The Government has announced action to tackle the use of controversial 'fire and rehire' practices. In a press release issued 19 February 2024 they said:

“Action against unscrupulous employers to tackle the use of controversial ‘fire and rehire’ practices will be rolled out by the Government today [19 February].

Dismissal and re-engagement, also known as ‘fire and rehire’, refers to when an employer fires an employee and offers them a new contract on new, often less favourable terms.

The Government has been clear that it firmly opposes this practice being used as a negotiating tactic. Today, a new statutory Code of Practice has been published making clear how employers must behave in this area. 

This new Code of Practice shows the Government is going a step further to protect workers across the country. This will help to preserve security and opportunity for those in work, as part of our plan to grow the economy.

In future the courts, and employment tribunals, will take the Code into account when considering relevant cases. This will include on unfair dismissal claims where the employer should have followed the Code.

Employment tribunals will have the power to apply an uplift of up to 25 percent of an employee’s compensation if an employer unreasonably fails to comply with the Code.

The new Code clarifies how employers should behave when seeking to change employees’ terms and conditions, aiming to ensure employees are properly consulted and treated fairly.

Employers will now also need to explore alternatives to dismissal and re-engagement and have meaningful discussions with employees or trade unions to reach an agreed outcome.

The Code makes it clear to employers that they must not use threats of dismissal to pressurise employees into accepting new terms. They should also not raise the prospect of dismissal unreasonably early or threaten dismissal where it is not envisaged.”

In general, there is no Capital Gains Tax (CGT) on a property which has been used as the family's main residence. This relief from CGT is commonly known as Private Residence Relief or PRR. However, where part of the home has been let out the entitlement to relief may be affected. Homeowners that let out part of their house may not benefit from the full PRR but can benefit from letting relief. Since April 2020, letting relief has been restricted to homeowners who live in their property and partly rent it out.

The maximum amount of letting relief due is the lower of:

• £40,000;
• the amount of PRR due; and
• the same amount as the chargeable gain they made while letting out part of their home.

Worked example:

• You rent out a large bedroom to a tenant that comprises 10% of your home.
• You sell the property, making a gain of £75,000.
• You're entitled to PRR of £67,500 on the part used as your home (90% of the total £75,000 gain).
• The remaining gain on the part of your home that's been let is £7,500.

The maximum letting relief due is £7,500 as this is the lower of:

• £40,000
• £67,500 (the PRR due)
• £7,500 (the gain on the part of the property that's been let)

There's no Capital Gains Tax to pay – the gain of £75,000 is covered by the £67,500 PRR and the £7,500 letting relief.

You are not considered to be letting out your home if either:

• you have a lodger who shares living space with you; or
• your children or parents live with you and pay you rent or housekeeping.

Business Asset Disposal Relief (BADR) applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership. Where this relief is available sellers can benefit from a 10% tax charge on exit from their business if BADR is available. When the relief is available Capital Gains Tax (CGT) of 10% is payable in place of the standard rate. 

There are a number of qualifying conditions that must be met in order to qualify for the relief. This includes that both of the following must apply for at least two years up to the date you sell your shares:

• you are an employee or office holder of the company (or one in the same group); and
• the company’s main activities are in trading (rather than non-trading activities) – or it is the holding company of a trading group.

There are also other rules depending on whether or not the shares are part of an Enterprise Management Incentive (EMI) scheme.

BADR used to be known as Entrepreneurs’ Relief before 6 April 2020. The name change did not affect the operation of the relief.

You can currently claim a total of £1 million in BADR over your lifetime. The £1m lifetime limit means you can qualify for the relief more than once. The lifetime limit may be higher if you sold assets before 11 March 2020.

A limited company is a company ‘limited by shares’ or ‘limited by guarantee’.

Limited by shares

This is the most common limited company structure. A limited by shares company is a separate legal entity owned by its shareholders and managed by its directors. In smaller limited companies, shareholders and directors are the same persons. Directors are employed by their company; they are not self-employed. Limited companies are required to pay Corporation Tax on their profits, not Income Tax. 

Limited by shares companies are usually businesses that make a profit. This means the company:

• is legally separate from the people who run it;
• has separate finances from its shareholders personal ones;
• has shares and shareholders; and
• can keep any profits it makes after paying tax.

Limited by guarantee

In essence, a company limited by guarantee is a limited company with no shareholders. Instead, the persons who set up the company – its members – guarantee to pay a fixed amount into the company if required on the winding up of the company. Usually, these guarantees are for small amounts.

This type of company is typically used by not for profit organisations and charities rather than trading companies.

This means a limited by guarantee company:

• is legally separate from the people who run it;
• has separate finances from your personal ones;
• has guarantors and a ‘guaranteed amount’; and
• invests profits it makes back into the company. Profits are not distributed to the guarantors.

Self-employed taxpayers should notify HMRC as soon as practicable when they begin working for themselves. HMRC must be officially notified by 5 October following the end of the tax year so that a self-assessment return can be issued on time and to avoid any unnecessary penalties.

HMRC’s guidance says that you are probably self-employed if you:

• run your business for yourself and take responsibility for its success or failure;
• have several customers at the same time;
• can decide how, where and when you do your work;
• can hire other people at your own expense to help you or to do the work for you;
• provide the main items of equipment to do your work;
• are responsible for finishing any unsatisfactory work in your own time;
• charge an agreed fixed price for your work; or
• sell goods or services to make a profit (including through websites or apps).

The newly self-employed should also register to pay National Insurance contributions (NICs) and monitor whether a VAT registration is required.

There is a £1,000 tax allowances for miscellaneous trading income that has been available to taxpayers since April 2017. This is known as the trading allowance.

The exemption from tax applies to taxpayers who have trading income of up to £1,000 from:

• self-employment;
• casual services, for example, babysitting or gardening; and
• hiring personal equipment, for example, power tools.

Where this £1,000 allowance covers all the individual’s relevant income (before expenses) the income is tax-free and does not have to be declared to HMRC.

The Cost of Living support package has been designed to help over 8 million households in receipt of means tested benefits. The details of Cost of Living Payments due in the 2023-24 tax year were published in 2023 and have recently been updated with details of the final payment.

Eligible recipients will receive up to 3 Cost of Living Payments of £301, £300 and £299 during the course of the current tax-year. This includes those receiving pension credit and these payments will be made separately from other benefit payments. The first payment of £301 was made between April-May 2023 and the second payment of £300 was paid during August-September 2023.

The third payment of £299 was due to be paid in spring 2024. It was confirmed that 700,000 families who receive tax credits and no other qualifying benefits would receive their £299 Cost of Living Payment between 16 and 22 February 2024. 

In addition, more than 7 million eligible UK households have already received their £299 payments directly from the Department for Work and Pensions (DWP), these payments were made between 6 and 22 February 2024.

The payment from HMRC to tax credits customers will appear on bank statements as ‘HMRC COLS’, referencing Cost of Living Support. Those receiving the payment from DWP will see the payment reference as their National Insurance number followed by ‘DWP COL’.

HMRC continues to warn of the ever-present problem of fraudulent phishing emails, suspicious phone calls and texts. These unwanted emails, phone calls and texts are being sent from around the world as HMRC and other agencies continue to combat the problem.

These messages aim to obtain taxpayers personal and or financial information such as passwords, credit card or bank account details. The phishing emails and texts often include a link to a bogus website encouraging the recipient to enter their personal details.

For example, taxpayers who completed their tax return for the 2022-23 tax year by the 31 January 2024 deadline might be taken in by an email, phone call or text message offering a tax rebate.

Recipients of phony messages should avoid clicking on any links. HMRC asks that phishing emails and bogus text messages are reported. The emails can be sent to HMRC by email phishing@hmrc.gsi.gov.uk or by text message to 60599.

HMRC responded to 207,800 referrals from the public of suspicious contact in the past year to January – up 14% from the 181,873 reported for the previous 12 months. More than 79,000 of those referrals offered bogus tax rebates.

HMRC is clear that they do not email, text or phone a customer to tell them that they are due a refund or ask them to request a refund. Taxpayers receive repayments into their chosen bank account, and can see any transactions in their online HMRC account and in the HMRC app. 

If you are considering selling or buying to or from companies based outside the UK, you may well be overawed by the plethora of regulation you are required to be familiar.

As a first step, you could make use of the GOV.UK website and access HMRC’s “digital assistant”. You could use this to find out about:

• getting an EORI number 
• importing your personal belongings
• looking up commodity codes, duty and VAT rates
• trading with Northern Ireland

Take a look at this support page: https://www.gov.uk/business-support-helpline

If the digital assistant cannot help you, you can ask to transfer to a webchat with an HMRC adviser, if they are available.

You can call HMRC for help with questions about:

• importing
• exporting
• customs reliefs

If you think you have been charged too much, find out how to claim a repayment of customs charges in the ‘If you’re charged too much or return your goods’ section of the Tax and customs for goods sent from abroad guide.

Telephone: 0300 322 9434

Opening times: 24 hours a day, 7 days a week

And if you prefer to have something in writing, you can send a letter for help with questions about importing, exporting and customs relief at:

HM Revenue and Customs — CITEX Written Enquiry Team
Local Compliance S0000
Newcastle
NE98 1ZZ
United Kingdom

Include your VAT registration number and the name and postal address of your business.

Most small business owners are happy, from a financial point of view, if sales are in line with expectations. And there are obvious grounds for this conclusion, after all, if sales dry up there are no funds feeding into cashflow.

Unfortunately, top-line sales are just one aspect of a business that measure bottom-line profitability.

To keep an eye on profitability traders must also monitor costs, and to monitor costs effectively businesses need to create a forecast or budget of future costs and compare actual costs with these numbers.

We encourage business clients to create forecasts on a rolling basis so they can see, in detail, how sales and costs are trending over the next year.

To round off these trading forecasts businesses also need to plot the effects of profit growth on their balance sheets.

Balance sheets gather the profits for the current trading period, add this to any retained profits brought forward and capital you have introduced, and display how this represented by the business assets and liabilities. For example, the value of fixed assets (plant, equipment and vehicles) and current assets (money owed to you, stocks etc), plus bank balances; less liabilities (loans, taxes due, bank overdrafts and so on).

Your balance sheet rounds off your management accounts reporting and together with a statement of profits (compared to forecasts) and cash flow provides you with the financial reporting to manage your business effectively. Making sure your sales are on track is one key indicator of financial well-being, but it is not a complete picture.

If you would like to consider setting up and managing your finances on a regular basis, please call.

The government published the Autumn Finance Bill 2023 on 29 November 2023. The Bill is officially known as Finance Bill 2023-24. The Bill contains the legislation for many of the tax measures announced in the recent Autumn Statement.

The Bill has now completed its passage through the House of Commons and the 1st reading at the House of Lords. This stage signals the start of the Bill's journey through the Lords. The 2nd reading of the Bill in the House of Lords is scheduled to take place on 21 February 2024.

The Bill is known as a 'Money Bill' which means that the further stages of the bill namely, the committee stage, report stage and third reading at the House of Lords are usually formalities. Once these steps have been completed, the Bill will receive Royal Assent and become an Act of Parliament.

Some of the many measures included within the Bill are:

• Making full expensing permanent for expenditure on plant & machinery.
• Extending the sunset clause for the Enterprise Investment Scheme and the Venture Capital Trust scheme to 6 April 2035. 
• Reforming the film, TV and video games tax reliefs to refundable expenditure credits.
• Expanding the ‘cash basis’ – a simplified way for over four million smaller, growing traders to use a simpler method of calculating their profits and pay their income tax.
• Legislating for more generous support for loss-making R&D intensive SMEs as announced in spring.
• Setting the rates of excise duty and certain environmental taxes.

The Autumn Finance Bill will be followed by the Spring Finance Bill 2024 which will be published after the Spring Budget which is taking place on 6 March 2024. This will cover any remaining tax measures needed ahead of April 2024 and will become the second Finance Act of 2024.

Class 1A NICs are paid by employers in respect of most benefits in kind provided to employees such as a company car. Class 1A NICs are also due on charge on termination awards above a £30,000 threshold that have not already been subjected to Class 1 NICs deductions. There’s no employee contribution payable for Class 1A NICs.

Class 1A NICs are due in respect of most benefits provided to:

• directors and certain other persons in controlling positions;
• employees; and
• members of the family or households of the above.

Where a benefit is provided as part of salary sacrifice or other optional remuneration arrangement (OpRA), special rules apply and the Class 1A NICs are calculated as a percentage of the relevant amount.

Certain conditions must apply before Class 1A NICs are due. These conditions are that the:

• benefit must be from, or by reason of, an employee's employment and must be chargeable to Income Tax under ITEPA 2003 on an amount of general earnings as defined at Section 7(3) ITEPA 2003;
• employment must be 'employed earner’s employment' under social security law and employment as a director or an employee;
• benefit must not already attract a Class 1 NICs liability.

There is a statutory exemption for qualifying trivial benefits in kind costing £50 or less in kind. The tax-free exemption applies to small non-cash benefits like a bottle of wine, or a bouquet of flowers given occasionally to employees or any other BiK classed as 'trivial' that falls within the exemption. An annual cap of £300 is applicable for directors or other office-holders of close companies and to members of their families or households.

Private pensions can be an efficient way to pass on wealth, but it is important to consider what, if any, tax will be payable on a private pension you inherit. The person who died will usually have nominated you by telling their pension provider that you should inherit any monies left in their pension pot. If the nominated person can’t be found or has since died, the pension provider may make payments to someone else instead.

In general, if you inherit a private pension and the owner of the pension fund died before the age of 75, the benefits left in a private pension can be paid as a lump sum or drawdown income to you, with no tax to pay. If the deceased passed away after the age of 75 the pension will be taxed at your marginal income tax rate, so 20% if you are a basic rate taxpayer or 40% if you are in the higher tax bracket and 45% if you pay tax at the top rate. The rates may differ if you are a Scottish taxpayer.

There are restrictions on pensions from a defined benefit pot (usually workplace pensions) whereby the pension can only be paid to a dependant of the person who died, for example a husband, wife, civil partner or child under 23. This rule can sometimes be changed if the pension fund allows, but the inheritance will be taxed at up to 55% as an unauthorised payment.

The rules on inheriting a pension are complex and depend on what type it is and how old the holder was when they died. There are also important time limits that must be followed.