss report showing the company’s sales, costs and the profits or losses it has made over the financial year
  • a director’s report
  • notes about the accounts.

Some companies will also have to include an auditor’s report.

Statutory accounts must meet UK GAAP or International Financial Reporting Standards.

Record keeping

It is a legal requirement for a company to keep and maintain accurate financial records.

If a company fails to keep accounting records it can be fined up to £3,000. Any discrepancies which come to light in the event of an inspection might also lead to further investigation by HMRC and Companies House.

The accounting records which a company must keep are as follows:

  • all money spent and received
  • all assets owned by the company
  • debts the company is owed or owes
  • stock owned at year end
  • all goods purchased and sold
  • who goods were purchased from or sold to, unless the business is a retailer.

These records must be kept for a minimum of 6 years (though there are some cases where they will need to be kept for longer).

The company must immediately notify their Corporation Tax Office and try to accurately recreate them if records are destroyed.

Penalties and deadlines

If a private limited company is late filing annual accounts with Companies House it will have to pay a penalty. The penalties are on a sliding scale and are doubled if a company files late 2 years in a row:

Timescale Penalty

 

Up to 1 month £150
1 – 3 months £375
3 – 6 months £750
More than 6 months £1,500

A company can appeal a penalty but must give a credible reason for filing late and prove that circumstances beyond anyone’s control e.g. a fire or flood destroyed them a few days before filing. Companies House will only accept circumstances that are deemed ‘exceptional’ so delays in postal delivery, illness and being unfamiliar with the process will not be considered.