Tax

The opposite of a low tax economy is

Othman — Wed, 26 Oct 2022 09:44:53 +0000

Being compared with only part of a salad was a little unfair on Liz Truss our shortest serving Prime Minister. As reality emerges from the Covid nightmare and the post Brexit light is cast across the United Kingdom, we appear less United than we once were as the stark reality of low productivity, the effect of quantitative easing and seizing control of our own destiny, casts a shadow upon the direction we take next.

Whilst Lord King a former Bank of England Governor has stated that all major central banks have been slow in raising interest rates, the Fed have led the way in creating a US dollar strength to the detriment of Sterling and the cost of imports are rising with a corresponding impact on inflation, creating the cost of living squeeze we now experience. The current level of inflation set at 10.1% almost 5 times the target required of the Bank of England. This virtuous circle of events does not create the best environment to boost productivity and grow the economy as the missing link remains the incentive to do so which is still broadly lacking.

“We set out a vision for a low-tax, high-growth economy,” said Liz Truss, in her resignation speech. “I recognise, though, I cannot deliver the mandate on which I was elected by the Conservative party”.

It was a brave attempt by LT and KK to address this aspect and as you will see from the graph below, UK average mortgage rates were rising long before the now historic “fiscal statement”.

When you remove the reliance on gold reserves to support the value of your currency and allow all major currencies to float freely on their own printing press, you merely create an economy which is at the beck and call of its major creditors and sadly these same creditors are truly out of touch with the needs of the local economy and are merely margin managers of the UK PLC balance sheet which currently projects a less appealing outcome. Add to this a desire to remove the stress, related to energy cost manipulation to our households by you know who, and the balance sheet looks even less inspiring. Hence why the “fiscal statement” provided the opportunity for the worlds opinion to focus on what appeared to be poor management of the economy in the hands of a new Prime Minister and her Chancellor.

So, what happens next. We now have the “eat out to help out” Chancellor in post as Prime Minister and we have witnessed the virtually entire erasure of the fiscal statement with Jeremy Hunt as the current Chancellor promising a tightening of public spending or “CUTS” for short. This revelation appears to have had no significant effect on the bond and long-term interest rate markets whatsoever other than to stabilise them. This attitude will almost certainly act as an impediment to the grow, grow, grow stance a direction that the economy has most certainly got to take now.

Gone are the Corporation Tax and Higher Rate Taxpayers rate reductions sending a message once more to the wealth creators that your time is not now. As with all Governments spending, this will continue at pace and the business community are expected to deliver on Government excesses.

Against this uninspiring outlook the hatches will be battened as we await the storm on the horizon.

About the Author
Adrian Hawkins OBE was awarded his honour by the Queen in the 2021 New Years Day Honours list for his services to business. A lifetime businessman, Adrian Chairs biz4Biz a business support organisation which he founded 15 years ago to create a business network in the Home Counties which is now reaching further nationally. Adrian is also, Chairman of Hertfordshire Futures (previously the LEP) and the Hertfordshire Futures Skills and Employment Board. Adrian is also Chairman of the Stevenage Development Board alongside biz4Biz. Adrian has 45 years’ experience in the world of business.

Bringing electric vehicles into your business – implications and considerations

Othman — Mon, 25 Jul 2022 12:12:34 +0000

As individuals and businesses become increasingly aware of the conversations being had about sustainability and the environment, many are considering how they can make greener choices.

One subject that we recurrently find ourselves engaging with employers and directors about, given the Government’s commitment to ban all sales of petrol and diesel vehicles by 2030, is switching to electric vehicles (EVs) and the tax implications of doing so.

Incorporating EVs into your business

Employers often opt to offer EVs to their workforce via a salary sacrifice arrangement. In principle, the employee pays for a particular benefit (in this case, an EV) by sacrificing a slice of their salary. Provided in this way, EVs are considered a Benefit-in-Kind (BiK) but do attract a preferential rate of tax.

Unsurprisingly, lower CO2 emissions result in more significant tax savings. The tax charge for solely electric cars is currently 1% for the 2021/22 tax year and will go up to 2% for the 2022/23 tax year. Compared to the 14% that vehicles emitting 1-50 CO2 (g/km), with an electric mileage range of <30, will pay in 2022/23, you can appreciate that 2% piques interest.

When considering EVs, it may also be worth getting to grips with the optional remuneration rules, and how these may or may not impact you.

Other tax implications and practical considerations

If you are thinking about replacing your own petrol or diesel vehicle, or those within your business, with an EV/s, it’s worth bearing in mind the following points:

You cannot claim VAT back on vehicles purchased by your company, unless 100% business usage can be proven. However, 50% of the VAT on leasing payments can be claimed back, even in cases where the vehicle is not used solely for business purposes.
The electricity consumed to charge an EV, if provided to an employee at no cost via a point at or near the workplace, is not considered a taxable benefit.
New and unused pure zero-emission cars and vans qualify for 100% first year allowance (FYA), in respect of capital allowances, with no upper constraint on value. Furthermore, the temporary ‘super-deduction’ affords for a 130% FYA on qualifying electric charging points, used within the business for EVs, until March 2023.
As of December 2021, the Government’s Plug-in Car Grant, which will be available until 2023 and should be applied for automatically by the car dealership in question, provides a £1,500 contribution towards pure EVs priced under £32,000.

Obviously, all of the tax advantages do not take account of the fact that it’s an electric vehicle and may have some limitations; for example, the vehicles range, time taken to charge, and the availability and installation of charging points are all important considerations. From discussions that we have had, we also know that cost and availability of vehicles are two significant drawbacks, presently.

Planning a purchase?

We understand the extent to which tax is an integral consideration when it comes to having control of your business and being able to plan proactively and effectively.

We can help you to dissect the implications of purchasing EVs, whether for yourself as a director or for your wider workforce, and of operating salary sacrifice schemes in relation to cars or other benefits.

To discuss your plans for the year ahead, or for more information about the tax and accounting services we offer, contact George Hay Chartered Accountants on 01462 708810 or visit www.georgehay.co.uk

This article is for general information only. No responsibility for loss occasioned to any person acting or refraining from actions as a result of its contents can be accepted. The relevant professional advice should be sought in relation to your own circumstances.

About the Author
Richard Dilley, FCA FCCA, is a Partner at George Hay Chartered Accountants. Richard joined George Hay in 1986; he qualified with the firm, was appointed as a Partner in 2001 and took on the role of Managing Partner in 2017. Richard specialises in advising small to medium sized businesses (SMEs).

Business picks up the bill again!

Othman — Mon, 27 Sep 2021 16:07:54 +0000

As I inferred in my piece regarding “Redundancies or Resignations” which can be seen here https://biz4biz.org/will-we-face-redundancies-or-resignations-with-the-removal-of-furlough/ demands will be made upon business to support various increased costs of the Covid fallout. It is clear that the profligacy from quantitative easing is over and government will now find new ways to raise funds as demonstrated by the recent 2.5% increase in National Insurance (1.25% Employee and 1.25% Employer). It’s an inevitability of the costs created in fighting Covid, but some would argue is further proof of how little thought Government has for the process of running a business.

Businesses do not have a vote in General Elections but are required to foot the bill for pretty much all our governments spending. Covid support mechanisms like Furlough schemes are hugely supportive of the Electorate, individuals who get the opportunity to vote have maintained their employment, whilst business activities have been greatly reduced.

Unfortunately, this government is creating the wrong impression almost every time the Prime Minister speaks. Activities like the NI tax increase are not temporary and will exist forever and are in fact a direct tax on employment. It’s just one of many taxes imposed like, insurance tax, increased several times since inception, VAT -ditto only ever increasing, the Apprenticeship Levy which has a use by date and corporation tax increasing significantly from 2023. It all sounds like “Oliver Twist” no not “please sir can I have some more” but more like “gotta pick a pocket or two.”

The issue is how much more cost will sneak up on business and remain fixed forever? Each additional cost whilst increasing the spending power of government, increases the disincentive of starting or owning a business, creating a strong economy, and maximising employment and reducing Welfare and unemployment costs.

For some months now there has been an inference that Government will disconnect their relationship with LEP’s the only apolitical, business facing, local government group, responsible for the provision of Growth Hubs, Inward investment and Tourist Hubs, Enterprise Zones and Innovation and Skills investments, this past 10 years.

Clearly Government is saying to Businesses give us your money, but we do not want to hear your opinion! Just be careful how distanced you appear from your major benefactors; you might be accused of being out of touch which would be a real shame!

There is so much more that Government can do to maximise its income from Businesses without increasing taxes and they need to start looking at these innovative options now.