All posts by Terry Harris

Pension

Tax relief for employer contributions to a pension scheme

Sep 18, 2025 by Terry Harris 0 Comments

Employers can generally claim tax relief on contributions made to a registered pension scheme by deducting those payments as an expense when calculating their business profits. This reduces the amount of taxable profit and therefore lowers the overall tax bill.

For businesses involved in a trade or profession, employer pension contributions can usually be claimed as a business expense on the proviso that the payments are incurred wholly and exclusively for the purpose of running the business.

If the employer is a company with investment business, the employer contributions should be deductible as an expense of management.

When claiming tax relief on employer pension contributions, there are a few important rules to keep in mind. Importantly, only contributions that have actually been paid qualify for relief. Other amounts recorded as liabilities that have not yet been paid are not eligible for relief until they are paid. This means employers can only claim relief in the accounting period during which the payment is actually made.

The pension tax legislation amends the normal rules regarding what is an allowable deduction and the timing of a deduction.

International employers contributing to a UK-registered pension scheme benefit from the same rules. In addition, the same basis of relief is also given to employer contributions that are referred to as relevant migrant member contributions.

Source:HM Revenue & Customs | 15-09-2025
HMRC notices

Who needs to register for anti-money laundering supervision

Sep 18, 2025 by Terry Harris 0 Comments

If your business operates in a sector covered by the Money Laundering Regulations, you must be monitored by a supervisory authority to ensure compliance. This article outlines who needs to register with HMRC for anti-money laundering (AML) supervision.

Your business must be registered with a supervisory authority if it operates in a sector covered by the Money Laundering Regulations. Some businesses are already supervised through authorisation by bodies like the Financial Conduct Authority (FCA) or professional associations such as the Law Society.

If your business is not already supervised and falls under one of the regulated sectors, you must register with HMRC.

Business Sectors Supervised by HMRC

HMRC is responsible for supervising businesses in the following sectors (where not already regulated by the FCA or a professional body):

  • Money Service Businesses not regulated by the FCA
  • High Value Dealers handling cash payments of €10,000 or more (in a single transaction or linked transactions)
  • Trust or Company Service Providers not supervised by the FCA or a professional body
  • Accountancy Service Providers not supervised by a professional body
  • Estate Agency Businesses
  • Bill Payment Service Providers not regulated by the FCA
  • Telecommunications, digital, and IT payment service providers not regulated by the FCA
  • Art Market Participants involved in buying or selling works of art valued at €10,000 or more (including linked transactions)
  • Letting Agency Businesses managing property or land with a monthly rental value equivalent to €10,000 or more

If your business conducts these activities by way of business and is not already supervised, you must register with HMRC.

Money Service Businesses and Trust or Company Service Providers are not allowed to trade until their AML registration with HMRC is confirmed. Other businesses may continue operating while their registration is being processed.

Trading while not registered is a criminal offence and may result in a penalty or prosecution.

Source:HM Revenue & Customs | 15-09-2025
Business Support

Why you should maintain a tax reserve

Sep 15, 2025 by Terry Harris 0 Comments

Every business has a duty to pay tax, whether that is Corporation Tax, VAT, PAYE, or personal tax liabilities for the owners. While these payments are predictable, many businesses still find themselves short of cash when the due dates arrive. One way to reduce this risk is to create a cash deposit reserve specifically set aside to cover past and current tax liabilities.

The idea is simple. Each time profits are made, or taxable income is earned, a proportion of cash is transferred into a separate bank account. This money is not touched for day-to-day trading but held back until HMRC requires payment. By treating tax as an ongoing expense rather than an occasional shock, businesses can avoid last-minute scrambles to find funds.

There are several benefits. First, a reserve provides peace of mind. Business owners know that when the tax bill lands, the money is ready and waiting. This reduces stress and allows management to focus on running and growing the business.

Second, a tax reserve supports cash flow planning. By separating tax money from working capital, it becomes clearer how much is genuinely available for wages, suppliers, or investment. Mixing tax liabilities with general funds often leads to overspending and unnecessary borrowing.

Third, building up a reserve shows financial discipline. It reassures banks, investors, and other stakeholders that the business takes its responsibilities seriously and manages risk sensibly.

Even small, regular transfers can make a big difference. By keeping tax reserves in a deposit account, businesses may also earn some interest before payments fall due.

In short, creating a tax reserve is a practical and prudent step. It reduces surprises, improves cash flow visibility and ensures that tax obligations are met without disrupting business operations.

Source:Other | 14-09-2025
Business Support

Understanding working capital and why it matters

Sep 15, 2025 by Terry Harris 0 Comments

Working capital is a simple but powerful measure of a business’s financial health. It is the difference between current assets and current liabilities. In other words, it shows what is left when a business’s short-term debts are taken away from its short-term resources such as cash, stock and money owed by customers.

If the result is positive, the business has money available to cover day-to-day operations. If it is negative, the business may struggle to meet upcoming bills or need to rely on borrowing.

Why is working capital so important? First, it gives a clear picture of liquidity. A profitable business can still fail if it runs out of cash to pay suppliers, wages, or rent. By keeping a close eye on working capital, owners can see whether they have enough resources to keep the business running smoothly.

Second, working capital affects flexibility. A business with strong working capital can take opportunities such as bulk-buying stock at a discount or investing in new projects. A business with weak working capital may be forced to delay decisions or turn down growth opportunities because it cannot afford the risk.

Third, lenders and investors often look at working capital when deciding whether to support a business. A healthy balance suggests stability and good management, while a weak position may raise concerns.

Improving working capital does not always mean cutting costs. It can involve speeding up customer payments, negotiating longer terms with suppliers, or keeping a closer watch on stock levels. Even small changes can make a big difference to cash flow.

In short, working capital is about making sure a business can meet today’s needs while staying ready for tomorrow’s opportunities.

Source:Other | 14-09-2025
General

Budget date announced

Sep 11, 2025 by Terry Harris 0 Comments

The Chancellor of the Exchequer, Rachel Reeves confirmed, in a video message, that the next UK Budget will take place on Wednesday, 26 November 2025.

Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s speech in November.

HM Treasury is inviting written representations for the Autumn Budget 2025 from individuals, interested groups, MPs and organisations. Submissions should propose evidence-based policy ideas or comment on existing policies, with clear rationale, costs, benefits, and deliverability. The deadline for submissions is 23:59 on Wednesday, 15 October 2025.

The Budget will be published alongside the latest forecasts from the Office for Budget Responsibility (OBR). This forecast will be in addition to that published for the Spring Statement and fulfil the obligation for the OBR to produce at least two forecasts in a financial year, as is required by legislation.

The OBR has executive responsibility for producing the official UK economic and fiscal forecasts, evaluating the government’s performance against its fiscal targets, assessing the sustainability of and risks to the public finances and scrutinising government tax and welfare spending.

Source:HM Treasury | 08-09-2025
Corporate Governance & Regulation

16 years old – the minimum age for a company director

Sep 11, 2025 by Terry Harris 0 Comments

Thinking of starting a company at 16? Know the rules, risks and responsibilities before you take the leap.

The Companies Act 2006 does not set a minimum age for shareholders, meaning even minors can hold shares unless a company’s articles of association explicitly state otherwise. However, the minimum age for a company director in the UK is 16 years.

Directors carry significant legal responsibilities, including ensuring that company accounts and reports are accurate and filed on time with the relevant authorities. Even if the company is dormant, you must still submit confirmation statements and accounts annually without fail.

Setting up a company is generally straightforward, but being a director comes with serious ongoing responsibilities. These duties are not just formalities, and failure to meet them can lead to personal fines, disqualification or even imprisonment.

Even dormant companies must file annual accounts and confirmation statements regularly. While directors can delegate daily tasks, such as hiring an accountant or other professionals, they remain legally responsible for the company’s records, accounts, and overall performance.

Seeking professional advice before starting a company is highly recommended, especially for a 16-year-old unlikely to have all the necessary business knowledge.

Source:Companies House | 08-09-2025
Income Tax

What is the settlement legislation?

Sep 11, 2025 by Terry Harris 0 Comments

Thinking of gifting income to a spouse or partner? HMRC’s settlements rules may still tax it as your own.

The settlements legislation is contained in s.624 ITTOIA 2005. The legislation seeks to ensure that where a settlor has retained an interest in property in a settlement then the income arising is treated as the settlor’s income for all tax purposes. A settlor can be said to have retained an interest if the property or income may be applied for the benefit of the settlor, a spouse or civil partner.

In general, the settlements legislation can apply where an individual enters into an arrangement to divert income to someone else and in the process, tax is saved.

These arrangements must be:

  • bounteous, or
  • not commercial, or
  • not at arm’s length, or
  • in the case of a gift between spouses or civil partners, wholly or substantially a right to income.

However, there are a number of everyday scenarios where the settlements legislation does not apply. In fact, after much case law in this area, HMRC has confirmed that if there is no 'bounty' if the gift to a spouse or civil partner is an outright gift which is not wholly, or substantially, a right to income, then the legislation will not apply.

Source:HM Revenue & Customs | 08-09-2025
HMRC notices

How do HMRC define “wholly and exclusively” for tax purposes

Sep 11, 2025 by Terry Harris 0 Comments

Not sure if a business cost is deductible? HMRC’s ‘wholly and exclusively’ rule is the key test.

When deciding whether an expense is deductible or not it is important to bear in mind that the expenditure must be incurred wholly and exclusively for the purposes of your trade or employment. This is a difficult starting point as there is often a fine line to thread between deciding whether an expense meets this ‘wholly and exclusively’ rule.

In general, HMRC takes a slightly more relaxed view that a strict reading of the legislation would suggest. HMRC’s own internal manuals offers advice to HMRC inspectors to exercise care when applying the ‘wholly and exclusively’ test. The advice states that where there is an incidental benefit that does not, of itself, mean that the expenditure is disallowed.

The following example helps clarify this point. A self-employed consulting engineer may travel to exotic locations to advise on projects. The travel and the exotic locations may be benefits but where there was no private purpose they are incidental to the carrying on of the profession and the cost is allowable.

It is also possible to apportion part of an expense where necessary. For example, when considering the running costs of a car used partly for the purposes of the trade and partly for other purposes. HMRC’s position is that the costs associated with the business use of the car would be deductible.

Source:HM Revenue & Customs | 08-09-2025
Employee Benefits

Using your own car for work purposes

Sep 11, 2025 by Terry Harris 0 Comments

Using your own car or bike for work travel? You may be able to claim tax relief for business mileage.

If you are employed and spend your own money on items needed for your job, you may be eligible to claim tax relief on those expenses. However, you can usually only claim tax relief on items that are exclusively used for work purposes.

For example, you might be able to claim tax relief when using your own vehicle, whether it is a car, van, motorcycle or bicycle, for work-related travel. Generally, travel between home and your regular place of work does not qualify. However, if you travel to a temporary workplace or incur business mileage, tax relief is typically allowed.

Employers often reimburse mileage using a set rate per mile depending on the type of vehicle. HMRC publishes approved mileage rates that apply when employees use their own vehicles for business journeys. If your employer uses these rates, the reimbursement is not treated as a taxable benefit.

If you are reimbursed at a rate below the HMRC approved amount, you can claim tax relief on the difference through Mileage Allowance Relief. For cars, the rate is 45p per mile for the first 10,000 miles and 25p per mile thereafter. The rate is 20p per mile for bicycles and 24p per mile for motorcycles.

Additionally, there is a passenger payment of 5p per mile per colleague if you transport other employees during business journeys in a car or van.

Source:HM Revenue & Customs | 08-09-2025
Value Added Tax

When you cannot charge VAT

Sep 11, 2025 by Terry Harris 0 Comments

Not all goods and services carry a 20% VAT, knowing the right rate can save costly mistakes.

When a VAT-registered business issues an invoice to their customer, they must ensure that they charge the correct rate of VAT. Whilst most businesses in the UK charge VAT at the standard rate of 20% there are a number of different VAT rates and exemptions to be aware of. This includes the reduced VAT rate of 5% and the zero rate (0%).

There are two other categories that the supplies of goods and services can fall under:

  • Exempt – where no VAT is charged on the supply. Examples of exempt items include the provision of insurance, postage stamps and health services provided by doctors. If a business only sells VAT-exempt goods and services, they cannot register for VAT.
  • Supplies that are 'outside the scope' of the UK VAT system altogether. These supplies are beyond the realm of the UK VAT system, and you cannot charge or reclaim VAT on these supplies. Examples include goods or services you buy and use outside of the UK, statutory fees (such as the London Congestion Charge) and goods you sell as part of a hobby.

If a business has made an error in charging VAT, then this needs to be corrected. The timing and amount of an error can impact on how the issue is resolved.

There are also penalties if you charge VAT to your customers before you are officially VAT registered. VAT registration is only required for eligible businesses earning more than £90,000 per year although businesses under the threshold can voluntarily apply for a VAT registration.

Source:HM Revenue & Customs | 08-09-2025