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.
Flexible Working
The implementation of new rules regarding flexible working is currently open to public consultation until the end of this month.
One of the changes being brought in by the Employment Rights Act is how employers handle employees’ requests to vary their normal working pattern. The aim is that the opportunity to work flexibly should be seen as a genuine right in some industries, such as accountancy.
At present, any employee has the right to make up to two flexible working requests in any 12-month period. This can be for any reason.
Employers can refuse the request for one of eight statutory reasons, including costs, impact on a business’s ability to meet customer demand, and impact on quality and performance.
The employer must deal with the application in a “reasonable manner”, and they must provide an outcome within two months of the request being made.
From 2027, the government plans to introduce a set process, by way of secondary legislation, that all employers will have to follow, and if any employer refuses the request, they can still rely on the same eight statutory reasons, but they must show that the refusal for that reason is reasonable.
The government has set out the test for what is “reasonable” in refusing a flexible working request. The current proposal for the process to be followed will include additional obligations such as:
- a requirement to hold a meeting “without delay” and within six weeks of the request
- the employer is to establish if the request is being made as a reasonable adjustment for a disability
- where an employer identifies challenges to the proposal, they are expected to explore ways to address those, such as alternative start dates or a trial period
- where the request is refused, employers will be expected to explore alternatives for the employee.
Any decision by the employer will also have to be communicated in writing with an explanation.
Additional obligations inevitably create additional opportunities for employees to present claims if they are not satisfied with the outcome of any request they make.
Consultation closes at the end of the month. If your firm would like to provide feedback or review the information required, respond to the Make Work Pay consultation.
We made the transition to flexible working, and it has operated very well. There are only a couple of sensible restrictions just to make sure the offices are manned, security and confidentiality are maintained, and the local manager has sanctioned the working arrangement, but other than that, our staff can work when and where they want. They know what they have to do, when it is required and complete time sheets which we review regularly. All this is written into our Employment Handbook and Contracts. We have not experienced any downsides.
Tax Avoidance by AI
Tax avoidance has been around for as long as tax has existed.
Artificial intelligence is often cited as the solution to any and every problem, so consider how the powerful new technology could impact the tax avoidance industry. Your view might depend on whether you are a gamekeeper or a poacher.
Parliamentary draughtsmen and women don’t always get it right, leaving opportunities for failures to collect as much tax as had originally been intended. Could handing some of the drafting and/or oversight duties to computers help? We may not need to wait that long to find out.
For poachers, far more of the kinds of arrangements that are deemed unacceptable could be identified almost instantly. If the gamekeepers ran the same software, could they identify gaps in the legislation faster, aiding clampdowns?
If HMRC is able to utilise the power of AI to close down avoidance arrangements, the poachers should be able to employ the same technology in order to find additional loopholes and develop more watertight tax-saving strategies.
Time will tell who comes out in front in this battle.
Wrong Dates of Birth at Companies House
This has become an issue since mandatory ID verification requirements were introduced by Companies House last autumn, as the register clearly cannot process the identity verification process if the original data does not correlate with the passport or other documents used for proof of date of birth.
It is vital to ensure dates of birth are correct before going through the identification process, and not surprisingly, there are a lot of incorrect records on Companies House, which are only coming to light since the tightening of the rules as a result of mandatory ID verification.
The updated guidance sets out the various requirements. If a director or PSC was added as part of company registration (IN01), or a director appointed after the company was registered, these can be updated online via the Companies House WebFiling service.
There are different requirements if the director was appointed before 1 October 2009
250k sign up to MTD
HMRC confirms 250,000 signed up, but mostly accountants and agents, not individual landlords and self-employed
There are just four months until the first quarterly filing report, but only around 80,000 individual taxpayers have signed up out of an expected 864,000 individual taxpayers.
The majority of registrations have been from tax agents and accountancy firms, raising questions about how HMRC can achieve full registration of the 864,000 affected taxpayers in time for the first quarterly filing deadline of Friday 7 August.
A recent survey showed that 39% of small business owners have never even heard of MTD, while 19% say they do not understand anything about MTD for Income Tax.
Under MTD for Income Tax, from 6 April, sole traders, self-employed, and landlords with qualifying income over £50,000 for the tax year 2024-25 have to keep digital tax records and make quarterly tax submissions to HMRC. Next year, the threshold drops to £30,000 from April 2027.
The government and HMRC see MTD as the answer to the perennial tax avoidance and evasion challenge, stopping a high level of errors and closing some of the huge tax gap.
Quarterly reporting does not replace the annual self-assessment tax return, but is in addition to current tax compliance requirements, so the annual 31 January deadline will remain a critical date regardless of MTD.
There is still plenty of time to register, so there is no need to panic, but it is important to ensure records are kept and can be submitted to HMRC via MTD commercial software, accountants, bookkeeping firms and tax agents, or using bridging software.
Tax on Winter Fuel Payments
In future, HMRC will claw back the average £200 payment for pensioners with total income over £35,000 through PAYE tax codes unless the individuals file a self-assessment tax return. Based on HMRC figures, around one in five pensioners has an income over £35,000.
The payment will effectively be treated as an income tax charge, although the government says ‘the winter payments themselves are not being made taxable’.
However, for pensioners, it will feel like a major inconvenience and an additional tax charge, which will inevitably cause confusion among a vulnerable, elderly population, many of whom may not be totally digitally experienced.
HMRC figures show this will affect 2.2 million individuals aged over 65 who are in receipt of winter payments and have a total income over the £35,000 threshold.
Cannabis Growing Accountant
An accountant, previously an Associate Director at Deloitte, was convicted in the Royal Court of Guernsey for growing and owning Class B drugs, specifically cannabis, as well as possessing Class C drugs, including Xanax and Gabapentin.
He was sentenced to 240 hours of unpaid community service as a direct alternative to two years’ imprisonment, and a £5,000 fine for the production of a controlled Class B drug, and concurrent sentences of one year’s imprisonment, suspended for two years, for the three drug possession offences.
ICAEW, far from applauding his entrepreneurial spirit. has excluded him from membership of ICAEW.
At a tribunal hearing of the conduct committee, ICAEW found he was liable for disciplinary action, and he was excluded and had to pay costs of £5,342.
The tribunal recommends that suitable arrangements be made with Mr Hart to pay the sum by instalments and over a reasonable period of time.
The ICAEW tribunal heard that in September 2023, police carried out a search warrant at the chartered accountant’s house while he was away in Thailand for a few weeks. Here they found four cannabis plants, grow tents, dehumidifiers and 11 jars of cannabis, as well as around 300 Xanax and Gabapentin pills. The 400 grams of cannabis were valued at up to £18,991, the police said.
Upon returning to Guernsey in October 2023, Hart was questioned by the police and admitted to ‘using all the substances found at his property at the time’.
The tribunal document stated ‘Hart says that the Cannabis cultivation was not started by Mr Hart, and that his house sitter started growing the Cannabis whilst Mr Hart was out of the country’.
However, the document said ‘Mr Hart admits he tended and maintained the cannabis at times whilst he was home’. He was later charged and entered guilty pleas.
Under the ICAEW Code of Ethics, the tribunal said Hart ‘noted that he may lose’ both his ACA and chartered financial adviser (CFA) professional qualifications.
As a result of the conviction, he was sacked from his job as an accountant.
As part of his community service, he worked at a local palliative care hospice in the finance team, helping them with budgeting, financial reporting, benchmarking and other finance-related tasks.
Reduced VAT rate for public EV charging
The First Tier Tribunal has recently agreed that a company that provided public EV charging facilities was right to use a reduced rate of VAT for the supply of electricity.
The company considered the reduced VAT rate of 5% applied to its supplies, on the basis that they fell within the de minimis limit for supplies of electricity and so were deemed to be for “domestic use”. HMRC had disagreed.
ruled that the standard rate applied. The First-tier Tribunal (FTT) has agreed with CMS.
The provision of electricity to a person at any premises at a rate not exceeding 1000 kilowatt hours (kWh) a month is deemed to be for “domestic use”.
Taxes on Property, Savings and Dividends
Income tax on these will increase by two percentage points. The rates of tax on dividends and savings income apply to taxpayers across the UK. However, the rates of tax on property for Scottish and potentially Welsh taxpayers will be determined by the devolved governments.
For 2026/27 onwards, the basic and higher rates of income tax on dividends will increase by two percentage points. The basic rate will increase to 10.75% from 8.75%, and the higher rate to 35.75% from 33.75%. The additional rate for dividend income will continue at 39.35%.
For 2027/28, the rates of income tax on savings will increase by two percentage points. From 6 April 2027, the basic rate will be 22% (currently, 20%), the higher rate 42% (40%) and the additional rate 47% (45%). Separate tax rates will apply to income from property. The new property income rates will be set at the same level as for savings income (see above).
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.
