October 2024 Newsletter

October is a big month for news and we’ll bring Budget updates as soon as they hit. For now we have included information from HMRC on penalties for late filing of accounts and how likely an appeal might be for challenging them successfully. Affecting many thousands of people, the government is urging people to check their eligibility for Home Responsibility Protection (HRP) which boosts the pension for parents and carers. This is relevant for those who may have an NI gap owing to time taken out of employment for caring responsibilities. Find out more about higher rate relief on pension contributions and how this might affect you. Our final piece is a reminder of the impact of gifts and how they are treated for inheritance tax purposes. We conclude this month’s news with financial deadlines that take us up to mid-November.

Penalties for late filing of company accounts (Corporate Governance & Regulation)

There are late filing penalties which are designed to encourage companies to file their accounts and reports on time. All companies, private and public, large or small, trading or non-trading must send their accounts to Companies House. A penalty is automatically imposed by Companies House if the accounts are late.

The table of penalties for late submission is as follows:

Failure to file confirmation statements or accounts is a criminal offence which could result in the directors being personally fined in the criminal courts. Late penalties which are unpaid will be referred to collection agents and could result in a County Court judgement or a Sheriff Court decree against the company.

It is possible to appeal against a penalty, but it will only be successful if the appellant is able to demonstrate that the circumstances of the late filing were exceptional, for example, a fire destroying records a few days before the filing deadline.

According to Companies House guidance, an appeal is unlikely to be successful if it’s based on the following examples:

• your company is dormant
• you cannot afford to pay
• your accountant was ill
• you relied on your accountant
• these are your first accounts
• you are not familiar with the filing requirements
• your company or its directors have financial difficulties (including bankruptcy)
• your accounts were delayed or lost in the post
• the directors or LLP members live (or were travelling) overseas
• another director or LLP member is responsible for preparing the accounts.

Don’t miss out on Home Responsibilities Protection

HMRC together with the Department for Work and Pensions (DWP) have issued a press release urging tens of thousands of people to check if they are eligible to boost their State Pension utilising Home Responsibility Protection (HRP).

This HRP scheme has helped protect parents’ and carers’ State Pension. HRP reduces the number of qualifying years a person with caring responsibilities needed to receive, to secure a full basic State Pension. HRP was replaced by National Insurance credits in 2010.

Between 6 April 1978 and 5 April 2010, most eligible individuals automatically received Home Responsibilities Protection (HRP). However, this did not apply in all cases, and it is still possible to apply for HRP if you believe it’s missing from your National Insurance (NI) record. During Pensions Awareness Week, HMRC is encouraging those affected, primarily women at or near State Pension age, to check their NI records for gaps and potentially increase their State Pension at no cost.

If HRP is missing from someone’s NI record, it does not necessarily mean that their State Pension calculation is wrong, but it could be, especially if they took significant time-out from employment to raise a family.

The Exchequer Secretary to the Treasury said:

“The State Pension is the foundation of state support for people in retirement. We are urging people to check their National Insurance records to make sure they will receive the pension they deserve.”

If a claim is successful, HMRC will update the individual’s NI record, and the DWP will recalculate their State Pension entitlement. Depending on the individual’s situation, their State Pension entitlement may increase or stay the same.

Higher rate relief pension contributions

You can typically claim tax relief on private pension contributions up to 100% of your annual earnings, subject to certain limits. Tax relief is applied at your highest rate of income tax, meaning:

• Basic rate taxpayers receive 20% pension tax relief
• Higher rate taxpayers can claim 40% pension tax relief
• Additional rate taxpayers can claim 45% pension tax relief

For basic-rate taxpayers, the initial 20% tax relief is usually applied by the employer. Higher and additional rate taxpayers can claim the extra relief through their self-assessment tax return.

Taxpayers can claim on their self-assessment return for private pension contributions as follows:

• 20% relief on income taxed at 40%
• 25% relief on income taxed at 45%

Alternatively, taxpayers can contact HMRC to claim the relief if they pay 40% income tax and do not submit a self-assessment return.

These rates apply in England, Wales, and Northern Ireland, but there are some regional variations for Scotland.

There is an annual allowance of £60,000 for pension tax relief. Taxpayers can carry forward any unused allowance from the previous three tax years, provided they made pension contributions during those years. The lifetime limit for pension tax relief was abolished as of 6 April 2023.

Gifts and Inheritance Tax

Most gifts made during a person’s lifetime are not subject to tax at the time of transfer. These gifts, known as "potentially exempt transfers" (PETs), can become fully exempt if the donor survives for more than seven years after making the gift.

If the donor passes away within three years of the gift, the inheritance tax is treated as if the gift was made upon death. A tapered relief applies if death occurs between three and seven years after the gift, reducing the tax liability based on the time elapsed.

The effective tax rates on the amount exceeding the Inheritance Tax nil rate band are as follows:

• 0 to 3 years before death: 40%
• 3 to 4 years before death: 32%
• 4 to 5 years before death: 24%
• 5 to 6 years before death: 16%
• 6 to 7 years before death: 8%
• 7 or more years before death: 0%

However, these tapered rates do not reduce the tax on a lifetime chargeable transfer below the amount initially chargeable and offer no benefit for transfers within the nil rate band.

We strongly recommend maintaining a record of any PETs you make, including details of exemptions used and any regular gifts made out of surplus income.

Tax Diary October/November 2024

1 October 2024 - Due date for Corporation Tax due for the year ended 31 December 2023.

19 October 2024 - PAYE and NIC deductions due for month ended 5 October 2024. (If you pay your tax electronically the due date is 22 October 2024.)

19 October 2024 - Filing deadline for the CIS300 monthly return for the month ended 5 October 2024.

19 October 2024 - CIS tax deducted for the month ended 5 October 2024 is payable by today.

31 October 2024 - Latest date you can file a paper version of your 2023-24 self-assessment tax return.

1 November 2024 - Due date for Corporation Tax due for the year ended 31 January 2024.

19 November 2024 - PAYE and NIC deductions due for month ended 5 November 2024. (If you pay your tax electronically the due date is 22 November 2024.)

19 November 2024 - Filing deadline for the CIS300 monthly return for the month ended 5 November 2024.

19 November 2024 - CIS tax deducted for the month ended 5 November 2024 is payable by today.