The Growth Plan 2022

The new Chancellor of the Exchequer, Kwasi Kwarteng, delivered a fiscal statement referred to as The Growth Plan 2022 on 23 September 2022. The statement to a packed House of Commons centred on the government’s plans for generating growth.

Colloquially referred to as a mini-budget, it would perhaps be more fitting to refer to the statement as a maxi-budget. In his first major statement since becoming Chancellor, a number of striking measures were announced representing a major shift in policy direction for the Exchequer.

Paying an estimated £45 billion for these measures will see borrowing levels soar as the government attempts to grow the economy and avoid a deep recession. It is hoped that these measures will help to reduce peak inflation by around 5%.

The Chancellor was also keen to remind the House of the measures already announced to tackle spiralling energy costs. This included the Energy Price Guarantee which will see the average household have their energy bills capped at £2,500 a year for the next two years, a £400 energy rebate for UK households as well as more support for vulnerable households.

A new Energy Bill Relief Scheme to help cut energy bills in the non-domestic sector will also apply to energy usage from 1 October 2022 to 31 March 2023 and will automatically be applied to qualifying businesses fuel costs.

Taxation changes

National Insurance

Before the Chancellor rose to his feet, a number of other important announcements had already been made. The first of these related to the new Prime Minister’s pledge to reverse the 1.25% rise in National Insurance contributions (NICs) that came into effect at the start of the 2022-23 tax year on 6 April 2022. This will see the reversal of the increase from 6 November 2022 and will cover Class 1 (both employee and employer), Class 1A , Class 1B and Class 4 (self-employed) NICs.

It was also confirmed by the Chancellor that the ring-fenced Health and Social Care Levy of 1.25% due to be introduced from April 2023 will not go ahead as originally planned. These measures will provide average savings of around £135 in this tax year and £330 in 2023-24 for almost 28 million people across the UK as well as a tax cut for 1 million businesses. The 1.25% increase to the rate of Income Tax on dividends which took effect in April 2022 will remain in place until April 2023.

Income Tax

The Chancellor announced that the government will reduce the basic rate of Income Tax to 19% (from 20%) with effect from April 2023. This brings forward the planned 1p cut in the basic rate by 12 months. According to HM Treasury, the 19% rate is the lowest the basic rate has ever been in the modern Income Tax system. There will also be a four-year transition period for Gift Aid relief to maintain the Income Tax basic rate relief at 20% until April 2027 to help support almost 70,000 charities.

In a surprise move, the Chancellor also announced that the Additional Rate of Income Tax of 45% that applies to taxpayers with an annual income over £150,000 will be scrapped. The 45% rate has been in place since April 2013 and its removal from next April will mean that there will be a single higher rate of Income Tax of 40%.

The reductions will not apply to the non-savings and non-dividend income of Scottish taxpayers because the power to set these rates is devolved to the Scottish Government. However, the Scottish government will receive additional funding which they can use as they see fit, including a reduction on Income Tax or other taxes, or increased spending. The Income Tax rate cuts will apply to Welsh taxpayers.

Income Tax and dividend income

The tax rates payable on dividend income will revert back to those that applied before April 2022, from April 2023 in line with the 1.25% decrease in NIC contributions.

The rates that will apply in all regions of the UK from 6 April 2023 are:

  • Dividends that form part of the basic rate band – 7.5% (8.75% 2022-23)
  • Dividends that form part of the higher rate band – 32.5% (33.75% 2022-23)

Dividends that form part of the additional rate band and are currently liable to tax at 39.35% will be withdrawn from 6 April 2023 to align with the removal of the 45% additional Rate of Income Tax. This change applies UK-wide.

The dividend tax is charged on taxable dividend income an individual receives that falls outside of the personal allowance and that exceeds the dividend allowance. The current £2,000 dividend tax-free allowance is unchanged.

Those who would have otherwise been additional rate taxpayers will from April 2023 benefit from a Personal Savings Allowance of £500, in line with higher rate taxpayers. This was not previously available to them.

Stamp Duty Land Tax (SDLT)

The Chancellor announced a permanent increase of the SDLT nil rate band to £250,000 (from £125,000) with immediate effect from the date of his announcement, 23 September 2022.

Prior to the announcement, no SDLT was payable for first-time buyers making a purchase of up to £300,000. This limit has now been increased by £125,000 with immediate effect to £425,000. The first-time buyers relief also increases the nil-rate threshold to £425,000 (£300,000 prior to 23 September 2022) for first-time buyers of properties costing up to £625,000 (£500,000 prior to 23 September 2022). There is no relief available for first-time buyers spending more than £625,000 on a property. There are a number of requirements that must be met in order to qualify for the relief.

These measures will reduce stamp duty bills across the board for all movers by up to £2,500 with first-time buyers able to access up £11,250 in relief.

It is important to note that these measures apply to England and Northern Ireland only. Any changes to the Land and Buildings Transaction Tax in Scotland or the Land Transaction Tax in Wales will be announced separately

Reversal of Corporation Tax increase

The Corporation Tax main rate had been set to increase from 19% to 25% from 1 April 2023 for companies with profits over £250,000. A Small Profits Rate (SPR) of 19% was also to have been introduced from the same date for companies with profits of up to £50,000 with a marginal rate of Corporation Tax. This would apply to companies making profits of between £50,000 and £250,000 meaning an incremental rise in the Corporation Tax rate from 19% to 25% depending on how much profit a firm was making.

The Chancellor has now confirmed that these planned rises have been cancelled in full. This means that the Corporation Tax rate will remain at 19% for all firms, regardless of the amount of profits made. The Chancellor was excited to inform the House that this means the UK will have the lowest Corporation Tax rate in the G20 group of the world's major economies.

Annual Investment Allowance threshold

The Annual Investment Allowance (AIA) was permanently set at £200,000 for all qualifying expenditure on or after 1 January 2016. Following the pandemic, this limit had been temporarily increased (with a number of extensions) to £1 million.

This increased threshold was set to expire on 31 March 2023, but the Chancellor announced that the limit will be permanently extended to £1 million. This will give business owners thinking about high-value investments in qualifying assets some comfort and remove the need to rush any capital acquisitions.

Investment Schemes

The Seed Enterprise Investment Scheme (SEIS) is to be extended to help more UK start-ups raise higher levels of finance.

The Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) will be extended beyond 2025.

Investment Zones

As part of the Growth Plan, the government is in discussions with 38 local authorities to establish investment zones in England.

The government will also work with the devolved administrations and local partners to deliver this opportunity to drive local growth in Scotland, Wales and Northern Ireland.

These Investment Zones will be designed to encourage investment and new economic activity, supporting growth and jobs. The Investment Zones will benefit from lower taxes and more relaxed planning frameworks to encourage rapid development and business investment.

VAT

The Chancellor announced that VAT-free shopping for overseas visitors is to be reintroduced to help encourage more tourists to the UK. The VAT Retail Export Scheme was cancelled on 1 January 2021. The old paper-based system will be replaced with a modern, digital one and will be put in place as soon as possible.

Miscellaneous

  • The planned increases next year in the duty rates for beer, cider, wine and spirits in line with RPI have all been cancelled.
  • The cap on bankers’ bonuses is to be scrapped to enhance London’s reputation as a worldwide banking centre.
  • The Office of Tax Simplification is to be wound down with responsibility for tax simplification being handed to Government.
  • There will be moves to simplify IR35 rules, including the repeal of the 2017 and 2021 reforms.

The Customs Declaration Service

Businesses importing goods must submit import declarations from 1 October 2022 using the Customs Declaration Service (CDS). The CDS is a customs IT platform designed to modernise the process for completing customs declarations for businesses that import or export goods from and to the UK.

A phased launch of the service started in August 2018. The CDS is used for making import and export declarations when moving goods into and out of the UK.

The CHIEF system is being withdrawn in two stages. The first stage, 30 September 2022, saw the ability to make import declarations on CHIEF close. From 1 October 2022, businesses who did not move across to the CDS are now unable to import goods into the UK. The second stage will happen on 31 March 2023 when the CHIEF system will fully close. From this date, the ability to make export declarations using CHIEF will also be withdrawn.

Even businesses that use a customs agents need to ensure they take the following steps:

  • subscribe to the CDS;
  • choose a payment method;
  • check their standing authorities are correctly set up; and
  • give their customs agent customs clearance instructions.

HMRC’s Director of Programme and Operational Delivery for Borders and Trade said:

'Those concerned about moving across to the Customs Declaration Service should work with a customs agent who is ready to use the system and can make declarations on their behalf.'

Transfer of business as a going concern

The transfer of a business as a going concern (TOGC) rules concern the VAT liability on the sale of a business. Normally the sale of the assets of a VAT registered or VAT registerable business will be subject to VAT at the appropriate rate.

Where the sale of a business includes assets and meets certain conditions the sale will be categorised as a TOGC. A TOGC is defined as 'neither a supply of goods nor a supply of services' and is therefore outside the scope of VAT. Under the TOGC rules no VAT would be chargeable on a qualifying sale.

All the following conditions are necessary for the TOGC rules to apply:

  • The assets must be sold as part of a 'business' as a 'going concern'. In essence, the business must be operating as such and not just an 'inert aggregation of assets'.
  • The purchaser intends to use the assets to carry on the same kind of business as the seller.
  • Where the seller is a taxable person, the purchaser must be a taxable person already or become one as the result of the transfer.
  • Where only part of a business is sold it must be capable of separate operation.
  • There must not be a series of immediately consecutive transfers.
  • There are further conditions in relation to transactions involving land.

The TOGC rules can be complex, and both the vendor and purchaser of a business must ensure that the rules are properly followed. The TOGC rules are also mandatory which means that it is imperative to establish from the outset whether a sale is or is not a TOGC. For example, if VAT is charged in error, the buyer has no legal right to recover it from HMRC and would have to seek to recover this 'VAT' from the seller.

Companies House new WebFiling account

Companies House has introduced a new WebFiling account. The new account represents a first step in creating a single sign-in across all Companies House services and a continued push to becoming a fully digital organisation.

The new WebFiling account also includes new benefits and options for users that include the following:

  • multi-factor authentication;
  • the ability to link your company to your WebFiling account to give you more control over your filings;
  • the ability to digitally authorise people to file on your behalf on WebFiling, and to remove authorisation;
  • easily seeing who’s digitally authorised to file for your company; and
  • an option to sign up to emails to help you with the running of your company.

Online filing can also help reduce the likelihood of late filings and associated penalties. There are also built-in checks when filing documents online which can help avoid errors and rejection. Companies House also sends confirmation once an online filing has been accepted. If your document is rejected, it can be quickly corrected and resubmitted.

In order to register for online WebFiling, you must register with Companies House and choose a password. Companies House will then send an authentication code to the company’s registered office address. Both the password and Authentication Code are needed to use WebFiling.

Some small companies have had concerns adopting to electronic filing, however, in the long run the investment in using electronic filing should more than pay for itself in time and fees saved, as well as providing a more secure filing experience.

Land Registry Property Alerts

HM Land Registry's property alert service is a free service to help protect property owners from fraud. The counter-fraud security measure was introduced by the Land Registry to monitor registered properties where there is a concern that it might be subject to a fraudulent sale or mortgage. The alert service can be used to monitor up to ten properties. It is a particularly useful fraud warning tool if you have an unencumbered property.

The property alert service can be used to monitor any property in England or Wales that is registered with the Land Registry. Once registered, owners or other interested parties will receive email alerts when certain activity occurs on their monitored properties, allowing them to act if necessary. For example, this could be an alert that a new mortgage has been taken out. You don't have to own a property to set up an alert.

Tenanted, unoccupied and mortgage-free properties have been known to be particularly vulnerable to fraud. Fraudsters can attempt to acquire ownership of a property either by using a forged document to transfer it into their own name, or by impersonating the registered owner. They can then use this bogus evidence to support a mortgage application. Once the mortgage is completed the offender disappears, leaving the property owner to pay the bill.

Private owners and companies who feel their property might be at risk can also apply to have a restriction entered on their title register which is designed to help prevent forgery.

New Chancellor’s approach to economic priorities

The new Chancellor, Kwasi Kwarteng, recently met in London with various market and city leaders to set out the Prime Minister’s new, pro-growth economic approach.

The new approach focuses on providing immediate support for families and businesses to cope with soaring inflation and rising fuel costs whilst at the same time supporting the economy to grow in a fiscally sustainable way.

At the meeting, the Chancellor also underlined his support for the Bank of England’s moves to keep inflation under control as much as possible, which is central to tacking cost of living challenges.

In a press release from HM Treasury, Mr Kwarteng stressed that the government will support the economy to grow. He recognised that the rate of growth has been too low and committed to a radical supply side agenda to deliver lasting economic growth. This will mean creating the right conditions for business investment and innovation, reducing burdensome regulation and taxes, which will in turn create jobs, wealth and drive economic growth.

Since the new Prime Minister, Liz Truss, took office on 6 September 2022 we have seen the introduction of a cap in energy bills at £2,500 for the average household from 1 October 2022. The new Chancellor will also make further important announcements in the mini-Budget on Friday 23 September.

Creditor bankruptcy and liquidation cost changes

The Insolvency Service is a government agency that provides services to those affected by financial distress or failure. The Insolvency Service operates as an executive agency of the Department of Business, Energy and Industrial Strategy (BEIS). 

The Insolvency Service has announced changes to the deposits paid to initiate creditor bankruptcies and compulsory liquidations.

The petition deposit, the amount that needs to be paid up-front to seek an order, will be increasing in all cases where a petition is filed at court on or after 1 November 2022. The current fees have been in place since April 2016.

Changes being made to deposits Current Fee   Fee from 1 November 2022
Creditors’ bankruptcy petition deposit £990 £1,500
Company liquidation petition deposit  £1,600  £2,600

The deposit contributes to the Official Receiver’s administration costs, with the remainder of their costs recovered through fees charged against assets realised during the bankruptcy or liquidation proceedings.

If there are sufficient assets to recover all the fees and costs, then the deposit is returned to the party who initiated the insolvency.

There are no changes to the adjudicator petition deposit where the individual applies for their own bankruptcy.

Energy Bill Relief Scheme launched

The Business Secretary Jacob Rees-Mogg has announced the launch of the new Energy Bill Relief Scheme to help cut energy bills in the non-domestic sector. The new scheme will cover all non-domestic energy customers, including UK businesses, the voluntary sector, for example charities and the public sector such as schools and hospitals.

This new support measure will apply to fixed contracts agreed on or after 1 April 2022, and to deemed, variable, flexible tariffs and contracts. It will apply to energy usage from 1 October 2022 to 31 March 2023 and will be automatically applied to qualifying businesses fuel costs. The level of price reduction for each business will vary depending on their contract type and circumstances.

The discount on energy costs for the non-domestic sector is broadly equivalent to the Energy Price Guarantee for households that was announced earlier this month. This Energy Price Guarantee will see the average household have their energy bills capped at £2,500 a year.

Whilst the support for households has been put in place for two years, the Energy Bill Relief Scheme for non-domestic energy users will apply for six months. However, the government has said that further support to those deemed eligible will be available after the end of the initial six-month support period.

Commenting on the launch of the scheme, the Prime Minister Liz Truss said:

I understand the huge pressure businesses, charities and public sector organisations are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods.

As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind.’

Tax Diary October/November 2022

1 October 2022 – Due date for Corporation Tax due for the year ended 31 December 2021.

19 October 2022 – PAYE and NIC deductions due for month ended 5 October 2022. (If you pay your tax electronically the due date is 22 October 2022.)

19 October 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2022. 

19 October 2022 – CIS tax deducted for the month ended 5 October 2022 is payable by today.

31 October 2022 – Latest date you can file a paper version of your 2021-22 self-assessment tax return.

1 November 2022 – Due date for Corporation Tax due for the year ended 31 January 2022.

19 November 2022 – PAYE and NIC deductions due for month ended 5 November 2022. (If you pay your tax electronically the due date is 22 November 2022.)

19 November 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2022. 

19 November 2022 – CIS tax deducted for the month ended 5 November 2022 is payable by today.
 

Goods sent from abroad

There are special rules to help ensure that goods sent from abroad are taxed appropriately and do not disadvantage UK businesses supplying goods in the UK. For example, by having to compete with VAT free imports. This includes goods that are new or used and bought online, bought abroad and shipped to the UK and goods received as gifts.

This means that in order to receive goods you may have to pay VAT, Customs Duty or Excise Duty if they were sent to:

  • Great Britain (England, Wales and Scotland) from outside the UK.
  • Northern Ireland from countries outside the UK and the European Union (EU).

VAT is charged on all goods (except for gifts worth £39 or less) sent from:

  • outside the UK to Great Britain; and
  • outside the UK and the EU to Northern Ireland.

Online marketplaces that engage in facilitating the sale of goods are usually responsible for collecting and accounting for the VAT. If the VAT has not been collected, VAT will have to be paid to the delivery company either before the goods are delivered or when goods are collected. If you have to pay VAT to the delivery company, it’s charged on the total package value which includes the value of the goods, postage, packing, insurance and any duty owed.

Generally, there are no Customs Duties payable on non-excise goods worth £135 or less. There are various rates payable above this level and on excise goods of any value.