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.
School Fees Tax Scheme
The key point of the school fees scheme is to take advantage of the children’s lower tax rate and personal allowances to set against income that would otherwise be taxed in their parents’ hands, so there is a tax advantage, and that advantage is why the scheme is used.
This involves B shares issued by the parents’ company, which are put into trust for the children.
The arrangements tried to circumnavigate the provisions that where shares are gifted to minor children, the income is taxable on the parents.
Parents using tax avoidance schemes to offset private school fees are being warned by HMRC that the schemes do not work.
Cyber-attack – BBC, Boots and British Airways
The attack has compromised the HR and payroll details of organisations such as the BBC, Boots, British Airways, Aer Lingus and more.
It is thought that the sensitive data may have been stolen in a widespread cyber hack orchestrated by a criminal gang, targeting the payroll software MOVEit and HR software Zellis.
Zellis serves nearly half of the FTSE 100 companies. Zellis has confirmed that eight of its users have been affected.
The vulnerability in MOVEit is what’s known as an SQL injection attack which allows a front-end user to instruct the server to execute commands. The skill comes with how the attackers have exploited the vulnerability to gain access to systems and obtain data from organisations that run MOVEit file transfer servers.”
You hope that your software is secure but for an additional level of security, if payroll or other sensitive data needs to be transferred outside of an organisation, it is appropriate to encrypt the files and/or apply password protection,
The cyber hack has affected tens of thousands of workers, with the BBC employing 20,000 workers and the retailer Boots employing 50,000. With so many workers’ sensitive information potentially compromised, the MOVEit hack only underlines the threat payroll information is constantly under.
Digital Transformation and Accountancy Jobs
Recent reports suggest that by 2030, 30% of all jobs in the UK could be eradicated due to automation. The accountancy profession is aware of the significant value behind data and analytics, artificial intelligence (AI), machine learning and blockchain technology. However, a large majority in this sector are struggling to capture the full potential of digital transformation and are, therefore, failing to deliver a satisfactory return on investment.
This is going to dramatically affect the accountancy profession. Basic digital literacy has become an essential skill, on a par with reading and writing. As more jobs require digital skills, upskilling is a key priority particularly for the employees who may not have the digital skills to prepare them for the coming revolution.
The capacity to keep on learning, throughout one’s career and life, is now recognised as one of the most critical capabilities in any organisation. Even in roles that will not disappear with automation the need to constantly be able to learn new technologies and ways of working have become essential skills at every level.
A growth mindset is maintaining the belief that basic abilities are not fixed, and that intelligence can be developed over time. Your abilities and successes can improve with continuous learning. In a fast-changing working environment, this capacity is likely to be more important than it has ever been.
Changes to P11Ds
You can no longer make paper submission of P11Ds and P11D(b)s and benefits and expenses will need to be submitted online through HMRC’s PAYE online service or via commercial payroll software. The PAYE online service can be used if you have up to 500 P11D and P11D(b) returns to complete.
Paper forms sent to HMRC on or after 6 April 2023 will be rejected.
Employers can remove the requirement to send P11Ds to HMRC and their employees, by opting to payroll benefits. By payrolling benefits, you increase employees’ taxable pay by the benefit value, so they pay the relevant PAYE via the payroll in real time.
You can still provide your employees with a paper copy of the submission made online.
All benefits can be payrolled apart from:
- living accommodation provided by you as an employer; and
- interest free and low interest (beneficial) loans.
HMRC VAT : Payments Plans Online Set Up
As of 31 May 2023, VAT-registered businesses that owe less than £20,000 of VAT can set up a Time to Pay Arrangement online as long as they agree to pay off the VAT within six months.
The measure is part of HMRC’s wider programme to digitise tax reporting and payments, reducing the pressure of HMRC advisers.
The service is not available to businesses that use the VAT cash accounting or annual accounting schemes or those that make VAT payments on account.
Eligible VAT-registered business can set up a VAT payment plan online if:
- filed their latest VAT return;
- owe £20,000 or less;
- their bill is due within 28 days of the payment deadline;
- do not have any other payment plans or debts with HMRC; and
- plan to pay off the debt within six months.
The service will be available for sole traders, directors, landlords, partnerships, IR35 personal service companies, farmers and haulage companies, as well as international companies.
Fake Companies Get Caught
Sham companies that fraudulently claimed bounce back loans have been shut down by the Insolvency Service
11 companies claimed £500,000 through the Covid-19 support scheme, despite the Insolvency Service failing to identify trading premises for any of the businesses.
Nine of the companies claimed the maximum amount available – being £50,000 – through the scheme, with one company even claiming two loans.
Investigators also found links between the companies involved, including the use of common addresses, and the transfer of funds between them to entities registered in Hong Kong. The majority of them were involved in the wholesale trade.
The businesses were identified due to their affiliation to five other companies that had previously been wound up by the Insolvency Service in 2021 and 2022.
The companies were wound up by the High Court of Justice, Business and Property Courts Manchester on 22 May 2023. The official receiver is currently working to trace the funds and those responsible, to recover the money.
Fast Track to Exit
It has been reported that 2/3s of UK business owners are currently considering an exit strategy due to the anticipated tax rises following the 2024 general election. The fear of an increase in the rate of capital gains tax is key.
Nearly a quarter of business owners have already accelerated their plans to sell or wind down their business in the past 12 months.
The political situation, or at least the perceived political situation, seems to have been the catalyst.
As well as tax, accessing capital and long-term investment were other problems highlighted.
The use of employee ownership trusts is increasingly becoming a way to sell all or some of the business.
Crackdown on Umbrella Companies
The UK loses around £400m per year to marketed tax avoidance and there are widespread concerns that freelance workers are being duped into signing up to umbrella companies and frequently face punitive tax bills as a result of non-compliance on the part of third party agents. Tighter laws will be introduced to regulate the sector but the government ruled out calls to ban umbrella companies, saying that an outright ban would not be a ‘proportionate response’.
In most cases, the umbrella company employs staff and pays their wages through the PAYE system while staff carry out work for the agency’s clients. The government estimates that there are up to 1.7m temporary workers in the UK, many of whom use employment intermediaries to secure work.
The following measures are under consideration and HMRC is presently consulting on these and other options:
- putting the agencies on a statutory basis with a clear definition to ensure they are covered by any relevant legislation.
- introducing more employment rights for workers,
- introduction of a mandatory due diligence requirement supported by penalties applying to those employment businesses or end clients that do not comply.
- to legislate to give HMRC the power to collect an umbrella company’s tax debt from another business in the labour supply chain, in specified circumstances. This would primarily apply to outstanding amounts of income tax and National Insurance contributions (NICs) that should have been collected via PAYE.
- to change the liability for PAYE to the contracting employer
- action to combat the abuse of the £5,000 annual employment allowance and the VAT flat rate scheme,
The consultation will close on Tuesday, 29 August 2023.
Self-assessment threshold change
The government plans to take people with PAYE-linked earnings of between £100,000 and £150,000 per annum and no other substantive sources of income, out of the self-assessment tax return system.
This will only apply from 2023/24 tax year.
They will receive a self-assessment exit letter if they submit a 2022-23 return showing income between £100,000 and £150,000 taxed through PAYE and they do not have additional income to report.
Accountant Jailed in £5m Tax Fraud
The fraud triggered Northern Ireland’s biggest ever tax probe and was proved after secretly recording conversations in a bugged accountant’s office.
The tax fraud involved widespread evasion of VAT and income tax related to construction work.
The case was based on more than 260 hours of secretly recorded footage of gang members plotting the fraud from the Belfast accountancy firm Allen Tully & Co where Devlin was a partner and the wider gang used as a base.
HMRC has compiled a video featuring some of the surveillance footage, including a clip where the gang members admitted they ‘would go down in history’ if they were caught for their crimes.
In one clip they were caught describing the office as an ‘Aladdin’s cave’ for fraud investigators ‘at the Revenue’ and boasted they would be featured on the local news and London if the scam was discovered.
The gang created a false audit trail that enabled clients to operate in the construction industry without paying tax or VAT. They created 16 bogus companies and used 56 associated bank accounts.
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