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News - 17 January 2025

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Accounting News - 17 January 2025

In this week’s Enews, we look at calls to make changes to unfair VAT rules. There is also news on proposed regulatory changes to benefit small businesses and the UK’s latest economic data to update you on.

Photo by Sean Robertson on Unsplash

CIOT calls on government to rewrite unfair VAT rules

The Chartered Institute of Taxation (CIOT) is calling on the government to address unfair tax rules as interest rates on late payments rise.

The CIOT is urging the government to reintroduce rules which enable HMRC to waive interest on underpaid VAT when no actual tax loss to the Exchequer occurs.

This power was omitted from the new VAT interest regime which came into effect for VAT return periods starting on or after 1 January 2023.

The exposure to interest where there is no tax loss is due to the unique operation of the VAT regime.

The interest rate on late payment of tax is due to increase by a further 1.5% in April, with no equivalent increase in interest on overpaid tax.

Richard Wild, CIOT’s Head of Tax Technical, said:

‘It is possible for a taxpayer to under-declare an amount of VAT due to HMRC, in circumstances where that VAT is reclaimable by a third party, such as the taxpayer’s customer.

Under the previous interest regime the principle of commercial restitution could be applied, providing HMRC with discretion not to charge interest in these circumstances, because there had been no loss to the Exchequer.

Under the present system, HMRC no longer has statutory discretion to not charge interest in these circumstances. So, interest is now being charged in situations where there is no net loss of tax.

We do not understand this to be a deliberate decision on the previous government’s part, but it is vital that this unfairness is removed and commercial restitution reinstated.’

Internet link: CIOT website


Regulators must grasp growth opportunity

The UK’s regulators must grasp the opportunity to help small business grow, says the Federation of Small Businesses (FSB).

The FSB has written to seven of the UK’s regulators with a set of measures to unlock small business growth. The regulators are the Financial Conduct Authority (FCA), Finance Reporting Council (FRC), Ofgem, Ofwat, Ofcom, Competition and Markets Authority and Information Commissioner’s Office.

This follows requests from the Prime Minister, the Chancellor of the Exchequer and the Business Secretary for leading regulators to submit proposals by mid-January for reforms that will spur investments and back economic upturn.

The FSB is calling for a better regulatory policy atmosphere in various areas ranging from financial services to broadband and utilities to digital markets. It has asked the FCA to investigate the use of Personal Guarantees for limited companies, the FRC to include late payments in audits and Ofgem to ensure small firms get quarterly bills from energy companies.

Tina McKenzie, Policy Chair at the Federation of Small Businesses said:

‘We’re glad to see this drive at the start of a new government and new Parliament.

‘Regulators must grasp this opportunity to propose small business growth measures within their activities and remits. We’re also keen to see ministers and all public bodies to put their shoulders to the wheel on growth, alongside business and industry.

‘Regulating for growth doesn’t always mean deregulation – sometimes it means better protection for small firms as consumers.’

Internet link: FSB website


UK economy returns to growth as inflation dips

The UK economy grew for the first time in three months in November, according to the Office for National Statistics (ONS).

ONS figures showed an expansion of 0.1% in GDP after the economy shrank in each of the two previous months.

But the figure was lower than economists had expected, with declines in manufacturing and business rentals and leasing.

Figures showed the services sector drove the marginal growth in November, with pubs, restaurants and IT companies performing well.

UK inflation dipped in December for the first time in three months, the ONS reported.

Prices rose 2.5% in the year to December, down from 2.6% the month before, ONS said.

The ONS said while hotel prices and tobacco prices had fallen last month, the decreases were offset by the cost of fuel and second-hand cars rising.

Ben Jones, CBI Lead Economist said:

‘After a string of disappointing data, it’s good to see that growth returned to positive territory in November, though the economy is still only on track for a very modest expansion at best over the final quarter of last year.

‘In the wake of the Autumn Budget a mood of caution seems to have settled over UK businesses. Many firms are entering 2025 with a focus on reducing operational expenditure, which is likely to weigh on pay, hiring and investment in the months ahead.

‘The government can help shift the UK’s economic narrative with more determined focus on measures that could underpin growth.’

Internet link: ONS website | ONS website | CBI website



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