The VAT exemption for pharmacists has been extended to medical services carried out by supervised, non-registered staff as of 1 May.

Prior to the measure, the exemption only applied to medical services carried out by registered health professionals. The new zero-rating rules now mean that all staff can provide their service exempt from VAT under the direct supervision of a registered pharmacist.

According to HMRC, extending the exemption will bring the VAT treatment of pharmacists in line with other health professionals.

Simplifying the current VAT rules may also positively impact over 13,000 community pharmacies in the UK, encouraging them to offer a wider range of services — easing the pressure on GPs and the NHS.

Services affected may include blood pressure checks and health checks conducted by non-registered pharmacy team members, which were previously liable for the 20% VAT rate.

Malcolm Harrison, chief executive of the Company Chemists’ Association (CCA), praised the measure, saying:

“The CCA has long campaigned for the full breadth of the pharmacy team to be utilised. From May this year, healthcare services provided by pharmacy team members under a pharmacist’s supervision will be treated as zero-rated for VAT.

“In addition, from this autumn, medicines supplied via Patient Group Directions will be treated the same way for VAT as those prescribed by a GP or independent prescribing pharmacist.

“These measures will boost capacity in pharmacies and crucially pave the way for the future commissioning of clinical services in community pharmacy.”

Janet Morrison, chief executive of the Pharmaceutical Services Negotiating Committee (PSNC), shared Harrison’s point of view, adding that the PSNC had been “fighting for changes to these VAT rules for many years”.

She continued:

“While small in impact in the context of the current challenges, this is a very welcome development.”

Speak to us about your VAT scheme.

Reward your staff with a stake in the business.

As an employer, there are many ways you can reward and incentivise your staff, from Christmas parties to team lunches. But one of the most attractive options is an employee share scheme.

Employee share schemes allow you to give some (or all) of your employees a stake in your business. Not only are share schemes a great way to show your appreciation for your team’s hard work, but they also give staff a vested interest in your success.

In recent years, more and more companies have chosen to start an employee share scheme. By the end of the 2021 tax year, 16,330 companies were operating a scheme – a 6% increase from the year before.

But what are employee share schemes, and how do they work?

What are share schemes, and why do employers offer them?

As the name suggests, an employee share scheme allows you, as director of your company, to give shares to your employees. This could include just the upper management or the whole team.

There are many reasons you may decide to start up your own scheme. Maybe you’re looking to attract new staff, or retain the ones you currently have: either way, a share scheme is an effective way to motivate staff and maintain a rewarding work environment.

Not only are share schemes good for your employees, but for you as well. If you provide one through an HMRC-approved scheme, you could take advantage of some attractive tax reliefs. As your scheme will be wholly and exclusively for business purposes, you may be able to deduct any costs associated with the scheme from your corporation tax bill. You can also provide shares without incurring employers’ National Insurance contributions (NICs) if you meet certain criteria.

Other advantages of an employee share scheme include the following:

• supplementing salaries if your company is relatively new or cash-low
• aligning the interests of your employees and shareholders
• motivating your current employees by providing a shared goal.

Before you decide whether to start an employee share scheme or not, there are some disadvantages to consider:

• shares are unpredictable, and their value can fluctuate, meaning employees could become dissatisfied
• if you award too many shares, you could lose the majority shareholding
• there are admin costs when setting up your scheme and running it.

Tax incentives

As mentioned, share schemes can be a tax-efficient way of rewarding your employees’ hard work. Some schemes will allow you to provide shares without paying employers’ NICs, while others will only incur capital gains tax (CGT) on the employee.

Even if a share scheme falls outside the scope of income tax, your employees will have to pay capital gains tax if they sell their shares. The rate of CGT they pay could be lower than their income tax rate, depending on how much said employee has earned before selling their shares.

Types of employee share scheme

As with most Government schemes, there’s more than one to choose from. It’s important to pick the one that will benefit you and your employees the most.

The first decision to make is whether you want to offer the share scheme to key employees or the whole team.

Schemes for key employees

While many companies will want to provide a share scheme for every employee, it’s not always feasible – especially for new or smaller companies.

By offering your senior employees, such as upper management or department heads, a share scheme, you can motivate them to hit targets based on KPIs or the overall quality of their work. The main schemes for key employees are:

• the enterprise management incentive (EMI)
• the company share option plan (CSOP)
• growth shares.

Schemes for all employees

If you’re in a position where you can easily provide a scheme to each employee in your company, you have two main schemes to choose from. These are:

• the share incentive plan (SIP)
• the save-as-you-earn scheme (SAYE).

Only some companies will be eligible to offer certain schemes. Each scheme has certain criteria you have to meet before joining. Deciding factors include:

• number of employees
• the overall value of your company assets
• your annual profit.

For full details on the range of employee share schemes and the eligibility criteria, you can visit the Government website.

How do I set up an employee share scheme?

If a share scheme sounds like a good idea for your company, there are a few steps to take before you can start handing out shares to your team.

1. Check your eligibility

Before starting the setup process, you’ll first have to check if your company or employees are eligible for your preferred scheme.

2. Design your scheme

Now that you’ve chosen your scheme, you next need to decide how it’ll work. You’ll have to decide:

• which employees you’ll include
• how many shares you’re going to offer
• when you’ll distribute the shares
• how employees will earn their shares.

3. Authorise the scheme

Even if you’re the director of the company, you’ll still have to gain authorisation from your existing shareholders before starting your scheme.

Remember, some shareholders may be concerned about their stake in the company and its value if you’re offering your employees part of the company.

4. Register with HMRC

The final step in your employee share scheme setup will be registering your scheme with HMRC. Any new tax-advantaged scheme has to be declared by 6 July following the tax year of establishment.

You cannot register the following schemes after 6 July:

• SIPs
• SAYE

You can register your share scheme on the Government website with your Government gateway ID.

Employee share schemes give you an excellent opportunity to motivate and incentivise your team. Not only do they offer a generous benefit, but they can be a very tax-efficient way to reward your employees.

Get in touch to learn more about employee share schemes.

In his Budget speech in March earlier this year, Chancellor Jeremy Hunt kicked off the Government’s plan for growth with changes to business tax legislation, a key policy being ‘full expensing’.

“It is a corporation tax cut worth an average of £9 billion a year for every year it is in place”, Hunt said. “The Office for Budget Responsibility says it will increase business investment by 3% for every year it is in place”.

But what did the Chancellor mean by ‘full expensing’, and how does the policy work?

What is full expensing?

Under full expensing, companies can claim 100% first-year relief on qualifying new main-rate plant and machinery investments.

“That means every single pound a company invests in new IT equipment, plant or machinery can be deducted in full and immediately from taxable profits”, Hunt said.

The policy replaces the 130% super-deduction that Rishi Sunak unveiled in March 2021 when he was Chancellor, which ended on 31 March 2023.

“If the super deduction was allowed to end without a replacement, we would have fallen down the international league tables for tax competitiveness and damaged growth”, Hunt said during the Budget speech.

The full expensing scheme will last from 1 April 2023 until 31 March 2026, although Hunt added that he wanted to make it permanent “as soon as we can responsibly do so”.

The Government predicts the scheme to cost around £30bn between 2022/23 to 2026/27 and boost business investment by almost 3.5% in the next two fiscal years.

How does full expensing work?

Full expensing is only available under very specific circumstances.

First, it is only available to companies subject to corporation tax. Sole traders and partnerships are excluded, although they are still eligible for the 100% annual investment allowance — which  is capped at £1 million per year.

Second, full expensing only applies to certain plant and machinery items, which refers to most capital assets — other than land, structures and buildings — used for business purposes (see below for examples).

Third, plant and machinery must be new and unused to qualify for the policy. It also cannot be a car, given to the company as a gift, or purchased to lease to someone else.

Fourth, expenditure must be within the ‘main rate pool’ of plant and machinery. A list of items that may qualify for full expensing includes:

• machines such as computers, printers, lathes and planers
• office equipment such as desks and chairs
• vehicles such as vans, lorries and tractors (but not cars)
• warehousing equipment such as forklift trucks, pallet trucks, shelving and stackers
• tools such as ladders and drills
• construction equipment such as excavators, compactors, and bulldozers
• some fixtures, such as kitchen and bathroom fittings and fire alarm systems, in the non-residential property.

The other type of plant and machinery — items in the ‘special rate pool’ — do not qualify for full expensing, but they do for a 50% first-year allowance, subject to the same conditions that apply to full expensing. Capital allowances can then be claimed on the remainder of expenditure at a 6% rate in subsequent accounting periods.

This 50% allowance is a holdover from the super-deduction and will last until 2026, like the full expensing scheme.

Example of full expensing and 50% first-year allowance

A company purchases a new production line and various new items of other main rate plant and machinery, incurring £10m. It also spends £2m on a brand-new electrical system, which is a special rate expenditure.

Because of the new policies, the company can claim £10m under full expensing and £1m under the 50% first-year allowance in the year it made the purchases. The remaining balance of £1m can then be spread over the next accounting periods with writing down allowances of 6%.

What happens when a company sells an asset?

There are special disposal rules that apply to assets that a company has claimed either full expensing or the 50% first-year allowance on.

For fully expensed assets, the company will have to bring in an immediate balancing charge equal to 100% of the disposal value. This means that if the company sold an asset for £10,000 on which they had claimed full expensing, they would be required to increase their taxable profits by £10,000 rather than deducting the proceeds from the capital allowances pool.

For the disposal of an asset on which a company has claimed the 50% first-year allowance, the company will be required to bring in a balancing charge equal to 50% of the disposal value, with the remaining 50% being deducted from the pool.

In this case, a company selling assets on which they had claimed the 50% first-year allowance for £10,000 would be required to increase their taxable profits by £5,000 and deduct £5,000 from the special rate pool.

What other capital allowances are there?

Businesses can benefit from various other capital allowances, some of which we’ve already touched on.

First, there is the annual investment allowance (AIA), which, like full expensing, allows businesses to write off the full value of an eligible expense in one go. It applies to both main and special rate equipment and is open to sole traders and partnerships on top of companies but is capped at £1m per year.

Therefore, if you’re interested in full expensing but have made purchases below £1m, you’ll actually benefit from the AIA scheme; you’ll benefit more if you’re purchasing special-rate assets or second-hand assets.

Then there is the writing-down allowance. Companies usually use this if their expenditure on qualifying plant and machinery exceeds the annual investment allowance limit to deduct a percentage of an item from their yearly profits. They are also used where the annual allowance does not apply, such as with cars and gifts.

As of 2023/24, 18% of the net value of main rate items can be claimed with writing-down allowances; it’s 6% for special rate expenditure.

Lastly is the first-year allowance, which should not be confused with the 50% first-year allowance. Similar to the AIA, you can use the first-year allowance to claim the full cost of eligible assets in the same accounting period.

Specific types of expenditure include:

• electric cars and cars with zero CO2 emissions
• plant and machinery for gas refuelling stations, such as storage tanks, pumps
• gas, biogas and hydrogen refuelling equipment.

Expenditure claimed with the first-year allowance does not count towards your annual investment allowance, so businesses should make sure to make full use of each scheme available to them.

Need help making sense of your expenditure to ensure you claim all that you’re entitled to? Get in touch with us for assistance with capital allowances.

Expanding your property portfolio can help increase your financial security — but is now a good time to buy to let?

As house prices start to fall and rents rise across the UK, 2023 may look like a good year to get your foot on the investment property ladder. However, making that decision is far from straightforward.

While a buy-to-let investment strategy can provide you with a regular rental income, it also comes with additional costs and responsibilities.

Recent economic factors such as soaring mortgage rates and reduced tax relief could also negatively impact your profits as a landlord, so it’s essential to weigh up your options carefully.

In this article, we’ll discuss the pros and cons of investing in buy to let in 2023.

What is buy-to-let?

A buy-to-let is a property bought for the purpose of renting it to tenants. You’ll usually need to get a buy-to-let mortgage if you intend to receive rental income from a residential property — unless you purchase it outright.

While these mortgages usually come with higher upfront costs, they are often interest-only. This means your monthly instalments will only pay off the interest on the loan, so you won’t need to settle the full sum until the end of your mortgage period.

Is it a good time to buy to let?

The housing market

The UK housing market is slowing down. Property transactions dropped by 18% in the year to February 2023 and reports suggest that house prices are falling at the fastest annual rate since 2009.

This could have both positive and negative consequences for buy-to-let investors. On one hand, buying a property when prices are low may give you a better return on your investment — so long as you get your timings right.

A slower market could also give you some bargaining power if you can offer homeowners a quick sale. Some sellers may be willing to reduce their asking price rather than keep their property on the market for an extended period of time.

Conversely, if your property continues to decrease in value well into the near future, you may end up selling it for less than you paid for. Even if you do get a good deal, you’ll also need to factor in additional costs such as taxes and mortgage rates.

The lettings market

You may experience less competition from other landlords in 2023. According to the Royal Institution of Chartered Surveyors, tenant demand hit a five-month high in March 2023 as many UK homeowners decided to sell their properties rather than rent them out.

As a result, the disparity between the number of rental properties and prospective tenants are causing rents to rise across the country, which could be good news for your bottom line.

It may also be easier to find good tenants quickly. The smaller the gap between tenancies, the less time you’ll need to spend without a regular rental income.

Mortgages

The Bank of England has increased the base rate 11 times between December 2021 and March 2023 in an effort to curb soaring inflation. As a result, landlords looking to invest face steeper borrowing costs compared to a year ago.

While mortgage rates have fallen from their peak at the end of last year, the average buy to let five-year fixed deal sat at 5.72% in March 2023 — significantly higher than the 3% rates seen in March 2022.

Waiting for rates to fall further before taking out a mortgage may therefore help you avoid higher monthly payments. Alternatively, a tracker mortgage based on the BoE’s base rate may make it easier for you to switch to a better deal in the future.

Taxes

The tax landscape has changed significantly in recent years, leaving many landlords with a greater tax burden and fewer opportunities to save costs in 2023.

Mortgage interest relief

Prior to April 2017, you could deduct the entirety of your mortgage interest payments from your rental income as an allowable business expense.

A less generous basic rate tax deduction limited to 20% of your finance costs, profits of the property business or total income — whichever is lowest — has since replaced this relief.

As a result, no longer being able to deduct the full mortgage interest from your rental profits could push you into a higher tax bracket, depending on your earnings.

However, the original tax relief system still applies to limited companies — but before you incorporate, make sure you understand the additional costs and responsibilities of being a director.

Stamp duty land tax

Unless you’re eligible for a relief or exemption, stamp duty land tax (SDLT) is payable on a portion of the value of most properties over £250,000.

If you own more than one residential property, you’ll usually need to pay an additional 3% surcharge on top of the standard SDLT rates, increasing your upfront costs.

Corporation tax rise

Letting properties via a limited company may also be more expensive this year. As of April 2023, companies with annual profits over £50,000 will need to pay a higher rate of corporation tax.

Are you ready to expand your property portfolio?

If you’re thinking about expanding your property portfolio, outside factors are only half the story. Your own finances and personal circumstances need to be stable before you make any significant investments.

The minimum deposit for a buy to let mortgage is usually 25% of the sale price, and you’re likely incur other expenses, such as landlord insurance and maintenance costs, on top of that.

A long-term investment like buy to let also means long-term responsibilities. Landlords have a wide range of legal obligations, including ensuring the residential property is safe and checking that all gas and electrical equipment is installed correctly. You’ll also need to stay up to date with any changes to lettings legislation.

Seeking professional advice can help you determine whether it’s a good time for you to invest in buy to let.

As your accountant, we can guide you through the process. We’ll work closely with you to ensure you get the best return on your investment. We can also use our tax expertise to minimise your liabilities so you can retain more of your rental income when you start letting out your property.

Just weeks after announcing downloadable self-assessment returns would no longer be available online, HMRC has backtracked its decision.

Originally, the Government planned to take the option of physical self-assessment forms off the online portal, meaning taxpayers would have to call a dedicated line to request one.

At the end of March 2023, HMRC contacted almost 135,000 people who file paper tax returns to tell them downloadable self-assessments would no longer be available. The move was an attempt to push more people to file their returns digitally.

In reaction to the announcement, professional bodies such as the Institute of Chartered Accountants for England and Wales argued against the change in a bid to reverse HMRC’s decision.

Following this feedback, the forms will remain available for download from the Government website.

As well as self-assessment tax returns, HMRC will be moving the following forms to digital by default:

• SA316 Notice to file
• SA300 Statement of account
• SA250 Welcome letter
• SA251 Exit letter
• R002 Repayment notification
• CT603 Postal notice to deliver a company tax return
• P2 Employee coding notice
• P800 Tax calculation.

Recent reports from HMRC show that even though it had planned to require taxpayers to call for a paper return, its average phone waiting times increased to 10 minutes in February 2023, while over a third of calls were unanswered.

In the same month, HMRC received 3,229,945 calls, up 20% compared with 2.68m calls in February 2022, despite the tax authority’s attempts to encourage people to use online services and webchat to resolve queries.

Glenn Collins, head of technical and strategic engagement at the Association of Chartered Certified Accountants (ACCA), said:

“It would be good to see a long-term action plan, but in the short term, the Government does have an urgent duty not to make a bad situation even worse.”

Talk to us about your self-assessment tax return.

The Government has introduced a new bill to modernise business rates across the country.

Following feedback from businesses calling for a fairer system, the new Non-Domestic Rating Bill, announced on 29 March, will support businesses by incentivising property investment and introducing more frequent valuations.

A new business rates improvement relief will remove barriers for businesses to extend or upgrade their property. Businesses undertaking qualifying building improvements will not face higher rates for a year.

According to Melanie Leech of the British Property Federation, this relief could also support the UK’s journey to net zero as businesses work to future-proof older buildings.

Furthermore, valuations will now take place every three years instead of every five years, meaning businesses with falling values could see their bills drop earlier than expected.

The Government says these new measures will make business rates in England fairer and more responsive to changes in the market. The bill will build on recent measures from the 2022 Autumn Statement, which saw £13.6 billion announced in business rates support.

Victoria Atkins, Financial Secretary to the Treasury, said:

“I want businesses to know that the Government is on their side. Businesses have asked for changes to the business rates system, and we are acting, including more frequent revaluations to make the system fairer and more responsive.

“And they come on top of £13.6bn of business rates support which resets the balance between bricks and clicks businesses, helping our much-loved high streets and communities.”

However, Helen Dickinson, chief executive of the British Retail Consortium, urged the Government to take further action to support businesses:

“These are all positive changes, but the job is not done. Government’s focus must remain on reducing the rates burden, enabling more local communities across the country to thrive.”

A new report from the Public Accounts Committee (PAC) warns that the “temporary” digital services tax (DST) could stay in place longer than planned.

The DST raised £358 million in its first year – 30% more than expected. However, the Treasury acknowledges that it is a “second best” solution until the international community introduces a permanent international tax deal, according to the PAC.

“However, we saw little evidence to support the confidence expressed by the departments in evidence to us that the OECD reforms will be implemented to the current timetable,” the PAC wrote.

MPs on the committee warned that delays to this deal could prompt larger tech companies to circumvent the DST with the “huge resources and expertise at their disposal”.

The tax charges a 2% levy on the revenues of search engines, social media services and online marketplaces that profit from UK users.

The Chartered Institute of Taxation (CIOT) agreed that the DST risks becoming a permanent part of the UK tax system.

John Cullinane, director of public policy at CIOT, said the fact that the tax still exists represents a “failure”. He continued:

“A revenue tax such as this is a blunt instrument that cannot accurately represent the tax on the profits generated in the UK. It will inevitably over-tax some companies and under-tax others.”

Talk to us about your corporation tax liabilities.

HMRC has released guidance clarifying how it will phase in the abolition of the lifetime allowance (LTA) for pensions.

As announced by Chancellor Jeremy Hunt in his Spring Budget 2023, the current £1,073,100 threshold on the LTA ended on 5 April.

However, because the legislation is not included in the Spring Finance Bill 2023, the current LTA framework will remain in place until the Government fully removes it in 2024/25. This means that pension scheme providers must wait another year for their LTA-related duties to end.

The guidance states that pension scheme administrators should continue to operate standard LTA checks when paying benefits in 2023/24.

The current rules and charges will apply for any benefit crystallisation events (BCEs) occurring before 6 April 2023, but no LTA charge will arise for BCEs that take place from 6 April onwards.

Furthermore, while payments such as defined benefits and lump sum death benefits would usually be subject to a 55% LTA charge, this will be replaced with income tax at the recipient’s marginal rate.

As a result, HMRC says that employers will need to update their payroll systems “as soon as possible” and no later than 30 September 2023.

The pension lifetime allowance (LTA), which limits the amount savers can contribute to their pensions without a tax charge, will be abolished, Chancellor Jeremy Hunt announced in his Spring Budget.

Currently, people who save more than the current allowance level of £1,073,100 in their workplace pension scheme face a tax charge of either 25% or 55% on the excess (depending on how they receive it).

The Chancellor was expected to raise this limit to encourage pension savers to stay in work longer. Instead, he revealed he would “go further” and remove the tax charge from April 2023, before abolishing the allowance altogether from April 2024.

“I do not want any doctor to retire early because of the way pension taxes work,” he said. “As Chancellor, I have realised the issue goes wider than doctors. No one should be pushed out of the workforce for tax reasons.”

Hunt also announced an increase to the annual tax-free allowance for pension contributions from £40,000 to £60,000.

Legislation will be introduced in Spring Finance Bill 2023 to:

• increase the annual allowance (AA)
• increase the money purchase AA from £4,000 to £10,000
• increase the income level for the tapered AA to apply from £240,000 to £260,000
• ensure that nobody will face an LTA charge from 1 April 2023.

Other measures affecting individuals confirmed in the Spring Budget include a three-month extension of the energy price guarantee, an expansion of free childcare and the introduction of ‘returnerships’ to incentivise over-50s to return to work.

In his speech, Hunt said:

“It is a pension tax reform that will stop NHS doctors from receiving a tax charge, incentivise our most experienced and productive workers to stay in work for longer and simplify our tax system, taking thousands of people outside of the complexity.”

“This is a comprehensive plan to remove barriers to work.”

Talk to us about your pension contributions.

The Government has extended the voluntary National Insurance deadline by an extra four months, meaning taxpayers now have until 31 July 2023 to make additional payments and help increase their state pension entitlement.

The deadline for making additional National Insurance contribution (NIC) payments is usually six years. However, this extension allows taxpayers more time to fill gaps in their NI record between April 2006 and April 2016.

This decision came after public concern over the original deadline in April.

HMRC will also accept all voluntary NIC payments made at the current 2022/23 rates until the end of July 2023. This means taxpayers will need to pay the higher 2023/24 rates from August onwards.

Taxpayers need at least ten years of NICs to qualify for the state pension. As such, HMRC is urging those eligible not to miss out on the opportunity to boost how much they receive when they retire.

Victoria Atkins, financial secretary to the Treasury, said:

“We recognise how important state pensions are for retired individuals, which is why we are giving people more time to fill any gaps in their National Insurance record to help bolster their entitlement.”

Talk to us about your National Insurance contributions.