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.
With VAT Sympathy
In a recent case the tax tribunal was asked to decide whether the repatriation of dead bodies was a zero rated or exempt supply.
VAT exemption applies for “the disposal of the remains of the dead” and “the making of arrangements for or in connection with the disposal of the remains of the dead”.
Zero rating applies to certain types of transport of goods, including “the transport of goods from a place within to a place outside the United Kingdom or vice versa, to the extent that those services are supplied within the United Kingdom”.
This company provided services of repatriation of the deceased. The argument was that they were providing specialist transport services, which would fall within the zero-rating provisions. They simply transport the bodies and have no involvement in the funeral arrangements that eventually take place.
HMRC argued that the services provided were those that were usually included in a funeral supply, including coffins and embalming, and were therefore made “in connection with” the disposal of the remains of the deceased. They would therefore be exempt.
The court concluded that the services do fall within the exemption but as the company was providing transport serves it also fell within zero rating for the transport of goods.
In such a case zero rating takes precedence over exemption.
There were also complaints from the taxpayer that they had had at least two previous VAT compliance visits where the zero rating of their services was not challenged by HMRC. It was therefore unfair that HMRC should now change their minds. However the tribunal had decided in the company’s favour.
On the question of the company having to go through these hearings, the tribunal could not address this point, but they did express sympathy for the company.
Process Now, Check Later Abuse
HMRC generally processes repayment claims first and checks the validity of those claims later. This means possibly opening enquiries resulting in repayment, plus interest and sometimes penalties, months, often years, down the line. Responsibility for checking the validity of claims is placed with the individual taxpayer, expediting the settlement of tax which, of course, is great for cashflow.
However, the regime has unfortunately left the door wide open to shady practice, with crooks and cowboys masquerading as “claims agents” hiding around every corner ready to pounce on the unsuspecting, vulnerable taxpayer.
In a recent report a Suffolk-based firm allegedly submitted bogus self-assessment repayment claims for employment expenses on behalf of hundreds of taxpayers. These unsuspecting individuals are now being forced to repay significant amounts to HMRC, totalling an estimated £1.8m.
The real sting in the tail is that, the taxpayers themselves are liable to pay HMRC the repayment amount in full, including the fee that was deducted by the agent, who loses nothing.
HMRC’s advice is that you should always be cautious about promises of easy money,
Gen Z and Motivation
It has been reported that over one third of businesses found it was more difficult to motivate their Gen Z employees and the majority (88%) of employers are adapting their training methods to meet the needs of the newest members of the workforce.
Nearly one in three (32%) businesses have moved towards more on demand content and more gamification within their training (30%), to appeal and engage with the new younger cohort.
Gen Z workers also have specific expectations around what they believe are unreasonable asks in an early career job. They were particularly keen to ensure they did not have to work excessive hours and did not want to study for professional exams such as accountancy qualifications outside of working hours.
Over half (51%) said it was unreasonable to be expected to take on extra responsibility without compensation, while 40% thought regularly working 10-hour days should not be expected.
One in three (31%) also said that being expected to study outside of working hours was unreasonable, which is a common requirement for those working towards gaining a professional qualification.
Three quarters of the young people surveyed believed that what they do for their job will be an important part of their identity and the research identified what Gen Z consider the most motivating reward for going above and beyond in their role at work:
- career progression and opportunity to do more interesting and challenging work;
- annual salary increase; and
- direct verbal appreciation from line manager and colleagues.
For those of us who studied in our own time and regularly worked long hours, this is an uncomfortable reality, but nonetheless, it is unlikely to change anytime soon, if ever. Gen Z have different goals and aspirations but without effort and sacrifice most of them will not succeed.
HMRC Cuts Phone Line Access
Jim Harra has told MPs he aims to cut the volume of phone calls to HMRC advisers by nearly a third by the end of 2024 and will shut more helplines
The aim is to cut contacts with helpline advisers at its contact centres by 30% in a bid to force people to move to digital services by default and to try to achieve service level targets.
Harra admitted that HMRC are not resourced to deliver our customer service standards through traditional channels of phone and post. They cannot meet service standards.
Harra told MPs that in the last year the number of phone calls had risen three million to 38m and volume of post had also grown significantly.
Admin Assistant £1.5m fraud
A grandmother who stole £1.5m from a family scrap metal business in Aberdeen by faking invoices has been jailed
She was sentenced at the High Court in Edinburgh after she pled guilty to a charge of embezzlement over the theft of £1,524,192.
She worked as an administrative assistant in the finance department. Another employee became suspicious because she was apparently living beyond her means. A separate review of company finances was carried out amid concerns over a drop in funds.
During that review, it was discovered that she had been paying invoices to a fake customer and depositing the money into her own bank account. The review also uncovered five company accounts which contained her bank details.
Question: Could this happen in your business? Are you sure?
Self-Assessment Scams Warning
HM Revenue and Customs (HMRC) received more than 130,000 reports about tax scams in the 12 months to September 2023, of which 58,000 were offering fake tax rebates.
In the run up to the self-assessment filing deadline on 31 January 2023 fraudsters will prey on customers by impersonating HMRC.
The scams take different approaches. Some offer a rebate; others tell customers that they need to update their tax details or threaten immediate arrest for tax evasion.
HMRC is reminding customers to be wary of approaches by fraudsters. Criminals are great pretenders who try and dupe people by sending emails, phone calls and texts which mimic government messages to make them appear authentic.
Unexpected contacts like these should set alarm bells ringing, so take your time and check.
Apply Online to Join VAT Flat Rate Scheme
HMRC has launched an online form for businesses to apply to join the VAT flat rate scheme (FRS). The FRS is a scheme that simplifies VAT accounting for businesses with an annual turnover of no more than £150,000.
Do People Trust Accountants?
A recent report has revealed a significant increase in trust in chartered accountants in the wake of ongoing economic uncertainty.
Accountants are also seen as data guardians (81%) responsible for data integrity and helping businesses combat misinformation (77%).
Additionally, chartered accountants are expected to be tech-savvy navigators (81%), necessitating universal training and resources for technology adoption.
Trust in accountants is in part increasingly linked to advocacy on social and environmental issues, the report explains.
BrewDog Procurement Fraud
A rogue sales agent almost cost company 100,000 cans.
The agent had flown out of the starting gates in a key foreign market, racking up new distribution points, beer deals with famous music festivals and close ties with online influencers.
Unusually, the sales agent had insisted on working alone, refusing to be accompanied to meetings by other BrewDog staff.
The company discovered fake emails, faked meetings, forged purchase orders, and fake email addresses, which subtly mimicked the actual email addresses of real customers.
Right before the point of exposure, BrewDog had been poised to send 100,000 cans of beer to a fake customer dreamt up by the rogue agent.
Question: Question: Could this happen in your business? Are you sure?
Overlap Relief
Anew online overlap relief form will allow you or us to request the information HMRC holds on the available overlap relief that must be claimed in the 2023/24 transition year.
Basis period reform means that sole traders and partnerships will move to a tax year basis of taxation in 2024/25. Affected taxpayers must claim any remaining overlap relief to offset against their trading profits in 2023/24. This includes taxpayers who stop trading in the 2023/24 tax year.
Taxpayers may already know how much overlap profit they are carrying forward as they are including it on their self-assessment returns. If the taxpayer (or their agent) does not have that information, a new online service is available to ask HMRC for the information it holds.
VAT Assessments
When traders miss the deadline for filing a VAT return, a ‘central assessment’ is raised by HMRC’s system. This is also known as a ‘VAT notice of assessment of tax’.
A central assessment estimates the VAT liability due to HMRC on the outstanding VAT return. The estimate is usually based on the VAT amount owed on previous returns. Other methods of estimation may be used where HMRC does not have historic data.
Any penalties for late payment are initially calculated based on the estimate of the VAT liability.
Previously, when a late VAT return was submitted to HMRC, the central assessment was removed from the VAT account by the next working day. The estimate was replaced in the VAT account by the actual figures submitted. Any checks on the submitted return would take place in due course.
HMRC has confirmed that this approach has now changed. By design, the updated process does not update the VAT account to remove the central assessment until the late return has been fully processed. If the late return is subject to compliance checks, the central assessment will not be removed from the VAT account until these checks are complete.
Paying NIC While Working Abroad?
HMRC has launched a new tool for people to check whether they should be paying national insurance contributions (NIC) while they are working abroad.
Typically, individuals relocating abroad permanently will stop paying NIC in the UK and pay social security (or the domestic equivalent) in their new country of residence. There is the option to pay voluntary class 3 NIC while abroad to qualify for the UK state pension in the future.
If people relocate abroad temporarily for work, they may continue to pay NIC in the UK, depending on the length of time that they are working abroad and the country to which they are relocating.
HMRC’s new interactive guidance tool helps you to know whether you should pay NIC while you are abroad.
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.
