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 Pursue SEISS Grants Overpaid
HMRC is writing to a ‘small’ number of taxpayers who have amended their self-assessment returns and as a result their 4th SEISS was too high and part or all of it needs to be repaid..
£28.1bn was paid in the 5 SEISS grants. 1m individuals claimed all five grants. 1.6m individuals claimed each of the first four grants.
HMRC calculated the fourth and fifth SEISS grants based on calculations on the tax return data that it held in its system in March 2021.
Any amendments to the relevant tax returns made after 2 March 2021 which reduce the amount of the grant by more than £100 needs to be reported to HMRC, and grant repaid.
HRMC state that all taxpayers who have been affected will be contacted. They have had the opportunity to voluntarily repay the amount but those who have not are now being contacted directly.
Anyone struggling to repay the grant should contact HMRC to discuss a time to pay arrangement.’
During the pandemic HMRC allowed anyone working at home due to the pandemic lockdowns to apply for the tax relief for the whole year regardless of how many days they worked at home, but this relaxed interpretation of the rules has now ended.
You would need to check if you are still eligible for the relief in 2022-23.
Due to Covid, people could claim the £6 per week tax relief in full for each of the 3 last tax years, and they simply were required to work from home for a limited period in each of these tax years.
If your employer specifically requires you to work from a home office, and your role is contractually regarded 100% as a home office role, you can still claim the allowance.
Hybrid working where you choose to work partly from home will not qualify you for the allowance. If your employer offers flexible working, this will not qualify for the allowance.
You will qualify for the allowance if:
- there are no appropriate facilities available for you to perform your job on your employer’s premises;
- the nature of the job requires you to live so far from the employer’s premises that it is unreasonable for you to travel to those premises on a daily basis;
- you are required, under government restrictions, to work from home.
HMRC and MTD for ITSA
The full details of how MTD Income Tax Self-Assessment will work in practice are yet to be announced.
When an individual taxpayer has a turnover exceeding £10,000 per year, they will be required to comply with MTD ITSA from 6 April 2024, or from a later date for partners in general or complex partnerships.
HMRC will check the turnover reported in your previous tax returns. If the sum total of all the various turnovers (trading, rentals etc) exceeds £10,000, you are mandated into MTD ITSA from the beginning of the next tax year.
To determine who needs to be within MTD from 6 April 2024, HMRC will perform the calculations based upon your 2021/22 tax return.
If turnover is not reported on the tax return because it is covered by the property income allowance, sundry trading income allowance, or rent-a-room relief, it is not included in the MTD turnover test.
You will not have to judge whether you need to comply with MTD ITSA, unlike for MTD for VAT. Instead, based upon a review of your earlier tax return, HMRC will issue a formal notice to the you to start submitting quarterly updates under MTD ITSA, if the £10,000 turnover threshold has been breached.
Each taxpayer will have to sign up to MTD individually. We can also sign you up, in the 12 months before you join.
General partnerships are not mandated into MTD ITSA until 6 April 2025. HMRC confirmed that large partnerships with 20 or more partners are excluded from the definition of “general partnership”, as are any partnerships that include companies that are members or are LLPs. The is no MTD ITSA start date for those partnerships that are not general partnerships.
Hire Purchase agreements and VAT
If the possession of goods is transferred under an agreement for the sale of the goods, or under agreements which expressly contemplate that the property will pass at some time in the future, it is a supply of the goods forVAT purposes. Although the arrangement refers to hire, it is nonetheless not a supply of services.
VAT can therefore be claimed up front, where as if it was a “hire” agreement the VAT could only be reclaimed from each instalment over the life of the agreement.
There are a range of other finance options available, some of which have much larger balloon, or option payments. One of the most common is Personal Contract Purchases (PCP). The above-mentioned legislation still applies, where it is ‘expressly contemplated’ that title will transfer.
However, a larger balloon can bring into question whether that can really be said to be the case.
Pregnancy and Redundancy
Women on maternity leave should not be shielded from any redundancy procedures. They do, however, have the right not to be made redundant where the reason why is the pregnancy or maternity leave, and the right to be offered any alternative roles as a priority.
As a result of these protections, there is a greater burden on your client to justify the redundancy itself, and the selection process.
A woman on maternity leave should not get favourable treatment. Compensation to account for pregnancy and maternity should be limited to that which is proportionate for the disadvantages caused by pregnancy or maternity leave.
EIS Deferral Relief
It may be possible to defer a Capital Gain using EIS reinvestment relief where there is a chargeable gain arising on the disposal of any asset and the proceeds are reinvested into a subscription for shares in an EIS company. The following conditions must be met:
- The individual is UK resident at the date of disposal of the asset and at the date of subscription for the shares.
- The shares are subscribed for within the 12 months prior or the 36 months following the disposal of the asset.
- The shares are subscribed for and are fully paid up in cash and the funds are used by the company wholly for the purposes of the qualifying trade.
- Claim for relief should be made within 5 years from the 31st January after the end of the tax year in which the shares are issued.
You do not need to qualify for EIS income tax relief to qualify for EIS reinvestment relief.
The amount of the gain that can be deferred is restricted to the amount reinvested into the shares. However, it is possible to claim less than the maximum available for relief to utilise the annual exempt amount or capital losses, which is important because the relief works as a deferral, and the gain is frozen until
- Disposal of the EIS shares by investor or by the spouse of the investor if the shares have been transferred to the spouse.
- The individual (or spouse of the investor that the EIS shares have been transferred to) becomes non-resident within the 3 years following the share issue.
- The shares cease to be eligible shares.
Homes for Ukraine Scheme Payment
The government has announced that it intends to introduce legislation in Finance Bill to ensure that the Homes for Ukraine Sponsorship Payment will be exempt from income tax and corporation tax and that the payment will not be chargeable to national insurance contributions (NIC).
The payment will be made by local authorities to sponsors under the Homes for Ukraine Scheme.
However, as the payments will be treated as non-taxable income, landlords will be unable to claim a tax deduction for related expenditure.
MTD – Who is responsible for your Digital Records
The legal responsibility for creating digital records under Making Tax Digital (MTD) lies with you.
The length of time the accounting records must be kept has not changed with MTD, and that remains at six years from the end of the period. However, the old records do not have to be maintained in digital format for those six years. Once the required data has been submitted to HMRC, the old records can be kept in another digital format or even on paper.
The accounting records are likely to only exist in cloud-based software. What happens if the software licence is discontinued for any reason? Where are the backups of the accounting records kept?
Where digital records are held by way of licensed proprietary software (e.g., Sage, Iris or other accounts preparation or tax software), you should make alternative arrangements to access the data after the software licence is relinquished. This may involve exporting the data to another electronic format or taking a printed copy.
NMW – Expenses that reduce pay
In a recent case, at taxi driver argued that car rental payments and a payment for uniform were ‘in connection with’ his employment and reduced his pay for NMW purposes. The Employment Tribunal agreed.
The Employment Tribunal agreed that costs that the driver had to make to the taxi operator were required for him to perform his job.
Costs in respect of vehicle hire, uniforms, insurance, cleaning and fuel would reduce pay for NMW purposes. The correct test was merely whether an expense was ‘in connection with the employment’ and that the employee’s choice was not relevant. Employers should carefully consider what payments they require their employees to make and whether this would reduce pay.
Flu Vaccine – a taxable benefit?
Flu vaccinations provided directly by employers to employees, whether through the provision of a vaccination at, or local to, the workplace or via a voucher scheme, are taxable benefits. However, the provision of the vaccination generally meets the conditions of the trivial benefits exemption and so is exempted from income tax and national insurance contributions (NIC).
Reimbursements made to an employee by an employer in respect of the cost of a flu vaccination borne by the employee do not meet the conditions for the trivial benefits exemption, as it is the provision of cash. This will create an income tax liability for the employee and an NIC charge on the employer.
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 email@example.com.