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.
High Income Child Benefit Charge Problems
An estimated 630,000 people are liable for the tax charge, according to a recent Freedom of Information request.
The charge applies to anyone with an adjusted net income over £50,000 who receives child benefit, or whose partner gets it. It is equal to 1% of the total child benefit received for every £100 earned over £50,000 so if your adjusted net income is £60,000 or higher, the tax charge is equal to 100 per cent of child benefit payments received.
Common problem areas include:
- lacking awareness of the charge and that it is the taxpayer’s responsibility to notify HMRC.
- Not understanding that child benefit is paid every 4 weeks i.e. 13 payments in a year.
- not understanding the processes of completing self-assessments, paying through tax code adjustment or opting out of the charge.
- having complex earnings either multiple sources of earnings or fluctuating earnings.
- Unclear and untargeted initial letters from HMRC although later communication from HMRC was seen as a helpful source of support.
It is the responsibility of the individual taxpayer to notify HMRC of liability for the charge via self-assessment. There can also be issues when people opt out as they can lose national insurance contributions credit which contribute to the state pension.
For participants who opted out, their decision was largely driven by the knowledge that they would not gain anything financially (all had an individual income more than £60,000). A further motivation for opting out was to avoid the administrative burden, including filing self-assessment returns, associated with paying the charge.
Despite increased activity by HMRC to help customers to comply with HICBC, it has been reported that there is evidence of some of you returning to non-compliance following an intervention from HMRC. Clearly there is something lacking either in the design, implementation or communications relating to the charge.
The government has decided that the new rules will start from 1 January 2024 giving platforms and their advisors time to prepare for the implementation. Collection of information will start from January 2024 with the submission of the first reports due by the end of January 2025.
HMRC will publish draft regulations in due course giving details of the new rules, and an update on interactions with EU rules. HMRC will also be engaging with platforms and their advisors before the new rules come into effect to make sure they are implemented proportionately and effectively.
Self-Assessment Budget Payment Plan
Filing early gives advance warning of the amount to be paid in January 2023 and opens up the possibility of using a budget payment plan to spread the payments.
You can set up a Budget Payment Plan if you want to make regular monthly or weekly payments towards your next tax bill.
The amount in your Budget Payment Plan will be used against your next tax bill – this means you’ll have less to pay at the payment deadline. If the amount in your plan does not cover your next bill in full, you’ll need to pay the difference. If you’re in credit, you can request a refund.
When you set up your Budget Payment Plan, you’ll choose how much you want to pay and how often.
You can pause payments for up to 6 months if you need to.
To use the Budget Payment Plan, you must be up to date with your previous Self-Assessment payments.
For more details follow the following link:
Covid Disclosures Corporation Tax Returns.
Most Coronavirus grants and payments to support businesses and self-employed individuals during the pandemic are taxable.
If you need to complete a Company Tax Return (CT600) and have claimed Coronavirus Job Retention Scheme (CJRS) grants, Eat Out to Help Out (EOHO) payments or any coronavirus support payments made by local authorities, devolved administrations, or other public authorities, you will need to include them as income when calculating your taxable profits.
If your client received a CJRS grant and/or an EOHO payment, you will need to include these in the specific boxes provided on the CT600.
If you received a CJRS grant or EOHO payment and have submitted a Corporation Tax Return without completing the relevant boxes, you may need to submit an amended return.
£5bn Energy Profits Levy
The Chancellor has announced a 25% energy profits levy, set to raise £5bn in year one, effective from today
The measure is designed to help fund more cost-of-living support for UK families and is a 25% surcharge on the extraordinary profits the oil and gas sector is making.
‘The temporary energy profits levy will be coupled with a new investment allowance similar to the super deduction so companies have an incentive to reinvest.
The new investment allowance will nearly double the investment relief for oil and gas companies.
The government wants to see the oil and gas sector reinvest its profits to support the economy, jobs, and the UK’s energy security. The new ‘super-deduction’ style relief is being introduced to encourage firms to invest in oil and gas extraction in the UK.
The new 80% investment allowance will mean businesses will overall get a 91p tax saving for every £1 they invest – providing them with an additional, immediate incentive to invest.
The levy will be set at a high rate of 25% but will be offset by additional capital allowances for investment, which will reduce the overall impact .
The legislation will include a ‘sunset clause’, so that it will expire automatically after an initial period.
Currently, the oil and gas sector pays a 40% headline rate tax on profits consisting of 30% ring fence corporation tax and 10% supplementary charge.
In recent years, under the existing regime, fewer than 35 groups have made tax payments each year. In 2021, the top seven groups accounted for around 95% of payments.
The energy profits levy is an additional 25% tax on UK oil and gas profits on top of the existing 40% headline rate of tax, taking the combined rate of tax on profits to 65%.
To appropriately tax the extraordinary profits, companies will not be able to offset previous losses or decommissioning expenditure against profits subject to the levy.
The tax will take immediate effect from 26 May 2022, and will be legislated for via a standalone Bill to be introduced shortly.
HMRC is reminding taxpayers that CGT UK property returns must be filed before the relevant self-assessment return.
In April 2020, the UK government introduced the requirement for UK residents to report and pay capital gains tax (CGT) on disposals of UK residential property within 30 days. The deadline was extended to 60 days for all completions on or after 27 October 2021.
Once a disposal has been reported on a self-assessment (SA) return, it is not possible to submit a CGT on property disposal return. Therefore, it is important to file the CGT return before the SA return, even where the need for a CGT return is only identified when preparing the SA return.
The only exception is where the SA return is filed within 60 days of completion of the property transaction (i.e., before the deadline for the CGT return). In that situation, it is not necessary to file a CGT PPD return.
For 2021/22, any CGT overpaid is offset against income tax due. However, this does not cover the situation where the SA return shows an overall refund. In that situation, it is necessary to phone HMRC to request a refund of the CGT paid.
Energy Customer’s Loan Becomes £400 Grant
The Chancellor has announced a £15bn package of support with one-off payments for pensioners and lowest income earners, and doubled the £200 energy bill support
The measures will see one-off payments of £650 for low-income earners, £300 for pensioners and a further £150 for disabled people.
He also changed the £200 loan for electricity bills, doubling it to £400 and removing the requirement to pay it back.
The Government will send directly to eight million of the lowest income households a one-off payment of £650. The DWP will make the payment in two lump sums, in July and later in the year, and HMRC will make payments to those on tax credits.
‘From the autumn, the Government will send over eight million pensioner households who receive the winter fuel payment an extra, one-off pensioner cost of living payment of £300.
Business Fraud Escalates
It has been reported that 64% of UK organisations have fallen victim to fraud in the last two years, with cyber-attacks and supply chain fraud growing
Cybercrime was the most frequent with 32% experiencing a cyber breach.
Supply chain fraud accounted for 19%.
There has however been a decline in incidences of bribery and corruption, and the level of accounting or financial fraud reported in the UK.
A third of frauds were perpetrated by internal staff with access to corporate IT systems and financial records.
With fraud now a greater and more costly threat than before, it is important that you invest in prevention, and take the time to make sure your defences are adequate. You also need measures in place so you can react quickly should a fraud attack happen.
HMRC Targets Mini Umbrella Companies
HMRC’s Fraud Investigation Service has deregistered tens of thousands of mini umbrella companies which they believed were involved in exploiting the VAT Flat Rate scheme and the Employment Allowance.
Where investigations established that a business in the supply chain knew, or should have known, that there was fraud, HMRC has taken steps to deny other businesses in the same labour supply chain the right to recover VAT input tax.
In 2017, the government introduced the trader of limited cost legislation after seeing a surge in the number of mini umbrella companies.
Criminals create multiple limited companies and only a small number of temporary workers are employed by each one. These are set up to enable fraud.
One In Five Workers Plan To Quit
A recent survey indicated that a significant number of UK workers expect to leave their current job in the next 12 months.
18% of workers said they ‘are very or extremely likely’ to switch jobs within the next year with a further 32% stating that they are ‘moderately or slightly likely’ to.
Gen Z workers are leading the ‘great resignation’ with 27% of 18 to 25-year-olds planning to leave and 23% of 26 to 41-year-olds compared to 15% of Gen X and only 9% of baby boomers.
The pressure on pay was highest from respondents in the tech sector where 44% of workers surveyed plan to ask for a raise and was lowest in the public sector which only saw 25%.
The second reason to change employers was for better job fulfilment with 69% citing this. Workers also want a workplace that allows them to ‘truly be themselves’ with 66% of those surveyed indicating this as an important factor.
It also revealed that women were seven points less likely than men to say they are fairly rewarded financially, but still seven points less likely to ask for a raise.
Women were also eight points less likely to ask for a promotion, and that request is more likely to fall on deaf ears, as women were eight points less likely than men to feel their manager listens to them.
The offer of hybrid working was not as important for employees with only 47% of respondents citing this as an important factor about a job. However, hybrid working came out on top as the preferred future way of work with 62% of respondents opting for a mix of in-office and remote working.
Around two-thirds of UK respondents stated that they are currently working remotely full-time or most of the time.
Tax Credits Scam Warning
HMRC has warned that fraudsters are targeting claimants with scam emails, fake websites, and text messages. In the 12 months to April 2022, HMRC dealt with nearly 277,000 referrals of suspicious contact received from the public.
HMRC expects around 2.1m tax credits users to renew their annual claims by 31 July 2022 and has issued the warning to remind people about the tactics used by criminals who mimic government messages to make them appear authentic.
The tax authority has also restated that it does not charge tax credits users to renew their annual claims and is urging users to be alert to misleading websites or adverts designed to make them pay for government services that should be free, often charging for a connection to HMRC phone helplines.
HMRC also reiterated that they will not call anyone ‘out of the blue’ as fraudsters use phone calls, text messages and emails to try and dupe individuals, often trying to rush them to make decisions.
The typical style that the scammers use to imitate HMRC includes making phone calls threatening arrest if people do not immediately pay a fictitious tax bill owed or claiming that the victim’s national insurance number has been used fraudulently.
Scammers will also use emails or texts to offer fake tax rebates or Covid-19 grants, they may also claim that a direct debit payment has failed.
Negative Effects Of NIC Increase
Four out of five employers stated that they were immediately impacted by the increase in National Insurance contributions (NICs) according to a recent survey
The main effects cited by respondents included increased prices for their services, planned investment for their businesses reduced or scrapped, and increased staff costs with employers expecting wages to increase by 5% over the next year.
The tight labour market is already pushing up staff costs and the national insurance rise has only served to exacerbate that pressure without having a positive impact on recruitment.
The Chancellor has on multiple occasions defended the manifesto breaking increase stating that it was ‘necessary, fair and responsible’. He has also argued that the levy is progressive, with the highest 15% of earners paying more than half the revenues.
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