In this month’s Enews, we look at the review of the Loan Charge commissioned by the government. There is also news on business confidence for early 2025 and pensions reform to update you on. We look at the government’s decision to scrap powers for HMRC to collect data on the hours employees work. There is also news on tax reliefs for the alcohol sector and the self assessment deadline to update you on. We also look at a report into the cost of tax compliance on UK business. There is also news on topping up State Pensions and the business response to a cut to interest rates to update you on. Finally we look at a government consultation on mandatory electronic invoicing for businesses. There is also news on HMRC’s late and repayment interest rates and the business response to the jump in the rate of inflation to update you on.
- Government commissions review of the Loan Charge
- UK firms expecting slowdown
- Pension reforms to ‘unlock billions’ for government growth agenda
- Proposed HMRC powers to collect data on hours worked scrapped
- Tailored tax reliefs boost alcohol sector
- 11.5 million file self assessment by 31 January deadline
- Business tax compliance costs £15 billion a year
- £35 million added to State Pension pots
- Rate cut brings ‘measure of relief’ to business
- Government consults on mandatory e-invoicing
- HMRC cuts late and repayment interest rates
- Higher than expected inflation underlines business challenges
Government commissions review of the Loan Charge
The government has commissioned an independent review of the Loan Charge.
The Exchequer Secretary to the Treasury made a Written Ministerial Statement announcing that Ray McCann, a former President of the Chartered Institute of Taxation, would lead the review.
The review will examine the barriers preventing those who are subject to the Loan Charge but have not already settled and paid their tax liabilities in full from reaching resolution with HMRC. It will recommend ways in which they can be encouraged to settle with HMRC.
The reviewer will report and present their recommendations to the Exchequer Secretary to the Treasury by summer 2025.
However, the announcement drew criticism from campaigners.
Steve Packham, from the Loan Charge Action Group, said:
‘What the government has announced today is not a review at all, as it actually astonishingly excludes reviewing the Loan Charge. It is a complete sham and a betrayal of the promise made by Rachel Reeves last year.
‘The terms of reference start by justifying the Loan Charge and the whole approach taken and instead of being any review of the issue and scandal, is just about how people can be persuaded to give in and pay the unfair and disputed demands. This will not only not get to the truth, it will not resolve the matter and cases will unfortunately drag on and on.’
Internet link: GOV.UK Loan Charge Action Group website
UK firms expecting slowdown
UK firms are expecting to reduce both output and hiring this quarter, according to a survey conducted by the Confederation of British Industry (CBI).
Activity has been flat or falling since the middle of 2022, reflecting a prolonged period of stagnation.
The survey suggested that sentiment among businesses dipped in the aftermath of the Government’s Autumn Budget.
Some businesses said that the tax rises had resulted in them reviewing their budgets at short notice and taking steps to mitigate higher costs.
Plans include raising prices to pass on additional costs to clients, trimming investment plans and cutting staff to reduce business expenses.
Alpesh Paleja, Interim Deputy Chief Economist at the CBI, said:
‘After a grim lead-up to Christmas, the New Year hasn’t brought any sense of renewal, with businesses still expecting a significant fall in activity. Alongside plans to cut staff and raise prices further, this risks an increasingly awkward trade-off for policymakers.
‘Anecdotes suggest that companies are being hit by lacklustre demand and caution among consumers, while also continuing to adjust to measures announced in the Budget.
‘There is an urgent need to get momentum back into the economy. The government can help shift the UK’s economic narrative with more determined focus on measures that could drive growth.’
Internet link: CBI website
Pension reforms to ‘unlock billions’ for government growth agenda
New rules that will give more flexibility over how occupational defined benefit pension schemes are managed, according to the government.
The government said this will remove blockages that are inhibiting its growth agenda.
Approximately 75% of schemes are currently in surplus, worth £160 billion, but restrictions have meant that businesses have struggled to invest them.
Where trustees agree to share a portion of scheme surplus with a sponsoring employer, the employer may choose to invest these funds in their core business, for example to purchase equipment or supplies, and/or provide additional benefits to members of the pension scheme.
Prime Minister, Keir Starmer said:
‘The number one mission of my government is to secure growth, drive higher living standards for everyone, and get more money into people’s pockets.
‘To achieve the change our country needs requires nothing short of rewiring the economy. It needs creative reform, the removal of hurdles, and unrelenting focus.
‘Whether it’s how public services are run, regulation or pension rules, my government will not accept the status quo. Today’s changes will unlock billions of investment, pushing forward in delivering my Plan for Change.’
Internet link: GOV.UK
Proposed HMRC powers to collect data on hours worked scrapped
The government has stopped controversial plans to collect information about the exact hours worked by every employee in PAYE returns.
The data collection on employee hours was meant to start from April 2026, but the plan has been scrapped as part of the government’s attempts to reduce red tape and regulatory burden for business.
The (Draft) The Income Tax (Pay As You Earn) (Amendment) Regulations 2024 will not be progressed further after the results of a consultation were published.
HMRC said:
‘The government has listened to businesses and acted on their feedback about the administrative burden the requirements in these regulations would bring.’
The Chartered Institute of Taxation (CIOT) warned last May that the estimated one-off cost to businesses of £58 million and ongoing costs of £10 million – an average per business of £29 and £5 respectively- were “significantly underestimated” and that gathering additional data to provide to HMRC would lead to extra work for many employers.
The CIOT added it was unclear why HMRC wanted to collect this information and what they were going to use it for.
Eleanor Meredith, Chair of the CIOT’s Employment Taxes Committee, said:
‘We’re pleased to see the Government’s decision not to progress this legislation. We raised several concerns about the proposal, primarily the extra burden this would place on businesses to provide much more detailed data to HMRC.
‘We also raised concerns that the cost to businesses of complying with these requirements had been underestimated, despite the calculations being revised upwards during the course of the consultation.
‘It’s reassuring that we, and other representatives, have been listened to during this process and our warnings heeded.’
Internet link: GOV.UK CIOT website
Tailored tax reliefs boost alcohol sector
The government has introduced a package of support that it says will help the alcohol sector to grow.
From 1 February, draught relief has increased to knock 1p off duty on draught products whilst small producer relief – a measure to encourage craft brewers to innovate – is becoming more generous.
Together these tax cuts are worth £85 million and are tailored to support the alcohol sector to innovate and grow, according to HM Treasury.
The increase to draught relief, first announced at Autumn Budget, will affect around three in five of all alcoholic drinks sold in pubs, and represents the first duty cut on a pint of beer in 10 years.
As announced at the Autumn Budget, alcohol duty was also increased in line with inflation. The Treasury says this helps secure public finances and helps to fund the investment needed to grow the economy and fund public services.
Exchequer Secretary to the Treasury, James Murray, said:
‘Our pubs and brewers are an essential part the fabric of the UK and our brilliant high streets. Through draught relief, small producer relief, and expanding market access for smaller brewers, we will help boost sector growth and deliver our Plan for Change to put more money in working people’s pockets.’
Internet link: HM Treasury website
11.5 million file self assessment by 31 January deadline
More than 11.5 million taxpayers beat the self assessment deadline to file their tax return for the 2023/24 tax year by 31 January and avoid a £100 late filing penalty, according to HMRC’s data.
Almost three quarters of a million taxpayers left it to the last minute to file with 732,498 submitting returns on deadline day.
The most common time to file on 31 January was 16:00 to 16:59 when 58,517 people submitted returns. And 31,442 taxpayers cut it as close as possible by filing between 23:00 and 23:59.
Late filing and late payment penalties are charged for failure to meet the deadline. HMRC is urging anyone who has missed the deadline to file their tax return now and pay any tax owed.
The tax authority says one of the quickest ways to pay is via the free and secure HMRC app. Time to Pay arrangements are available for those who cannot pay their tax bill in full, it adds.
Myrtle Lloyd, HMRC’s Director General for Customer Services, said:
‘Thank you to the millions of people and agents who filed their self assessment tax return and paid any tax owed by 31 January. I’m urging anyone who missed the deadline, to submit their return as soon as possible to avoid any further penalties. Search ‘self assessment’ on GOV.UK to find out more.’
Internet link: HMRC press release
Business tax compliance costs £15 billion a year
An increasingly complex tax system is costing UK businesses an estimated £15.4 billion a year in compliance, according to a report from the National Audit Office (NAO).
HMRC’s cost of collecting tax has risen by £563 million over the past five years due to added complexity in the system plus investments in staff and IT.
During this period, the government’s tax yield rose by £113 billion in real terms, said the NAO.
HMRC estimates that compliant UK businesses incur costs of £15.4 billion each year in meeting around 2,500 obligations across 27 policy areas. These include £6.6 billion of fees paid to agents, accountants and other intermediaries, £4.5 billion of acquisition costs, such as software, and £4.3 billion of internal costs.
The report warned that HMRC is underestimating these costs as it does not take into account all taxpayer obligations.
Frank Haskew, Head of Taxation, at the Institute of Chartered Accountants in England and Wales (ICAEW), said:
‘This report highlights how the UK’s increasingly complicated tax system is saddling businesses and HMRC with extra burdens and costs, which are growing in real terms. The report also substantiates our concern that the cost to businesses of complying with their tax obligations is likely to be understated.’
Internet link: NAO website ICAEW website
£35 million added to State Pension pots
People plugging gaps in their National Insurance contributions (NICs) have added £35 million to their State Pensions since last April, according to figures from HMRC.
More than 37,000 online payments have been made through the online service, equating to 68,673 years of contributions.
The average online top-up payment is £1,835 and the largest weekly State Pension increase is £113.76. HMRC says that 65% of the years topped up by customers are from 2017 onwards.
HMRC and Department for Work and Pensions (DWP) are reminding customers they only have until 5 April to check their NICs record and fill any gaps from 6 April 2006 onwards.
From 6 April 2025, people will only be able to make voluntary National Insurance contributions for the previous six tax years, in line with normal time limits.
The Check your State Pension forecast service on GOV.UK is the quickest and easiest way to check if action is required, says HMRC. The HMRC app can also be used.
Angela MacDonald, HMRC’s Second Permanent Secretary and Deputy Chief Executive, said:
‘There are just two months left to check and fill any gaps in your NICs record from 2006 onwards to boost your State Pension entitlement. Don’t delay – it is quick and easy to check your NICs record on GOV.UK and it could help your finances in retirement.’
Internet link: HMRC press release
Rate cut brings ‘measure of releif ‘ to business
Businesses will get a ‘measure of relief’ after interest rates were cut by the Bank of England, says the British Chambers of Commerce (BCC).
The Bank cut the base rate from 4.75% to 4.5%, the lowest level since June 2023.
The Bank’s Monetary Policy Committee voted 7-2 in favour of the cut – those two members wanted a bigger cut, to 4.25.
The Bank also cut its growth forecast for the UK economy to 0.75% in 2025, down from a previous forecast of 1.5%.
David Bharier, Head of Research at the BCC, said:
‘Given the raft of cost pressures and global economic uncertainties businesses are facing, today’s interest rate cut provides a measure of relief for SMEs.
‘UK businesses are facing a range of challenges. Domestically, firms face increased tax bills and employment costs within weeks, with national insurance and minimum wage hikes. Internationally, a looming trade war could hit many UK importers and exporters. This is likely to feed into heightened inflation throughout the year.
‘The government needs to pull all levers possible to ease the cost pressures on firms and unlock investment opportunities. That includes accelerating business rate reform, supporting infrastructure projects and boosting trade opportunities.’
Internet link: Bank of England website BCC website
Government consults on mandatory e-invoicing
The government has launched a consultation on plans for the rollout of electronic invoicing (e-invoicing) in the UK.
The 12-week consultation is being jointly conducted by HMRC and the Department of Business and Trade (DBT) and will consider whether to make e-invoicing mandatory for businesses in the UK.
E-invoicing is the digital exchange of invoice information directly between buyers and suppliers.
The government says this could help businesses get their tax right first time, reduce invoicing and data errors, improve the accuracy of VAT returns, help close the tax gap and save time and money.
It usually results in faster business to business payments, leading to improved cash flow and less paperwork, the government adds.
The 34-question consultation can be completed online and once the 12-week feedback session closes.
James Murray, Exchequer Secretary to the Treasury said:
‘As part of the Prime Minister’s Plan for Change, we have begun our work to transform the UK’s tax system into one that is focused on helping businesses and the economy to grow.
‘E-invoicing simplifies processes, reduces errors and helps businesses to get paid faster. By cutting paperwork and freeing up valuable time and money, it will help improve firms’ productivity and their ability to grow and succeed.’
Internet link: HMRC press release
HMRC cuts late and repayment interest rates
HMRC will reduce late payment and repayment interest rates from 25 February following the cut in the base rate.
The Bank of England cut the base rate to 4.5% on 6 February, triggering a 0.25% cut in HMRC interest rates which are pegged to the base rate.
From 25 February, the late payment interest rate will be cut to 7.0% from 7.25%.
The repayment interest rate will be cut to 3.5% from 3.75% from 25 February.
HMRC late payment interest is set at base rate plus 2.5%. Repayment interest is set at base rate minus 1%, with a lower limit – or ‘minimum floor’ – of 0.5%.
Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments dropped to 5.5% from 5.75% from 17 February, a week earlier than the main late payment rate change.
Internet link: GOV.UK
Higher than expected inflation underlines business challenges
The higher-than-expected rise in the rate of inflation underlines the real challenges businesses face, according to the British Chambers of Commerce (BCC).
The consumer prices index (CPI) measure of inflation rose to 3% in January, up from 2.5% in December, according to the Office for National Statistics (ONS).
Economists had expected inflation to rise to 2.8% in January.
The increase was driven by rises in the prices of air fares, food and non-alcoholic drinks and private school fees, added the ONS.
The data underlines the inflationary pressures in the economy right now and the ‘real challenges businesses are facing’, said Stuart Morrison, Research Manager at the British Chambers of Commerce.
He continued: ‘Firms are having to deal with significant cost burdens which threaten to fuel inflation further. Within weeks they’ll be facing the hikes in national insurance contributions and the minimum wage.
‘The inflation landscape, coupled with ongoing global risks and the looming threat of US tariffs, is likely to give the Bank of England more food for thought, as it charts a cautionary path to further interest rate cuts.
‘Businesses are crying out for cost-pressures to be eased so that they can invest, recruit and trade – driving forward the economic growth we all want to see.’
Internet link: ONS website BCC website
