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 Resolution Foundation has suggested that reforms to inheritance tax (IHT), capital gains tax (CGT) and national insurance (NI) could raise more than £20 billion a year.

The Foundation said that the reforms could also pass a ‘triple tax test’ of improving tax efficiency, making sure that tax rises fall on those with the broadest shoulders.

It said that Chancellor Rachel Reeves has ‘greatly limited’ her revenue raising options by pledging not to raise the main rates of income tax, corporation tax, VAT or NI.

According to the Resolution Foundation, CGT is ‘ripe for reform’ as rates are ‘unjustifiably lower’ compared to those on other forms of income.

Adam Corlett, Principal Economist at the Resolution Foundation, said:

‘There is widespread speculation about what might be in the first Budget of the new Parliament, but overall tax rises are a dead cert and time-honoured tradition.

‘Long overdue reforms to IHT, CGT and pension contribution reliefs would fit the bill and could raise over £20 billion if needed, while also making the tax system fairer and more consistent between different taxpayers.’

Internet link: Resolution Foundation

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

The number of self-employed people aged 60 or over has reached a record level, according to analysis by Rest Less.

These numbers have increased by over a third in the past decade, totalling 991,432 self-employed people aged 60 or over in 2023.

The analysis found that while the number of self-employed workers in their 50s and older has grown since 2021, it is those in their 60s who have set the new high.

The total number of workers who are self-employed is about 4.3 million, after a two-year recovery following a sharp fall during the pandemic, according to the research.

Stuart Lewis, Chief Executive of Rest Less, said:

‘With the state pension age soon to be 67 and set to go higher still, many people are choosing to work beyond the point of traditional retirement.

‘For many, self-employment is a great option as it allows people to remain active and engaged in the community and workforce whilst also providing greater flexibility – leveraging their skills, experience and network to make an impact.

‘The decision to go self-employed can be driven by wildly different sets of circumstances from people living comfortably and pursuing an entrepreneurial passion to those who are forced to generate an income and have not been able to find a permanent solution in the mainstream workforce.’

Internet link: Rest Less

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