HMRC pressure sees drop in tax debt

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 where they relate to tax should not be acted upon without looking into the them more completely as everyone’s circumstances are particular to them. 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 should not be used as the basis for making decisions without seeking further advice and guidance.

HMRC says that the outstanding tax figure is down by more that 10% from the £57.5bn at the end of March 2021, which itself represents a 31% reduction on the highest level, £72bn, that was seen in August 2020.

The high levels seen previously were due to temporarily deferred payments and that the debt balance had now dropped because the deferred payments had started to become due. The tax authority said that it was also seeing strong levels of payments as they “contact” taxpayers.

HMRC’s monthly figures also show that the call wait times reduced by more than half from 19:25 minutes in April 2021 to 08:45 minutes by the end of June. It does not tell us how may people got fed up with waiting and hung up.

HMRC stated that it had seen ‘considerable improvements’ in its service levels in the first quarter of 2021-22 with its overall customer satisfaction between April-June 2021 ‘remaining strong’ at 83% which is the same level it was in March 2021.

The turnaround on customer correspondence remains low with only 35.5% of correspondence dealt with in around 15 days from April to June.

An HMRC spokesperson said: ‘As the impact of Covid-19 continues to be felt by our customers, we remain focused on keeping the tax system running, while supporting the economy and protecting livelihoods

‘Our approach to collecting revenue is to do all we can to enable our customers to meet their obligations from the outset, then support customers who need additional help and work with them promptly and professionally to put things right.

‘During the pandemic we have taken a common-sense approach to individual customer circumstances. Where people cannot pay their tax, we have enabled them to defer payment, and to pay off their debts over time in affordable instalments.

‘As the country slowly returns to a steady state, we are restarting our debt collection work but we will continue to carry out this work in a way that is sensitive to customers’ altered needs and capabilities.

Third government department falls foul of IR35

IR35 was seen as a way of clamping down on employers trying to minimise costs by getting their employees to work through their own personal service companies. The suggestion was that these employers were trying to avoid their tax and National Insurance liabilities.

Now yet another Government Department has been found to be doing just that. The UK’s court system has become the latest government department to stumble over off-payroll tax rules, landing itself a £12.5m bill for incorrect IR35 decisions.

The others were the Department of Work and Pensions (DWP) that owed £88m and the Home Office, which had a liability of £33.5m.

Fingers have again been pointed at HMRC’s much-maligned Check Employment Status for Tax (CEST) online tool. CEST determines how the work being done should be dealt with for tax purposes, and was used by all three departments leading to wrong decisions.

On the one hand we have CEST which seems to have been widely discredited as a tool, while on the other is the myriad of rules and varying interpretations of these rules. There are so many cases where the final decision is a matter of judgement from people who are not expert in this field. The whole matter lacks certainty.

An IR35 expert has pointed out that CEST places too much weight on the question of substitution and anyone using CEST who is relying on a valid right to substitute should seek specialist advice. Try rechecking the status with the assumption that the substitution clause is not valid.

Bug in HMRC data feeds affects SEISS figures

Reports are appearing about a bug in HMRC’s self-assessment application programming interface (API) that is corrupting figures entered on 2020-21 returns for SEISS grants.

An HMRC spokesperson confirmed: “We are aware of a problem with the way that SEISS grants received in the 2020/21 tax year are being presented on the individual income API. Figures are being presented in pence rather than pounds. This is impacting individuals who use commercial software only (customers using our online portal, for example, are not affected). We apologise for the inconvenience this is causing.”

“We advise that customers check the pre-populated SEISS entry and where necessary, delete the pre-populated figure and manually enter the correct amount. Our system will not process a return if the SEISS grant entry does not match our record of the amount paid.”

HMRC expect to resolve the problem this week.

UK has lost 83% of department stores

This highlights the acceleration of change in the retail sector even before the pandemic.

The UK has lost 83% of its main department stores in the five years since the collapse of the BHS chain.

The same report reveals that more than two-thirds of these shops still remain unoccupied and there are  237 big stores not yet taken over by a new business.

Of the 388 department stores that closed  237 are currently sitting empty but 52 others already have either firm plans in place or early planning approval for a change of use or repurposing.

It was recently reported that the 6 floors of the old BHS building on Princes Street in Edinburgh was undergoing repurposing. The old staff locker rooms and half of the building have been turned into hotel bedrooms by Premier Inn. A state-of the art office is being developed right at the top, while the basement will hopefully become a bowling alley. The remainder will become retail.

Job Market Rebound

According to recruitment firm, Hays, adramatic” recovery in the jobs market has led to wage inflation and shortages of qualified workers in some industries.

Recruiters’ fees were decimated by the pandemic. However, Hays said it had never seen such a strong recovery in the fees it earned over the year to the end of June. Between April and June fees were up 39% on the same period a year earlier, when many of the countries in which Hays operates were locked down for the first time.

Alistair Cox, Hays’ chief executive, said: “Across all our regions there are clear signs of skill shortages and wage inflation in certain industries, particularly technology and life sciences.

“Overall, the strength of the recovery has been dramatic,” he said. “We now see a clear route back to, and then exceeding, pre-pandemic levels of profit, faster than we envisaged even six months ago.”

Hays, which is hiring more recruiters, is mainly focused on finding office workers across the 33 countries in which it operates.

Outside of the office worker market  it is reported that pay rises for lorry drivers have been particularly striking with Asda, Tesco, and others resorting to bonuses of £1,000 or more  to attract drivers as they struggle to get goods to shops.

The UK labour market has also been affected by the lack of immigration caused by the pandemic and the UK’s departure from the EU, a source of cheaper labour in recent decades.


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