Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and you need to take specific advice appropriate to your own circumstances. While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and must not be acted upon without taking further advice and guidance.
Chip shop owner battered
A Welsh fish and chip shop owner has been issued a ban for five years after failing to declare £459,522 in VAT over the course of five years
Matthew Antone Williams, 39, was the director of Maw Catering Services Limited which traded as The Crispy Cod in Tonyrefail, Wales.
HMRC launched an investigation and visited the premises to obtain the sales records for a four-month period from the shop’s point of sale register.
The point of sale register revealed that the company had not distinguished the difference between the hot and cold food sales. Williams had not declared that the food he was serving was hot which meant that he had failed to declare around £2,000 of VAT a week from between January 2012 and July 2017.
HMRC then raised assessments to cover underdeclared tax totalling £459,522 over the five years.
Maw Catering services went into voluntary liquidation on 31 July 2019 and at the point of liquidation the company had not paid off any of the VAT debt that was owed in this period.
During the proceedings, Williams had stated that he was ‘devastated’ and that he had bit off more than he could chew and was sorry. Williams also stated that he had ‘made a mistake’ regarding the undeclared VAT.
Inheritance tax receipts rise
HMRC’s latest tax receipt figures show inheritance tax rising by £500m after the nil-rate freeze in the Spring Budget
The inheritance tax statistics show that the government continues to collect more from the tax each year. Inheritance tax receipts for April to July 2021 sat at £2.1bn, £500m higher than the same period a year earlier. Inheritance tax is currently a hot topic as rumours continue to circulate as to whether the Chancellor, Rishi Sunak will consider changes to IHT in order to raise more funds after the pandemic.
HMRC has indicated that the higher receipts are due to the higher volume of wealth transfers that have taken place during the Covid-19 pandemic. With rising property and asset valuations, IHT receipts are likely to continue increasing.
There is also a concern that both inheritance tax and capital gains tax rates could increase post-pandemic as the government considers options for increasing its income from tax.
What can you do to halt this trend?
The most recent figures show that taxpayers have saved £30m in inheritance tax through gifting last year with many taking advantage of the £3,000 annual gift allowance
The £3,000 allowance, which was introduced in the 1980s has been frozen for nearly 40 years.
You can also use the small gifts exemption which allows individuals to make unlimited gifts of £250 each year. This has to be given to different individuals and cannot take the form, for example, of monthly payments to the same beneficiary.
When Inheritance Tax, and its forerunner, Capital Transfer Tax, was first introduced it was intended to affect only the very wealthy, but the rise in the value of homes, particularly in the south-east of England, has brought more families into the net in recent decades. Gifting is a legitimate way for families to reduce an inheritance tax bill.
There are other reliefs available most notably gifts of any amount out of surplus income. That is, if you do not need all of your income you can gift the surplus free of IHT.
Also, Agricultural and Business Property Reliefs are still an important way of reducing the tax on family businesses.
Motorhome hire and VAT
HMRC have confirmed in VAT Notice 709/3 that the hire of what they describe as a “motorhome” will qualify for the temporary reduced rate provided it is specifically for holiday accommodation.
https://www.gov.uk/guidance/hotels-holiday-accommodation-and-vat-notice-7093#section5.
The temporary reduced rate is currently 5% until 30th September 2021, when it will increase to 12.5%. After the end of March 2022, it is expected the rate will revert to 20%, unless HMRC extend the temporary rate.
However, daily hires, whether for day trips or wedding transport (whether with or without a driver), will be standard rated as the vans are not being provided as holiday accommodation.
It is also worth mentioning deposits. If a deposit is taken as a pre-payment to secure a booking, then it creates an actual tax point to the extent of the deposit value. If the booking is cancelled and the deposit retained, then it remains consideration and cannot be treated as compensation.
However, a deposit taken as a security against damage to the van is outside the scope at the time it is taken and if it is retained to cover the cost of repairing damage, then it remains outside the scope as compensation for the loss or damage incurred.
Cryptoassets – tax implications
HMRC does not regard buying and selling cryptoassets to be gambling so the profits are likely to be taxable one way or another. HMRC also does not regard cryptoassets as being money or currency..
If you have acquired the cryptoasset in order to sell it at a profit, you must determine whether you are carrying on a trade of dealing in cryptoassets. HMRC’s view is that ‘only in exceptional circumstances’ would activities of this nature amount to a trade. This is because HMRC views a trade in cryptoassets as being akin to a trade in shares and securities.
If you have bought the cryptoasset in order to use it in an existing trade, perhaps to pay for goods or services, the cryptoasset is taken into account in calculating the your trade income in the normal way.
If you are carrying on a trade you may receive payment for goods or services in cryptoassets. In this case, the value of the cryptoassets is taken into account in calculating your trade income.
Other tax issues may arise depending on how the cryptoasset are then used; for example, a capital gain or loss may arise on the sale of the cryptoasset.
Child benefit – deadline for 16 year olds
HMRC is reminding parents and carers they have until 31 August 2021 to confirm whether their teenagers are staying in full-time education or training beyond 16
Recently students received confirmation of their results for this year and many are now considering their future. If they decide to continue their full-time education or training, parents or carers will be eligible to continue receiving child benefit payments for their child.
Child benefit is paid at £21.15 a week for the first child and £14 for each additional child.
HMRC has sent reminder letters to families receiving child benefit for their child in the last year of school or home education. If their child is staying in education beyond age 16, parents or carers must notify HMRC by the end of August, or their child benefit will be stopped.
It is quick and easy to update child benefit records via gov.uk. Alternatively, parents or carers can return the 297b form sent to them by HMRC.
Parents or carers receiving child benefit and who also have an income over £50,000 (or their partner does), may have to pay the high income child benefit charge via an annual self assessment tax return.
From 30 November 2021, HMRC will stop making payments of child benefit, guardians allowance and tax credits, into Post Office card accounts. Any child benefit and tax credits customers who use this account to receive their payments, will need to notify HMRC of their new bank, building society or credit union account details. The HMRC helpline is available on 0345 300 3900 or bank account information can be updated via taxpayers’ personal tax account.
HMRC frequently get it wrong!
A recent report says that HMRC data reveals its tax decisions are mainly wrong.
When HM Revenue & Customs conducts an investigation or tax enquiry and considers that there is additional tax owed, a letter will be sent to the taxpayer setting out the decision and the additional tax due. This will include a summary of the reasons behind the decision.
You can ask HMRC to have a decision reviewed by another member of HMRC’s staff.
Apparently, where decisions were reviewed at the taxpayers request in the last quarter of 2020-21, 76% of the decisions were overturned or cancelled. Only one in four reviews was upheld.
Businesses and individuals affected by an HMRC decision would be wise to use the statutory review procedure to check whether the tax assessed is in fact due.
The coronavirus crisis has undoubtedly put immense pressure on HMRC who want to a conclude ongoing enquiries quickly, but it appears that they may be rushing the process and issuing incorrect decisions.
The review and the data it revealed raises the question of whether the lockdown has led to HMRC making rash decisions in the hope of quick easy wins.
It is therefore important that any decisions by HMRC, especially now, are reviewed by a suitably qualified professional. You know where to find us.
Questions?
If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at alan.long@thelongpartnership.co.uk.
