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Business Companion News – August 2024
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Welcome to our Business Companion Newsletter for August 2024.

Summer Parties
Don’t forget that HMRC allows your company to spend up to £150 (in total) per staff member on annual parties. This could be, for example, split between a summer Barbeque or Day at the Races and a Christmas Party.  To find out more just contact us.

Make the most of the warm weather over the next couple of weeks!
 

August 2024

• Major R&D scheme overhaul

• Commuting Costs Guidance Updated

• Reporting Rules for Digital Platforms

• Loss Relief
Major R&D scheme overhaul
A new merged research and development (R&D) scheme has come into effect for periods beginning on or after 1 April 2024.
The new scheme unifies the old R&D expenditure credit (RDEC)for large companies and the small and medium entity (SME) relief schemes.

In line with the RDEC, the merged scheme offers a taxable credit of 20% of qualifying R&D expenditure. This is a net benefit of 15% of qualifying expenditure for claimants paying the 25% main rate of corporation tax, or 16.2% for companies paying the 19% small companies rate and loss-making companies.

Under the previous RDEC scheme, services contracted out to another individual or company did not attract relief except in very limited circumstances. Under the new scheme the approach to subcontracting is more generous, closer to the previous SME relief rules.

Enhanced R&D intensive support (ERIS)
A separate more generous regime is available for loss-making ‘R&D intensive’ SMEs. To qualify for the ERIS an SME must have a trading loss before R&D expenditure and qualifying R&D expenditure must be 30% or more of its total expenditure (reduced from 40% from 1 April 2024).

The existing subsidised expenditure rules for SMEs have been removed so expenditure will now qualify for the relief even if the R&D project is subsidised. This is good news for innovative start-up companies and claimants in industries where grant funding is common.

Third parties can no longer be nominated to receive R&D tax credits on behalf of claimant companies for claims submitted after 31 March 2024.

These changes are likely to have a significant impact on most if not all businesses involved in R&D. Contact us to discuss what this might mean for your business.

 
Commuting Costs Guidance Updated
Reporting Rules for Digital Platforms
HMRC has updated its guidance to clarify the tax position of reimbursed travel costs for hybrid workers.

As many employees are now working from home at least part of the time, some employers are offering to repay certain travel expenses. HMRC’s updated guidance includes new examples to illustrate when those costs are deductible and when they are not.

Reimbursed travel expenses can be deducted if the employee is obliged to incur and pay them and the expenses are attributable to the employee’s necessary attendance at any place in the performance of the duties of the employment.

This does not apply where the expenses are incurred in ordinary commuting, defined as travel between the employee’s home and a permanent workplace; or a place that is not a workplace and a permanent workplace.Introducing a hybrid working arrangement may result in a change to an employee’s permanent workplace for tax purposes.

This is not necessarily the case and where employees are still required to spend some days in the office the permanent workplace is unlikely to change to the home.Travel to work on office days will still be regarded as normal commuting with any reimbursed costs subject to tax and NIC.

Where there is no longer an office to travel to or the employee is 100% home-based the home may be treated as the permanent workplace.




 
From 1 January 2024 online platforms such as websites, online marketplaces and apps that allow individuals and businesses to sell items and services are required to collect and report seller information and income to HMRC.

If you sell items through eBay, Etsy, Facebook or another online marketplace, or rent out your property using Airbnb, Vrbo, Booking.com or a similar platform, HMRC will cross-reference the data it receives with other records it holds to ensure you are reporting your income accurately.

Freelancers who operate through an online platform such as Deliveroo or Uber will also come under the reporting requirements.

Websites and digital platforms must report information about sellers to HMRC including:
  • name;
  • address;
  • date of birth;
  • taxpayer identification number;
  • earnings from selling via the platform;
  • fees paid to the platform;
  • business registration numbers;
  • where property has been rented out, the address of the property; and
  • bank account details for the accounts the income was paid into.
The first reporting deadline for these digital platforms is 31 January 2025. They will be required to keep a copy of any data that they send to HMRC about you and provide this information to you.

The new reporting requirements have been brought in to help sellers get their tax right and to enable HMRC to detect and tackle non-compliance. They do not change the tax rules for online selling.

 
Loss Relief
Losses calculated under the ‘accrual basis’ of accounting can reduce the tax payable on any other income of the current tax year.  Tax relief can also be claimed by offsetting the loss against any capital gain incurred but only if offset is not possible against other income. Finally losses can reduce the tax payable on any other income of the current tax year or tax that has been paid for the previous tax year.

Coronavirus concession
As part of the measures to help businesses during the pandemic, the government introduced a temporary Coronavirus concession to allow the carry back of losses over a longer period with a view to enabling a tax refund, if available.  This concession applies to trading losses made by companies in accounting periods ending between 1 April 2020 and 31 March 2022. The concessionary rules permitted losses to be carried back for a period of three years, with losses being carried back against later years trading profits first.  For such companies we were able to usually find a year with some tax profits and recover 19% tax.  

Now
Now the concession is over the rules are simpler.  The companies that make losses in accounting periods ending from 1 April 2022 onwards can now only take a loss back one year.  As it is we are finding that many companies made profits in 21/22 but losses in 22/23.  We could claim the loss in 22/23 back against 21/22.  However a further loss in 23/24 becomes unclaimable under these tighter rules.  So no 19% – the losses have to be thrown forwards.  

Therefore losses this year will be thrown forwards.  Some businesses have had hard times temporarily but remain very profitable.  For them this is actually an advantage.  Now the tax recovered might be at 25% rather than the 19% foregone under the old rules.
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Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks or Xero.

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