VAT BUSINESSES MUST BE READY FOR MAKING TAX DIGITAL FILING BY NOVEMBER

HMRC is reminding businesses that they will no longer be able to use their existing Value Added Tax (VAT) online account to submit VAT returns from 1 November.

By law, all VAT-registered businesses must now sign up to Making Tax Digital (MTD) and use compatible software to keep their VAT records and file their returns.

According to HMRC, more than 1.8 million businesses are already using the MTD for VAT service. Over 19 million returns have been successfully submitted through MTD-compatible software so far, the tax authority adds.

From November, businesses who file their VAT returns on a quarterly and monthly basis will no longer be able to submit them using their existing VAT online account, unless HMRC has agreed they are exempt from MTD.

If businesses do not file their VAT returns through MTD-compatible software, they may have to pay a penalty. Even if a business currently keeps digital records, they must check their software is MTD compatible and sign up for MTD before filing their next return.

Richard Fuller, Economic Secretary to the Treasury, said:

‘MTD can help businesses get their tax right first time, which cuts the administration burden and frees up time for them to get on with what matters most to them – growing their business.’

GOVERNMENT ABANDONS PLAN TO SCRAP 45P TOP RATE OF INCOME TAX

The government has abandoned its plan to abolish the 45% top rate of income tax due to the negative reaction it has received.

Chancellor Kwasi Kwarteng first announced the policy in the Mini Budget on 23 September.

He has now confirmed that it will not go ahead in a statement on the social media platform Twitter. It has not yet been confirmed whether the same reversal applies to the top rate of income tax on dividends.

In a tweet, Mr Kwarteng said:

‘From supporting British business to lowering the tax burden for the lowest paid, our Growth Plan sets out a new approach to build a more prosperous economy.

‘However, it is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country.

‘As a result, I’m announcing we are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened.

‘This will allow us to focus on delivering the major parts of our growth package.’

CHANCELLOR OUTLINES GROWTH MEASURES AT MINI BUDGET

Chancellor Kwasi Kwarteng used the 2022 Mini Budget to announce a series of tax cuts for businesses and individuals.

The Chancellor confirmed that the 1.25% rise in national insurance contributions (NICs) that came in this year will be reversed from 6 November, while the Health and Social Care Levy has been cancelled.

The planned rise in corporation tax to 25% will be scrapped and the rate maintained at the current 19%. The basic rate of income tax will be cut to 19p in April 2023, a year ahead of schedule.

Additionally, the level at which homebuyers will start to pay Stamp Duty Land Tax (SDLT) in England and Northern Ireland has been doubled from £125,000 to £250,000. First-time homebuyers will pay no SDLT on homes worth up to £425,000, up from the previous price of £300,000.

For businesses, Investment Zones will be established across the UK that benefit from lower taxes and liberalised planning frameworks to encourage business investment.

The cap on bankers’ bonuses, which limited rewards to twice the salary level, will be axed.

The Chancellor also committed to repealing the off-payroll legislation. The IR35 reforms, which rolled into the public and private sectors in 2017 and 2021 respectively, will no longer apply from April 2023 and responsibility for determining employment status where a personal service company is used will return to the worker.

Mr Kwarteng said:

‘Growth is not as high as it needs to be, which has made it harder to pay for public services, requiring taxes to rise. This cycle of stagnation has led to the tax burden being forecast to reach the highest levels since the late 1940s.

‘We are determined to break that cycle. We need a new approach for a new era focused on growth.’