HMRC reminds employers about payrolling benefits deadlines
HMRC reminds employers about payrolling benefits deadlines HMRC is reminding employers of key dates and preparations ahead of the transition to real-time payrolling of benefits in kind (BiKs). With an important voluntary registration deadline approaching, what do payroll teams need to know? Find more help with Payroll here! The February 2026 edition of HMRC’s Employer Bulletin highlights important dates and guidance for employers preparing to report BiKs through payroll software rather than via P11Ds. The update forms part of the wider move towards payrolling most BiKs in real time under the new system. The deadline to register for voluntary payrolling of BiKs for the 2026/27 tax year is 5 April 2026. Employers that intend to payroll benefits in the next tax year must complete registration before 6 April 2026, as the voluntary registration service closes once the tax year begins. The Bulletin also reiterates that payrolling most benefits in kind will become mandatory from April 2027. From that point, employers will be required to tax benefits through payroll software and real time information submissions rather than relying on end-of-year P11D reporting. For employers and payroll professionals, the practical points are straightforward: register for voluntary payrolling before 5 April 2026 if you intend to payroll BiKs in 2026/27 ensure payroll software can handle real-time benefit reporting review and plan to change internal processes if you currently rely on P11D reporting With the move to mandatory payrolling now less than 14 months away, employers that delay preparation risk operational pressure during the 2026/27 tax year. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
MONTHLY FOCUS: AUTO-ENROLMENT – EMPLOYERS’ RESPONSIBILITIES
MONTHLY FOCUS: AUTO-ENROLMENT – EMPLOYERS’ RESPONSIBILITIES What are an employer’s responsibilities with regard to pension schemes and their employees? Page content:- Basic Principles Overview Choosing A Pension Scheme Assessing Workers Emplyees: Rights to Join, Op In and Opt Out Exceptions Postponement or Waiting Periods Basic principles What is auto-enrolment and who is it for? Simply put, auto-enrolment is the process that employers must follow to give their employees the opportunity to become a member of a workplace pension scheme. Where membership is required by auto-enrolment both the employer and their employees must pay contributions at least to a minimum level. However, it is possible for employees to opt out of joining the workplace pension, in which case neither they nor their employer will be required to make contributions. The auto-enrolment process is compulsory for all employers whether they are in business or not. It therefore applies to charities and other non-profit organisations and even to those who employ domestic staff such as a nanny, cleaner or gardener. Following a staggered rollout, all employers are now required to meet auto-enrolment obligations from the day they first take on an eligible employee. Who has responsibility for auto-enrolment? The employer always has the responsibilities under auto-enrolment – they will at the very least have to assess the status of persons who work for them to establish if they are “workers” for the purposes of auto-enrolment and whether they need to take further steps. The employer’s role may be twofold: that of the employer and that of pension scheme administrator. However, they may, and often will, defer the latter role to a pension company or financial advisor. Below is a brief description of who is responsible for various aspects of auto-enrolment. 1. Employers Employers have an obligation to provide a suitable pension scheme and contribute to it for all eligible employees unless they have opted out. They must also manage or arrange for someone else to manage the scheme on a day-to-day basis. 2. The Pensions Regulator (TPR) TPR has the role of overseeing schemes and ensuring that employers meet their obligations in running their pension schemes. 3. The Financial Conduct Authority (FCA) The FCA’s role is to regulate most pension schemes offered by employers. The FCA regulates the marketing and sale of most pension schemes and retains regulatory control of the joining process outside of auto-enrolment. Employers receive communications regarding auto-enrolment from TPR and may receive communication from the FCA regarding the pension scheme they choose or operate. Can the employer use any employer pension scheme for auto-enrolment? No, while most pension schemes for employers meet the auto-enrolment requirements, not all do. For example, if the only workers for the business are directors the company might not be required to have an auto-enrolment scheme and so an existing pension scheme for directors only might not meet the auto-enrolment requirements. If the business later takes on other employees and wants to use an existing pension scheme it must first: ascertain whether it can operate as an auto-enrolment qualifying pension scheme (QPS). The pension company, pension administrator or a financial advisor will be able to help with this; and assess whether the existing scheme is suitable for auto-enrolment. For example, while it might be a QPS, its rules might require the employer to pay contributions greater than are required by auto-enrolment/ Employers must be prepared to establish a new pension scheme if the existing one isn’t suitable. What’s my first step in choosing a pension scheme? An employer must have at least one QPS, which is ready to enrol employees as soon as they have an employee who is eligible for auto-enrolment. They must find a pension provider by themself or with the aid of a pension advisor. All major insurance companies offer schemes which comply with auto-enrolment. The government-backed National Employment Savings Trust (NEST) pension scheme is a good DIY option and has grown in popularity, especially with small employers. However, it’s worth speaking to a financial advisor specialising in auto-enrolment pensions before making a decision about which scheme to use. What are the basic auto-enrolment duties as an employer? · to assess the status of employees for auto-enrolment purposes, i.e. are they eligible to join or not? · to make qualifying employees members of a pension scheme · to pay contributions for and on behalf of employees · to deal with all employee auto-enrolment rights, such as their right to opt out or opt in to the QPS; and · to make all reports to TPR as required by legislation. What is the cost of getting things wrong? Having a suitable pension scheme will keep an employer out of trouble with TPR. In the first few years of auto-enrolment TPR took a relatively soft approach to employers who didn’t meet their auto-enrolment obligation on time, but this is changing and it’s issuing penalties more frequently. When do penalties apply and how much can they be? TPR uses information from government agencies such as HMRC to find employers not already on its database. If employers fail to start the auto-enrolment process on time, or subsequently meet their duties, it can fine them. Before it does it will send warning notices which indicate what steps the employer needs to take to avoid a financial penalty. The final warning gives the employer 28 days in which to act. If they don’t respond a fine is likely. The rate of the fixed fine for initial non-compliance is £400. Thereafter it can escalate to daily penalties depending on the number of employees there are. The minimum is £50 per day if there are up to four workers, and increases to £10,000 per day if there are 500 or more. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Overview
HMRC bungles 2026/27 PAYE codes for pensioners
HMRC bungles 2026/27 PAYE codes for pensioners For some pensioners, the 2025/26 winter fuel payment should be collected via their 2026/27 PAYE code. HMRC has started to issue PAYE codes for the new tax year, but the extra charge is missing. What’s going on? For the personal tax services you are looking for. The winter fuel payment was paid to state pensioners automatically at the end of 2025, unless they opted out in time. The full payment is clawed back if an individual’s income exceeds £35,000 gross per annum, and for those that aren’t completing tax returns, it’s supposed to be collected through their PAYE code. This means the winter fuel payment received in 2025/26 will be collected via the 2026/27 PAYE code. The adjustment will deduct around £17 per month to claw back the payment over the course of the tax year. Some PAYE tax codes have already been issued for 2026/27, but HMRC has confirmed these may not include the charge. No action is required because an updated PAYE code will be issued in April 2026 to rectify this. It is possible to opt out of the winter fuel payment, but this will need to be done each year. From April 2026 it should be possible to opt out using an online form. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
Government unveils business rates cuts and late licensing boost for pubs
Government unveils business rates cuts and late licensing boost for pubs Pubs will see their business rates cut and licensing rules relaxed under a new support package aimed at reviving high streets and protecting local community hubs. What’s changing and what does it mean for the trade? The Chancellor has announced a package that she expects to save the average pub an extra £1,650 in 2026/27, with around three‑quarters of pubs seeing their business rates bills fall or stay flat next year. The measures include a 15% cut to new business rates bills from April, followed by a two‑year real‑terms freeze, alongside a review of how pubs are valued for rates. However, this discount applies to the rates as calculated under the rerated value from 1 April 2026, so businesses whose values will increase significantly will still see increased bills. Take a closer look at Our Accounting Services The government will also pilot a new High Street Strategy to support retail, leisure and hospitality businesses, and consult on loosening planning rules so pubs can add guest rooms or expand trading space more easily. A £10 million Hospitality Support Fund over three years will help more than 1,000 pubs offer extra community services, such as cafes, village stores and play areas, and support people furthest from the labour market into hospitality jobs. Licensing rules will be temporarily relaxed so pubs and other venues can open after midnight for Home Nations’ matches in the later stages of this summer’s Men’s FIFA World Cup, with a consultation to follow on similar extensions for major events such as Eurovision. The government also plans to legislate to increase the number of temporary events pubs can hold to screen matches or host community and cultural events. The package builds on a wider £4.3 billion support programme for business rates, including a cap on bill increases from April and a permanent 5p cut in the business rates multiplier for over 750,000 retail, hospitality and leisure properties, funded by a higher rate for the top 1% of properties. Grassroots live music venues that operate as pubs will also be included in the new reliefs, though business rates remain a devolved matter and it will be for the Scottish, Welsh and Northern Irish administrations to decide whether to match the support. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
HMRC updates guidance for claiming new allowance
HMRC updates guidance for claiming new allowance Qualifying expenditure on plant and machinery can qualify for a 40% first-year allowance from 1 January 2026. HMRC has now updated its guidance to help make claims. What do you need to do? The new 40% first-year allowance (FYA) is available to companies as well as unincorporated businesses. Perhaps the biggest winners will be companies that purchase assets and lease them out, as these assets are excluded from full expensing, and so 100% relief is limited to the £1 million annual investment allowance. Until this year, the only option for relieving any excess was through writing down allowances on a reducing balance basis. Find more Guidance on our Accounting Services tax return, but HMRC’s corporation tax online service will not be updated for the new allowance until 2027. A company that wants to make a claim in the meantime, e.g. one with a year end of 31 March 2026 filing this year, will need to use a workaround. HMRC has now updated its guidance, saying that claimants should use: boxes 725 or 750 for claim amounts box 760 for qualifying expenditure back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
Get ready for Making Tax Digital for Income Tax
Get ready for Making Tax Digital for Income Tax If you’re one of the (un)lucky individuals who need to join Making Tax Digital for Income Tax (MTD IT) from 6 April 2026, you probably know that this involves submitting regular, digital records to HMRC. But what do you need to do to prepare? What’s required? Making Tax Digital for Income Tax (MTD IT) will affect how you keep records as well as how often you report to HMRC, so you need to take practical steps now to prevent problems cropping up later. In a nutshell, you’ll be required to: sign up for the service before April 2026 keep digital records of self-employment or property income and expenses send quarterly updates to HMRC summarising income and expenses; and submit your end-of-period statement and final declaration using software that works with HMRC’s system. Making Tax Digital, Find the help you need! see our Accounting Services. Start by signing up HMRC may have written to you to tell you that you need to join MTD IT but unfortunately it won’t sign you up automatically. Signing up is therefore your first practical action and needs to be done before MTD IT starts in April 2026 (see further information). If you already use an accountant, they can do it for you. Your accountant will need a fresh authorisation to access your MTD IT account. Existing authorisation for self-assessment access won’t transfer automatically. Record keeping MTD IT requires digital records to be kept in compatible software. This means income and expenses should be recorded regularly, not reconstructed at the year end. So now is the time to review your current record keeping system. Tip. Update records in real time as leaving it until the end of the quarter increases the risk of missing income or expenses. Choose the right software for you You will need HMRC-compatible software to submit quarterly updates. There is no single “best” option, and the right choice depends on how complex your affairs are. There are two main types of software, one that creates records for you by connecting to your bank account, or having invoices uploaded to it, and one that connects to your own records, e.g. a spreadsheet or accounting software. When choosing software, consider how easy it is to use, bank feed integration, support and long-term costs. Tip. There’s an HMRC tool to help you find software (see Further information ). New routine MTD IT is as much about process as technology. Setting aside time each month to review transactions will make quarterly submissions far easier. If you currently rely on paper records or spreadsheets that you update once a year, you’ll need to change your habits. MTD IT changes reporting, not when tax is paid. Payments on account still apply unless rules change in the future. Which quarters? Under MTD IT, the default position is that the quarters will follow the tax year, i.e. 6 April, 6 July, 6 October and 6 January. If you’d prefer to use calendar quarters you can elect to do so when you sign up to MTD IT. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
SPECIAL FOCUS – 2025 AUTUMN BUDGET
SPECIAL FOCUS – 2025 AUTUMN BUDGET In this month’s focus, we’re breaking down the key announcements from the 2025 Autumn Budget Page Contents:- INCOME TAX RATES INCORPORATION RELIEF SHARE REORGANISATIONS BUSINESS & AGRICULTURAL PROPERTY RELIEF MANSION TAX CAPITAL ALLOWANCES VENTURE CAPITAL SCHEMES ENTERPRISE MANAGEMENT INCENTIVE PENSIONS AND SALARY SACRIFICE ELECTRIC VEHICLE EXCISE DUTY INCOME TAX RATES What’s changing? Income tax thresholds will be frozen for a further three years, until 6 April 2031. As wages and taxable benefits increase, individuals may find themselves in a higher tax bracket as the thresholds at which the basic, higher and additional rates of tax bite stay the same. In addition, income tax rates for certain types of income are increasing by 2%. If you need more Help with any of these Budget Items, Please see our Accounting Services. or call us on 0161 872 8671. Dividends Dividend tax rates for basic and higher rate taxpayers will increase by 2% from 6 April 2026 as shown in the table below. The additional rate will remain unchanged. 2025/26 2026/27 Ordinary rate 8.75% 10.75% Upper rate 33.75% 35.75% Additional rate 39.35% 39.35% The charge applying to loans to participators of close companies under s.455 Corporation Tax Act 2010 will also increase to 35.75% accordingly. Savings and property income From 6 April 2027, interest from savings will be taxed at a higher rate than income from employment and self-employment as tax on savings income will increase by 2%. A new property rate of tax will also be introduced from 6 April 2027, which will be 2% higher than the standard rates of income tax across all bands. The introduction of a specific rate of tax for income from property increases the possibility of further changes, i.e. a wider divergence from the rate of tax applied to other income. The changes to savings and property income tax rates are shown in the table below. 2025/26 (%) 2026/27 (%) 2027/28 (%) Basic rate 20 20 22 Higher rate 40 40 42 Additional rate 45 45 47 Currently, allowances and reliefs are allocated tax efficiently, to minimise the tax liability. A further sting in the tail is that these rules are to be changed so the personal allowance is first set against employment, trading and pension income, rather than property or savings income, which will be taxed at a higher rate. This greatly reduces the scope for escaping the tax increase. A person who has taxable savings/property income of £10,000 per year will pay £200 more tax on that income in 2027/28 than currently. The Budget documentation confirms that the income tax reducer, which replaced the deduction for financing costs, will increase to 22% from April 2027. Who will this affect? The changes affect all individuals who pay tax on their dividend income, whether from being a shareholder in a company they own or work in, or from holding shares as investments from 6 April 2026. The savings and property income tax hikes affect unincorporated landlords and savers who pay tax on their savings and/or property income from 6 April 2027. According to the Budget 2025 document, over 90% of taxpayers do not pay tax on savings income. This is largely due to the personal savings allowance. The savings and dividend tax rates will apply to the whole of the UK, but the property tax rates will not apply to Scotland. The government intends to work with the devolved governments of Scotland and Wales to enable them to set property tax rates. Can I have a practical example? Dividends Example Luke is the sole shareholder of Acom Ltd, which makes £75,000 per annum. Luke always extracts all available profit each year. In 2025/26, he takes a salary of £12,570 and the balance (£62,430) as dividends. His tax liability for 2025/26 is calculated as: Income (£) Tax rate Tax liability (£) 12,570 effectively 0% 0 37,700 8.75% 3,299 24,730 33.75% 8,346 Total 11,645 In 2026/27, once dividend rates increase, Luke’s tax liability will increase by almost £1,250 as shown below. Income (£) Tax rate Tax liability (£) 12,570 effectively 0% 0 37,700 10.75% 4,053 24,730 35.75% 8,841 Total 12,894 Savings income Example Dylan’s state and private pensions total £60,000 per annum and he has interest income of £1,000. He is entitled to the personal savings allowance, which is £500 for a higher rate taxpayer, so the remaining £500 is taxable. In 2026/27, Dylan will pay £100 income tax on the interest. In 2027/28, this will increase to £110. Are there any opportunities for savings? Dividends As the change to dividend tax rates is coming on 6 April 2026, those in control of their dividend income should accelerate dividends where possible before this date, whereas investors need to make the most of their ISA allowance. Dividends from shares held within an ISA aren’t taxable. You should therefore utilise your annual ISA allowance to shelter investments from income tax (and capital gains). Married individuals and those in a civil partnership should review how their shares are owned and transfer shares between them to minimise their combined tax bill. There are no capital gains tax (CGT) or inheritance tax (IHT) implications when assets are transferred between spouses/civil partners. Owners of trading companies can transfer shares to other individuals (such as their children over the age of 18) without triggering a CGT liability. This is done by claiming holdover relief. This does of course mean the owner manager has less income; if they are already supporting others it may be more tax efficient to pay dividends directly, e.g. to children at university. Owner managers should consider paying additional dividends prior to 6 April 2026 to take advantage of lower tax rates. Don’t forget about outstanding directors’ loans. If they are to be cleared with a dividend it will be more expensive to do so after 6 April 2026. Owner managers should also consider alternatives to larger dividends, such as a mixture of exempt benefits and pension contributions. Owner managers with cash
Government announces significant climbdown on IHT reforms
Government announces significant climbdown on IHT reforms The introduction of a £1 million cap on 100% business and agricultural property relief from April 2026 has been criticised particularly heavily by the farming industry. The government has announced a significant watering down of the measure. What’s happening? The 2024 Autumn Budget announced the end of unlimited 100% agricultural and business property relief (APR/BPR) from April 2026. Get the Accounting Knowledge you Need The plan was to introduce a combined cap of £1m, with any qualifying assets in excess of this to benefit from 50% relief. The announcement was met with outrage from the agricultural community. Tractor protests in Central London have been ongoing periodically ever since. One of the criticisms was that the allowance would not be transferrable between spouses/civil partners if it was unused. The Autumn 2025 Budget back peddled on this and confirmed a transferrable allowance, along the same lines as the existing nil rate bands. However, less than a month later the government has announced a significantly more generous amendment: instead of a £1m allowance, each individual will be entitled to a £2.5m transferrable allowance. Accompanying the published details was the statement from the Environment Secretary that “We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms.” This seems rather odd, as the government had 13 months from the original announcement to “listen closely” to farmers (who weren’t exactly being inconspicuous) ahead of the November Budget, and you have to wonder what new feedback became available in the four subsequent weeks. Still, perhaps it’s best not to look a (Christmas) gift horse in the mouth! back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
Planning ahead for pension salary sacrifice changes
Planning ahead for pension salary sacrifice changes From 6 April 2029, both employers and employees will be required to pay Class 1 NI on pension contributions in excess of £2,000 made through a salary sacrifice arrangement. What can you do about it? Salary sacrifice Under a salary sacrifice arrangement, your employee gives up some of their salary in return for a benefit. At the very least, this results in employees’ NI savings, and where the benefit is exempt will also deliver income tax and employers’ NI savings. The rules on salary sacrifice arrangements were tightened considerably from April 2017 meaning that now only a handful of benefits can be provided tax efficiently through a salary sacrifice arrangement, which includes pension contributions. Boost pension contributions The use of salary sacrifice arrangements to swap cash salary for employer pension contributions increased in popularity following the hike in employers’ NI to 15% from 6 April 2025. Find the Accounting and Planning Services You Need Employee pension contributions attract tax relief (subject to the earnings cap and the employee’s available annual allowance), but they do not benefit from NI relief. However, there is no NI to pay on employer contributions to a pension scheme. Therefore, both the employer and the employee can benefit by entering into a salary sacrifice arrangement whereby the employee gives up cash pay in return for an employer pension contribution. Example. An employee pays £200 a month into a pension scheme (£2,400 per year). The employee will benefit from tax relief on their contributions, but there is no NI relief. Depending whether the employee pays NI at 8% or 2%, either £16 or £4 NI is payable on the salary paid into their pension. The employer will pay employers’ NI of £30. If, instead, the employer and employee enter into a salary sacrifice arrangement whereby the employee sacrifices £2,400 of their annual salary in return for an employer pension contribution, the employee’s cash pay will drop by £200 a month, saving them £16/£4 in NI. The employer will save £30 a month (£360 a year). The contribution to the employee’s pension is unchanged but both the employee and employer save NI. The changes don’t come in until 2029 so you can use a salary sacrifice arrangement for pension contributions without limit until April 2029. The greater the contribution, the greater the NI savings. Changes in 2029 From 6 April 2029, only the first £2,000 pension contributions (per employee, per year) made through a salary sacrifice scheme will be exempt from NI. This will limit the employee’s savings to £160 for basic rate taxpayers or £40 per year for higher rate taxpayers. Your savings will be restricted to £300 per year, per employee. Assuming you already have employees contributing more than £2,000 per year under salary sacrifice, your business will have a hefty NI bill if you don’t take action. Mitigating the effects Ensure unlimited salary sacrifice arrangements only run to 5 April 2029, and encourage employees to increase the amount sacrificed in 2026/27 and 2027/28. New arrangements should be put in place from 6 April 2029, capping the contributions at £2,000 per annum. You can still save NI at 15% if you unilaterally decide to increase employer pension contributions instead of giving employees a pay rise from 6 April 2029. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk
Marginal relief – responding to an HMRC nudge letter
Marginal relief – responding to an HMRC nudge letter HMRC is running a campaign to clamp down on incorrect claims for corporation tax marginal relief (MR). In what circumstances might you be challenged by HMRC and how should you respond? Marginal relief When the main rate of corporation tax (CT) increased in April 2023 marginal relief (MR) was introduced to soften the blow. While companies with annual profits of £50,000 or less pay CT at the small profit rate of 19%, if profits are greater, even by £1, all profit is taxed at the 25% main rate. To prevent an inequitable tax bill MR tapers the impact of the main rate of CT where profits are between £50,000 and £250,000. Get more information on Business Tax Services Anti-avoidance Businesses are prevented from obtaining multiple MRs where they operate through more than one company and the companies are associated. Companies that are associated must share a single MR. The rules that determine when two or more companies are associated are especially tricky. Broadly, companies within the same corporate group, are controlled by the same individuals or commercially dependent on each other are associated (see Further information ). Some types of company that appear to be associated with others can be ignored when working out MR, e.g. passive companies (see Further information ). HMRC’s MR campaign According to HMRC many companies have been overclaiming MR, in most cases probably because they have not fully understood the associated company rules. As a result, HMRC started a campaign to claw back excess MR claimed. Its attack starts with one of two different letters. What happens next depends on which type of letter you receive. HMRC letters While the text in each letter is similar, the content of each differs slightly. One indicates that HMRC might start a compliance check or take punitive action if you don’t respond while the other is less aggressive. The action you should take is the same for both letters, i.e. you should check the CT returns for the company’s accounting period that includes 1 April 2023 and subsequent periods. The letters also list the companies which HMRC thinks are associated. If the MR for the company the letter is sent to is wrong then any MR claimed for the other companies that HMRC lists is probably also wrong, so also check the CT returns for them. Remember that HMRC is far from infallible. We’ve seen a letter where its list of allegedly associated companies includes at least one that’s passive and so shouldn’t figure in the MR calculation. Responding to HMRC Despite the threats of possible action if you don’t reply to HMRC’s letter within 30 days, you’re under no obligation to do so. However, we strongly advise that you do. If you need more than 30 days for this contact HMRC as soon as possible and ask for an extension. If after checking you still believe that your calculation of MR is correct, ask HMRC to explain its reasoning. That way you can dispel any misapprehensions it has and prevent the matter from escalating or being raised in a later year. back to the menu top If you would like any assistance with any of these points. Please Call Us on 0161 872 8671 Get in Touch Want a financial consultation with no obligation? Call Dunhams Chartered Accountants now on 0161 872 8671 Or email paul.o’brien@dunhams.co.uk or andrew.edwards@dunhams.co.uk