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.
MPs: “accountants should be properly qualified”
There is no requirement for individuals offering taxation services to be professionally qualified.
The Association of Accounting Technicians (AAT) recently polled MPs and found that 82% agree that anyone employed to deliver tax and accountancy services should be professionally qualified.
HMRC research published last year revealed that 82% of unregulated and unaffiliated tax agents are not qualified.
Two-thirds of agent related complaints to HMRC are about the one-third of agents who are unregulated. The next step is some action to introduce and pass the appropriate legislation.
Qualifications mean that you are accountable to your professional body who can sanction poor advice or conduct. Qualified accountants therefore have a considerable incentive to do a good job.
Recovery Loan Scheme – New Lenders Available
The British Business Bank has signed up the first five lenders to offer the revamped Recovery Loan Scheme to businesses and these are Bank of Scotland, Coventry & Warwickshire Reinvestment Trust (CWRT), Lloyds Bank, NatWest and Royal Bank of Scotland.
Additional lenders will be added to the accredited lenders listing on the British Business Bank website once they are confirmed as participants in the scheme.
Under the revamped Recovery Loan Scheme (RLS) businesses can use the finance for any legitimate business purpose including managing cashflow, investment and growth. However, normal lending criteria will be applied for the most part.
The original scheme provided over £4.5bn of finance to smaller businesses between April 2021 and 30 June 2022.
It has been reported that taxpayer UTRs are sometimes being cancelled when a tax repayment is claimed meaning that the taxpayer (or their tax agent) can’t submit any further tax returns or tax refund claims. Also, the tax agent loses online access for that client until the UTR number is reinstated.
All tax repayment claims are subject to routine checks, but where the claim is unusual for that taxpayer, or there is some concern about the taxpayer’s identity, further checks follow.
In these circumstances HMRC will send the taxpayer a series of self-assessment verification letters, which are also known as “SURF” letters from the reference in the corner.
The SURF letters and accompanying forms are designed to be used where there is suspected fraud, but a number of genuine repayment claims are getting flagged as fraud risks.
If the taxpayer does not respond to HMRC in the appropriate time scale they will cancel the UTR number to “prevent any further fraud”.
However it has been reported that UTRs are being cancelled in some situations when a response has been submitted.
It is important that you check that HMRC have the right contact details for you because, if not the SURF letters will be sent to the wrong address, you may not receive them, and your UTR may, as a result, be cancelled.
Wrongful trading occurs when directors allow a company to continue to incur debts even though the business is no longer viable, and the directors knew or ought to have known there was no reasonable prospect of the company avoiding entering an insolvency process.
An administrator or a liquidator may then bring claims of wrongful trading against the directors and a court order could be made against the directors, making them personally liable for losses to creditors.
Wrongful trading can incur a civil liability and could lead to an individual being disqualified from acting as a company director for a period of time.
If creditors believe there may be a claim for wrongful trading, they can approach the appointed administrator or liquidator to explain what they think has happened and provide evidence to support their claims, such as details of the debts incurred and correspondence with the company.
The insolvency practitioner could make an application for a court hearing, where the directors might be ordered to pay money into the insolvent business to provide compensation for the worsening financial position.
14,000 Furlough Fraud Whistle-Blowers
The number of furlough fraud whistle-blowers approaching HMRC is now around 14000.
This is people reporting their employers, and ex-employers.
Employers claimed £70bn from the Coronavirus Job Retention Scheme which ran from April 2020 to September 2022 with an estimated £5.5bn in furlough fraud over the period or 9% of the claims.
Since the end of the scheme, HMRC has added a significant amount of resource to its investigation teams to pursue fraudulent or inaccurate furlough claims, with an additional 2,000 staff hired and trained up to tackle abuse of the jobs scheme, along with other covid support programmes.
HMRC is now stepping up its enforcement activity with a view to recovery, issuing penalties and pursuing prosecution or directors’ disqualifications where appropriate.
HMRC has made information about whether an employer has made a furlough claim available online and employees are increasingly using this information to make fraud reports through HMRC’s digital reporting service.
If you think that you may have incorrectly claimed furlough payments you need to take advice on the best course of action.
These are the Microsoft Excel world championship, otherwise known as the Excel “All-Star Battle”, pitting eight spreadsheet whizzes against each other in a series of challenges until a champion is crowned.
A sports broadcaster recently ran a replay of the latest battle under its e-sports umbrella. The contest featured three rounds. In the first, players vied to calculate how many points different spins of a slot-machine-style game would generate for players, while the second saw contestants tackle a yachting regatta simulation, and the final task required the two finalists to navigated a bespoke Excel-based platform game.
Are you ready to pit your Excel skills against the best in the world?
Common VAT Errors
Here are some common VAT errors.
1. Non-standard supplies
When there is an unusual or infrequent transaction it is easy to get the VAT treatment wrong.
2. Services from abroad
Generally, invoices coming from companies outside the UK will not show UK VAT and, with limited exceptions, that is correct. However, the recipient’s UK VAT return does need to account for the VAT on the service in boxes 1 and 4 of the return, with the net amount being shown in boxes 6 and 7. The amount in box 4 shown as input tax recovery is worked out in the normal way with restriction for partial exemption.
3. Import VAT
Input tax relating to VAT on imports can only be claimed off the C79 certificate issued by HMRC. Businesses must take care not to claim the input tax without a C79.
4. VAT on deposits
A business may sometimes require a deposit from a customer when taking an order. Receipt of the deposit, should it occur prior to the issue of a VAT invoice, creates a tax point and the business needs to ensure that VAT output tax is accounted for in the correct period.
5. VAT on motor cars
Input tax motor cars cannot be recovered unless you can show that the vehicle is “not available” for private use, as opposed to “not used for private purpose”. However, for VAT purposes, a vehicle with a payload over a tonne is not classified as a motor car but as a commercial vehicle. This can mean some of the double-cab vehicles are not motor cars for VAT purposes.
6. VAT on fuel
Input tax can only be recovered on fuel used exclusively for business purposes and HMRC will request detailed mileage records to support these claims. Alternatively, you pay a scale charge as output tax to account for the private use element of the fuel purchased. Whichever method is chosen needs to apply across the whole company fleet.
7. VAT on entertainment
All input tax on entertainment, which is not for staff of the business, is blocked from recovery. Taking a client to lunch is business entertainment. HMRC is very strict on disallowing input tax on all business entertainment (apart from staff entertainment).
8. VAT claimed on non-Vatable items
Many businesses assume that there is VAT on all business expenses. You need to check the VAT status of such things as tolls, car parking and taxis, and to remember which supplies are zero-rated. We often see VAT reclaimed on insurance.
9. Aged creditors
You must repay any input tax that has been recovered on purchase invoices that are unpaid six months after the due date.
10. Reclaiming input tax without supporting invoices
A business needs to have a valid VAT invoice from a supplier to recover input tax. HMRC can allow the recovery based on alternative evidence, but the level of evidence required is high and HMRC has the discretion not to keep allowing recovery on that basis for future purchases from that same supplier. You should therefore chase up missing invoices prior to submitting the VAT return for the period.
Coronavirus Job Retention Scheme (CJRS) Errors –
HMRC recently issued advice on correcting errors in CJRS claims.
If an employer has overclaimed CJRS they should notify HMRC as per the guidance on GOV.UK and pay Coronavirus Job Retention Scheme grants back. Employers should also follow this guidance to notify HMRC of their intent to disclose any error if they have overclaimed and need more time to work out what they owe.
HMRC consider that an error has been made that must be corrected if you have failed to take reasonable care in following HMRC guidance available at the time of the claim. Where the guidance has changed, HMRC would expect you to have taken changes in to account subsequently.
If a different method has been used to HMRC’s preferred method for calculating reference pay but it is consistent with guidance, does it need correcting? In June 2020 HMRC changed the calculation of reference pay from a ‘paid’ basis to on an ‘earned’ or ‘payable’ basis.
HMRC accept the use of amounts paid/earned/payable both before and after that change, provided the method used is reasonable, consistent and is not abusive, for example, it has not been used primarily
For more information refer to Gov.uk.
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