13
Feb, 2025

Cut in interest rates

The Bank of England’s Monetary Policy Committee (MPC) met on 5 February and in a 7-2 vote decided to reduce interest rates by 25 basis points to 4.5%. The two remaining members voted to reduce the rate further to 4.25%. This was the third interest rate cut since August 2024.

This means that the late payment interest rate applied to the main taxes and duties that HMRC charges interest will be reduced to from 7.25% to 7%.

These changes will come into effect on:

  • 17 February 2025 for quarterly instalment payments
  • 25 February 2025 for non-quarterly instalments payments

The repayment interest rates applied to the main taxes and duties that HMRC pays interest on will also decrease by 0.25% to 3.50% from 25 February 2025. The repayment rate is set at the Bank Rate minus 1%, with a 0.5% lower limit.

Source:HM Treasury | 10-02-2025
13
Feb, 2025

Health services exempt from VAT

Health professionals providing medical services may be exempt from VAT if their work falls within their registered profession and primarily protects, maintains, or restores health. HMRC outlines specific exempt services, including diagnosis and treatment.

The VAT liability of goods and services provided by registered health, medical, and paramedical professionals, can be a complex area of tax law. HMRC’s guidance provides clarification on the definition of medical services and outlines the specific health services performed by registered professionals that are exempt from VAT.

If a health professional, as defined by HMRC, provides services, those services are generally exempt from VAT, provided that both of the following conditions are satisfied:

  1. The services fall within the profession in which you are registered to practice.
  2. The primary purpose of the services is the protection, maintenance, or restoration of the health of the individual concerned.

For VAT purposes, the definition of medical services (including medical care and treatment) is limited to those that meet the second condition outlined above. This includes services such as the diagnosis of illnesses, the provision of analyses of scans or samples, and assisting a health professional, hospital, or similar institution in making a diagnosis.

HMRC provides examples of services that are considered to meet the primary purpose of protecting, maintaining, or restoring a person’s health. These include:

  • Health services provided under General Medical Services (GMS), Personal Medical Services, Alternative Provider Medical Services, General Dental Services, and Personal Dental Services contracts
  • Sight testing and prescribing by opticians (limited to England, Wales, and Northern Ireland)
  • Primary and secondary eye examinations (limited to Scotland)
  • Enhanced eye health services
  • Laser eye surgery
  • Hearing tests
  • Treatment provided by osteopaths and chiropractors
  • Nursing care provided in a patient’s own home
  • Pharmaceutical advice
  • Services involving the diagnosis of an illness or the provision of analyses of samples that are a key part of a diagnosis

Additionally, certain insurance or education-related services may also be exempt from VAT, regardless of their primary purpose, as they could qualify under other independent exemptions.

Source:HM Revenue & Customs | 10-02-2025
11
Feb, 2025

How to Check the Creditworthiness of New Customers

Before extending credit to new customers, it’s essential to assess their financial reliability. Checking their creditworthiness helps protect your business from potential losses and late payments. Here’s how to do it:

  • Start by requesting basic financial information from the customer, including company details, trading history, and references from suppliers. Established businesses should be able to provide trade references that confirm their payment behaviour.
  • Conduct a credit check using a business credit reference agency such as Experian, Equifax, or Credit safe. These agencies provide credit scores and reports on a company’s financial health, outstanding debts, and payment history. For individual customers, you may need their consent to run a personal credit check.
  • Review the customer’s filed accounts at Companies House if they are a UK-registered business. Financial statements, including balance sheets and profit and loss accounts, offer insight into their financial stability. A company with poor liquidity or persistent losses may pose a credit risk.
  • Check for County Court Judgments (CCJs) or insolvency records. If a business or individual has a history of unpaid debts or legal action, this could indicate a higher risk of non-payment.
  • Set appropriate credit limits and payment terms based on the information gathered. If necessary, request upfront payments or guarantees to minimise risks.

Finally, monitor ongoing customer creditworthiness. Even reliable customers can experience financial difficulties, so it’s important to review accounts periodically and adjust credit terms when necessary.

Source:Other | 10-02-2025
11
Feb, 2025

How to Stop Future Payments on Your Debit or Credit Card

Stopping future payments from being made on your debit or credit card is crucial for avoiding unwanted charges and managing your finances effectively. Here’s how you can do it:

The first step is to contact the company taking the payments. Request that they cancel the recurring charge and provide confirmation in writing or via email.

If the merchant refuses to stop the payments, you can contact your bank or card provider. Under UK law, you have the right to cancel recurring payments (also known as Continuous Payment Authorities, CPAs) at any time. Banks are legally required to stop the payment when requested.

Many banks allow you to manage subscriptions and regular payments through their online or mobile banking services. Look for options under “Manage Payments” or “Recurring Transactions” to cancel them yourself.

If all else fails, cancelling your debit or credit card and requesting a new one can be an effective way to stop unauthorised charges. However, this should be a last resort, as it can cause disruption to other legitimate payments.

Regularly checking your bank statements ensures that no unauthorised payments slip through. If you spot an issue, report it immediately to your bank.

Taking these steps will help you stay in control of your finances and prevent unwanted payments from continuing.

Source:Other | 10-02-2025
11
Feb, 2025

Not all hurt feelings are uncapped & costly

The Employment Appeal Tribunal slashed a £10,000 award for injury to feeling by 80% after an original tribunal ruling was deemed not to be Meek compliant as it failed to provide adequate reasons for the quantum awarded. A Miss Graham was employed by Eddie Stobart Ltd. for just over ten months as a planner when she became pregnant and immediately notified her line manager. Miss Graham asserted her right to be offered suitable alternative employment during her maternity leave under the MAPLE Regulations. She was interviewed for a new role but was unsuccessful and was terminated by reason of redundancy although her grievance Email to HR was blocked by the firewall.

Miss Graham complained that she had been "automatically" and unfairly dismissed as per Section 99 of the Employment Rights Act 1996 on the basis that the new role should have been given to her in priority to others who were not on maternity leave. The first Tribunal found that Miss Graham had not been unfairly dismissed but upheld her claim of detrimental treatment and pregnancy/maternity discrimination and awarded £10,000 for injury to her feelings. Eddie Stobart Ltd. appealed and the second tribunal found the award excessive given that she had soon found alternative employment and had not endured prolonged suffering.

This case underscores the importance of presenting evidence supporting any claim for injury to feelings in the form of a ‘checklist’, although HR departments should note that those who are forced to chase up their grievances during allocated maternity or paternity leave may have grounds for such claims, however excessive or seemingly irrational.

Source:Other | 10-02-2025
6
Feb, 2025

Tax chores if managing a deceased person’s estate

When someone dies, their personal representative (executor or administrator) must value their estate to determine if Inheritance Tax (IHT) is due. This involves assessing assets, debts, and handling tax obligations throughout the estate’s administration period.

In order to ascertain whether or not IHT is due, the personal representative (an executor or administrator) of the deceased must value the deceased’s estate. This is done by calculating the total value of the assets and gifts of the deceased and deducting any debts.

However, the personal representative is also responsible for the assets from the date of death until the date everything has been passed on to the beneficiaries. This is known as the ‘administration period’. This may also include having to apply for probate.

There are also other tax chores that are required that include:

  • paying any unpaid bills
  • paying any unpaid personal taxes
  • applying for tax refunds
  • filling a self-assessment return for income the person earned before they died if needed
  • repaying any overpaid benefits

If necessary, the personal representative also needs to pay tax on any new income the estate generates after the person has died and finally pay any IHT that is due.

Source:HM Revenue & Customs | 03-02-2025
6
Feb, 2025

Tax on inherited private pension pots

Private pensions can be a great way to pass on wealth, but tax implications depend on the age of the deceased and the type of pension. Some beneficiaries may receive funds tax-free, while others could face significant tax charges. Knowing the rules is essential.

Private pensions can be an effective means of passing on wealth, but it is crucial to consider the potential tax implications when inheriting a private pension. Typically, the individual who passed away will have nominated the beneficiary by informing their pension provider of their wish for the remaining funds in the pension pot to be inherited by you. If the nominated beneficiary cannot be located or has since passed away, the pension provider may make alternative arrangements and direct the funds to someone else.

In general, if you inherit a private pension from someone who died before the age of 75, the benefits remaining in the pension can be paid out as a lump sum or drawdown income without any tax liability. However, if the pension holder passed away after the age of 75, the inherited pension will be subject to taxation at your marginal income tax rate. This means you would pay 20% tax if you are a basic rate taxpayer, 40% if you are in the higher tax bracket, or 45% if you are taxed at the top rate. Note that tax rates may differ for Scottish taxpayers.

For pensions from a defined benefit scheme, typically associated with workplace pensions, there are additional restrictions. In most cases, the pension can only be paid to a dependant of the deceased, such as a spouse, civil partner, or a child under the age of 23. If the pension scheme permits, this rule may be adjusted, but any inheritance under such circumstances may be subject to a tax charge of up to 55% as an unauthorised payment.

The rules governing pension inheritance are complex, varying depending on the type of pension and the age of the deceased at the time of death. Furthermore, there are strict time limits that must be adhered to in order to ensure compliance.

Source:HM Revenue & Customs | 03-02-2025
6
Feb, 2025

How umbrella companies work

Umbrella companies offer an easy way for freelancers and contractors to get paid without running a limited company. They handle payroll and tax via PAYE, ensuring compliance and employment rights. But are they the right choice for you? Consider the pros and cons.

Essentially, an umbrella company acts as an intermediary between the worker and the end client (or recruitment agency), handling payroll, taxes, and other administrative tasks on behalf of the worker.

The worker enters into a contract with the umbrella company. In most cases, the umbrella company employs the worker and pays their wages through PAYE. The umbrella company then enters into a separate contract with the client or recruitment agency who requires the worker's services.

As an employee of an umbrella company, a worker has the same employment rights as other employees including the right to a written employment contract.

There are many advantages to using an umbrella company, this can include simplifying tax obligations, employee rights and IR35 compliance. Some of the disadvantages can include the costs of using the umbrella company, limited control and the overall tax burden may be higher compared to other structures that may be available.

Source:HM Revenue & Customs | 03-02-2025
6
Feb, 2025

31 January deadline met by more than 11.5 million people

Over 11.5 million people met the 31 January 2025 self-assessment deadline, but 1.1 million taxpayers missed it. If you're one of them, expect a £100 penalty. Learn about late fees and HMRC’s payment plan options to avoid further charges.

There are an estimated 1.1 million taxpayers that missed the deadline. Are you among those that missed the 31 January 2025 filing deadline for your 2023-24 self-assessment returns?

If you have missed the filing deadline then you will usually be charged a £100 fixed penalty if your return is up to 3 months late, regardless of whether you owed tax or not. If you do not file and pay before 1 May 2025 then you will face further penalties unless you have arranged to pay with HMRC.

If you are unable to pay your tax bill, there is an option to set up an online time to pay payment plan to spread the cost of tax due on 31 January 2025 for up to 12 months. This option is available for debts up to £30,000 and the payment plan needs to be set up no later than 60 days after the due date of a debt.

If you owe self-assessment tax payments of over £30,000 or need longer than 12 months to pay in full, you can still apply to set up a time to pay arrangement with HMRC, but this cannot be done using the online service.

Source:HM Revenue & Customs | 03-02-2025
6
Feb, 2025

When is a hobby a business

Not sure if your hobby is actually a taxable trade? HMRC uses ‘badges of trade’ to assess whether an activity is a business. Factors like profit motive, transaction frequency, and asset changes help determine if tax rules apply to your earnings.

The 'badges of trade' tests, although not definitive, serve as important tools for HMRC in determining whether an activity constitutes a legitimate economic trade or business, or whether it is simply a personal hobby. There comes a point at which a careful and thorough evaluation is required to assess whether what initially started as a hobby has indeed transformed into a taxable activity.

As part of their investigation into whether a hobby has evolved into a trade, HMRC typically examines the following badges of trade:

  • Profit-seeking motive
  • The number of transactions
  • The nature of the asset
  • The existence of similar trading transactions or interests
  • Changes made to the asset
  • The manner in which the sale was carried out
  • The source of finance used
  • The interval of time between purchase and sale
  • The method of acquisition

It is important to note that there is no statutory definition of the term ‘trade.’ The only statutory clarification available is that ‘trade’ includes a ‘venture in the nature of trade.’ As a result, it is the courts that have provided a definition of what constitutes a 'trade,' and these decisions serve as a framework for guiding HMRC's assessments when disputes arise.

The badges of trade have proven to be valuable indicators in numerous cases, providing practical guidance in distinguishing between a hobby and a taxable trade or business.

Source:HM Revenue & Customs | 03-02-2025