Pension tax relief changes from April 2023

There was good news in the Budget for those saving in a personal pension. The current pension lifetime allowance (LTA) charge is being abolished from 6 April 2023. The LTA has caused some high earners, particularly doctors, to retire early as tax charges apply on crystallisation of pension funds if the LTA (currently £1,073,100) is exceeded.

Individuals may be able to receive 25% of their pension savings as a tax-free lump sum when they become entitled to their pension benefits. This is currently capped at 25% of the LTA and going forwards, for most individuals, will remain capped at £268,275.

Another pension limit increased by the Chancellor in the Budget was the pension Annual Allowance (AA) which increases from £40,000 to £60,000 from 6 April 2023. The AA applies to the combined pension input by the individual and, in the case of employees, their employer. Pension contributions in excess of the AA result in a tax charge on the individual, although they may take advantage of unused AA amounts from the 3 previous tax years.

For those with high incomes, the AA is tapered. From 6 April 2023, where a taxpayer’s adjusted income exceeds £260,000 (increasing from £240,000), the AA is tapered by £1 for every £2 in excess of £260,000, down to a minimum of £10,000 (increasing from £4,000).

The Money Purchase Annual Allowance (MPAA) replaces the AA when an individual starts to flexibly access a defined contribution pension scheme. The MPAA will increase from £4,000 to £10,000 on 6 April 2023.

Note that an individual’s pension contributions can be very tax efficient depending on their level of income.

The taxation rules for pensions are complex as there have been numerous changes in recent years so please talk to us about your pension contribution strategy.

Do you need further support with your pension? We offer a wide range of services which are unique to your businesses who are just getting going! Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

Letters from HMRC about Research and Development claims

Following on from the alleged abuse of the Research and Development (R&D) tax relief schemes, particularly the SME tax credit scheme, HMRC have issued “nudge” letters to the directors of over 2,000 claimant companies asking them to check their claims. Here is an extract from the letter:-

“As Company Director, it’s important you submit accurate claims for the correct amount of tax relief. If we check a claim and find it’s incorrect, your company might be asked to pay back the full amount.

This letter is not a compliance check into your Company Tax Return. It is to help you make sure your claims are complete and correct.

What you need to do now

Please review your previous R&D claim using the checklist below to make sure all the information you have given is complete and correct.

1. Have you read and understood the HMRC guidance on R&D?
2. Have you considered the conditions for making an R&D claim? Are you happy that the project is seeking an advance in the field of science and technology?
3. Do you understand what you’re claiming for?
4. Who has helped with the supporting R&D report and are they qualified to do so?
5. Have you read the R&D report, and do you agree with its contents?
6. If you’re working with a third party to make a claim, have they answered your questions satisfactorily?
7. Does this claim seem to be too good to be true?

If you’re unsure about the answers to these questions, you should contact HMRC….

…..In some circumstances we may need to open an enquiry into your claim. This could lead to a delay in us paying you any tax relief due. It could also mean that we have to reject your claim if we find it’s incorrect. And we could charge you a penalty. The best way to avoid delay, rejection of your claim, or penalties is to check your previous and future claims online now.”

We encourage all R&D claimants to consider questions 1-7 above and to contact us if they have any queries.

Do you need further guidance on HMRC Research and Development claims? We offer a wide range of services which are unique to your business. Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

HMRC penalties for careless and deliberate errors

As well as charging interest on tax paid late, HMRC may also levy a penalty where there is an error in a tax return. These penalties may be judged as careless or deliberate and the level of penalty will also depend upon whether or not;

• the taxpayer has been upfront, making unprompted disclosures to correct the error;
• the error was deliberate; and
• the error was concealed from HMRC.

This matter is topical following the recent sacking of the former Chancellor of the Exchequer and Chairman of the Conservative Party Nadeem Zahawi who was adjudged to have been careless in connection with the reporting of capital gains and allegedly received a 30% penalty.

The amount of the penalty is based on the Potential Lost Revenue (PLR) and the range of penalties is set out in the table below:

Higher maximum penalties may apply when offshore matters are involved.

Where HMRC issue the taxpayer with a “nudge” letter that would be regarded as a prompt from the department and thus potentially increases the level of penalty that might be imposed.

The law defines ‘careless’ as a failure to take reasonable care and needs to have consideration of the taxpayer’s abilities and circumstances. In HMRC’s view it is reasonable to expect a person who encounters a transaction or other event with which they are not familiar to take care to find out about the correct tax treatment or to seek appropriate advice. A taxpayer who can demonstrate that they acted on professional advice from a person with the appropriate expertise, will normally be able to demonstrate they take reasonable care.

HMRC may reduce, or mitigate, the penalty depending on the quality of the disclosure, but any such reduction will not take the penalty percentage below the bottom of the stated range. The quality of disclosure is based on three factors – ‘telling’, ‘helping’, and ‘allowing access to records’.

HMRC may also suspend a penalty if it can be demonstrated that controls can and will be put in place to prevent the matter occurring again in future.

We offer a wide range of services which are unique to your businesses who are just getting going! Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.

Reduce your 2021/22 tax bill

If you would like to legitimately reduce your 2021/22 tax bill that you have just paid, or your bill for 2022/23, you might want to consider investing in shares in qualifying Enterprise Investment Scheme (EIS) companies.

Under this HMRC approved scheme every £1,000 you invest reduces your tax bill by £300 (30%), provided you are not connected with the company. Broadly you are not allowed to be an employee or control more than 30% of the company.

The reduction in your tax bill is available in the tax year in which the shares are issued, however you may elect to treat some or all of the shares as issued in the previous year and claim tax relief in that previous year.

If you are prepared to take more of a risk by investing in small start-up companies, the Seed EIS scheme provides a 50% tax deduction on up to £100,000 of investments.

Although we can advise you on the tax advantages of investing in EIS and Seed EIS companies you will need to consult with a suitably qualified Independent Financial Adviser who will help you find investments appropriate to your needs.

Do you want to reduce your 2021/22 tax bill?

We offer a wide range of services which are unique to your business and our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.

Our fantastic team at A&C Chartered Accountants are here to help.