Author: Glenn

As part of the Autumn 2024 Budget measures, the government introduced new anti-avoidance provisions to prevent the abuse of the existing close company anti-avoidance rule. The measure will have effect for any tax avoidance arrangements falling within the scope of the announcements that are made on or after 30 October 2024.

The government has said they are introducing this new measure as they have become aware of arrangements using a group of companies or amongst associated companies, so that new loans are made and then repaid in a chain such that no s455 charge arises on the increasing amounts extracted. Chapters 3A and 3B cannot catch the behaviour.

It will be clear under new legislation in Finance Bill 2024-25, that where the TAAR applies (where companies and their shareholders are attempting to avoid the s455 charge on any extractions), tax is payable whether or not there has apparently been a repayment, or a repayment is subsequently made. Section 464B of the CTA 2010, which currently provides relief from the charge in cases where a return payment is made (even if the payment is made for avoidance purposes), will be repealed and relevant amendments will be made to Section 464D.

Despite an appeal, the Courts recently found against Bolt in relation to their attempts to evade the statutory entitlements of their drivers to a minimum wage and holiday pay.  The ruling confirms that 10,000 Bolt drivers employed on what was erroneously conceived to be an ‘agency arrangement’ as freelance contractors are indeed entitled to minimum pay, sick leave and paid vacations.

Under the Employment Rights Act 1996, National Minimum Wage Act 1998, National Minimum Wage Regulations 2015, and the Working Time Regulations 1998, Bolt’s drivers were considered by the Courts to be ‘exclusive’ employees unless they also drove for other ride-hailing apps or were part of the ‘Link’ scheme.  Bolt’s contention of self-employment was refuted based on its contractual control over their livelihoods and the absence of any valid notion of ‘free agency’. The Courts gave Bolt a scathing rebuke for the fictional nature of its contract that sought to deny any employer-worker relationship with the drivers.

Once again, the attempt to cut costs and responsibilities by creating sham contracts inferring that long-term employees are part-time freelancers has backfired. This ruling reaffirms that such sham contracts are no longer acceptable in the UK and that any employers operating under this attempted abrogation of responsibilities will find themselves on thin ice at tribunals. If you are currently employing any staff on zero-hours contracts or on an extended contractual freelance basis, you are advised to seek legal advice.

New proposals to crack down on subscription traps, have been unveiled by the Department for Business and Trade as the government launches a consultation on measures to make it easier for consumers to get a refund or cancel unwanted subscriptions.

“Subscription traps” are instances where consumers are frequently misled into signing up for a subscription through a “free trial” or reduced price offer. In some cases, if the consumer does not cancel the trial within a set amount of time, they are often automatically transferred to a costly subscription payment plan.

It comes as new figures reveal consumers are spending billions of pounds each year on unwanted subscriptions due to unclear terms and conditions and complicated cancellation routes. Nearly 10 million of 155 million active subscriptions in the UK are unwanted, costing consumers £1.6 billion a year.

Subscriptions can be for anything from magazines to beauty boxes, with many subscriptions having complicated or inconvenient cancellation processes such as phone lines with long waits and restrictive opening hours that can leave consumers feeling trapped.

The consultation sets out proposals to make the refunds and cancellation processes simpler, with a requirement on retailers for greater transparency on their subscription programmes in a way that is proportionate to balance consumer rights without placing unnecessary burdens on businesses.

Determining an acceptable level of pension income for retirement depends on individual circumstances, including lifestyle expectations, health, and financial commitments. However, several guidelines and studies provide benchmarks to assist in planning.

Retirement Living Standards

The Pensions and Lifetime Savings Association (PLSA) outlines three retirement living standards in the UK:

• Minimum Lifestyle: Covers essential needs with some social activities. As of 2024, a single person requires £14,400 annually, while a couple needs £22,400.
• Moderate Lifestyle: Offers more financial flexibility, including short-haul holidays and increased leisure activities. This standard suggests £31,300 per year for singles and £43,100 for couples.
• Comfortable Lifestyle: Allows for luxuries such as long-haul travel and a new car every five years. The recommended income is £43,100 annually for singles and £59,000 for couples.

Average Retirement Incomes

According to government data, the average weekly income for pensioners in 2023 was £267, equating to approximately £13,884 per year. This figure varies regionally, with higher living costs in areas like London potentially reducing disposable income.

Gender Disparities

Studies indicate a gender gap in retirement incomes. Women are projected to receive an average of £12,000 annually, compared to £17,000 for men. This 33% disparity highlights the need for targeted financial planning, especially for women.

Replacement Ratio

A common measure is the replacement ratio, which is the percentage of pre-retirement income needed to maintain lifestyle post-retirement. Typically, replacing 60% to 80% of pre-retirement income is recommended. However, the average retirement income often falls short of this benchmark, underscoring the importance of personalized retirement planning.

State Pension

The UK State Pension provides a foundational income. As of April 2024, the full new State Pension is £221.20 per week, totalling £11,502.40 annually. Eligibility depends on an individual’s National Insurance record, with 35 qualifying years required for the full amount.

Planning Considerations

To achieve a desired retirement income:

• Assess Lifestyle Needs: Determine the lifestyle you wish to maintain and estimate associated costs.
• Calculate Required Income: Use tools like the MoneyHelper pension calculator to estimate the income needed to support your desired lifestyle.
• Review Pension Savings: Evaluate your current pension savings and contributions to ensure they align with your retirement goals.
• Seek Professional Advice: Consulting a financial adviser can provide personalized strategies to optimize retirement income.

In summary, while benchmarks offer general guidance, an acceptable pension income is highly individual. Regularly reviewing and adjusting your retirement plan is essential to meet your specific needs and aspirations.

The current tax benefits for the letting of properties as short-term holiday lets (known as Furnished Holiday Lets – FHL) is to be abolished from April 2025. The changes will take effect on or after 6 April 2025 for Income Tax and for Capital Gains Tax and from 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains.

The changes will remove the tax advantages that current FHL landlords have received over other property businesses in four key areas by:

• applying the finance cost restriction rules so that loan interest will be restricted to basic rate for Income Tax;
• removing capital allowances rules for new expenditure and allowing the replacement of domestic items relief;
• withdrawing access to reliefs from taxes on chargeable gains for trading business assets;
• no longer including this income within relevant UK earnings when calculating maximum pension relief available.

After the repeal, properties previously classified as FHLs will be integrated into the individual's UK or overseas property business and will be governed by the same rules as non-FHL property businesses.

An anti-forestalling rule also prevents individuals from gaining a tax advantage by entering into unconditional contracts to claim capital gains relief under the current FHL rules. This provision applies from 6 March 2024, the date the measure was first announced.

The removal of the special tax regime for holiday lets is expected to have a significant impact on many involved in the short-term holiday rental market in the UK.