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.
World’s Fastest Accountant
Amo-Dadzie is 30 and works as a full time accountant. He only took up the sport 4 years ago but
He ran a 9.93-second 100m in Graz, Austria, last week which means he is now the quickest 100m runner in Europe this year by some margin.
Amo-Dadzie’s 9.93 seconds:
- Joint-fourth fastest British male of all time
- Fastest European time of the season so far
- Joint-13th fastest man in the world this year
- Reece Prescod is the only other Briton under 10 seconds this year
Within a year of his first training session at Woodford Green Athletics Club, he reached the British Championships semi-finals, racing against Olympians Adam Gemili and Harry Aikines-Aryeetey.
That debut season brought a personal best of 10.55, which he then lowered to 10.20 in 2021 and 10.05 the following year.
A first British vest arrived this March at the European Indoor Championships, where he reached the 60m semi-finals.
The switch to turning professional is an option, although this week he is back fitting training sessions around work as a senior management accountant for a property company.
He is on track for an individual spot on the British team for August’s World Championships, where he also hopes to make the 4x100m squad for the first time.
Ban on Repayment Agencies
Three more companies have fallen foul of UK regulations and the Advertising Standards Authority (ASA) has banned three adverts made by these companies for exaggerating the refunds available to customers.
Phillipson Hardwick Advisory, Quickly Finance, and Total Tax Claims all made misleading statements regarding their services helping customers retrieve repayments from HMRC.
They had made claims that had “omitted significant conditions and didn’t make clear that consumers could apply directly to HMRC at no cost.
Two of the three companies also failed to make it clear that, in using the services, customers would be transferring the legal benefit of their claim to the advertise.
The ASA notes that its work “sits alongside action being taken by HMRC who, last year, published a consultation on how to protect customers and increase transparency around claiming tax repayments”.
In recent months, HMRC’s decision to target tax repayment companies has led to various businesses being censured or fined as a result of misinformation.
In January, HMRC added five companies to its list of named tax avoidance schemes, promoters, enablers and suppliers, while only a month later, they banned another from operating as a repayment agent after it was found to have committed “serious anti-money laundering breaches.”
Interest rates hiked for 13th time
The published rate of inflation for May was 8.7%.
The Bank of England therefore raised interest rates to 5%, with a larger than expected increase of 0.5%.
They have gradually increased interest rates since the start of 2022 when the base rate was sitting at 1%.
The central bank’s approach mirrors that of the Federal Reserve, which has increased interest rates from near zero to the 5 to 5.25% range. In contrast to the Bank of England, the Federal Reserve kept interest rates unchanged last week while inflation in the US has dropped to 4.05% from 8.58% last year.
The next base rate announcement from the Bank of England will be on 3 August 2023.
HMRC ‘underestimated’ MTD complexity
HMRC chief executive Jim Harra admitted to a committee of MPs that the government had underestimated the scale and complexity of the government’s Making Tax Digital scheme, leading to multiple delays and a budget overrun of more than £1bn.
Brexit and the Covid-19 pandemic hampered the department’s efforts to deliver the MTD but even if the events hadn’t occurred, it was unlikely the programme would have landed on schedule due to a variety of outdated back-end systems at HMRC, according to Jim Harra.
The latest plan is for a phased introduction: with those with incomes above £50,000 joining the programme in 2026, while those whose incomes are in the £30,000 to £50,000 bracket (or ‘joining in 2027.
The Treasury is currently reviewing whether Making Tax Digital quarterly reporting is appropriate for people with income between £10,000 and £30,000.
There are no plans to remove the quarterly reporting element of the programme. The direction of travel is clear and HMRC’s ultimate ambition is to have real-time information that would update HMRC’s systems in the background.
HMRC think that the tax gap is in part due to the time lag between transactions and reporting, that is between doing the business and reporting on the relevant tax return. Quarterly reporting is the first step on the journey.
Harra believes that the plan will lift the compliance levels of the whole taxpaying public, not just targeted individuals.
More Tax Investigations for Small Businesses
HMRC has reported that the tax gap, which is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid, has risen by 5% to £35.8bn. As a percentage of theoretical tax liabilities it remains at 4.8%.
Apparently, the percentage of the tax gap attributable to small businesses has risen to 56%
This is likely to put the spotlight back on small businesses and signal a shift in HMRC’s attention back on this group. More investigations into small businesses seem likely in the coming months as a result.
Closing the tax gap was one of HMRC’s justifications for pressing ahead with Making Tax Digital, noting that the project would make it easier for taxpayers to get their tax right first time and help reduce the scope for error.
MTD for VAT and the new record keeping obligations have resulted in a fall in the VAT gap and HMRC want to see this for income tax and other taxes.
The same report, which highlights various aspects of the tax gap, illustrate the complexity of the tax system. More than £16bn of the tax gap relates to taxpayers not getting things right through what HMRC categorise as error or a failure to take reasonable care.
Were you mentioned in the Pandora papers
The Pandora Papers consisted of 11.9 million leaked documents from 14 offshore financial service providers. The data contains details of many shell companies, often based in tax havens, which have been used by many rich individuals, including world leaders, to hide transactions from prying eyes.
They were gradually released by the International Consortium of Investigative Journalists from October 2021 to May 2022, and include more than 750,000 names of people and companies with links to more than 200 countries and territories.
HMRC has been reviewing the details relevant to UK taxpayers, and this month has written to around 600 people named in those papers. Many more letters will follow.
In the letter, HMRC is asking the taxpayer to review their disclosure of offshore income or gains and warns that if there is an under-declaration the penalties could amount to 200% of the unpaid tax. The individual could also face criminal prosecution if they make a dishonest disclosure.
HMRC asks the taxpayer to respond within 30 days from the date of the letter and helpfully recommends that the recipient should seek professional tax advice.
Accountant Summer Camp
Just think! You could send your children off to a summer camp and they could come back ready for a career in accountancy.
A new type of summer camp is being offered to American high-school students across the state of New York.
This summer, New York high schoolers will have the opportunity to participate in a new programme giving budding young accountants the chance to peek behind the curtain of the profession over the course of one or two days.
Created by the New York State Society of certified public accountants (NYSSCPA), the programme will be held on campuses across the area in order to “introduce high-school juniors to the amazing opportunities available in the accounting profession”, with sessions including career discussions, technology workshops and professional etiquette, as well as the chance chat to qualified professionals in the field.
NIC Deadline Postponed Yet Again
The government is giving taxpayers a further 22 months to fill gaps in their national insurance contribution (NIC) record and hence boost the amount of state pension they will be eligible to receive.
Many people don’t realise that they have years for which they didn’t pay NIC for the full 52 weeks, and thus have a gap in their NIC record. Typically you find out when you come to retire.
Individuals who reach SPA on or after 6 April 2016 need 35 full years of NIC in order to receive the maximum state retirement pension, and at least 10 full NIC years to receive any state retirement pension at all.
You can check your NIC record for your entire working life in your personal online tax account. This will also provide an estimate of the state retirement pension they should receive.
A deficiency in the NIC record can also mean the taxpayer is denied other contribution-related state benefits such as employment and support allowance, the bereavement support payment, or maternity allowance (for self-employed individuals).
The original deadline to fill your NIC gaps was 5 April 2023 but taxpayers who were eager to make the voluntary NIC (class 3) payments found that they couldn’t get through on the HMRC helpline (0300 200 3500) to make a one-off payment. The deadline was thus extended to 31 July 2023.
It has now been extended from 31 July 2023 to 5 April 2025.
The problem of people staying at home to care for children and hence not paying NIC was addressed by giving the care-giver NI credits for years spent caring for a child or children aged under 12.
However, those NI credits are only given if the care-giver also claims child benefit.
Declining to claim child benefit means the NI credits are not given and the child may not be allocated a national insurance number when they reach age 16.
Many people opt not to claim because of the High Income Child Benefit Charge which claws back child benefit received by anyone earning more than £50000.
But not claiming child benefit means you are not allocated NI credits which in turn reduces your entitlement to state pension.
The solution is for the parent to make a child benefit claim and opt to stop receiving the payment of the benefit, while the higher earner of the couple has annual income over £60,000.
On 27 April 2023 the government announced that those parents who have not claimed child benefit, and as a result have a reduced entitlement to the state pension, will be able to receive NI credits retrospectively.
It promised to set out further steps of how this NI credit will be given, but that information has not been forthcoming.
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