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.
Statutory Payments Update
With the approach of a new tax (payroll) year, the various statutory rates and thresholds need to be checked for changes. You don’t want to get them wrong.
Statutory sick pay (SSP) will rise to £109.40 per week, up from £99.35.
Statutory maternity pay (SMP), statutory paternity pay (SPP), statutory shared parental pay (ShPP), statutory adoption pay (SAP) and parental bereavement leave pay (PBLP) will all rise from £156.66 per week to £172.48 subject to all the normal rules.
Small businesses can claim 103% of the statutory payment, rather than the usual 92%. This can make a huge difference to smaller companies, ie you fall under the £45,000 class 1 national insurance threshold.
There is a new type of statutory payment in the pipeline, for those parents whose child requires neonatal care. Once introduced into law, this new type of leave will entitle eligible parents up to 12 weeks’ paid time off. This will be a day-one right and apply where babies are admitted to hospital up to the age of 28 days and when a continuous stay of seven days or more is required. It is also in addition to other statutory leave entitlements, giving fathers and partners additional scope to care for their new born and partner. As usual there are conditions attached and there are also rules for the level of pay.
Tax Gap now a Chasm
The tax gap is the tax that is due but HMRC fails to collect from taxpayers.
In 2021/22, according to official figures, it was calculated to be £42bn or 5.1% of annual liabilities. or £1 in every £20 that should have been collected.
Tax revenues increased by 20.1% compared with the previous year, but tax compliance yields only rose by 1.1% and were almost 20% down on 2019/20.
The PAC (Pubic Accounts Committee) have been looking at this and concluded that “HMRC lacks ambition to tackle fraud and error and recover losses.”
This can also be seen in that HMRC only expects to recover one quarter of the £4.5bn (or almost 5%) lost to fraud and error connected to Covid-19 support schemes.
Staff numbers at HMRC have dropped significantly. The PAC report highlights that for every £1 that HMRC spend on compliance it collects £18 in tax. So, why are they being starved of resources to do their job properly.
Dame Meg Hillier MP, the Chair of the Committee said: “The eye-watering £42bn now owed to HMRC in unpaid taxes would have filled a lot of this year’s infamous public spending black hole.”
AI Chatbot fails Accounting Exam, but only just!
Chartered Accountant Stuart Cobbe decided to put AI-powered chatbot ChatGPT to the test and to see if it could answer sample accounting papers from the ICAEW website.
He spent just under an hour entering questions from a sample exam into the chatbot, then extrapolating its answers back into the online test. It scored 42% (the pass mark is 55%.
Cobbe is not an ordinary accountant. He is a consultant in the use of artificial intelligence (AI) in accounting and audit, and previously worked as global head of analytics and industry insights at AI leader MindBridge, amongst other things.
Should the rest of us take note of this development. Maybe, but not for a while.
HMRCs Poor Service Standards
MPs have demanded urgent improvements to address HMRC’s unacceptable service standards.
The PAC (Public Accounts Committee) said. ‘HMRC’s customer service performance has been declining for many years and is not acceptable to the taxpayers or agents it serves,’
‘We are unconvinced that HMRC’s plans to address this through moving more enquiries to digital channels will sustainably reduce demand or deal with the poor level of service quickly enough.”
‘Taxpayers and their agents are still not receiving an acceptable level of customer service.’
In the last five years, HMRC has cut its customer service staff numbers by 6,000 from 25,500 to 19,500.
‘We do not consider that HMRC has the resources required to provide the level of service its customers need, or to maximise the tax revenues it collects, at a time when the public finances are under huge strain.”
The committee asked HMRC to respond within three months setting out its plan to improve customer service to adequate levels as quickly as possible, including:
Rogue Repayment Agents
HMRC is clamping down on rogue repayment agents. These are organisations that entice taxpayers into agreements to reclaim overpaid tax while taking large commissions
In future, repayment agents will have to register with HMRC before they can act for clients and offer repayment claim services.
The HMRC standard for agents has also been updated to require greater transparency on the part of repayment agents, clearer evidence of customer consent and a 14-day cooling off period. A number of other measure are either being put in place or will be put in place once the necessary legislation has been passed.
Around 500,000 individuals used repayment agents to claim income tax repayments in tax year 2020-21. HMRC received 2,200 complaints about repayment agents between January and October 2022.
Top up Your NIC – Deadline Approaching
At the moment there is a scheme in place which allows you to fill historic gaps in your National Insurance record. However, this particular scheme is coming to an end.
The deadline is 5 April 2023.
So, if you have say 10 missing years you could pay around £8,000 to fill the gaps.
but see a boost of £55,000 in state pension over a typical 20-year retirement.
Under normal rules it is only possible to fill gaps in your NI record up to six years after the year in question. After that point, the year becomes a permanent gap in your NI record and could affect your ability to build up a full state pension.
However, until 5 April 2023 you are able to go further back and fill gaps for any year from 2006/07 onwards.
This concession applies only to those who reached (or will reach) state pension age after 5 April 2016.
Some people have gaping holes in their NI record and this will be the last chance to fill them.
For some people this could be the best rate of return they could get on any spare capital, but that will not be the case for everyone.
5.7m Tax Returns to be Submitted in January
File your self-assessment returns before the 31 January deadline, or face an automatic £100 penalty.
More than 12m people are scheduled to complete self-assessment tax returns for tax year 2021-22, and the number of returns outstanding is comparable to last year.
Over the new year period nearly 42,000 taxpayers completed their return.
During 2020/21, more than 10.2 million people filed their tax returns by the 31 January deadline. This included around 630,000 people who filed on the deadline day, during which the peak time was 16:00 and 16:59.
In the last two years, HMRC has extended the normal 31 January deadline by a month because of disruption due to Covid, but it is very unlikely that there will be any similar grace period offered this year.
Those that fail to file a tax return on time will face an automatic £100 penalty. After three months, late payers will face additional daily penalties of £10 per day, up to a maximum of £900.
Christmas Day Self Assessments
HMRC has reported that 3,275 taxpayers set aside time on Christmas Day to file their tax return. A total of 22,060 customers went online to submit their form for the 2021 to 2022 tax year between 24 and 26 December 2022, and 141 opted to file between 23:00 and 23:59 on Christmas Eve.
However, the numbers were down compared with 2021.
Christmas Eve: 8,474 tax returns were filed. Peak time for filing was between 11:00 and 11:59, when 888 returns were received.
Christmas Day: 3,275 tax returns were filed. Peak time for filing was between 12:00 and 12:59, when 319 returns were received.
Boxing Day: 10,311 tax returns were filed. Peak time for filing was between 12:00 and 12:59, when 953 returns were received.
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