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.
HMRC‘s Lack of Ambition
A report from the Public Accounts Committee (PAC) has indicated that only a third of the error and fraud in Covid-19 support payments would be recovered from a total fraud amount of £6bn.
In their view, HMRC is not doing enough to get back the money lost.
Dame Meg Hillier MP, chair of the Public Accounts Committee, said: ‘The PAC is concerned about how long HMRC will be playing catchup to get back to revenue collection levels before the pandemic. What signal does it send when HMRC rolls over on billions of pounds of fraud and error directly related to Covid support packages? With the current parlous state of the public finances, we can ill-afford to be so cavalier over so much taxpayers’ money. Every taxpayers’ pound lost to a fraudster will lead to honest ordinary people feeling the post-pandemic pinch harder and harder.’
In March 2021 the government announced that it would establish a Taxpayer Protection Taskforce of 1,265 HMRC staff to tackle fraud within the Covid-19 support schemes, at a cost of more than £100m. HMRC expects to recover £1bn through the task force.
Empty HMRC Offices
Changed work patterns have left large volumes of HMRC office space empty meaning that it has over capacity. This comes as HMRC has reorganised its office structure to create 13 regional hubs, closing over a hundred smaller local offices.
The shift to hybrid working caused by the pandemic has reduced the office space HMRC needs. HMRC is already renting out some spare capacity to other government departments in its regional centres. HMRC relies on the Cabinet Office to identify suitable alternative users of its spare space and encourage them to use it.
The Captain Tom Foundation
The charity was incorporated last year to honour the army veteran Sir Tom who in 2020 walked 100 laps in his garden in order to raise money for the NHS. Sir Tom was knighted by the Queen in July 2020 and died of Covid-19 last year at the age of 100.
The Charity Commission has been working with the organisation since March last year after issues surrounding its governance arose and following the recent publication of the charity’s accounts, the commission has confirmed a case has been opened looking at its regulatory compliance.
According to the annual financial accounts which covered the charity’s first year from 5 May 2020 to 31 May 2021, the charity received £1.1m in donations. It paid out grants to four charities worth £40,000 each but spent £209,433 on support costs including £162,336 on ‘management’.
These costs were reported as being for accommodation, security, and transport relating to Sir Tom ‘travelling around the UK to promote the charitable company’.
The financial statement also showed that reimbursement costs of £16,097 were paid to Club Nook Limited which is a company run by Sir Tom’s daughter Hannah Ingram-Moore.
Payments of £37,942 were also made to Maytrix Group Limited which is a company run by Ingram-Moore and her husband, relating to photography, office rental, telephone, and third-party consultancy costs. Expense payments of £1,686 were also made to Ingram-Moore to cover ‘motor, post, subscription and travel costs’.
The Fundraising Regulator and Information Commissioner’s Office had also looked at concerns regarding the foundation but those inquiries have now been closed.
Harrow – The tax avoidance hotspot of the UK
Harrow in West London is the centre for tax avoidance in the UK with 346 taxpayers admitting to avoiding tax last year
Other honourable (or dishonourable) mentions go to Leicester, Nottingham and Manchester.
The research reveals however that well off neighbourhoods in London such as Knightsbridge and Putney, as well as the surrounding home counties of Surrey and Berkshire continued to make up nine of the top 10 areas for reporting tax avoidance.
Birmingham was the only area outside the south east featured in the top 10.
New Cryptocurrency Guidance from HMRC
HMRC has updated its crypto assets tax guide. It focuses on how a return from lending or staking is taxed depending on whether it is considered capital or income. HMRC also clarified that investors need to distinguish whether their income was earned through lending or was the return realised from the capital growth of an asset.
This may not always be clear, so HMRC has provided some examples. One of these is whether the return to be received was known at the time the agreement was made e.g. 5% per annum which would be income.
If the return to be received is unknown and speculative (and could result in a loss from the activity), this would indicate a capital receipt.
If the returns were paid out periodically or throughout the period of lending this is likely to be income. A one-off payment is more likely to have the nature of capital.
Dennis Post, co-chair, Global Digital Finance tax working group said that the HMRC guidance on staking and lending is one of most comprehensive positions so far we have seen in this area and that they believe that taxpayers, policymakers and stakeholders will generally welcome the additional certainty.
Which is not to say that there won’t be a debate (and perhaps controversy) on some of the topics and the positions taken.
He went on to say that with this guidance HMRC is clearly pro-actively contributing to the debate and that should very much be encouraged and that they hope that other administrations will follow suit and provide certainty.
Stressed Accountants Overworked!
The Chartered Accountants Benevolent Association carried out a survey in which eight out of 10 respondents said stress and poor mental health are a problem within the accountancy profession.
Apparently, Accountants are stressed, with workload, long hours and the lack of margin for error in the job tipping many over the edge.
The survey found that more than half of accountants surveyed said they were suffering with stress and burnout, compared with 41% of employees across a wide range of sectors, business sizes and job roles.
The survey results also highlight that the stigma associated with mental health problems is alive and well. When comparing accountants with employees in wider sectors, they were much more likely to be concerned about the impact on their career of admitting they were suffering from stress.
An HMRC commissioned report found the impact of IR35 ‘minimal’ and that there has been no statistically significant change in the number of direct and off payroll workers since the 2017 roll out.
However, the national audit office (NAO) was more scathing in its report, finding that public sector bodies had little time to prepare and that the original guidance and tax status checking tool was difficult to use.
HMRC now faces fresh challenges in the private sector to make the reforms a success. The NAO has recommended that HMRC further develops the Check Employment Status for Tax (CEST) tool and accompanying guidance to make it as easy as possible to use accurately as the tax authority continues to embed in the changes in the private and third sectors.
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