The snap general election has derailed controversial plans to increase probate fees, dubbed a ‘stealth death tax’, as the Ministry of Justice (MoJ) has said there is now insufficient time for the necessary legislation to pass through Parliament
Under the proposals, the MoJ planned to raise the legal fees for handling an estate following a death from the current £155 or £215, depending on whether a solicitor is involved, to up to £20,000, by introducing a sliding scale of charges from May.
The MoJ said it wanted to replace the flat rate system with a system of bands linked to the value of the estate (before inheritance tax), and the same rate applies regardless of whether the applicant is a solicitor or an individual.
Estates under £50,000 would pay no fee, and those from £50,000 to £300,000 would pay £300. This compares with the current system where the threshold for no payment of fees is £5,000. However, an estate of £500,000 to £1m would pay £4000, which doubled to £8000 for estates of between £1m and £1.6m, rising to £12,000 for estates in the £1.6m to £2m bracket and £20,000 above that.
The MoJ’s proposals were sharply criticised earlier this month, when the Parliamentary joint committee on statutory instruments said the charges appear ‘to have the hallmarks of taxes rather than fees, particularly in view of the amounts that would be payable for larger estates and the scale of the proposed increases (from £155 to as much as £20,000 – a rise of nearly 13,000%) – and because the charges are disproportionate to the service provided by the Probate Registry.’
The MoJ had said the new fees would generate an estimated £300m per annum in additional income, which it planned to use to fund other areas of the courts and tribunal service. The joint committee said it disagreed with this approach, as a ‘fee’ should cover only the costs of the service provided, not other services.
The committee said: ‘The Lord Chancellor is not permitted to impose a tax.’
Now that a general election has been called, the MoJ has confirmed that the relevant statutory instrument would not be completed before the election, meaning the proposals will not be put before this Parliament before it dissolves. It will be up to the next government to decide whether to go ahead with the plans.
UK business groups have expressed mixed reactions to Theresa May’s plans to hold a snap General Election on 8 June.
Some business leaders have welcomed the announcement, believing that a Conservative win could see the Prime Minister increase her majority and thus enter Brexit talks in a much stronger position.
Terry Scuoler, chief executive of the manufacturing group EEF, commented: ‘We have significant negotiations to undertake with our partners in the rest of Europe and doing this with a fresh and stable mandate from the country can only provide greater certainty about the future direction of travel for policy.’
However, others have warned that the move could distract from Brexit negotiations and other issues of concern to businesses.
Carolyn Fairbairn, CBI Director General, said: ‘With a snap General Election now called, businesses will be looking to each political party to set out their plans to support economic stability and prosperity over the next Parliament in a way that is fair and sustainable for communities across the UK.
‘Distraction from the urgent priorities of seeking the best EU deal and improving UK productivity must be kept to a minimum.’
Meanwhile, Stephen Martin, director general of the Institute of Directors, commented: ‘Businesses are having to get used to being buffeted by the changing winds of politics at the moment, and will just have to endure yet another campaign.
‘While Brexit will inevitably dominate the campaign, there are also much wider questions that need to be addressed on the changing nature of business and work, automation and our ageing society,’ he added.
Following Theresa May’s surprise announcement, the pound soared to a six-month high of 2.37% to $1.2904 against the dollar.
However, the FTSE 100 share index fell by 180 points, or 2.5%, to 7,148, wiping almost £46 billion from the value of Britain’s biggest blue-chip companies.
The government has launched a new savings bond, offering a ‘market-leading’ rate of 2.2%.
First announced in the 2016 Autumn Statement, the Investment Guaranteed Growth Bond (IGGB) is available to those aged 16 and over, and permits savers to invest between £100 and £3,000 at any time during the next 12 months.
The product is only available online: the government hopes that this will provide customers with a ‘simple way to apply for the bond and to manage their investment’.
Additionally, offering the bond online ‘reflects the changing nature of customer behaviour,’ the government stated. The IGGB can be purchased from the National Savings and Investments (NS&I) website.
Commenting on the launch of the IGGB, Simon Kirby, Economic Secretary to the Treasury, said: ‘From raising the ISA threshold to introducing the new Lifetime ISA, this government is committed to creating a nation of savers.
‘With its market-leading rate of 2.2%, the investment bond will provide a valuable boost for savers who have been affected by low interest rates.’
More information on the new savings bond can be found here.
Confidence amongst small businesses in the UK has risen to its highest level in more than a year, according to data published by the Federation of Small Businesses (FSB).
The FSB’s Small Business Index (SBI) for the first quarter of 2017 stands at 20.0 – the highest figure since the fourth quarter of 2015, and a significant improvement on the figure of -2.9, which was recorded after the EU referendum. Confidence has risen despite small firms facing ‘spiralling business costs’, the FSB stated.
The rise in confidence has, in part, been caused by an increase in international trade, according to the SBI. A net balance of 15.6% of small businesses reported a rise in export activity, with an additional 30.5% expecting international sales to increase over the next quarter.
Mike Cherry, National Chairman of the FSB, commented: ‘It’s hugely encouraging to see our small businesses trading more overseas, driving an exports-led recovery.
‘We know small firms that export have higher turnovers than those who rely on the domestic market, so it’s crucial that the government maximises cross-border trade opportunities for small firms.
‘That includes negotiating an ambitious free trade agreement with the EU as part of the Brexit process.’
From 6 April, large businesses are required to publish their gender pay gap figures. The government hopes that the requirement to publish such information will help to ‘break the glass ceiling and create a more modern workforce’.
The gender pay gap currently stands at a record low of 18.1%. The requirement to publish gender pay gap information will help employers to address any gaps in their business and take action to close their gender pay gap.
Voluntary, private and public sector employers with 250 employees or more are required to publish their figures by April 2018.
Those employers who fail to comply with the regulations will be contacted by the Equalities and Human Rights Commission.
Justine Greening, Minister for Women and Equalities, said: ‘We have more women in work, more women-led businesses than ever before and the highest proportion of women on the boards of our biggest companies.’
HM Revenue and Customs (HMRC) has launched a new hotline for the public to report fraud and evasion in the fight against tax fraud.
This service will replace the two separate tax evasion and customs hotlines with one, streamlining HMRC’s intelligence gathering on tax fraud.
Customers can report all kinds of tax fraud and evasion on the new hotline, including PAYE and National Insurance fraud, undisclosed offshore investments, non-payment of the National Minimum Wage, tax credit fraud, failure to pay UK duty, tax evasion and VAT fraud.
Jennie Granger, HMRC’s Director General for Customer Compliance, said:
“Information provided by the public is a crucial element of HMRC’s work to close the tax gap, so it’s vital that the reporting process is as simple and accessible as possible. The HMRC Fraud Hotline will form an important part of our intelligence gathering operations to bring in more money for the Exchequer and the country.
“We encourage the public to continue to work with us and report any suspected fraud or evasion to us for investigation.”
The HMRC Fraud Hotline – on 0800 788 887 – is open between 8am – 8pm seven days a week, 365 days a year.
New National Minimum Wage (NMW) and National Living Wage (NLW) rates came into effect from 1 April.
The NLW, which applies to those aged 25 and over, is set to rise from its current rate of £7.20 to £7.50 an hour, whilst the NMW rate for individuals aged between 21 and 24 will increase to £7.05 from its current rate of £6.95.
Workers aged 18 to 20 will see their hourly rate rise to £5.60 from £5.55, and the rate for those aged under 18 will rise by 5p to £4.05 from £4.00.
Apprentices stand to benefit from a 10p increase from £3.40 to £3.50 per hour.
Commenting on the wage rises, Bryan Sanderson, Chair of the Low Pay Commission (LPC), said: ‘The minimum wage increases on 1 April will bring another year of substantial pay rises for the lowest paid. The minimum wage will cover more workers than ever, and ripple effects mean that the benefits could affect people earning above the minimum as well.’
However, Mr Sanderson acknowledged that businesses may experience added pressure. He stated: ‘Accompanying pay increases, there will inevitably be pressure for employers. These are turbulent times and we will continue to monitor the situation closely.’
From April, the government will align the NMW cycle with that of the NLW. This means that any future NMW increases will occur in April of each year, instead of October.
This scam appears to have been circulating for a while now but was brought to our attention by a client who has recently set up a limited company.
If you receive a letter from ‘Register of Companies and Businesses’ please be aware that this has nothing to do with Companies House. The letter sounds official and requests a payment of £210 to be paid via a website link, they target newly formed companies and state that lack of payment will result in lack of entry in the Register of Companies and Businesses, suggesting that it is a required part of company registration.
Similar schemes include emails claiming to be a response to an online filing submission. These emails should be forwarded to email@example.com and then deleted.
Further information on this scam can be found on the Action Fraud website here
If you are in any doubt about a letter or email claiming to be from Companies House please contact us for advice.
HMRC is consulting on proposals to combat organised fraud in labour provision within the construction sector, which include introducing a VAT reverse charge and changes to the qualifying criteria for gross payment status (GPS) within the construction industry scheme (CIS)
The move has been prompted by the discovery that organised crime groups are setting up or taking over businesses with the intention of fraudulently failing to pay the VAT and making incorrect income tax deductions, by creating companies which artificially lengthen the supply chain with the intention of making it difficult to reconcile the main contractor’s CIS declaration to all sub-contractors below it.
HMRC says losses from this type of fraud are ‘significant’, with estimates in the tens of millions of pounds. The consultation will consider policy options first set out in Budget 2017, such as introducing a domestic reverse charge applies which would take VAT payment out of transactions so the provider of the goods or services cannot disappear or fail to pay the VAT due.
Any such charge would operate in a similar way to the rules around the supply of mobile phones and computer chips, although HMRC says its view is that monthly sales lists will not be required on the VAT return for labour provision services.
HMRC acknowledges that for the purposes of a reverse charge both parties need to be VAT registered, which in construction could mean a large number, size and variety of providers and customers are affected, complicated by the different rates of VAT that can apply.
HMRC says it thinks applying the reverse charge to the final customer who takes ownership of the construction project could be an added complication that may be unnecessary to prevent the fraud. One option is to make the main or principal contractor the final recipient of any reverse charge supply, i.e. they will be required to account for the VAT on their provider’s sale.
An alternative would be to keep to the principle that the reverse charge applies all the way through the supply chain to the final customer, but to apply a rule whereby the reverse charge ceases to apply if the amount of non-labour provision (for example, materials) exceeds a certain amount of the overall value.
The consultation highlights that potentially there will be a large number of small businesses that are not a fraud risk that will need to apply the reverse charge to their sales. HMRC proposes a number of options for excluding small businesses, such as applying a sales based threshold, or having a narrower CIS definition of the services affected, or some other qualifying criteria. It also asks for views on how the proposals would interact with the Flat Rate Scheme (FRS) available to businesses with a turnover of up to £230,000.
HMRC points out that reverse charges have historically been introduced quite quickly and with very little notice, in order to close down fraud. It suggests a ‘light touch’ period of around six months could be available to support companies going through the change in approach.
As regards potential changes to the CIS regime, HMRC says it may be appropriate to limit any changes to companies, rather than sole traders or partnerships. One option would be to consider changes to the turnover test for new companies only, such as increasing the GPS turnover threshold, and increasing compliance test for both new and existing companies.
The consultation closes on 9 June.
New technology to be introduced later this year will allow cheques paid into bank accounts to be cleared within one working day.
The Cheque and Credit Clearing Company (C&CCC) – the organisation that manages the cheque-clearing system – claims that a new image clearing system will ‘revolutionise how cheques are cleared in the UK’.
Instead of the current paper-based system, whereby the actual paper cheque is transported around the country to be cleared, which can take up to six days, a digital image of the cheque will be used instead. This should significantly speed up the process.
The changes will be phased in from October 2017, although it won’t be until the second half of 2018 before all UK banks and building societies are able to offer the new service.
James Radford, Chief Executive of the C&CCC, said: ‘These changes will put cheques firmly in the 21st century, delivering real and important benefits for the many individuals, charities and businesses that regularly use cheques.
‘Not only will cheques clear faster but banks and building societies may offer their customers the option of paying in an image of a cheque rather than the paper cheque itself.’
Cheque use has declined in recent years, especially with the growth in internet bank transfers. The banking industry has previously expressed a desire to phase them out entirely by 2018. However, they remain an important method of payment, with some 477 million cheques written in the UK in 2016.