Inflation remains close to a 40-year high despite falling in January, according to the latest data from the Office for National Statistics (ONS).

The ONS found that inflation fell to 10.1% in the year to January 2023 from 10.5% in December 2022. The Bank of England has also reported that inflation ‘might now have turned a corner’ . The drop has been linked to the costs of fuel, restaurant and hotel prices slowing. The data also revealed that, on a monthly basis, the Consumer Prices Index (CPI) fell by 0.6% in January 2023, compared to a fall of 0.1% in January 2022.

However, the ONS found that food inflation remains high with the 12 month rate to January 2023 at 16.7%. The largest upward contributions to the annual Consumer Prices Index including owner occupiers’ housing costs (CPIH) inflation rate in January came from housing and household services, food and non-alcoholic beverages.

Alpesh Paleja, Lead Economist at the Confederation of British Industry (CBI), said:

‘Another fall in inflation over January suggests that the tide is turning on price pressures. But with inflation and pipeline cost pressures set to remain high this year, households and businesses are likely to feel the pain for a while yet. In particular, the continued strength in more domestic measures of inflation will keep alarm bells ringing at the Bank of England.

‘Given the central role played by energy prices in driving inflation up over the past year, the government must use the upcoming Budget to deliver a home-grown, secure, low-cost and low-carbon energy system. Measures that boost green investment will not only help reduce exposure to volatility in global energy prices, but also deliver a sustainable path to reaching net zero.’

Internet link: ONS website CBI website

Are you a VAT registered business then you need to be aware of changes HMRC have made for late VAT returns. We can help ensure you do not fall foul of these new rules, please contact us for more information. We can also provide a free software license for 12 months to help you get your records into a digital format.

• Late submission penalties – These work on a points-based system. For each VAT return submitted late, customers will receive a penalty point until they reach the penalty point threshold – at which stage they will receive a £200 penalty. A further £200 penalty will also apply for each subsequent late submission while at the threshold, which varies to take account of monthly, quarterly and annual accounting periods.
• Late payment penalties – If a VAT payment is more than 15 days overdue, businesses will pay a first late payment penalty. If the VAT payment is more than 30 days overdue, the first late payment penalty increases and a second late payment penalty will also apply. To help customers get used to the changes HMRC will not charge a first late payment penalty on VAT payments due on or before 31 December 2023, if businesses either pay in full or a payment plan is agreed within 30 days of the payment due date.
• Payment plans – HMRC will help businesses that cannot pay their VAT bill in full. Customers may be able to set up a payment plan to pay their bill in instalments. After 31 December 2023, if a customer proposes a payment plan within 15 days of payment being due and HMRC agrees it, they would not be charged a late payment penalty, provided that they keep to the conditions of the payment plan. Late payment penalties can apply where proposals are made after the first 15 days, but the agreement of the payment plan can prevent them increasing.
• Interest calculations – HMRC has introduced both late payment and repayment interest, which will replace previous VAT interest rules. This brings the new regime in line with other taxes.

For more information please contact us on info@mcgintydemack.co.uk or call 01942322767

The government has launched a consultation on simplifying the UK’s research and development (R&D) tax relief system, driving innovation and growing the economy.

The consultation runs to 13 March 2023 and sets out proposals on how a single scheme could be designed and implemented.

This would replace the two R&D tax relief schemes currently in place – the Research and Development Expenditure Credit scheme and the small and medium enterprises R&D relief.

This is part of the government’s ongoing R&D tax reliefs review, and follows changes announced at Autumn Statement 2022 where the generosities of the two R&D tax schemes were broadly aligned.

Victoria Atkins MP, Financial Secretary to the Treasury, said:

‘We are focussed on growing the economy – with thriving businesses bringing more jobs, higher pay and more tax revenue to fund our precious public services.

‘Getting R&D tax relief right and fit for the future sits at the heart of making sure the UK remains a competitive location for cutting edge research – helping new firms grow.

‘I welcome views on the option to simplify the scheme, especially from those who have experience of the existing tax reliefs.’

Internet link: GOV.UK

The British Chambers of Commerce (BCC) has warned that small and medium-sized enterprises (SMEs) that export are facing ‘tightening pressure’ as a result of decreasing export sales.

The BCC’s quarterly Trade Confidence Outlook report, which polled more than 2,300 SMEs, showed that 27% of exporters recorded decreased export sales during the fourth quarter of 2022.

The survey showed that 26% of businesses saw increased export sales, whilst 47% reported no change. 36% said they expect to see increased profitability in the next 12 months; however, 35% anticipate a decrease.

William Bain, Head of Trade Policy at the BCC, commented:

‘Last autumn the World Trade Organisation forecast global trade growth of just 1% in 2023, down from 3% in 2022. This is creating huge headwinds for smaller UK firms battered by the pandemic, Brexit and energy price shocks.’

Internet link: BCC website

HMRC has revealed that more pensioners filed a tax return for the 2020/21 tax year compared to young people.

Overall, those aged 65 and over accounted for 16% of individuals who submitted a tax return, whereas 16 to 24-year-olds made up 2.7% of total filers.

The new data is part of an analysis by HMRC into the demographic data of self assessment taxpayers. The largest group of self assessment filers were 45 to 54-year-olds, who accounted for 24% of all tax returns submitted.

Men accounted for 62% of those who submitted a return last year, compared to 38% who were women. The data also showed that almost 146,000 people submitted their tax return at the earliest opportunity between 6 and 11 April 2021.

Internet link: HMRC press release