798 Years on Hold to HMRC

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.

 

 

798 Years on Hold to HMRC

The National Audit Office (NAO) has published a report dealing with how taxpayers have been let down by poor HMRC customer service.

The main figure highlighted is that taxpayers and their agents spent a cumulative 798 years waiting to speak to an adviser in 2022/23 – a figure that has increased from 365 in 2019/20 and doesn’t include the time spent listening to automated messages.

The report also found that those who got through to an adviser waited on average nearly 23 minutes in the first 11 months of 2023/24, up from five minutes in 2018/19. Then the time it takes to handle each call has increased on average from 11.24 minutes in 2019/20 to 13.48 minutes in 2022/23. It also reported that in 2022/23, advisers answered 20.5m calls, out of 38m call attempts.

The Treasury stepped in and awarded HMRC funds of £51m ahead of publication of this report.  This is to improve its customer service, particularly its phone lines which have been underperforming and have been a constant source of frustration for agents and taxpayers. The NAO report noted that the net cost of HMRC’s customer service directorate from 2022/23 was £881m so an extra £52m is a very small contribution.

Due to budgetary constraints, HMRC is currently set to cut staff numbers by 14% in 2024/25.

HMRC is pressing on with its efficiency-improving strategy of encouraging taxpayers and their agents to use its digital services to resolve queries. While more are using digital channels, HMRC advisers in personal tax are under increasing pressure from more taxpayers being brought into the tax system through fiscal drag, while the number of staff has reduced by 4%.

So far the move towards digital services has not relieved the strain on traditional services, where the quality of service has declined. The report found that performance has fallen below expected levels for telephone and correspondence for almost all of the past five years, and HMRC does not expect to meet its telephone performance target in 2024/25.

The NAO recommends that HMRC develop more realistic plans for cutting the services. As such, it said HMRC should reassess what levels of customer service performance are needed to achieve value for money.

The report raises valuable insight into the depth and scale of HMRC’s customer service problems.

 

 

Influences Under the Cosh

Nine influencers, including three from Love Island and two from The Only Way is Essex, face a court date next month.

The two people running the site had been offering high-risk foreign currency trading advice through social media platforms from 2018 to 2021 but were not authorised by the FCA.

They enlisted the help of reality TV stars to promote their brand, who were all paid for their involvement. The influencers had a combined following of 4.5m followers on Instagram and other social media sites.

The group were all promoting the @holly_fxtrends Instagram account and each faced one count of issuing unauthorised communications of financial promotions and is due to appear at Westminster Magistrates’ Court on 13 June. This could result in a maximum of two years in jail and a fine.

It is clear that unauthorised persons, such as social media influencers, who promote a regulated financial product or service without the approval of an appropriate FCA-authorised person may well be committing a criminal offence.

 

 

HMRC and Giant Marshmallows

HMRC lost this VAT case at the Upper Tribunal having previously also lost at The First Tier Tribunal but they just can’t get enough marshmallows. They are appealing to the Court of Appeal

Both tribunals found the consumable was not a confectionary item as it was intended to be roasted over a fire, therefore making it exempt from the usual 20% VAT.

The placement in supermarkets also came into question, as they were mostly sold on a seasonal basis within the barbeque section.

HMRC did not agree, issuing demands for VAT amounting to £472,928 for 2015 to 2019.

One pertinent question would be whether this is the best use of taxpayer’s money when making any sense of the VAT dividing lines on food has always been hard and occupied many hours of court and Tribunal time.

 

 

Accountants’ Hobbies

Only 53% of accountants have hobbies!

Most said they played or watched sports (61%), cooked (48%), and over a third played a musical instrument (36%). More niche hobbies enjoyed by accountants included rock collecting, belly dancing and matchstick model making.

On average accountants take part in their hobbies for five to six hours a week and said that the activities brought them ‘significant personal and professional benefits’, and were important for their mental health and wellbeing.

But 40% of accountants said they did not have the time or money to dedicate to their hobbies while 56% said they would like to be able to do their hobbies more and believed it would benefit their effectiveness at work.

Hobbies help you unwind, de-stress and ultimately feel better which will inevitably help your work as well.

 

 

DWP – 2500 New Anti-Fraud Staff

The benefits office plans to increase staff numbers by 2,500 and update the legal powers of the DWP in a bid to clamp down on fraud. This is predicted to save the taxpayer £9bn by 2027/28. This will bring the headcount to nearly 6,000.

The new staff members will be employed to check Universal Credit claims for legitimacy and introduce a new civil penalty targeting fraudsters.

Additionally, £70m will be invested into advanced data analytics.

The Data Protection and Digital Information Bill, currently being debated in parliament, will bring in new rules so that DWP can work with banks to identify potentially fraudulent claims, which is expected to save a further £600m over the next five years.

 

 

Term-time Working

Significant changes to the Working Time Regulations have been made in 2024, in particular for term-time only and irregular hours workers.

Under the regulations, a worker is part-year when under the terms of their contract, they are required to work only part of that year and there are periods within that year of at least a week during which they are not required to work and for which they are not paid.

Term-time working is a typical example of part-year working, as the employees working under these types of contracts are not required to work outside of term-time.

A worker is an irregular hours worker when under the terms of their contract, their hours generally are wholly or mostly variable.

Under new regulations, part-year and irregular hours workers’ holiday will accrue, on the last day of the pay period, at the rate of 12.07% (where statutory minimum holiday is given) of hours worked in that pay period.

As an employer, you can only implement this for leave years that start on or after 1 April 2024, so if the organisation has a January to December leave year, this cannot be implemented until 1 January 2025, unless you make the annual leave year for this employee start earlier than January 2025.

There is also a practice known as ‘rolled-up holiday pay’. This is where holiday pay is calculated as it is accrued and paid as an additional sum each time the worker is paid, rather than when the leave is taken.

The payment for rolled-up holiday must be on the payslip as a separate entry to any other pay, and marked as ‘rolled-up holiday pay’. This method of holiday payment will also need to be outlined in the contract of employment.

 

Off the Hook by the Skin of Her Teeth

The taxpayer was a registered general nurse (RGN), specialising in disorders of the skin. She operated a clinic where she would diagnose clients with skin conditions and offer treatments.

HMRC formally notified her on 17 January 2018 that she had been registered for VAT. The effective date of registration then became 1 November 2007. The taxpayer appealed because her services were exempt from medical care. HMRC disagreed, hence they registered her.

In 2018, HMRC issued a best judgment VAT assessment for £270,648.91 for the period up to 28 February 2018. The taxpayer appealed.

Subsequently, the taxpayer submitted a nil return in 2020. According to HMRC, this resulted in the assessment being automatically cancelled by its electronic system. Consequently, HMRC issued a new assessment for £212,897. The taxpayer appealed again.

The VAT Act exempts a supply of services that consist of the provision of medical care by a person who is appropriately registered.

The taxpayer argues that it did. HMRC contended that many of the symptoms treated were simply the cosmetic results of ageing. Neither party provided sufficient evidence to support their cases.

The Tribunal held that the taxpayer had failed to demonstrate to the necessary standard that her services were within the scope of the exemption.

The taxpayer challenged the 2021 assessment on the basis that it was issued outside of the statutory time limits.

It was issued more than two years after the end of the period, which ended on 28 February 2018. HMRC argued that the automatic cancellation of the prime assessment by the electronic system ought to mean that the nil return constituted evidence of facts justifying a new assessment. The Tribunal agreed with the principle, but only if the cancellation of the original assessment was out of HMRC’s control. They held that this test was not satisfied, and the 2021 assessment was therefore invalid.

HMRC could not shed any light on why the original assessment had been cancelled by their software, other than its electronic system had done so automatically. There was clear case-law authority for the proposition that it was in HMRC’s discretion whether to withdraw an assessment following the submission of a return.

Because HMRC (or their computer) had cancelled (effectively voluntarily withdrawn) the original assessment, they were precluded from raising a later assessment. The taxpayer had a lucky escape.

 

Garden Sale

Most people think that for Capital Gains Tax, the date of disposal of property is at completion. This is not strictly correct. It is when the bargain becomes unconditional, and the paperwork can follow sometime later.

This case helps to illustrate this.

A taxpayer sold part of his garden to a developer which in many instances is exempt from CGT.

In order to allow the developer to get started during the good weather, the taxpayer and developer entered into an agreement allowing the developer to commence work on the development while the sale was going through.

The agreement took the form of a letter, signed by both parties.

HMRC took the view that the sale was taxable because the “garden”  no longer had the character of a garden when it was sold. The developer had started work. The dispute at the heart of the appeal concerned whether the area of land retained the character of the garden at the time of disposal, or whether HMRC was correct to disallow PRR as building works had commenced before completion of the sale and the taxpayer was no longer benefitting from his own occupation and enjoyment of the land. HMRC charged CGT of £72,633.80 on the disposal.

The Act says: “…where an asset is disposed of and acquired under a contract the time at which the disposal and acquisition is made is the time the contract is made (and not, if different, the time at which the asset is conveyed or transferred).”

Therefore, if the letter constituted an unconditional contract, the disposal date for CGT purposes would be the earlier date of the letter, before any building work commenced.

The tribunal concluded that the letter fundamentally altered the taxpayer’s relationship with his land, hence this was the disposal date for CGT purposes, that PRR applied and the sale was exempt from tax.

 

 

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.

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