Author: Glenn

When a limited company makes charitable donations specific rules apply. These may include Corporation Tax relief for donations to registered charities or community amateur sports clubs (CASC), as well as capital allowances for equipment donated that has been used by the company.

However, the rules are different if the company is given something in return for making a donation, such as tickets for an event.

These rules apply to benefits given to any person or company connected with your company, including close relatives.

Charity sponsorship payments are different from donations because the company gets something related to the business in return. A company can deduct sponsorship payments from its business profits before it pays tax by treating them as business expenses. 

Payments qualify as business expenses if the charity:

• publicly supports the company's goods or services;
• allows the company to use their logo in company’s printed material;
• permits the company to sell their goods or services at the charity's events or premises; and/or
• has links from their website to the company's website.

Goodwill is a concept frequently discussed, and yet it is seldom addressed in legislation. Typically, it is defined as the additional value of a business beyond its tangible assets.

In the vast majority of cases, when a business is sold, a significant proportion of the sale price will be for intangible assets including goodwill. Essentially, this involves assigning a monetary value to the business’s reputation and customer relationships. Or as HMRC say in their guidance, in accounting terms, purchased goodwill is the balancing figure between the purchase price of a business and the net value of the assets acquired. Valuing goodwill is complex and there are many different methods which can be used and that vary from industry to industry.

Businesses may qualify for Corporation Tax relief on purchases of goodwill made on or after 1 April 2019 if the:

• goodwill and relevant assets are purchased when you buy a business with qualifying intellectual property (IP);
• business is liable to Corporation Tax; and
• relevant assets (including goodwill) are included in the company accounts.

If relief is available, it is at a fixed rate of 6.5% a year on the lower of the cost of the relevant asset or 6 times the cost of any qualifying IP assets in the business purchased. Relief is given yearly until the limit is reached and a claim is made using the Company Tax Return.

A higher rate of CGT applies to gains on the disposal of residential property (apart from a principal private residence). In the Spring Budget 2024, the Chancellor announced a reduction in the higher rate that exists for residential property to 24% (from 28%) from 6 April 2024. These rates apply to higher rate taxpayers as well as to trustees and personal representatives. The lower rate that applies to basic rate taxpayers remain unchanged at 18% in the current 2024-25 tax year.

Most people are aware that they do not usually have to pay CGT when they sell their qualifying residential property used wholly as a main family residence. However other sales of property that are not a principle private residence (PPR) will be subject to CGT.

This includes:

• buy-to-let properties
• business premises
• land
• inherited property

The deadline for paying any CGT due on the sale of a residential property is 60 days. This means that a CGT return needs to be completed and a payment on account of any CGT due should be made within 60 days of the completion of the transaction. This applies to UK residents selling UK residential property where CGT is due. There are various reliefs available from CGT for the sale of qualifying business assets.

The Competition and Markets Authority (CMA) has published an update on the widespread action it is taking to ensure that people can get the best possible choices and prices in the face of ongoing cost of living pressures. New analysis highlights how the cost to drivers of weakened competition in the fuel sector persists, but competition in the groceries sector appears to be more effective in bearing down on retail margins.

In its recent monitoring update, the CMA found:

• Retailers’ fuel margins – the difference between what a retailer pays for its fuel and what it sells at – are still significantly above historic levels.
• Supermarkets’ fuel margins are roughly double what they were in 2019.
• The total cost to all drivers from the increase in retail fuel margins since 2019 was over £1.6bn in 2023 alone.
• Competition among fuel retailers is failing consumers, just as it was in July last year when the CMA published its road fuel market study.

The CMA is currently monitoring developments in the fuel market using information provided voluntarily by fuel retailers. It has created a temporary price data-sharing scheme, and it is positive that some major players have started to integrate this into consumer-facing products, like apps. However, the current scheme covers only 40% of fuel retail sites and is not comprehensive enough to be used by map apps or satnavs to bring accurate, live information to people – and this is what would have a substantial impact on the market.

The proposed introduction of the Digital Information and Smart Data Bill by the new government could provide the legislative basis to set up a compulsory and comprehensive scheme that would change this – which the CMA would welcome.

In a move to put more money in working people’s pockets, the government has overhauled the remit of the Low Pay Commission (LPC).

This will, for the first time, ensure the independent body considers the cost of living when it makes future recommendations to government on the minimum wage.

The Business and Trade Secretary Jonathan Reynolds said:

“For too long working people have faced the worst of the cost of living crisis, but this Government is taking bold action to address it and make work pay.

The new remit to the LPC is the first of many vital steps we will take to support more people to stay in work and improve living standards.

Our focus remains on putting more money in working people’s pockets and boosting economic growth.”

The Business and Trade Secretary and Deputy Prime Minister have also instructed the LPC to narrow the gap between the minimum wage rate for 18–20-year-olds and the National Living Wage. This will be the first step towards achieving a single adult rate. 

In addition to the cost of living, the remit of the LPC will continue to consider the impact on business, competitiveness, the labour market and the wider economy.

Inevitably, these changes will increase costs for business owners and government has confirmed that they recognise the importance of providing sufficient notice of changes to the minimum wage, so the timelines remain unchanged in the new remit. Government have asked the LPC to report back by the end of October, and the rates will increase in April 2025. Employers and workers alike can be confident that they will have sufficient advance knowledge of next year’s increases.