The following notes are copied from draft legislation published by HMRC, to be included in the Finance Bill 2024-25.

• As of 1 January 2025, all education services and vocational training supplied by a private school, or a “connected person”, for a charge will be subject to VAT at the standard rate of 20%. Boarding services closely related to such a supply will also be subject to VAT at 20%.
• Any fees paid from 29 July 2024 pertaining to the term starting in January 2025 onwards will be subject to VAT.
• Where pupils are placed in a private school because their needs cannot be met in the state sector, and they have their places funded by their Locally Authority (LA), a devolved government, or a nondepartmental public body, their funder will be compensated for the VAT they incur on these pupils’ fees.
• The government will legislate to remove eligibility of private schools in England to business rates charitable rates relief. However, the government recognises some pupils have special educational needs that can only be met in a private school. Therefore, the government will consider how to address the potential impact of these changes in cases where private school provision has been specified for pupils through an Education, Health and Care Plan (EHCP) – a plan given to children and young people who need more support than is available through special educational needs (SEN) support.
• The policy intention is for nurseries (both standalone nurseries and those attached to a private school) to remain exempt, and for the fees of children in the first year of primary school in a private school upwards to become taxable. This is the year in which children turn compulsory school age, often referred to as “reception” in England and Wales, “Primary 1” in Scotland, and “Year 1” in Northern Ireland.
• Education and vocational training provided either at sixth forms attached to private schools or standalone private sixth form colleges will also be subject to VAT. This is to ensure parity of tax treatment between further education supplied at sixth forms attached to private schools catering to children of compulsory school age (which are captured by the above definition of a private school), and those private sixth form colleges that only provide education to pupils aged 16-19. The legislation is also drafted in this way to ensure that private schools are not incentivised to artificially separate their sixth forms from the parts of their school catering to children of compulsory school age.
• Other “closely related” goods and services other than boarding (i.e. goods and services that are provided by a private school for the direct use of their pupils and that are necessary for delivering the education to their pupils) will remain exempt from VAT.

As set out in the draft legislation, “private schools” are defined as schools at which full-time education is provided for pupils of compulsory school age or, in Scotland, school age (whether or not such education is also provided for pupils under or over that age), or an institution at which full-time education is provided for persons over compulsory school age but under 19 and which is principally concerned with providing education suitable to the requirements of such persons (for example, a sixth form college), and where fees or other consideration are payable for that provision of full-time education.

Education and boarding provided by state schools (including academies) are not affected by this policy change, meaning they will continue to be exempt from VAT. This reflects the fact that state schools and academies will continue to be “eligible bodies”.

Business Asset Disposal Relief (BADR) applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership. When the relief is available, Capital Gains Tax (CGT) of 10% is payable in place of the standard rate. This can mean a substantial CGT saving for someone looking to exit their business.

There are a number of conditions that must be met in order to qualify for the relief. BADR used to be known as Entrepreneurs’ Relief before 6 April 2020 but the name change did not affect its operation.

You can currently claim a total of £1 million in BADR over your lifetime. The £1m lifetime limit means you can qualify for the relief more than once. The lifetime limit may be higher if you sold assets before 11 March 2020.

Claims for BADR are made either through your self-assessment tax return or by filling in Section A of the Business Asset Disposal Relief helpsheet.

The deadline for claiming relief is as follows:

Although there have been no specific announcements affecting this relief there are likely to be significant tax changes when the new Chancellor, Rachel Reeves, delivers her first Budget later this year. If you are thinking about selling your business we can help you consider your options.

It is important that anyone responsible for the accounts and tax filing regime for private limited companies is aware of their obligations.

After the end of its financial year, a private limited company must prepare full annual accounts and a company tax return. The deadline for filing the first set of accounts with Companies House is 21 months after the date the company was registered with Companies House. Annual accounts must be submitted 9 months after the company’s financial year ends.

There is a fixed date for the payment of Corporation Tax which is 9 months and 1 day after the end of the relevant accounting period. Note that a company is usually required to pay the tax due in advance of the filing deadline for a company tax return.

In most cases a company’s tax return must be submitted within 12 months from the end of their accounting period. Online Corporation Tax filing is compulsory for company tax returns. Company tax returns have to be filed using the iXBRL data standard using either HMRC’s own software or third-party commercial software.

The accounting period for Corporation Tax is normally the same twelve months as the company financial year covered by the annual accounts. Note that there are penalties for late filing with Companies House and HMRC.

1 August 2024 – Due date for corporation tax due for the year ended 31 October 2023.

19 August 2024 – PAYE and NIC deductions due for month ended 5 August 2024. (If you pay your tax electronically the due date is 22 August 2024)

19 August 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2024.

19 August 2024 – CIS tax deducted for the month ended 5 August 2024 is payable by today.

1 September 2024 – Due date for corporation tax due for the year ended 30 November 2023.

19 September 2024 – PAYE and NIC deductions due for month ended 5 September 2024. (If you pay your tax electronically the due date is 22 September 2024)

19 September 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2024.

19 September 2024 – CIS tax deducted for the month ended 5 September 2024 is payable by today.

According to the pundits, there are a number of issues that the new government will have to tackle if it wants to increase government revenues by achieving higher economic growth.

They include:

• Encouraging investment
• Reduce unemployment, and
• Improve productivity

Encouraging investment

There are already generous tax reliefs that allow businesses to write off the full cost of productive assets to reduce tax charges. Any upward movement in present allowances would reduce tax revenues and compound the current government funding crisis. It’s an unlikely component of the first Labour budget.

Reduce unemployment

In a recent press release, Liz Kendall announced that the Department for Work and Pensions will be setting out changes to employment support in a focussed attempt to improve employment opportunities for the unemployed and those unable to work because of ill health or long-term disability. According to the press release:

• Britain remains the only country in the G7 whose employment rate has still not returned to pre-pandemic levels.
• 2.8 million people out of work due to ill health or disability.
• 1 in 8 young people not in education, employment or work.
• Spending on sickness and disability benefits is set to increase by £30bn over the next five years according to the OBR.
• Too many people trapped in low paid, poor quality work, with little prospect of improving their lot in life. Of those in low pay in 2006, only one-in-six escaped it a decade later.

Liz Kendall argued:

“The fundamental problem we face is that the current system of employment support is designed to address the problems of yesterday – not today, tomorrow and beyond.

She said over the last 14 years the DWP has focused almost entirely on the benefits system, and specifically on implementing Universal Credit, and that “nowhere near enough attention has been paid to the wider issues – like health, skills, childcare and transport – that determine whether people get work, stay in work and get on in work.”

Improve productivity

Improvements in productivity would mean that output would rise without an immediate increase in the direct labour costs associated with its production. In turn, this would improve profitability and create the means for future increases in earnings.

According to government sources, the UK came fourth highest out of the G7 countries, with the US and Germany highest and Japan lowest. UK productivity was about 16% below the US and Germany.

Outlook

Much will depend on the government’s ability to enthuse the business community with ideas to kick-start economic activity. But if they continue to hold down taxation and reduce government borrowing, the only source of funding they will have to finance expansion will be economic growth. In some respects, this does present government with a classic – which comes first, chicken or the egg conundrum.