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 planning should not be acted upon without looking into 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 sole basis for making decisions.
Pension Age Rising?
State pension age is currently 66 and two further increases are currently set out in legislation: a rise to 67 for those born on or after April 1960; and a rise to 68 between 2044 and 2046 for those born on or after April 1977. The rise to 68 may be brought forward to 2037-39.
A new review will consider a range of evidence, including life expectancy data and assess the costs of an ageing population and future state pension expenditure. This may result in further changes to the pension age.
The government is also reviewing the current age limit for pension drawdown from private pensions and is likely to raise the age to 57 years (currently 55)
COVID-19 Tests and VAT
HMRC considers that the objective purposes of COVID-19 testing are diagnosis and the protection of human health and as a result, such testing may be treated as exempt medical care provided that the normal conditions are satisfied.
- Sales of tests where the test is self-administered with an immediate result are standard rated;
- Sales of tests which include testing and diagnosis by someone other than the buyer are exempt where the testing and diagnosis is carried out or directly supervised by a registered health professional; otherwise, they are standard rated;
- Tests administered by the pharmacist in pharmacies are exempt;
- Tests in GP surgeries are exempt where administered or directly supervised by a registered healthcare professional;
- Tests supplied by manufacturer to hospitals, pharmacies or GP surgeries are standard rated.
IHT – Residence Nil Rate Band
The RNRB was introduced in 2017 with the aim of protecting the family home from IHT and is £175,000 per person, providing an additional IHT free amount over and above the standard IHT nil rate band (NRB) of £325,000.
This therefore gives each individual a potential IHT free allowance of £500,000 (£325,000 + £175,000), or £1m for a married couple or civil partners.
The deceased must have held an interest in a residential property that has been the deceased’s residence at some point.
Buy-to-let properties cannot qualify but a property that was once lived in by the deceased, but has been later let to tenants, can qualify. There is also potential for holiday homes to qualify provided they are within the scope for IHT and have been used as the deceased’s residence.
On death the property must pass to one of the following:
- the deceased’s children (which could include adopted, fostered or stepchildren) or grandchildren;
- the spouses or civil partners of those children or grandchildren; or
- the widows, widowers, surviving civil partners of those children or grandchildren if not remarried at the date of the death of the property owner.
Bank of England raises base rate to 0.25%
At its meeting on 15 December 2021, the Monetary Policy Committee (MPC) voted by a majority of 8-1 to increase Bank Rate by 0.15%, to 0.25%.
This is the first increase in the base rate since 2018. Inflation has risen to 5.1%, with energy, food and second-hand car prices, forcing up the cost of living.
The rate rise to 0.25% will increase the cost of borrowing and is aimed at dampening down demand and keeping inflation in check.
This is a very small change but signals a possible direction of travel for interest rates in the coming 12 months.
Basis Period Reform Criticised
The House of Lords Economic Affairs Finance Bill Sub-Committee report states that it was concerned that the Treasury did not give sufficient reasons for changing the dates of the tax year and reporting requirements for businesses and that a ‘compelling case’ has not been made to reform ‘either as a simplification or as an essential prerequisite for introducing Making Tax Digital (MTD) for Income Tax.’
The Committee also questioned ‘the wisdom’ of introducing basis period reform and Making Tax Digital at a time where businesses are recovering from the economic impact of the Covid-19 pandemic.
The report claimed the consultation process for basis period reform was flawed and the proposals published in haste.
The Committee stated that ‘given as the government are determined to press ahead with the measures’ it has detailed a list of recommendations that the measures can be ‘improved and implemented to be as smooth as possible’.
However, it is unlikely that this report will change anything significantly.
What is HMRC doing about Furlough Fraud?
The government has invested over £100 million in the Taxpayer Protection Taskforce, with 1,265 staff, to tackle the problem. HMRC have reported that the unit is expected to recover £1 billion from fraudulent or incorrect payments from the various Covid support schemes over the next two years.
There are understood to be 23,000 ongoing investigations (across the Covid support schemes), with that number expected to reach around 30,000.
In the early stage of the furlough scheme, HMRC set up a Covid fraud hotline, and employees were encouraged to report suspected fraudulent activity. There have been approximately 30,000 calls to the hotline, giving HMRC intelligence to follow up on.
HMRC can be expected to use its full range of powers, covering criminal and civil options, to investigate cases of suspected furlough fraud.
SEISS letter to 2019/20 non-filers
SEISS 1, 2 and 3 claimants must have filed a self-assessment tax return for 2019/20 together with the relevant self-employment or partnership pages.
Where SEISS claimants have failed to do so, HMRC has written, informing them that they need to do so within 30 days to enable HMRC to check eligibility for the SEISS grants claimed.
If a claimant was not trading in 2019/20, they must repay the grant, and the letter explains how they should do this.
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