Increases to Capital Gains Tax (CGT) at the upcoming Budget would not deter investment into the country, according to the Institute for Public Policy Research (IPPR).

The think tank says that low CGT is not an effective way at encouraging entrepreneurship and investment.

Equalising CGT to income tax could help the Chancellor’s efforts to close the £22 billion hole in the public finances, with the IPPR saying doing so could raise up to £14 billion.

The IPPR said investors and entrepreneurs do not consider CGT when they set up a company as CGT only becomes relevant at the point of selling a business or assets.

The think tank claims low CGT rates are poor value for money, as they equally reward passive asset ownership and active entrepreneurship.

Finally, it says that unequal tax on income and capital gains encourages employees to act as ‘businesses’, creating labour market distortions.

The IPRR said:

‘Entrepreneurship and investment are vital to generating sustainable growth for the UK, but low capital gains tax is not an effective way at encouraging these activities. Instead, government and business must work together to make the most of the targeted support that is already on offer.

‘Closing the tax advantage on capital gains means that the system becomes more efficient whilst raising revenues to adequately fund the public services and investment that business across the country rely on.’

The government’s Make Work Pay Bill lacks a pro-growth element and will increase economic inactivity, the Federation of Small Businesses (FSB) has warned.

The business group says that the legislation, particularly around day one dismissal rights, risks deterring small employers from taking a chance on someone who has had a significant period out of the workplace, shutting those doors and deepening social exclusion

It warns that the Bill is rushed and poorly planned while dropping 28 new measures onto small business employers all at once leaves them scrambling to make sense of it all.

There are already 65,000 fewer payroll jobs since Labour took power, and the new government is sending out a ‘troubling signal to businesses and investors’, the FSB adds.

Tina McKenzie, Policy Chair at the FSB, said:

‘The Chancellor has the opportunity to lead the way in adding a pro-business, pro-employment element to Make Work Pay in her upcoming Budget. This should include a rise in the Employment Allowance, pegging it to future rises in the National Living Wage. It should also include the reintroduction of the small business rebate for Statutory Sick Pay.

‘Sufficient time should be taken to avoid this becoming a hastily cobbled-together Act of Parliament. We look forward to more engagement and the start of a full consultation on each individual measure to ensure the voice of small employers is heard.’

HMRC has published the latest issue of the Employer Bulletin. The October issue has information on various topics, including:

• Guidance for employers on RTI reporting obligations for payments made early at Christmas

• How salary sacrifice affects National Minimum Wage

• PAYE charge queries

• Notice of change to effective date of new data requirements on employees’ hours

• The Administrative Burden Advisory Board – Tell ABAB Report 2024

• Helping your employees prepare for retirement.

HMRC: Employer Bulletin

The government has announced an overhaul of the UK's apprenticeship system.

A new growth and skills levy which will replace the existing apprenticeship levy and include new foundation apprenticeships.

The government says these new apprenticeships will give young people a route in to careers in critical sectors, enabling them to earn a wage whilst developing vital skills.

The new levy will also allow funding for shorter apprenticeships, giving learners and employers greater flexibility over their training than under the existing system – where apprenticeships must run for at least 12 months.

The training eligible for funding under the new levy will develop over time, informed by Skills England's assessment of priority skills needs, the government adds.

The Department for Education will set out further details on the scope of the offer and how it will be accessed in due course.

Alex Veitch, Director of Policy at the British Chambers of Commerce, said:

'Skills shortages continue to be a major concern for businesses and a drag on economic growth.

'The proposed new Growth and Skills Levy was a key part of the government's plans at the election. It is welcome ministers have acted early to give more details about skills reform.

'We've long argued that the current Apprenticeship Levy needs urgent reform to make it more flexible. Businesses need a simple, coherent and responsive system that properly incentivises employer investment in training.'

HMRC has been urged to defuse a tax bombshell threatening online traders, by the Low Incomes Tax Reform Group (LITRG).

The LITRG, which is part of the Chartered Institute of Taxation (CIOT), says the tax authority must take action in order to make sellers aware of the fact that they may need to file a tax return and pay tax on their online trading income.

The group said that although there is no change to existing tax rules, HMRC will have more information on who is earning income via online platforms and will be more able to find out who owes tax on their earnings.

The LITRG argues that the new reporting rules could 'cause chaos' for taxpayers when the first reports are sent to HMRC and sellers in early 2025.

It has called on HMRC to strengthen its guidance for sellers using online platforms and standardise information so that users can easily understand it and report earnings by tax year.

Claire Thackaberry, Technical Officer at the LITRG, said:

'There are just over three months to go until HMRC starts getting information about the income and activities of people who use online platforms to make money. We are concerned that we will see the same chaos and confusion that arose when the rules first came into effect.

'Time is running out for HMRC to defuse this ticking time bomb. The information that HMRC will receive from platforms will be presented by calendar year, therefore covering more than one tax year. This could make it more difficult to work out when tax is due.'

An estimated £5.5 billion was lost due to tax evasion during 2022/23, according to a report published by the National Audit Office (NAO).

The NAO stated that 'significant weaknesses' in government systems have left the UK 'too open' to tax evasion. According to HMRC, 81% of the tax evasion came from small businesses.

HMRC said that, while the overall level of tax evasion has stabilised in recent years, it has increased amongst small businesses. Whilst HMRC has not estimated the scale of evasion by sector, it considers takeaways and sweet shops as high-risk retailers.

The NAO said that HMRC does not have a specific strategy to clamp down on tax evasion, and instead aims to stop overall levels of non-compliance increasing.

It also said that there has been too little emphasis on some widespread forms of tax evasion, such as electronic sales suppression (ESS) and abuse of the insolvency process to avoid paying tax debts, which is known as ‘phoenixism’.

Gareth Davies, Head of the NAO, said:

'Although tax evasion has been growing among small businesses, HMRC has so far lacked an effective strategic response.

'Its assessment of risks has given too little emphasis to widely used methods of evasion such as sales suppression and phoenixism. It has also failed to use new powers to tackle tax evasion.'

HMRC’s decision to make it easier for taxpayers to file a paper tax return has been welcomed by the Low Incomes Tax Reform Group (LITRG).

With less than a month until the 31 October deadline for filing a 2023/24 paper self assessment tax return, HMRC have confirmed to LITRG they will accept copies of the tax return form that have been downloaded and printed from GOV.UK.

Until recently, the 2024 form on GOV.UK had been marked ‘For reference only’ and HMRC indicated they would only accept a paper tax return form if it had been specifically issued by them and sent to the taxpayer by post.

Following concerns raised by LITRG, HMRC have now agreed to relax their position and have confirmed they will accept forms printed from GOV.UK.

It means some taxpayers wishing to file a paper return ahead of the 31 October 2024 filing deadline will be able to do so without needing to call HMRC to ask them to post out a copy.

Antonia Stokes, LITRG Technical Officer, said:

‘We understand HMRC strongly encourage people to file their tax returns online, but this is not always possible. We have always been clear that HMRC should not try to make things harder for those who have no option but to file on paper. Though late in the day, this is a step in the right direction, and we are pleased that HMRC have listened to – and acted on - our concerns.’

More than 10,000 payments worth £12.5 million have been made through a new digital service to boost people’s state pension, HMRC has revealed.

People have until 5 April 2025 to maximise their state pension by making voluntary National Insurance contributions (NICs) to fill any gaps in their NICs record between 6 April 2006 and 5 April 2018.

The service enables people to check if they have gaps in their NICs record, calculate if making a payment would increase their state pension, and then make a payment if they wish to do so.

HMRC data shows:

•         51% of taxpayers topped up one year of their NICs record

•         the average online payment is £1,193

•         the largest weekly State Pension increase is £107.44.

After the 5 April 2025 deadline, people will only be able to make voluntary contributions for the previous six tax years, in line with normal time limits.

Emma Reynolds, Minister for Pensions, said:

‘We want pensioners of today and tomorrow to enjoy the dignity and support they deserve in retirement. That’s why I urge everyone to check if they could benefit by filling gaps before the deadline passes. Using our online tool means only a few clicks could make a huge difference to your future.’

Check your pension here.

Chancellor Rachel Reeves must tackle barriers to growth in the Autumn Budget, says the Federation of Small Businesses (FSB).

The FSB is calling on the Chancellor to deliver a decisively pro-small business Budget, saying SMEs are ‘sick of stagnation’.

The business group wants measures to ease employment costs, remove barriers to access finance for investment, and lift more small firms out of business rates.

It also wants to see an increase in the Employment Allowance so it automatically rises in line with the National Living Wage (NLW) and the reintroduction of a Statutory Sick Pay small employer rebate.

The Chancellor should also take action to give small businesses confidence to invest by increasing protection for those who put their houses on the line to grow their business, by stopping the unscrupulous blanket use of personal guarantees on loans, the FSB adds.

Tina McKenzie, Policy Chair of the Federation of Small Businesses, said:

‘For small businesses, the barriers to investment are very personal. To help small businesses invest, employ and grow, we are asking the Chancellor to tackle the barriers that dissuade small businesses from growth.

‘Whether that’s the huge personal risks entrepreneurs take – often putting their house on the line – to secure finance; committing tens of thousands of pounds to give someone a job; or signing the contract for new premises knowing that business rates bills will land immediately. It’s by making these decisions easier for small businesses that Rachel Reeves can help small firms generate the growth we need.’