The government has announced a crackdown on late payments to small businesses and the self-employed.

Late payments cost SMEs £22,000 a year on average, according to Smart Data Foundry, while the Federation of Small Businesses says it leads to 50,000 business closures a year.

The government will consult on new laws that will hold larger firms to account and aim to get cash flowing back into businesses.

In addition, new legislation being brought in the coming weeks will require all large businesses to include payment reporting in their annual reports – putting the onus on them to provide clarity in their annual reports about how they treat small firms. This will mean company boards and international investors will be able to see how firms are operating.

Anna Leach, Chief Economist at the Institute of Directors (IoD), said:

‘For small businesses in particular, the time taken to pay an invoice matters. Companies that are paid swiftly can raise their productivity by spending more time on projects of economic value and less time chasing invoices.

‘We know from our research that there is a significant lack of awareness amongst businesses of the ability to check on the payment practices of large employers, and even fewer feel able to take enforcement action against their customers.

‘By ensuring that there is increased visibility of payment practices, reputational pressure will spur change in poorly performing firms, rather than smaller suppliers needing to try and negotiate in isolation.’

Internet link: GOV.UK IoD

The Chancellor should use her Autumn Budget to make off-payroll working rules ‘fairer and more effective’, according to the Association of Independent Professionals and the Self-Employed (IPSE).

IPSE says that the rules, commonly known as IR35, are still causing significant disruption for businesses and public bodies needing to recruit freelancers and contractors for their operations.

An IPSE survey of 1300 contractors in early 2024 found that 54% had walked away from an offer of work due to disagreements over the client’s IR35 determination.

It says the last government presided over a disastrous tightening of IR35 with the off-payroll working reforms. It is asking the new government to find a ‘fairer and more effective way for people to work as freelancers without being subject to endless challenges from their clients and the taxman’.

IPSE also called on HMRC to give taxpayers the support and the Chancellor to end the uncertainty over Managed Service Company legislation.

IPSE’s Fred Hick said:

‘For the first time since Spring 2010, a Labour Chancellor will deliver a Budget statement to the House of Commons. Government has so far painted a dour picture in the run up to the statement, with the Prime Minister warning that the Budget will be ‘painful’ – leading commentators to conclude that tax rises and spending cuts are on the way. But after a painful few years for the self-employed, we’re hoping government can spare some positivity for the sector.’

Internet link: IPSE

HMRC has ‘sent nudge’ letters to crypto investors who it suspects have failed to pay the correct tax on their gains, according to the Chartered Institute of Taxation (CIOT).

Many crypto investors are unaware of their tax obligations due to uncertainty over tax rules and limited understanding of the nature of crypto assets.

A chargeable disposal occurs when individual:

• Sells crypto assets for fiat currency.
• Exchanges one crypto asset for another.
• Uses crypto assets to buy goods or services.
• Gives away crypto assets to someone other than spouse or civil partner (in this instance, the individual is deemed to receive the value of the asset even if they do not actually receive anything).

Gary Ashford, Chair of the CIOT’s Crypto Assets Working Group, said:

‘Many investors may be unaware that profits from crypto assets are subject to income tax or Capital Gains Tax (CGT) like any other asset, depending on how they’re held.

‘If you receive a ‘nudge letter’ from HMRC, it’s important to take it seriously. Even those who don’t receive a letter should review their crypto activity and file a tax return or use the capital gains real time transaction service if necessary.

‘Sometimes tax can be due even where the investor does not think his or her investments have been profitable. Selling, lending or ‘staking’ crypto assets – or potentially even just transferring assets between crypto sites and portfolios – will usually trigger a disposal in the tax year in question.’

Internet links: CIOT

HMRC has reduced late payment and repayment interest rates following the cut to the base rate.

The Bank of England cut the base rate to 5.0% on 1 August, the first reduction for over four years.

This has triggered a cut in HMRC interest rates which are pegged to the base rate.

From 20 August, the late payment interest rate was cut to 7.5% from 7.75%, where it had been for 12 months. The repayment interest rate was also reduced to 4.0% from 4.25% from 20 August.

HMRC late payment interest is set at base rate plus 2.5%. Repayment interest is set at base rate minus 1%, with a lower limit – or ‘minimum floor’ – of 0.5%.

Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments dropped to 6.0% from 6.25% from 12 August.

The interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments is down by 0.25% to 4.75% from 5% from 12 August.

Internet link: GOV.UK

The 5p cut in fuel duty to be scrapped in the upcoming Autumn Budget, according to the RAC.

The motoring organisation says that motorists in the UK are ‘not gaining any benefit’ and retailers have failed to pass on lower petrol and diesel prices to drivers.

Prime Minister Keir Starmer recently refused to rule out a rise in fuel duty and warned that the Autumn Budget will be ‘painful‘.

The RAC suggested that average petrol prices should be reduced from 142p per litre to 136p per litre and diesel prices from 147p per litre to 139p per litre.

Simon Williams, Head of Policy at the RAC, said:

‘We’d normally be against any increase in duty. But we’ve long been saying drivers haven’t been benefitting from the current discount due to much higher-than-average retailer margins.

‘As more and more EVs come on to the roads the government will need to tax drivers differently. We think replacing fuel duty with a pay-per-mile system as soon as possible is the way forward as then the only tax levied on fuel would be VAT. This would give retailers nowhere to hide.’