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.
Late Paying their Taxes
1.4 million taxpayers had to pay interest for late payments of tax for 2021 This was up 15% on the previous year.
Around 270,000 people were penalised for missing the 2021 tax return filing deadline, a decrease on the previous year.
With the cut in the tax free allowance for Capital Gains Tax and dividend allowance likely to catch many people out, it seems likely that there will be a lot more people missing deadlines, and hence paying more penalties.
Those of you who fail to process your self-assessment tax returns by the deadline of 31 January each year will face an initial £100 penalty from HMRC. If the return is filed more than three months late, a daily £10 penalty is charged.
The system is being revamped for 2026 when a points based penalty system will begin,
The new penalty regime for paying tax late will be based on the length of time the tax is outstanding but will only affect the 5% of non-compliant taxpayers. The earlier an overdue tax payment is made, the lower the penalty charge will be.
Top Business Threats
Internal auditors are generally to be found in larger businesses. A report from the Chartered Institute of Internal Auditors has been published ranking the top risks to business. The top 5 are as follows:
- financial, liquidity and insolvency
- market changes, competition and changing consumer behaviour
- macroeconomic and geopolitical uncertainty
- human capital, diversity, talent management and retention
- supply chain, outsourcing and third-party risks
Of these financial liquidity and insolvency stood out well ahead of the other perceived risks.
This poll demonstrates that ongoing economic uncertainty means that businesses continue to face strong headwinds with financial, liquidity and insolvency concerns being very much to the fore.
1,180 Separate Tax Reliefs
There is currently a plethora of tax reliefs all contributing to make the UK tax system ever more complicated.
The biggest and most valuable tax reliefs are the VAT zero rating of food, exempting pensions from NIC, pensions tax relief and the capital gains tax exemption for principal homes.
The number and complexity of reliefs means that it is an area subject to compliance relief and especially as taxpayers generally find the process for claiming the relief to be complex, leading to a heightened risk of error in the claims.
Because of the scale and number of reliefs they are all administered differently –
The challenges of simplifying the tax system could be expensive and it might create losers and winners or conflict with wider policy objectives.’
MPs questioned whether the abolition of the Office of Tax Simplification would have a negative impact on the tax system.
The MPs were also concerned that many of these reliefs only impacted a very small number of taxpayers.
They were also concerned that HMRC was under-resourced and was unable to hire more staff due to budget restraints, which has contributed to a £9bn shortfall in recovering unpaid tax.
Claim Tax Reliefs on Expenses
HMRC has said that you should submit any work related tax relief claims directly with HMRC and not use repayment agents.
Only 800,000 taxpayers claimed refunds for work expenses during the 2021-22 tax year with an average claim of just £125, but nonetheless over 70% of claimants used an agent to make their claim instead of claiming directly with HMRC.
The majority of claims were made through tax refund agent, who charged up to 50% of the claim as commission.
There is a list of flat rate expenses that can be claimed including uniforms and work clothing, buying work-related equipment, professional fees, union memberships, and subscriptions, and using your own vehicle for work travel.
‘It is quick and easy to claim a tax refund directly through HMRC’s online portal. HMRC say that submitting a claim through HMRC’s online portal is straightforward and takes about 15 minutes.
VAT-free shopping
Certain retailers have called on the government to reinstate tax-free shopping for overseas tourists to boost the economy.
In a recent report it was estimated that the reintroduction of tax-free shopping would see contributions of £4.1bn in GDP and support 78,000 jobs. Of this, £1.8bn in GDP would be supported directly on-site at businesses where the additional visitor spending takes place.
The UK scrapped the policy in January 2021 as part of its Brexit law changes.
If the tax change was introduced, tax-free shopping would attract an extra 1.6 million visitors to the UK in 2025/26 and stimulate an extra £2.8bn of tourist spending, according to the retail sector.
The Treasury estimated it could cost £2bn and benefit only a very small minority of wealthy individuals but despite this, MPs have urged Rishi Sunak to commission an independent assessment on the full impact of tax-free shopping on the economy,
Did You Submit Your 2023 Tax Return Early
Around 77,500 taxpayers filed their 2023 tax returns on 6 April 2023, double the number in the previous year.
HMRC now offer an online budget plan for self-assessment tax. So, if you submit your return early, you can go online and set up a payment plan in advance of the payment deadline.
In contrast around 860,000 waited for the last minute to file their 2022 tax returns.
You need to do self-assessment if you:
- are newly self-employed and have earned over £1,000;
- are a new partner in a business partnership;
- have received any untaxed income; and
- are claiming child benefit and you or their partner have an income above £50,000.
There are also other criteria.
You are required to inform HMRC if you no longer need to do self-assessment as HMRC does not advise generally if tax returns are no longer required.
20% will Pay 40% or more
The five-year freeze on thresholds will take 2.5 million more taxpayers into paying tax at a higher rate.
The number paying income tax at 40% or above will reach 7.8m by 2027-28.
In the 1990s no nurses and just one in 16 teachers paid higher rate tax, but by 2027-28 more than one in eight nurses and one in four teachers are set to be higher rate taxpayers. Nearly half of lawyers will face higher tax bills although I am surprised that figure is so low.
The freeze to income tax allowances and thresholds is now set to become the single biggest tax-raising measure since then chancellor Geoffrey Howe doubled VAT to 15% in 1979.
The effect of frozen allowances is the equivalent of increasing basic rate income tax to 23.5% – therefore any pre-election tax cutting measures from the government would need to be dramatic to restore any sort of parity.’
Share Plans –Filing Deadline on 6 July
The deadline for employers to file their annual employment-related securities (ERS) returns with HMRC for the 2022/23 tax year is 6 April 2023.
ERS returns have to be completed by UK directors, employees or employees with UK work duties who have acquired shares or other securities in their company; or if their company operates an employee share plan or arrangement.
Annual ERS returns are required to report events relating to securities (such as options, shares or loan notes) which involve employees and/or directors (including founding directors).
A company must ensure it has registered its share schemes and ERS events properly online via the HMRC PAYE portal.
Corporation Tax not Refunded
It is estimated that HMRC is holding £11.9bn in corporation tax overpayments for 2022/23.
HMRC is unlikely to automatically refund this money unprompted.
If you have overpaid tax then you must reclaim it. The problem is that many businesses do not realise that they have overpaid.
This is a particular problem for large companies but it can affect smaller companies as well.
Hybrid Working and Training
In a recent survey, 58% of businesses said that hybrid working made it more difficult to train their people, while 64% believed that those working remotely miss out on the social aspect of the business,
It is clear from various reports that hybrid working is not without its problems and is a long way from receiving universal acceptance with problems still to be resolved.
At The Long Partnership, we operate flexible and hybrid working. It works well for us but in order to make it work effectively, you have to have the right systems. For example, if someone is not working in the office, they forward their office phones to their mobiles. That way, we can be sure of staying in touch. It works for us but it may not work for you.
Questions?
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 alan.long@thelongpartnership.co.uk.
