HM Revenue & Customs (HMRC) has warned that a new wave of fraudulent text messages is targeting taxpayers using iPhones, claiming that recipients are owed tax refunds and must supply personal information to receive them.

Some recipients are also being asked to follow a link to access their refund, which is disguised to appear legitimate.

This latest incident comes as HMRC-related scam messages rise sharply, growing by 36 per cent per annum between January 2022 and January 2023.

Recognising an incident

HMRC is aware of the issue and is working to tackle it. It has urged taxpayers to be cautious and be on the lookout for any fraudulent communications purporting to be from HMRC.

This includes text messages, as well as emails, phone calls, social media and WhatsApp messages, both on Apple and other devices.

HMRC has also warned recipients of these messages to exercise caution when asked to act quickly or send personal details via text message – as these are common warning signs of fraudulent activity.

Finally, it has confirmed that it avoids using methods of communication commonly used by fraudsters, particularly steering clear of requesting personal details via text message.

If you are concerned about communications relating to a tax refund, contact your accountant for advice.

Reporting an attack

The issue that many taxpayers are facing with this new campaign of scam messages is that it is difficult to report and block the number.

Fraudsters are using legitimate business phone numbers or Apple accounts to send messages, meaning they often cannot be blocked by the recipient.

Many recipients are also facing issues in reporting scam messages to Ofcom’s designated anti-spam line because they are often sent from legitimate business numbers.

For further advice on tax, tax refunds and staying safe as a taxpayer, please contact our team today.

The Consultative Committee of Accountancy Bodies (CCAB) has released the 2024 edition of its Statement of Recommended Practice Accounting (SORP) for Limited Liability Partnerships (LLPs).

CCAB is appointed by the Financial Reporting Council (FRC) to oversee the SORP for LLPs, ensuring that such businesses can present financial statements and accounts similar to those of other businesses, such as limited companies.

LLPs can present a challenge as they incorporate elements of limited companies and general partnerships.

Partners bear financial responsibility for the business, but only up to the value of the capital that they have contributed.

For this reason, CCAB regularly issues updated guidance for accounting rules for LLPs – with new rules applying to accounting periods (APs) beginning from 1 July 2024.

Remuneration changes

The most recent changes include guidance on sharing group profits and post-retirement payments for partnership members.

The latest SORP for LLPs dictates that, where an LLP has members who provide capital to the business, but where some do not provide ‘substantive services’ to the business, the automatic right to a share of the LLP’s profits should be treated as a return on capital – i.e. a share in future profits of the LLP.

Additionally, the SORP confirms that, if a former member is classed as an employee, post-retirement payments are covered by Section 28 of FRS 102.

It further outlines that LLP obligations towards members post-retirement are covered by FRS 102 and 103, including:

• Insurance contracts – Contracts which carry varying liability, for example when the total amount payable by the LLP is significantly affected by the longevity of the retiree.
• Share-based payments – Where a contractual obligation meets the definition of a share-based payment, this will fall in the scope of Section 26. For example, a retiree with an equity interest in the business may be entitled to a specific percentage of disposal proceeds if the LLP is sold.

Reporting requirements

With regard to financial reporting, new disclosure requirements have been included in the latest SORP, particularly for notes to the accounts, which must include:

• A decision on where loans and debts due to members sit concerning other unsecured creditors in the event of a winding-up petition
• Protections afforded to creditors which cannot be revoked by members
• The amount of debts owed to the LLP by members
• Policies which relate to members contributing funds to the LLP and to repayments by the LLP

LLPs must also detail their policy for drawings on account and divisions of profit.

For further advice on accounting rules for LLPs, contact our team today to discuss your needs.

HM Revenue & Customs (HMRC) has issued its updated guidance on salaried members in limited liability partnerships (LLPs), in relation to capital contributions.

Currently, LLPs incorporate elements of both partnerships and limited companies, limiting the liabilities of each partner to the amount of capital they put into the business.

Partners are typically considered to be self-employed owners of the business rather than employees, but LLPs do allow for certain partnership members to be treated as employees – known as salaried members.

Defining employees

In an LLP, salaried members must meet the following conditions:

• At least 80 per cent of the amount payable by the LLP to the individual takes the form of ‘disguised salary’ – not variable or affected by the financial performance of the business.
• They do not have significant influence over the affairs of the LLP.
• Their capital contribution is less than 25 per cent of their disguised salary.

Targeted anti-avoidance rules (TAAR)

The TAAR is designed to stop individuals from intentionally avoiding classification as a salaried member.

The rule states that: “In deciding whether an individual is a salaried member, no regard is to be had to any arrangements the main purpose, or one of the main purposes of which, is to secure that the individual (or that individual and other individuals) is not a salaried member.”

This means that, when determining if someone should be considered a salaried member, any plans or agreements that are set up primarily to prevent that classification will not be considered. This ensures that the decision is based on the actual job conditions and responsibilities.

What has changed?

HMRC has updated its guidance on salaried members, particularly concerning the alteration of capital contributions.

Members of a partnership may try to change their individual capital contributions to ensure they do not exceed the limit of 25 per cent of disguised salary.

For example, if an individual’s expected disguised salary rises, they may contribute additional capital to avoid being classed as a salaried member.

However, updated rules state that the TAAR can still be applied even when avoidance measures constitute a genuine contribution to the partnership by the individual.

In this case, the additional capital would not be counted, and the individual could be classed as a salaried member.

Why is this important?

Whether an individual is classed as a partner in an LLP, or a salaried member determines how their income will be taxed.

An employee will be taxed via PAYE and the partnership must pay Class 1 employers National Insurance.

By contrast, a partner must report their income via Income Tax Self-Assessment (ITSA) and is responsible for the payment of tax on any income earned via the partnership.

We can advise you on structuring your business in a tax-efficient way while remaining compliant with the latest legislation. For further support, contact a member of our team.

The Department of Business & Trade (DBT) has released the finalised draft of the Code of Practice on Fair & Transparent Distribution of Tips – the next step towards bringing the Employment (Allocation of Tips) Act 2023 (the Act) into force.

The Act will require businesses, where tips and gratuities are provided by customers, to pass on 100 per cent of these payments to staff through a fair distribution method, without withholding any amount to cover costs.

The long-awaited Code of Practice offers clarification on some key points within the legislation – most significantly, that requirements within the Act will be delayed until 1 October 2024.

This offers hospitality businesses an additional three months’ grace if they are implementing tronc management systems for the first time and make any further preparations required.

How to prepare

The requirements of the Act present two major areas in which business owners need to prepare to be fully compliant with regulations:

• Implementing a tronc system
• Cash flow planning to cover costs

From now until 1 October, we urge businesses to look at the solutions they have in place and identify areas where improvements could be made.

Troncs and troncmasters

Under the new legislation, hospitality business owners will be required to store and distribute tips and gratuities paid to staff through a tronc – the system that a business uses to pool and distribute tips.

As part of your compliance efforts, you will need to decide on how you will define ‘fair distribution’, as well as appoint a troncmaster who is responsible for distributing tips through the tronc system.

Cash flow planning

The most significant element of this legislation is that employers are no longer allowed to withhold a portion of tips paid by customers to cover costs, such as card payment charges or the cost of a tronc scheme.

If you have previously done this, you will now need to plan how to cover these costs through your existing cash flow.

For further guidance on the impacts of this new legislation, please contact a member of our team.

In its latest research into the UK’s SME economy, NatWest Group has identified an encouraging trend among the country’s independent operators, as SME growth continues for the fifth consecutive month.

Two sectors led the charge, as the service industry continues to be a significant driver of growth, while the manufacturing sector enjoyed expansion after a period of stagnation.

Summarising its overview of the SME economy, the Group employs its NatWest SME PMI Business Activity Index to quantify SME growth, with a reading of 50 or above signalling a general expansion among UK SMEs.

Recorded at 52.6 in the first quarter of 2024, the Index reveals sustained growth for SMEs that prioritise long-term success over short-term figures.

However, individual sectors were not the focus of this latest research – that title goes to the potential for future sustainability and investment.

Investing in sustainability

It may come as little surprise that the latest report found investment in energy efficiency and green working practices to be a major priority for 36 per cent of SMEs in the coming year.

With 18 per cent planning to invest within the next 12 months, and a further 41 per cent set to invest within five years.

It seems that the benefits to SMEs of sustainable processes are becoming more widely acknowledged and accepted.

From a financial perspective, the long-term benefits of sustainability are considerable, including access to additional tax relief and funding.

Additionally, adopting cutting-edge working practices to support sustainability inevitably has a positive impact on overall efficiency as businesses seek a return on investment beyond ESG objectives.

Planning cash flow for growth

It is evident from the report’s findings that SMEs are going to need sufficient access to funds to facilitate growth in the coming years if this pattern is going to continue.

Central to this is going to be cash flow planning, particularly if costs continue to rise and SMEs face accompanying financial challenges.

We typically recommend that SMEs create a healthy cash flow through:

• Forecasting future cash flow to support long-term plans for investment
• Maintaining liquidity reserves to cover unexpected expenses
• Utilising financing options such as bank loans, lines of credit, or even trade credit
• Regularly reviewing and managing costs through automation or new supplier contracts, for example

For support with making sustainable investments or growing your business, contact a member of our team to discuss your needs.

With the 6 July deadline nearing, it is essential to understand the updated reporting requirements for Class 1 National Insurance Contributions (NICs) on benefits in kind (BIKs).

Employers offering benefits, such as private healthcare, living accommodation, travel expenses, and company cars must report additional NICs through the payroll process or on a P11D form.

Significant changes are coming, however, that will simplify reporting BIKs through P11D forms for each employee receiving taxable benefits.

Employers currently have the option to manage BIKs directly through their payroll, a method known as ‘payrolling’, which must be set up before the tax year begins.

Otherwise, P11D forms need to be submitted online by 6 July following the tax year end.

Employers must also report the amount of Class 1A NICs via the P11D(b) form and ensure payments are made to HMRC by the 22 July deadline.

Late submissions can result in penalties of £100 per 50 employees for each month the forms are overdue.

All taxable benefits, excluding exempt expenses like business travel, business entertainment, and uniforms under specific conditions, need to be reported.

Certain trivial benefits are not taxable and thus exempt from reporting.

Remember from April 2026, it will become mandatory to report and pay Income Tax and Class 1A NICs on BIKs through payroll software, reducing administrative burdens due to the P11D and simplifying compliance.

If you have any queries about P11D reporting or any other payroll processes, please get in touch.  

Child benefit supports parents or guardians of children under 16, or under 20 if in approved education, by contributing towards the costs of raising them.

Since January 2013, the High Income Child Benefit Charge (HICBC) affects those earning above a specific threshold but this was revised in the Spring Budget 2024.

Initially, families with one parent earning over £50,000 saw a phased reduction in Child Benefit, ceasing at £60,000.

However, from 6 April, the HICBC threshold has increased to £60,000, with a new tapered charge between £60,000 and £80,000, reducing the benefit by one per cent for every £200 earned over £60,000.

This adjustment exempts about 170,000 individuals from the full charge and could affect you if your income is within this range as you are now eligible to claim.

In essence, the Government raised the threshold to ease the financial strain on middle-income families and encourage more parents to claim Child Benefit, avoiding the previous steep penalties for higher earnings.

Moreover, the Government plans to consult on a shift to a household-based assessment system by April 2026, aiming for a fairer approach by considering total household income.

If your earnings exceed £50,000 and you now need to register or adjust your Child Benefit, you likely fall into two categories:

• New claims: You can register for a child not previously claimed for, with benefits backdated up to three months or from the child’s birthdate.
• Existing claimants: Adjust your HICBC via Self-Assessment if your income falls within the new threshold.

If you require any other guidance relating to the HICBC, contact our team of experts. 

The Government continues to freeze both the personal allowance and the higher-rate income tax thresholds – leading to an increase in the number of higher-rate taxpayers this year.

The result of ‘fiscal drag’ – a phenomenon where tax thresholds fail to keep up with inflation or wage growth – the freeze will continue to increase the number of higher-rate taxpayers until it is due to end in 2028.

This freeze not only impacts numerous taxpayers but will also have broader economic implications by increasing the tax burden on a larger segment of the population – potentially influencing consumer spending and savings habits.

By not adjusting the thresholds for inflation, the Government has effectively increased tax revenue without the need to formally raise tax rates.

Taxpayers must consider this in the context of the Government’s long-term fiscal strategies and align it with their personal tax planning.

Future policy adjustments will likely be influenced by broader economic conditions and political change, underscoring the importance of staying informed and discussing the issue with us.

We often recommend a few simple ways to reduce your tax liability and manage your marginal rate, including:

• Income splitting: This strategy involves distributing income among family members to keep individual earnings below the higher tax thresholds, thus reducing overall tax liability.
• Tax-efficient investments: Leveraging tax-free savings accounts and pensions can significantly reduce taxable income, providing long-term financial benefits.
• Year-end tax planning: Regularly review your financial situation as the tax year draws to a close, making any necessary adjustments to income and deductions to optimise tax outcomes.

Being proactive in managing your tax position is crucial, especially with the thresholds remaining static and fiscal drag likely to impact more taxpayers.

For those seeking more comprehensive guidance or specific information, reaching out to a specialist is advisable. 

If you are a Self-Assessment taxpayer, it is almost time to make your second ‘payment on account’ – advance payments towards your tax bill.

Those who submit a Self-Assessment tax return and owe £1,000 or more will be required to make their second payment on account by midnight on 31 July 2024.

How do payments on account work?

‘Payments on account’ are a way of paying Income Tax for Self-Assessment (ITSA) for business owners, sole traders and other taxpayers that spread out the expected cost of an upcoming tax bill.

There are two payments on account each year – one payable on 31 January and the other on 31 July during the tax year.

Each payment is typically half of the previous year’s tax bill, including Class 4 National Insurance Contributions.

The expectation is that, when you file ITSA, you will not need to have a major cash reserve to pay your entire bill at once.

What if my income is lower this year?

Payments on account work for many taxpayers because they assume that they will owe a similar amount or more tax than in a previous year.

If you expect your income to be substantially lower this year than in the previous year, you can apply to HM Revenue & Customs (HMRC) to reduce the payments on your account.

When you submit your tax return, if it turns out that you have overpaid, this will be refunded or offset against future tax liabilities.

What happens if I can’t pay?

If you cannot pay your upcoming payment on account, it is important to contact HMRC as soon as possible.

Missing the deadline without explanation can mean that interest will be charged to your account, and you could end up owing much more than your original bill.

You may be able to set up a ‘Time to Pay’ agreement with HMRC, which is a formal payment plan. If you:

• Have filed your latest tax return
• Owe £30,000 or less
• Are within 60 days of the payment deadline
• Do not have any other payment plans or debts with HMRC

You can set up a Time to Pay agreement online through your account with HMRC.

For support with compliance and managing the cost of your tax bill, contact us.

There is an inherent degree of risk in any business growth strategy – but keeping this risk to a minimum can help you grow your business without sacrificing your hard work.

Growing your business hinges on your ability to take calculated risks, whether that be by investing in innovation or by taking on a new member of staff.

This risk is not a negative thing – in fact, it is indicative of a strong growth strategy.

However, it is important to understand how risk mitigation fits into your business growth strategy rather than viewing it as an isolated consideration.

This way, you can grow your business safely and sustainably. Here’s how:

Diversification

Expanding your product or service offering can help spread risk across multiple markets, particularly if your market is prone to fluctuations.

By not relying on a single source of revenue, your business can better withstand variations in the market which might temporarily reduce the value of a product or service.

Diversification can also include entering new markets or demographics, as well as introducing entirely new products or services, reducing the impact of poor performance in any one area.

Financial management

Robust financial management is crucial for growth and risk reduction.

This includes maintaining a healthy cash flow, setting aside reserves for emergencies, and managing debt responsibly.

For example, you may take on a business loan to finance growth. This is likely to carry an acceptable level of risk, provided you allocate funds according to genuine need and make timely repayments.

Regular financial reviews can help you make informed decisions, spot trends, and address issues before they escalate.

Market research

Understanding your market is key to successful growth.

Continuous market research helps you stay ahead of trends, understand your competition, and identify new opportunities.

It also allows you to make data-driven decisions, reducing the risk of costly mistakes by showing you which risks are, statistically speaking, worth taking.

Investment in technology

Technology can streamline operations, improve efficiency, and open new channels for business.

Investing in the right technology can also help you stay competitive and responsive to changes in the market.

For example, management software can offer substantial time savings over traditional administration methods with automation and integrations, which streamline repetitive tasks.

However, it’s important to assess the risks and ensure that any technology investment delivers value by continually monitoring return on investment and identifying bottlenecks.

Strategic partnerships

Forming alliances with other businesses can provide mutual benefits, such as access to new markets, shared resources, and enhanced capabilities.

Partnerships can also help spread risk through these avenues and by, for example, sharing the cost of investment in a new venture.

It’s important to choose partners wisely and ensure that agreements align with your business goals and values.

It is also important to seek external advice from experts before making significant decisions within your business, which could carry high levels of risk.

We can help you identify your growth priorities and make investments and operational improvements in the right places to achieve these goals.

Contact us today to find out how.