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.
HMRC – NI Numbers and Tax codes
You can now view your national insurance confirmation letter online or via the HMRC app, rather than waiting up to 15 days for the tax authority to resend the letter by post.
You can use your Personal Tax Account (PTA) or the HMRC smartphone app to generate a copy of your NI letter and save it as a PDF, and store a copy of the letter in your Google Wallet or Apple Wallet so that you can access it when needed without signing into your digital account.
You don’t have to use this service and you can still contact HMRC directly.
The tax code service allows you to check the code currently in use, perhaps on your payslip without having to log in to any of the tax authority’s services.
By answering a series of questions posed by the web-based tool, they say that you can find out how much tax you will pay (broken down into weekly, four-weekly, monthly and yearly figures), what the letters in your tax code mean, and find out more information about what to do if you think your tax code is incorrect.
Paternity Leave Changes
The following changes are on the way:
- Eligible fathers will be able to take their paternity leave and pay in two separate blocks of one week of leave (two weeks in total) at any point in the first year.
- Qualifying fathers will be able to take their leave and pay at any point in the first year (that is, within 52 weeks of birth or placement for adoption).
- It is proposed that fathers-to-be give their notice of entitlement 15 weeks before birth and give 28 days’ notice before the dates that they intend to take each period of leave (and pay, where they qualify).
Currently leave must be taken in one block of one or two weeks. If, for any reason, the father-to-be is unable to take the full two weeks in one go and can only take one, the second week is lost and cannot be taken at a later date.
HMRC Targets Car Dealers
Dealerships across the UK are being investigated for suspected tax evasion
It is reported that the automotive sector underpaid £444.2m in tax in 2021-22, and that HMRC is determined to recover it, potentially putting many dealerships at risk.
Cars are expensive and subject to complex rules for businesses buying and selling them and the provision of fuel and company cars creates fertile ground for HMRC to discover errors.
Other things that might attract HMRC’s unwanted attention include transition to a new dealer management system, property transactions, business acquisitions and VAT returns with large repayment claims.
So, what can you do to minimise the risks associated with this campaign:
- Keep good records particularly if you use the second hand car scheme.
- You could get a VAT health check – get someone to have a look at your systems and records before HMRC does.
- Be aware of the latest tax rules.
- Use a reputable dealer management system.
- And of course seek professional advice sooner rather than later.
Re-register for Child Benefit for 16 year olds
Your teenagers over 16 years old in education or training will stop receiving child benefit payments unless you have re-registered by 31 August
Child benefit payments stop automatically on 31 August after a child turns 16 unless the parent takes actions to continue claiming until they reach 18.
HMRC recently wrote to parents about extending their child benefit claim. The letter included a QR code which, when scanned, directs them to gov.uk to update their claim online. Any changes will be applied to their child benefit claim immediately.
HMRC Paid £500k to Whistleblowers Last Year
The current figure is up from the £495,000 paid out in 2021/22 and up 75% from the £290,000 paid five years ago.
In the US the tax authorities pay whistleblowers 15-30% of the additional tax collected through investigations instigated as a consequence of information received. In 2022, this amounted to $37.8m with the IRS receiving 5,084 submissions and 12,597 claims for reward.
In Washington DC, one whistleblower – who wishes to remain anonymous – received an IRS whistleblower award of $11.9m (£9.3m) after providing the IRS with original information that led to an enforcement action against a Fortune 500 company. The IRS recovered tax, penalties and interest of $55m (£43m) as a result.
‘HMRC has been making payments for information on an ad hoc basis for many years and would perhaps benefit from a tax related reward system.
Many of these cases come internally from businesses, such as disgruntled current or former employees as well as former partners and spouses.
Payrolling Benefits and Expenses
Employers don’t have to payroll benefits in kind but if they do then they must register with HMRC by 22:00 on 5 April prior to the start of the tax year. This is to allow HMRC to remove the benefit from the PAYE code of the affected employees.
Employers can choose to payroll for some employees by excluding others.
Payrolling BIK removes the need to submit forms P11D but Class 1A national insurance contributions (NIC) still need to be reported to HMRC on form P11D(b) by 6 July following the end of the tax year and the NIC paid by 19 or 22 July by cheque or electronic banking respectively.
The employer must notify employees by 31 May after the end of the year of the cash equivalent of each benefit that has been payrolled.
All benefits can be payrolled except beneficial loans and employer-provided accommodation.
Inheritance Tax –
The inheritance tax (IHT) thresholds will remain frozen until at least 5 April 2028 but it has not changed since 2009 and would now be worth around £475,000 if it had been uprated with inflation.
The residence nil rate band (RNRB) provides an additional £175,000 relief from IHT.
However with the increase in property values more and more estates are being pulled into the scope of IHT.
With this, more taxpayers and estates will be looking to make best use of IHT exemptions and reliefs such as:.
Downsizing relief
This involves a slightly complicated computation of calculating the percentage difference between the amount of RNRB that would have been available before the property disposal, and the amount of the RNRB that is used after the downsize. This percentage is the ‘lost relievable amount’ that may be available as a relief against IHT, provided all applicable conditions are met.
Gifts with reservation
Typically, this is where an individual gifts their main residence away while continuing to live in it. At the point of death the greater of its value at gift or at death will be included in the calculation of the IHT estate.
Domicile and the statutory residence test
For individuals domiciled in one of the countries of the UK, IHT will be due on their worldwide estate. However, for taxpayers who are not UK domiciled, only their UK assets will be subject to IHT.
Once non-domiciled individuals have been resident in the UK for at least 15 out of the previous 20 tax years, they are ‘deemed domiciled’ and, broadly, their worldwide assets come into scope of UK IHT.
Share relief
Where shares are sold for less than their value on death, relief may be available. This is only available for quoted shares and holdings in an authorised unit trust.
Qualifying shares and holdings must be sold within 12 months of the date of death.
Self-Employed -V- Employed Status
It is the employer’s responsibility to correctly determine an individual’s status as to whether they are employed or self-employed. Their status will depend on the terms and conditions of the working relationship which in most cases will be set out in the contract. Keep in mind that it is possible for the worker to be both employed and self-employed at the same time.
They are probably self-employed if they:
- are in business for themselves, are responsible for the success or failure of their business and can make a loss or a profit;
- can decide what work they do and when, where or how to do it;
- can hire someone else to do the work;
- are responsible for fixing any unsatisfactory work in their own time;
- the “employer” agrees a fixed price for their work which does not depend on how long the job takes to finish;
- use their own money to buy business assets, cover running costs, and provide tools and equipment for their work;
- can work for more than one client.
They are probably an employee if they answer YES to most of the following:
- do they have to do the work themselves?
- can someone tell them what to do, when and where to do it and how to do it?
- are they contracted to work a set number of hours?
- do they receive benefits such as paid leave or a pension as part of their contract?
- can they be paid overtime or bonus payment?
- do they receive a regular wage even if there is no work?
- do they manage other people who work for you?
- can they be moved from task to task?
HMRC’s Check Employment Status Tool (CEST) is an online tool that can be used to help determine employment status see www.hmrc.gov.uk/employment-status/. The result given by the tool will provide an indication of the worker’s employment status.
The employer can rely on the CEST outcome, say HMRC, provided the answers to the questions accurately reflect the terms and conditions under which the worker provides their services. The employer/engager must also print out or save the enquiry details screen and the CEST result screen as evidence of the decision made.
IR35 and Off Payroll Working
The IR35 legislation was introduced by HMRC in 2000 to ensure individuals who worked through their own sole person limited company paid employment taxes like other standard employees.
The individual director/shareholder had to decide whether they fell within IR35 rules. If yes, then taking remuneration as dividends drawn from the company profits and hence saving tax was not permitted. The individual was required to take 95% of the fees derived from the IR35 work as “deemed salary” including employer’s NIC leaving 5% to cover company expenses.
Most contractors ignored these rules or were prepared to argue they did not apply.
As a result, HMRC introduced rules to make the end client responsible for deciding the contractor’s employment status. These rules currently apply to end users in the public sector and to large and medium-sized private companies.
A company is small if 2 or more of the following criteria are met:
- Annual turnover is less than £10.2milllion;
- Balance sheet total assets, before deducting liabilities, is less than £5.1million;
- Average number of employees is less than 50.
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.
