WELCOME TO HARBOUR KEY’S AUGUST NEWSLETTER, WHICH HOPEFULLY YOU ARE READING WHILE ENJOYING SOME SUNSHINE!
July was busy both in HK HQ, and in the world of tax!
Grace from one of the local schools joined the HK team briefly to undertake her work experience, who wishes to become an accountant. We wish her all the best in the future with her studies and will hopefully see her again on her qualification journey.
We had our team away day in Gloucester, starting with professional and technical training in the morning, followed by a team exercise in the afternoon around the city.
Dan moved to new pastures. We said goodbye to Dan at our away day, wishing him all the best in his new role. In saying goodbye, we say hello to his replacement, Shruti, who has joined the team as a client administrator, and will now be looking after client onboarding and chasing clients for their information, in particular self-assessment!
LEGISLATION DAY
Outside of HK HQ, we had what has become known as Legislation Day(also known as “L Day”). This is an important date in the UK's tax policy calendar on which the Government publishes draft clauses for the next Finance Bill, alongside various other documents including tax information notes and responses to consultations. On the same day (21 July), the Autumn Budget Day was announced - 11 November 2025.
Two key areas relevant to our client base came out of Legislation Day, the first being sight of the inheritance tax (“IHT”) to be charged on unused pension funds from April 2027, first announced in the October 2024 Budget. Details of the changes, and an outline of how it will work can be found HERE.
The second is, despite significant lobbying, the government has not shown any signs of backing away from its announcement to curtail the existing unlimited 100% IHT relief under Agricultural Property Relief (“APR”) and Business Property Relief (“BPR”) to a £1 million allowance for qualifying property (and 20% IHT charge thereafter) with effect from 6th April 2026. If you missed our summary of the BPR changes, please click HERE!
TAX INVESTIGATIONS YIELD A RECORD £48BN
The total additional tax collected by HMRC through investigations rose by 15% last year, reaching a record £48bn, an increase of £7bn from £41bn in 2023. The surge (which we are feeling with the increase in enquiry work) highlights the effectiveness of HMRC's enforcement efforts in tackling tax evasion and ensuring compliance, an area in which the Government is continuing to invest in. Announcements made in both the Autumn Budget 2024 and Spring Statement 2025, designed to raise additional revenue through closing the tax gap (i.e. the difference between tax due and tax paid), were confirmed on Legislation Day:
- HMRC have been granted more power to act against tax advisers facilitating deliberate non-compliance by their clients (to come into force from 1 April 2026);
- Provisions which require tax advisers to register with HMRC and meet minimum standards, before being able to interact with HMRC on behalf of clients (also with effect from 1 April 2026); and
- Powers which will enable HMRC to make better use of third-party data, including the introduction of a new obligation on third-party data-holders (including, for example, financial institutions) to report data to HMRC for tax administration purposes (coming into force before April 2027);
As we are seeing at HK, there is a significant increase in tax investigations of high earners, as HMRC has doubled its revenue from enquiries into wealthy individuals, raising over £1.5bn in 2024. This surge has prompted HMRC to hire an additional 400 compliance officers over the next four years, aiming to generate at least £500m more in tax revenues by 2030. The total amount collected from high earners has increased from £4bn on the previous year to £5.2bn, with HMRC believing the wealthiest Britons are avoiding £2.1bn in tax annually.
As we have stated before, the playing field has changed and a tax enquiry/compliance check will be the norm, not a rarity, and something taxpayers must accept is likely to happen. The key is to make sure your initial reporting is correct and having the supporting records to defend a challenge in the future. If it is a case that you discover a mistake has been made, for example an omission of income, take steps at the earliest opportunity to rectify.
For those clients where we have completed the return, there is tax investigation fee insurance to help pay the fees in dealing with the enquiry. However, the insurance does not cover replying to nudge letters (HMRC contacting you if they believe you have not reported a particular type of income or gain).
COVID LOANS AND GRANTS
It seems a long time ago when we were all locked up to minimise the risk of the spread of Covid, and to keep the businesses and the economy alive, the then Government put in several funding schemes and loans to support businesses. Remember furlough grants to support wage payments, and bounce back loans!
The level of fraud/abuse of the support schemes has been reported on many occasions, and although the first lockdown was five years ago, the Government is still looking to recover wrongly claimed support payments and loans. With legal actions, director disqualification and recovery actions still taking place. An MP has recently been suspended from his party, following questions about Covid loans he took out.
In a recent case, a video game music producer (who was involved with Tomb Raider) was recently jailed for fraudulently applying for two Covid bounce back loans during the pandemic, following his Company going into administration. The company went into liquidation in August 2021 with neither of the loans being repaid. The Insolvency Service took legal action as the rules had been disregarded, as businesses were only allowed one loan.
Both HMRC and insolvency practitioners are actively monitoring Covid fraud, being encouraged to take legal action to make recoveries. Therefore, as with a tax irregularity, if you have a legacy Covid issue, best practice would be disclosing the matter and tidying it up, as the penalties, depending on the circumstances, are becoming increasingly severe.
DATES
- Key Tax dates for the period 1 July 2025 to 31 December 2025
- Autumn Statement - 11 November 2025.
Should you wish to speak with us about a specific matter, or just to be a sounding board or for a chat, please do not hesitate to give us a call on 01452 713277
