MTD for IT delayed once again
Making Tax Digital (MTD) for income tax was due to come in from April 2024 but has now been delayed by a further two years until April 2026, at the earliest. New, higher thresholds for mandation have also been announced with self-employed individuals and landlords only being required to comply from April 2026 if they have gross income of over £50,000. From April 2027, those with gross income of over £30,000 will also be mandated. A date to comply for those individuals with income of below £30,000 or partnerships is yet to be confirmed.
EMI options and exercise of discretion by directors
HMRC has updated their guidance in relation to the use of directors’ discretion for enterprise management incentive (EMI) options. In many cases EMI options are likely to include provisions allowing for certain discretions to be exercised by the directors of the company. Care should be taken when taking such decisions which require the use of discretion, however, as where it is deemed that the amendment has resulted in a fundamental change to the terms this could result in the loss of the tax advantages of those options afforded under an EMI scheme. In general, where discretion is exercised for something other than an amendment to a performance condition or a matter of judgement (e.g. whether someone should be treated as a ‘good’ leaver), then HMRC’s opinion is that it could amount to a fundamental change to the terms of the EMI option. For example, exercising a discretion to bring forward the date upon which the option may be exercised would fall into this category. Whilst the inclusion of discretion in the drafting of the scheme rules will not in itself have a direct impact on the EMI status, the tax advantaged benefits could be lost at the point the directors choose to exercise their discretion. We would therefore recommend that care is taken prior to the use of discretion and that professional advice is sought if unsure of the possible knock-on effect following such a decision.
Late payment interest rates
HMRC interest rates are linked to the Bank of England base rate and, as such, have been subject to multiple increases in recent times. As of 13 April 2023, the late payment interest rate has increased to 6.75% for most taxes. This is more than double the rate just 12 months previously and the additional cost should be factored into consideration when looking to agree a time to pay arrangement with HMRC. Those already subject to a time to pay arrangement may want to look at accelerating payments where possible to reduce the cost of the debt.
ATED
A company or other non-natural person holding a residential property with a value in excess of £500,000 is subject to the annual tax on enveloped dwellings (ATED) rules. 2022 was a revaluation year requiring properties to be revalued as at 1 April 2022 to determine whether the rules apply with effect from 1 April 2023. As a result many more companies could find themselves within the regime for the 2023/24 tax year if they now breach the £500,000 threshold following revaluation. Not all properties are subject to the charge as certain exemptions and reliefs apply but a return may still need to be filed, with penalties applying for failure to do so.