Steven Mugglestone

The more I learn, the less I know

Posts Tagged ‘corporation tax

How much does HMRC owe your business?

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MGC Hayles is urging business owners to check if they are due a Corporation Tax refund from HMRC now and not just at the end of each year, as delays are common, as well as asking whether they have ensured that they have claimed a number of major, basic tax reliefs, such as research and development.  They are holding a number of seminars to re-iterate what basic, legal and generous reliefs that are available, which are not taken up.

As well as many reliefs going unclaimed, MGC Hayles says that there was a large jump in the amount of refunded by HMRC over the past year – up from £5bn in financial year ending March 2011 to £7bn in 2012.

Check your payments on account

Larger companies are more likely to be owed money, as they pay Corporation Tax in advance (in quarterly payments), based on their previous year’s profits.  If profits in one year are lower than those in the previous year, due to recessionary pressures or a general decline in business, then HMRC will refund the overpaid tax.  In reality, however, many firms face a long wait to receive any refunded Corporation Tax

A partner at MGC Hayles, Jason Seagrave, reported that the CT refund system can be a bit of a “lottery”, with some companies receiving a refund quickly, whereas others have to wait a number of months before their claim is processed.  In the current economic climate, any delayed payments will put extra pressure on businesses with poor cash flow.

“When a business has overpaid Corporation Tax, refund delays can cause more pressure as the money should be in a business’ bank account, not sitting with HMRC. A missing Corporation Tax refund will add to the difficult financial situation a business might be in that led to the need for a refund in the first place.  We have seen this on numerous occasions and have stepped in to help our clients to get the money back”

Potential insolvencies

In fact, there have been rare situations where firms have gone into administration while waiting for an HMRC refund; “The refund that HMRC is sitting on could be the lifeline that helps a company stay in business, particularly when there is another large creditor to be paid.”  In the year ending March 31st 2012, almost 350,000 companies received CT refunds from HMRC, with an average payout of £20,231.

Always check the payment

Jason Seagrave urges companies of all sizes to check if they are eligible to claim a Corporation Tax refund – either due to simple over-payment, or due to loss relief or an R&D credit relief (it is worth noting that small companies can claim for an R&D credit if it has recorded no profits for the year in question).  Commenting on the significant rise in CT refunds between 2011 and 2012, Jason suggested that many companies may have been “over-confident about their profit predictions recently”, clearly expecting the economic downturn to have given way to a stronger recovery by now, but as we can see from the latest GDP figures, the UK economy is still very much struggling to grow.

MGC Hayles will be holding a breakfast seminar at the Leicester Tigers on 23rd May and the Notts County Ground on 30th May to highlight many of these areas and safe and legal reliefs that are available.




Written by Steven Mugglestone

May 9, 2013 at 10:10 am

Autumn 2011 Statement Headline Bits

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Autumn 2011 Statement Headline Bits
The Chancellor delivered his Autumn Statement to Parliament, on 29 November 2011, together with the Office for Budget Responsibility’s updated growth and borrowing forecasts.  Reductions in spending were announced to ensure that the country meets its fiscal targets, with some of the savings being used in the short term to fund investment in infrastructure resulting in the generation of long term growth. The Chancellor also announced measures to help households and businesses cope with higher inflation and to ensure that deficit reduction is fairly implemented.

The statement comprises numerous announcements, with key headlines of R&D tax credits being extended to large businesses and extension to tax relief for seed investment in start-up businesses.  Other initiatives and announcements include the following:

  • The State Pension Age is to rise to age 67 between April 2026 and April 2028. This is due to the increase in average life expectancy since the original State Pension Age timetable was produced. Future increases in the State Pension Age will be based on demographic evidence.  The Government will consult on the proposed process and take into consideration the views of all interested parties when these decisions are made.
  • The standard minimum income guarantee in Pension Credit increases by 3.9 per cent in April 2012 (to £142.70) per week for single pensioners and £217.90 a week for pensioner couples.
  • The full basic State Pension will rise from April 2012 by £5.30 to £107.45 per week. The full- rate for couples for those whose entitlement is based on their spouse/civil partner’s pension will rise by £8.50 to £171.85 per week.
  • The threshold for Savings Credit will rise to £111.10 for single pensioners and £177.20 for pensioner couples.
  • The Government has also published its National Infrastructure Plan 2011. The Autumn Statement announces a new strategy to bring to £20 billion of private sector investment. To do this a Memorandum of Understanding has been signed with two groups of UK pension funds to support additional investment in UK infrastructure.
  • The Government is also working with the Association of British Insurers to prevent employers gaining excessive tax relief for asset-backed pension contributions to their pension schemes.  The Government will introduce legislation in the Finance Bill 2012 (that takes effect on 29 November 2011) to ensure no excessive relief can arise for new arrangements.  Transitional rules will apply to existing asset-backed arrangements that have already received tax relief to ensure the correct amount is given by the end of an arrangement.  Asset backed contributions are those being made by large employers to fund their defined benefit (DB) schemes and manage pensions deficits by means of a series of payments guaranteed with security over the assets from which the payments derive, rather than making a one-off lump sum contribution.
  • Introduction of the Seed Enterprise Investment Scheme (SEIS) from April 2012. This will enable individuals to invest in qualifying new start-up companies and receive income tax relief at 50% with an annual investment limit of £100,000. In addition gains realised on disposal of an asset in 2012/13, which are then invested in SEIS in the same tax year, will be exempt from capital gains tax.
  •  The annual exempt amount for capital gains tax is frozen at £10,600 for 2012/13.
  • The Chancellor announced an indefinite delay on “auto-enrolment” for pensions for any firm with fewer than 50 employees.  Pension campaigners will to say that it undermines the Government’s attempts to encourage people to save more for their retirement.
  • Larger businesses are still be obliged to automatically enrol their employees into pension schemes from next year which is an additional cost as companies have to match the contribution made by their employees.

Other areas included in the autumn statement includes:


  • 2011 forecast revised down to 0.9% from 1.7%
  • 2012 forecast revised down to 0.7% from 2.5%
  • In 2013, 2014 and 2015, forecast growth will be 2.1%, 2.7% and 3%


  • Extra £11bn borrowing over the next 5 years
  • Borrowing forecast to be £127bn in 2011-2, falling to £120bn, £100bn, £79bn and £53bn in following years
  • Debt to GDP ratio to peak at 78% in 2014-5, falling afterwards

Transport Costs

  • The average rise in regulated rail fares to be capped at 6% – 1% above inflation – in January, rather than the 8% cap expected
  • Planned 3p fuel duty rise in January to be scrapped.
  • But duty will go up by 3p in August.


  • OBR forecast of total public sector job losses up from 400,000 to 710,000
  • Credit easing programme to underwrite up to £40bn in low-interest loans to small and medium-sized firms
  • £1bn business finance partnership to raise money for medium-sized firms
  • Regional Growth regeneration fund to get £1bn in extra funding£250m support package for energy-intensive firms, £500m for science
  • Business rate holiday relief for small firms extended to April 2013New time limits for planning applications£1bn “youth contract” to subsidise six-month work placements for 410,000 young people
  • Bank levy to increase in January


  • £5bn new spending over three years, including £1bn for the rail network
  • Go-ahead for 35 road and rail projects across England
  • Aim to unlock a further £20bn in investment from pension funds.


Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

T: 0845 519 5659                T: 0121 236 3317

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Written by Steven Mugglestone

November 30, 2011 at 5:34 pm

75% of Accountants Do Not Claim Enough Tax Relief On Behalf Of Their Clients ..… And R&D Tax Credits Is One Such Area

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75% of Accountants Do Not Claim Enough Tax Relief On Behalf Of Their Clients
..… And R&D Tax Credits Is One Such Area

This statistic is quite remarkable, but is being quoted around at the moment.  Rightly or wrongly, it does highlight that many accountants, whatever the percentage is, do not claim all the relevant tax reliefs that are available for their clients.  One such tax relief is R&D tax credit and this is a relief that could result in an actual refund of cash from HMRC, which in the current climate is very welcome.

In essence, Research and Development (R&D) Relief is a Corporation Tax relief that may reduce your company or organisation’s tax bill by more than your actual expenditure on allowable R&D costs.

Alternatively, if your company or organisation is small or medium-sized, you may be able to choose to receive a tax credit instead, by way of a cash sum paid by HM Revenue & Customs (HMRC), but your company or organisation can only claim R&D Relief if it is liable for Corporation Tax. Full details are available on the BIS site below and we have highlighted some of the key points in this article:

The key headline to bear in mind is that you may be able to claim an additional 100% of your costs against your tax and potentially receive a cash refund from HMRC.  Given the statistic above, there are clearly many businesses which do not claim this and so are missing out on potential substantial cash refunds.

Many companies are claiming R&D tax credits successfully, but despite the substantial financial benefits available, many others also do not realise that they have eligible projects or worry that the claim process is too onerous and costly or, most commonly, include the R&D claim as part of their broader tax and accounting affairs without a rigorous effort to optimise its scope.  Businesses need to take advice and consider what they do as they often miss the fact that they are already incurring R&D costs for commercial activities but do not include them as such and so miss out on the relief.

Not only is the tax legislation associated with the scheme a specialised area in its own right, it is unique in that a successful claim is based on its scientific or technological merits, meaning that the claim process cannot be fully handled by tax personnel alone and we certainly work with specialist in this area to assist and our clients with the relevant claims.

Qualifying criteria

  • Attempting to achieve an advance in science
  • Resolution of a scientific uncertainty
  • Technological advances
  • New knowledge – not just for their company

Typical R&D opportunity sectors (but not exhaustive)

  • Companies developing new products
  • Digital marketing – database software development
  • Games companies / Electronics / Instrumentation
  • Food manufacturers
  • Medical devices manufacturers
  • Technology industries e.g. aerospace
  • SMEs with a reasonable number of employees
  • Software – security, performance, packages together to make a system
  • Software development

So the question really, in respect of R&D Tax Relief – is your company claiming it’s full entitlement?

·         Do you employ scientists, engineers, software developers or technicians?

·         Have you developed a new or appreciably improved product or process?

·         Have you developed software in-house?

·         Are you a Small or Medium-sized Enterprise (SME) that has subcontracted out any of the above?

If the answer to any of these questions is ‘yes’, and you are a UK Corporation Tax payer then you could be eligible to claim R&D tax relief.

The benefit can be a cash credit to your business that is worth as much as 25% of your company’s expenditure on Research and Development. In short, if you employ only four engineers or software developers performing eligible  work at £25,000 each, under the UK R&D Tax Credit scheme you could be entitled to a cheque from HMRC for £25,000 each year.

We have been Finance Directors within business and involved in similar claims from the other side of the desk and we carry out this type of review for our clients on a regular basis to ensure that we understand what they are doing and picking up where eligible R&D is being carried out to ensure that the appropriate claims may be made and where we can, cash refunds obtained on behalf of our clients.  We are always endeavouring to ensure that we are firmly in the 25% of accountants that do claim all relevant tax reliefs for their current and future clients.

Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

T: 0845 519 5659                T: 0121 236 3317

Connect, call, talk, email, contact us, send a messenger pigeon and arrange a discussion, review and free meeting.

Written by Steven Mugglestone

November 30, 2011 at 1:16 pm

HMRC Target landlords, fast food retailers, construction workers and late filing

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HMRC Announce 5 New Taskforces

HMRC announced five new regional-specific taskforces, in November 2011, as part of a drive to tackle tax evasion.  HMRC state that the industries and regions selected are those where the risk of tax evasion is highest.

Following on from our recent posts,

  • “It is only a matter of time until HMRC finds your undeclared income!”
  • HMRC are targeting undeclared income for private tutors & coaches.  Act now to avoid hefty penalties:

HMRC have started to identify and prioritise key industries and regions that they believe include the most tax evaders.

These taskforces demonstrate HMRC’s warning that there is no hiding place for undisclosed income and gains and that it will clamp down very hard on anyone who does not have their affairs in order. Failure to do so will run the very serious risk of prosecution when the designated taskforce identifies an anomaly.

The Government has created these taskforces and has pledged to tackle tax evasion, avoidance and fraud which is planned to raise an additional £7bn each year by 2014/15.

If anyone is concerned they should act now and take specialist advice regarding tax disclosures to see how this applies to them and their business or personal tax returns.  Full disclosure and approaching HMRC with professional support should mean that you will reduce any hefty penalty that would be raised if discovered by an HMRC enquiry.

The new five new taskforces will target:

  • scrap metal dealers in Scotland deliberately suppressing their income or inflating expenditure to evade paying tax
  • self-employed construction traders who suppress sales or over-claim expenses in the North West and North Wales
  • taxpayers not submitting their statutory returns across Corporation Tax, Income tax Self- Assessment, PAYE and VAT in the South East
  • fast food outlets in Scotland
  • landlords evading their tax responsibilities in North West and North Wales.

HMRC is planning 12 taskforces in 2011/12, the first of which was launched in May, and more to follow in 2012/13.


Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

T: 0845 519 5659                T: 0121 236 3317

Connect, call, talk, email, contact us, send a messenger pigeon and arrange a discussion, review and free meeting.

Written by Steven Mugglestone

November 17, 2011 at 8:58 am

Posted in HMRC, Tax

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Budget 2011 – The best of the leaks and predictions

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Budget 2011 – The Best of the Leaks and Predictions

Business tax

Enterprise zones
Unable to resist the temptation of leaking his own Budget announcements, the Chancellor has already stated that he will create new enterprise zones across the UK. Enterprise zones are a long-standing Conservative creation to aid regional development, that have virtually been phased out and only loosely replaced by Labour’s ‘disadvantaged areas’ (with very different tax rules). Whether or not the new enterprise zones will operate in the same way as the old ones (with 100% up front capital allowances on the cost of building business premises) remains to be seen but they may provide some useful options for expanding or new businesses and investors.

Small businesses
The Chancellor has tasked the Office of Tax Simplification (OTS) with making recommendations on the simplification of the tax rules for small businesses and in particular, ways in which the IR35 legislation could be simplified or removed. The OTS is due to report on 10 March and, in his response in the Budget, it is likely that the Chancellor will issue a consultation document or at least outline which of the OTS suggestions are to be pursued in more depth: however, any legislative changes are unlikely to take place until April 2012.

Even so, it is understood that the OTS is considering some radical solutions to level the playing field between sole traders and small companies: removing the current tax incentive to incorporate a business is seen as the most effective way to tackle the IR35 issue. Such simplification is likely to lead to owners of small companies paying more tax. Whether or not the OTS can come up with a similar method of dealing with income splitting remains to be seen.

On the positive side, the Chancellor may allow some more administrative short cuts and opt-outs for small businesses – e.g. ‘payrolling’ employee benefits rather than completing forms P11D, or an opt-out for payroll year end returns where the business takes part in the proposed real time information system.

R&D tax credits
The Government has consulted on ways to refocus the current R&D tax credit schemes on high tech companies, small businesses and new start-ups as well as making the credit easier to claim. It is likely that some technical amendments will be announced in the Budget although a major extension of the credits seems unlikely on the grounds of affordability.

Green investment bank
Although the Government has committed to base level funding for its proposed green investment bank, there will be a considerable funding gap to be filled if it is to achieve the Government’s green objectives. It is possible that the Chancellor will offer tax incentives for private and corporate investors to help raise the additional funds required. Whether these will be for direct investment into the new bank or will be triggered by the bank launching it own funds and investments that qualify for the existing Venture Capital Trust (VCT) or Enterprise Investment Scheme (EIS) reliefs remains to be seen. As the bank could be a key part of the Government’s overall growth plan, significant proposals may well be announced.

The Chancellor has publicly spoken of making the UK an attractive location for green energy generation projects so there may be some comment on support for such projects from the new bank. There may also be some comment on the Department of Environment and Climate Change’s impending review of the current solar feed-in tariff system which has cast a long shadow over large scale investment in such projects since it was announced.

Enterprise Investment Scheme
It already appears that much of the Government’s growth plan will focus on ‘freeing’ entrepreneurs so it may well appeal to the Chancellor to enhance the current EIS, either by increasing the tax reliefs available or by simplifying the qualifying criteria (as suggested by the OTS) – for example, raising the ceiling on permitted fund raising beyond the current £2m in any 12 month period limit. Softening certain EIS criteria for green businesses may also be a tempting option although any changes may require EU state aid approval so could take some time to become law.

NIC holiday
The twelve month ‘holiday’ for new business that was announced in the Emergency Budget in June 2010 is only available in limited parts of the country. It is conceivable that, as part of a wider growth plan, the scheme could be extended to the whole country and also perhaps to Class 4 NIC that would otherwise be paid by sole traders starting up in self employment in affected areas. It is unlikely that the scheme will be made any more generous for employing companies.

Capital allowances
Cuts to the rates of capital allowances and the amount of the annual investment allowance (AIA)(reducing from £100,000 to £25,000) are due to take effect from April 2012. It is possible that these changes will be put back a year if business investment is still in the doldrums. Alternatively, some support on the timing of investment may be forthcoming so that small companies do not miss out on the AIA. Many companies do not invest in expensive plant and machinery every year, so a rule allowing the carry forward of the AIA limit for up to four years would be very welcome for those businesses investing in new machinery sporadically every few years.

Fuel duty
Increasing fuel prices will be filling the treasury coffers nicely but are also building up considerable political pressure for action on the rate of duty. The Chancellor has already indicated that he is listening to public opinion on this issue and it is likely that the duty rise scheduled for April will be deferred, although the introduction of a fuel duty stabiliser mechanism is perhaps less likely on technical and practical grounds.

Controlled foreign companies
With interim improvements to the CFC rules already published in the draft Finance Bill 2011, the Chancellor is likely to focus on the longer term improvements suggested at the time of the Autumn Statement. Therefore, we can expect to see further consultation on the suggested partial exemption for group finance companies and ways to target the CFC rules at high risk areas – specifically involving intellectual property held offshore.

Personal taxes

Income tax rates
As the whole focus of the Budget is expected to be on growth and supporting entrepreneurs, the Chancellor may wish to make some conciliatory noises about the one tax that is most widely seen as making the UK an unattractive location – the 50% top rate of income tax. Although cutting the rate now may not be affordable, or politically astute, with spending cuts about to have an effect on those on low incomes, he may confirm his intention to cut it in the future and may even set a date (with the proviso that the economy recovers as planned).

Tax allowances
Having already announced increased personal tax allowances for 2011/12 it is unlikely that there will significant further changes in the Budget unless the Chancellor decided get his teeth into the ‘spaghetti’ of tax allowances and reliefs identified by the OTS. It has recommended the abolition of a number of redundant and minor reliefs and allowances. Perhaps the most controversial item on the hit list is the OTS’s suggestion that the blind persons allowance should go – although the OTS recommends that it is only cut once more practical financial support is put in place for blind people (presumably in the form a tax credit or enhancement to the forthcoming universal credit).

Announcing a long term objective of merging income tax and NIC would be another significant move towards simplification. Unfortunately, this is likely to be a very long term project, partly because it is highly politically sensitive and partly because of a number of administrative obstacles. Interestingly, some of the obstacles to unification are already scheduled to be removed. For example, auto-enrolment to pensions for employees and the creation of NEST will abolish contracting out of the state second pension; the proposals to introduce a flat rate state pension and proposals to introduce a universal credit for state benefits that is not dependent on past NIC contributions.

Tax residence and domicile
The Government’s original Coalition Agreement stated that there would be a further review of the tax treatment of non-UK domiciled individuals living in the UK. Given the current economic climate, it is perhaps no surprise that this review has yet to materialise so the Chancellor may announce that a review will take place during 2011. A task that has been outstanding for even longer, is to write clear rules on personal tax residence in the UK into primary legislation, it is hoped that draft clauses for Finance Bill 2011 will be published with the Budget.

More controversially, the Chancellor may decide to look at the capital gains tax rules for non-UK residents. Currently, most states impose CGT on sales of real property (land, houses, etc) in the jurisdiction, irrespective of whether the vendor is tax resident there. The UK currently does not do this and there is an argument that this contributes to the inflation of residential prices at the top end of the market, which has a knock-on effect down the range. The Chancellor may regard this as an easy and popular way of raising cash in the coming months.

The future of inheritance tax
The OTS’s comments on the plethora of IHT reliefs has led some to speculate that the Chancellor may announce that a full review of IHT will start in 2011 with changes in future years. The Conservatives have previously stated that creating an IHT nil band (effectively an exemption) for the first £1m of an individual’s estate was one of their policy objectives. This may not be affordable at the moment but, as part of an overall review that removes many of the complex IHT reliefs that now exist, it is perhaps possible for the nil band to be increased to £500,000 per person (effectively £1m per married couple or civil partnership) in a tax-neutral way. Therefore, it seems quite likely that a review will be announced now although concrete changes should not be expected for several years.

Tax Avoidance

Disguised remuneration
New rules to tackle disguised remuneration were announced with the 2010 Autumn Statement and amended legislative clauses are expected to be published that incorporate most of the exemptions and clarifications consulted on since then. This should finally clarify the tax treatment of employee benefit trusts and EFRBS from 9 December 2010 although the tax treatment for earlier years is likely to remain in dispute.

These new rules also affect the tax treatment of the image rights arrangements often set up for high profile sports people although it is understood that HMRC is negotiating directly with employers in a many cases.

Close or personal companies
Much anti-avoidance legislation in the past few years has been created in response to tax legislation being used creatively, particularly where people take advantage of the differences in tax treatment between individuals and companies. From personal service companies (IR35) to image rights planning or simply the pragmatic payment of dividends within a family company, the differences in treatment have led to many tax planning arrangements that HMRC has disapproved of. Rather than continue to tackle the symptoms, the Government may finally choose to tackle the root cause with general provisions attacking close companies and single owner companies. These may be combined with the simplification proposals of the OTS (see above).

Tax amnesties
HMRC has recently announced a fifth tax amnesty, the Plumbers Tax Safe Plan (PTSP), but these remain confusing for taxpayers. Despite its name, the PTSP is actually open for virtually any UK resident to use (unless they previously had the chance to use one of the other amnesties) – on “very similar terms” according to HMRC’s own published guidance. Strangely, HMRC seems keen to play this down in its press comments. When the Government is in such dire need of tax revenue it would seem more sensible for the Chancellor to confirm in the Budget that the amnesty is to apply to everyone, to extend the registration deadline a little and to encourage everyone who needs to put their tax affairs straight to do so now.

Steven Mugglestone BA FCA, McGregors Corporate, More than just Accountants!

McGregors Corporate are a Member Of Probiz Tax.  We provide Innovative Tax Solutions to Owner Managed Businesses.  We are relentless in helping businesses.  Here are some examples of how we do that:

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Written by Steven Mugglestone

March 21, 2011 at 10:14 am