Host
Philippa Lamb
Guests
- Suren Thiru, Director, Economies, ICAEW
- Mei Lim Cooper, Technical Manager, Personal Tax, ICAEW
Transcript
Philippa Lamb: Hello and welcome back to the Insights podcast, I’m Philippa Lamb with the month’s key developments in accountancy. Today, we’re discussing the launch of ICAEW’s Economies campaign – how can members get involved, and how will it aim to influence policymakers? And we’ll hear about changes to filing self assessment returns and HMRC services. With us in the studio today we have Economies Director Suren Thiru and Technical Manager Mei Lim Cooper. Hello both, thanks for taking the time to join us. So, Suren, the Economies campaign, what is it?
Suren Thiru: Well, it’s a bit of a step back, because you read newspapers at the moment and there’s lots about inflation, the cost-of-living crisis, that sort of thing. But what this campaign is looking at is: what are those big challenges facing the UK economy that make us less resilient to external shocks, like the inflation hit that we’ve seen over the past year? So, we’re doing a bit of a deep dive on some of these huge issues that are facing our economy, but also what businesses and the wider accountancy profession can do to help solve some of these issues.
PL: So, what can members expect from it?
ST: It’s a three-part series, and the first part is out this week covering productivity investment, then there’s a skills segment in October and trade in November. And it’s going to be an interesting collaboration, looking at what businesses themselves are doing to deal with some of these issues. We’re also convening key experts, leading academics, government ministers and top economists to have a real look at what is happening here, and also what are some of the solutions to these long-standing issues?
PL: And you’re drawing on the ICAEW Business Confidence Monitor?
ST: Yes, that’s right. ICAEW’s Business Confidence Monitor is one of the biggest private sector business services in the UK. And it really gives us insights from across the accountancy profession, looking at all types of data around inflation, around the labour market, around what businesses are doing. It gives us real insight into what’s going on, and that helps to develop the solutions that these types of businesses need.
PL: So, the first theme, business investment and productivity, you just launched it. What sort of content have you produced for this one?
ST: There’s a number of interesting pieces. First, there’s a film, which follows a couple of really interesting businesses looking at how they’re coping in the current environment, how they’re actually taking practical steps to help boost their own activity, their own investment, and a contribution to the wider economy. All of that is through innovation and collaboration. We’re also producing a long read, which is that deep dive into some of the issues, looking at the history around productivity, why the UK has weak productivity compared to other countries, but also looking at some of the interesting solutions to that. And in that article, you’ll see really interesting contributions from people like the minister for tech, the next Bank of England interest rate setter, and top economists and academics who outline employment, but also some interesting solutions to some of these issues.
PL: I watched that film, and it features the ice-cream maker, Northern Bloc, and a plant-based milk firm, Mighty. I really enjoyed it. What are the themes you want to pull out of that film?
ST: What’s quite interesting in what both businesses are doing – and they’re really interesting businesses, as you say – what they’re really doing is looking at ways of how can you deal with the current environment? How can you adapt your business plan? How can you adapt the way you work? The two firms are very different businesses. What’s interesting in the film is that they actually do a lot of collaboration together, and that’s really key to dealing with some of these issues. And you can see the impact of these businesses on the local economy. They’re both based in Leeds, and the impact they’ve had on their economies is really striking. What you also see is the impact of the accountants that work with these businesses, and the importance of those dealing with everyday issues like cash flow, those sorts of things. But also, when businesses like these are looking for finance, they often speak to their accountant first. So it’s a really crucial role in whether you’re going to get finance that they can invest and grow their business.
PL: Yeah, I thought that was particularly interesting, because you hear from the accountants about the challenges and their businesses, how they’re dealing with them and how they deal with each other.
ST: Absolutely, and that’s really key. And it’s important that businesses have the right advice and the right framework in place to deal with some of these challenges. They can’t always do it by themselves. So I think that’s where accountants can play a really key role, both in helping businesses invest and do better, be more productive, but also, if you’re looking at things like businesses who may want to export for the first time, the person they often speak to first is their accountant, because they want to get under the hood of their own business and see what challenges or opportunities are there.
PL: And there are two more themes, as you said, following in October and November. Remind me of the topics?
ST: The second one is on the future of the workforce, that’s going to look at some of the issues around the labour markets. There are two big issues, one is around shortage of supply of labour, which we’ve seen particularly since COVID. But also skill shortages as well, businesses not being able to get the right staff with the right skills in place, which can impact things like productivity but also the business’s ability to grow. So, we look at some issues there, but also looking at some solutions as well. And again, we’re seeing some other interesting businesses who are taking a really innovative way of dealing with some of these issues, some of these shortages around skills.
PL: Talking about solutions there’s a date for everyone’s diary isn’t there? There’s a regions economic summit in November?
ST: Yes, on 9 November, we’ve got a guest speaker from the Bank of England, Chief Economist Huw Pill, who’s done a number of these events and really enjoys speaking at ICAEW events. And that’s going to look at two main areas. The first is it’s going to look at the national picture, what’s happening in the economy nationally, what’s going to happen with inflation and interest rates, that sort of thing – they’re both hot topics at the moment. But what we’re also going to have is regional breakout rooms, where you can really get to the details at a local level. And that’s where you can see really close links to this campaign, where we’re going to hopefully have some of the people who appeared in the films that you’ll see actually being guests on panels in this event as well, to bring those stories to life.
PL: This is a virtual event?
ST: Yes, it is. And you can sign up via the ICAEW website.
PL: That’s great. Thanks very much, Suren. So, Mei, the deadline to register for filing a self assessment return for 2022/23, that was 5 October. Perhaps we should start with if you’ve missed that deadline, what should you be doing now?
Mei Lim Cooper: If you’ve missed the deadline, you should get in contact with HMRC as soon as possible if you do think that you need to file a tax return. Or you could get in touch with an adviser if you’re not quite sure whether you do need to file a tax return or not.
PL: OK, because there are penalties, aren’t there, if you don’t do this?
MLC: Yes, that’s right, there are penalties in play. HMRC are quite reasonable. If you have a reasonable excuse for the failure to notify, the failure to notify was not deliberate, and you tell HMRC without unreasonable delay after your reasonable excuse has ended, then they don’t typically seek to apply penalties. However, if you don’t have this reasonable excuse, or perhaps you wait to tell HMRC, there may be tax-geared penalties in play, and these can range from 0% up to 100%.
PL: So, this is a serious matter. And obviously, if you’re deliberately concealing, well, that’s a whole other thing.
MLC: If you are deliberately concealing the fact that you need to make a self assessment tax return, there will be higher penalties in play.
PL: So, shall we just run over who’s covered by this? Who should be filing?
MLC: It won’t affect all taxpayers because most taxpayers pay tax through pay as you earn, so it’s automatically deducted by their employers. However, about 12 million self assessment tax returns are made each year. So, it affects people who have self-employment or partnership income, or perhaps property income from a rental property. Also savings and investment income of £10,000 or more, or a total taxable income of £100,000 or more. These are criteria that are set by HMRC, they’re not particularly set out in legislation. But these are the administrative criteria that HMRC use to try and identify people who might have a self assessment tax return obligation.
PL: Now the deadline for paper filing, that’s 31 October, isn’t it? And the deadline for digital filing?
MLC: That’s 31 January, and that’s also the deadline for payment of the self assessment tax liability.
PL: There are changes coming, aren’t there, on the eligibility threshold next year?
MLC: That’s right, there are some changes. This year, 2022-23, if you’ve got total taxable income of £100,000 or more then you are supposed to make a self assessment filing. However, the government has announced that from next year, only those who make £150,000 or more will need to make that self assessment filing. People with income between £100,000 and £150,000 will be able to be dealt with through the PAYE system.
PL: The freezing of the personal allowance and the high-rate tax band that was announced in November last year, that’s going to make more people come under this net, presumably?
MLC: Yes. So those freezes of the threshold, they will mean that probably more people are earning over the personal allowance of £12,570. Maybe they’ve had to put prices up if they run a self-employment business. Maybe they’ve had to put rents up. So that will be drawing more people over this threshold and into the self assessment tax system. That means more contact with HMRC. For those people, they should have made a registration by 5 October, so if they haven’t done so then they should get in contact with HMRC.
PL: And self assessment is being reviewed more widely, isn’t it?
MLC: Yep. The government has a 10-year tax administration strategy, and as part of that is a review and an update of the tax administration system in order to deliver a tax system fit for the future. So as part of that there is this thing called the tax administration framework review. There’s been a recent consultation on simplifying and modernising HMRC’s income tax services, including a review of the self assessment criteria, which means the criteria of who needs to file a self assessment tax return,
PL: But your sense is the HMRC, rather than changing thresholds, this is likely to be more about streamlining?
MLC: One of the government priorities is simplification of the tax system. I think that we might see some streamlining of the criteria from HMRC to simplify the process of registration, of identification, who needs to be within self assessment, and possibly to bring it more in line with what creates a tax liability.
PL: Mei, thanks for the update, Suren, thanks again. You’ll find more information on both of the topics we’ve just discussed in the show notes for the episode that’ll be on your app. Join us later in the month for October’s In Focus podcast, when Suren will be back with some familiar faces from the economies campaign to explore how British companies can go about attracting and retaining staff in the current challenging labour market.
The Insights series is back in early November. Meantime, please do rate, review and share this episode and subscribe on your app so you never miss an episode. Remember, you can also sign up to daily, weekly or monthly newsletters from ICAEW Insights so you’ll get all the latest accountancy news in your inbox, but crucially only as often as you want it. Thanks for being with us.