Election 24:
General Election 2024 – What are the Main Parties Saying About Tax?
Both the Conservatives and Labour are promising not to hike income tax, national insurance, or VAT. However, Labour plans to introduce VAT on private school fees. Both parties are also keen on clamping down on tax avoidance and evasion to fund their spending plans. They both think removing the remittance basis for non-Doms will bring in more tax revenue, though Labour wants to close loopholes in the Conservatives’ plans.
The Conservatives have a unique proposal to raise the personal allowance for pensioners, ensuring no State Pension is taxed—clearly a move to woo the “grey” vote. Interestingly, the Conservatives abolished the age-related personal allowance not too long ago.
Another Conservative pledge is the permanent extension of SDLT first-time buyer relief. This means no SDLT for purchase prices up to £425,000 and a 5% rate for prices above that, up to £625,000. This relief is currently set to end on April 1, 2025.
The Conservatives also propose a two-year CGT relief for landlords selling rental properties to their tenants, though details are sparse.
They claim they can save £20bn through “efficiencies” in the Civil Service—fingers crossed this doesn’t mean cutting HMRC staff, as customer service is already struggling.
Labour plans to close the “carried interest” tax loophole for private equity and venture capital sector general partners, which they believe will raise £565 million. They might subject carried interest to income tax or align CGT rates with income tax rates. But there’s no mention of changing general CGT rates.
In Scotland, the SNP wants full devolution of tax powers, including National Insurance and windfall taxation for companies. They also want to reform VAT, ending the exemption for private schools and introducing a lower VAT rate for hospitality and tourism.
VAT on Private School Fees – Any Planning?
The Institute of Fiscal Studies (IFS) says charging VAT on private schools could generate £1.6bn a year, which Labour claims would fund 6,500 extra teachers. Parents are curious about planning strategies to avoid a 20% fee hike. But the actual increase might not be a full 20%, as schools could reclaim some input tax on overheads and property maintenance, potentially offsetting the costs.
One strategy is pre-paying term fees in advance, often for multiple years. This relies on accelerating the “tax point” for the service. However, anti-forestalling legislation might come into play, effective from the announcement day. Although Labour has stated any legislation won’t be retrospective, the effectiveness of these strategies isn’t guaranteed.
“Tax Point” for VAT
- The time of supply is the earliest of:
- The date the supply is actually made (basic tax point)
- The date a tax invoice is issued
- The date payment is received for the supply
There are some refinements, especially the 14-day rule, and special rules for certain kinds of supply. If a VAT invoice is issued within 14 days of the basic tax point, the basic tax point can be ignored, and the date the invoice is issued is used instead. The invoice must be a proper VAT invoice issued by the supplier to their customer. You can opt out of the 14-day rule by notifying HMRC in writing.
Form P11D Deadline is 6 July
As mentioned in the main tax events diary, Form P11D for reporting benefits provided to employees and directors needs to be submitted online by 6 July. Common benefits include company cars, private healthcare, and loans at less than the 2.25% HMRC official rate of interest.
For company cars, remember that there may be an additional taxable benefit if private fuel is provided. This doesn’t apply if private fuel for 2023/24 is fully reimbursed by the employee by 6 July 2024.
If an employee uses a “pool car,” there’s no taxable benefit, and no entry is required on Form P11D. The conditions for a car to be a pool car are strict and often misunderstood:
- The car is available to and used by more than one employee
- It’s available to each employee by reason of their employment
- It’s not ordinarily used by one employee exclusively
- Any private use by an employee is incidental
It’s not normally kept overnight near any employee’s residence except while being kept at the premises of the person making it available.
Childcare Accounts Can Subsidise Summer Childcare Costs
If you have kids under 12 attending a nursery, after-school club, playscheme, or childminder, or if you’re considering summer camps, think about setting up a tax-free childcare account. The government adds 25% to the amounts saved—up to £2,000 per child (or more for disabled children).
The account is used to pay Ofsted-registered childcare providers. It doesn’t have to be the child’s parents paying into the account; other relatives can contribute too. Many eligible families haven’t set up their accounts, so employers should inform staff to increase uptake. Note that parents aren’t eligible if either of them has an adjusted net income over £100,000 for the current tax year.
VAT on the Costs of Selling a Subsidiary
When a holding company sells shares in a subsidiary, the VAT on professional fees involved is usually irrecoverable since a share sale is an exempt supply. However, a recent case argued that selling a subsidiary to finance a new hotel’s completion was directly linked to the group’s business activities, allowing VAT recovery on professional fees.
The Tax Tribunals initially agreed, but the Court of Appeal recently ruled in favor of HMRC, denying the VAT recovery on professional fees related to share disposals.
Feel free to reach out if you need to dive deeper into any of these topics. Happy reading!
