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.
Jeremy Hunt’s Fairwell Tour
Elton John’s farewell tour seemed to go on forever. We caught up with him in Glasgow, Really good concert and glad we went to see him one more time.
Rumours are circulating that Jeremy Hunt, that quiet bland politician thrust into No 11 after Liz Truss has started his farewell tour with the first event being the Autumn Statement and the final performance being the Spring Budget. Time will tell if the rumours are correct.
Will the Spring Budget be his Glastonbury moment? There are reported to be murmurings amongst Tory backbenchers about Hunt’s performance at the Despatch Box. He doesn’t have the Budget Day flair of George Osborne or the tax reforming radicalness of Nigel Lawson. He was just there, occasionally smiling, occasionally blinking, but mostly just there.
So, who might be next in line? Rishi Sunak may take the opportunity to appoint the first female Chancellor in British history, namely Claire Coutinho, the current Secretary of State for Energy Security and Net Zero.
He may appoint is his right-hand man was Mel Stride, the current Secretary of State for Work and Pensions.
Tax and the economy is going to be one of the arguments that decides the next general election. Politically, it makes sense for Sunak to rejig the cabinet to make a claim that this is not the same old gang that has been running the country for the last decade. So, whoever is Chancellor, they will almost certainly be more flamboyant.
Anyway, until the Spring Budget, his farewell number will either be ‘I’m still standing’ or ‘Sorry seems to be the hardest word?’
Academics AI blunder
A group of academics used material generated by artificial intelligence to implicate the firms non-existent scandals for a submission to the Australian Parliament.
An Australian Parliamentary inquiry was looking into the ethics and professional accountability of the consultancy industry – triggered by the leak of sensitive government tax plans by PwC Australia staff.
A group of accounting academics submitted evidence to the inquiry arguing for more public accountability and tightened regulation of the Big Four, including a structural split of their auditing and consulting wings, and a new independent regulator for the accounting profession.
Part of the evidence accused KPMG and Deloitte of involvement in several cases that were either non-existent or with which the firms in question had no connection. When questioned about the erroneous evidence, the academics admitted that part of it had been generated by an AI program, and not cross-checked for accuracy before the submission was made.
The evidence accused KPMG of being involved in the “KPMG 7-Eleven wage theft scandal” – a scandal that never took place , and charged the Big Four firm with auditing the Commonwealth Bank during a financial planning scandal, despite KPMG having never acted as auditors for the bank.
Deloitte was flagged in the non-existent “National Australia Bank [NAB] financial planning scandal”, where the AI bot wrongly accused the firm of advising the bank on a scheme that defrauded customers of millions of dollars, and also of falsifying the accounts of Patisserie Valerie – a real case that involved Grant Thornton and KPMG, but not Deloitte.
There was more but I think you get the picture. Could that have happened in the UK?
In a statement responding to the incident, the committee said it had “raised important questions” about the use of AI.
Accountants and SA burnout
As the end of the year approaches, self-assessment work begins to intensify.
Recent years have amplified the stresses of the accountancy profession arising from almost a decade of Making Tax Digital (MTD) uncertainty, to the challenges of the skills crunch and the increased scrutiny of anti-money laundering supervision.
As seasons change, and the 31 January self-assessment deadline approaches, accountants are now faced with the pressures of the annual client-chasing ritual and tackling piles of tax returns.
Recent research from the Future Forum in 2023 found that 42% of workers globally are experiencing burnout.
A lot of busy season stress comes from feeling overwhelmed so tracking the workload helps to put everything into perspective and permit forward planning.
Communicating, and sharing advice helps everyone to realise they are not alone. Taking breaks is also important, coming up for breath once in a while.
Many of you will experience your own periods of stress so apply these same strategies =s to keep you sane.
Directors avoid tax debt by dissolving business
It was recently reported that the number of objections to company strike offs at Companies House was 590,063 in 2022/23, more than double the figure just two years ago when there were 203,613 rejections in 2020/21. In the last year alone there has been a 30% increase.
This shows the spike in companies requesting dissolution when they have unpaid tax bills or bounce back loans issued during the pandemic. In these circumstances the companies are eligible to stop trading.
The actual number of strike off applications has barely changed over the past year and increased by just 18% over the last two years.
Directors should only apply to have their companies struck off the register if they have no outstanding liabilities, such as unpaid taxes owed to HMRC, Covid-related loans or money owed to staff or suppliers.
Directors who try to have their companies dissolved without settling their debts are risking severe penalties and criminal sanctions.
Expect taxes to rise?
A recent survey has revealed that more than three quarters of businesses expect to pay the same or higher taxes after the next general election, while just under a quarter expect business taxes to reduce.
This reflects a growing appreciation of the state of the public finances, the outlook for interest rates and the prospects for political change.
Roughly 40% said investment in HMRC service levels should be the top priority following widespread dissatisfaction with HMRC service levels, with a majority of respondents saying that poor service levels were making it harder to do business.
The survey also identified a high degree of concern among SMEs about the prospects for a reduction in the rates of R&D tax relief, with a high proportion of respondents saying they may look to move their R&D activities out of the UK.
HMRC Long Range Scammer
HMRC worked with Indonesian cybercrime police to track down and arrest a 36-year-old in a remote village.
The man, who has not been named, now faces up to 12 years in prison for selling website phishing kits that targeted UK taxpayers.
He posted more than 3,000 adverts in just a year promoting the illegal spoofing software on social media channels and crime forums for up to $250 (£200) each.
The software mimicked genuine webpages of major websites in the UK, including HMRC, Royal Mail and TV Licensing. HMRC is the third most scammed website after the NHS and TV Licensing.
The scammers operated across the UK, Canada, US and Australia, faking websites for global banks, tax authorities and government departments.
HMRC launched an investigation earlier this year and worked alongside international partners, including the Indonesian National Police, Royal Canadian Mounted Police, FBI and Australian Federal Police.
Poor HMRC Service
In a recent survey by the CIOT:
- 94% of respondents were either ‘somewhat’ or ‘extremely’ dissatisfied with HMRC’s service levels
- 96% were ‘not very’ or ‘not at all’ confident that these will significantly improve over the next 12 months
- 95% said that poor service levels have a ‘moderate’ or ‘significant’ negative impact on ability to do business
- 89% said that their issue could not have been resolved digitally, so telephone contact was essential
- 65% rated HMRC’s webchat alternative as “poor” or “extremely poor”
- 58% said that they were waiting more than half an hour to get through on the ADL
- 20% said that they would simply give up if they were unable to speak with an adviser
Nothing is going to change in the near future.
Horizon Scandal: Tax / NICs
Where taxpayers are in receipt of compensation under the Post Office / Post-master Horizon scandal, they are by default taxable as if the receipt were taxable as earnings in the year. Such a large “lump” of income is typically taxed quite punitively on the individual, when compared to a theoretically more equitable “spreading” over the compensation period.
The Top-Up Payment is supposed to put the taxpayer in the position they would have been in, had such income been taxed over the entire compensation period.
New Regulations ensure that the Top-Up Payments themselves are:
- Not taxable
- Disregarded for NICs purposes -.
VAT Time to Pay – Self-Service Payment Plans Available
From 31 May 2023, businesses have had the option to apply online for an automated VAT Payment Plan, provided they:
- Have filed their latest tax return
- Owe £20,000 or less
- Are within 28 days of the payment deadline
- Do not have any other payment plans or debts with HMRC
- Plan to pay their debt off within the next 6 months
However, businesses in the VAT Cash Accounting Scheme, or Annual Accounting Scheme, cannot use the new facility (nor can those making payments on account). Businesses unable to use the new Self-Service route may still apply using more traditional means.
The Tax Gap Holds Steady in spite of MTD
In the round, the figures show that the Tax Gap as a percentage of total tax take has remained steady at about 4.8%, but it has been on a mostly downward trend over the previous seven years, from 7.2% in 2013-14.
However, the Tax Gap, in relation to what HMRC categorises as error and failure to take reasonable care, has risen. One purpose of MTD was to lower the tax gap by reducing taxpayer errors but after 3 years of MTD, there seems to be little appreciable difference, with the VAT Gap’ merely continuing a long-term trend downwards, apparently unaffected by MTD.
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 firstname.lastname@example.org.