Happy Tax Freedom Day, which was on 8 June, falling a week later than last year, reflecting the ever-growing tax burden on individuals. This means that taxpayers have worked 159 days for HMRC this year, since the tax year started on 6 April. This means 8 June is the first day people start working for themselves!
CHARITY WING WALK!
If you missed our May newsletter, Emma, Deborah, James and Megan took to the skies on 14th May wing walking and raising money for Hope for Tomorrow. We cannot thank everyone enough for their generosity, the final amount raised was £4,185. The funds raised will be of great benefit to Hope For Tomorrow, so they can continue their great work helping patients fit their cancer treatment into everyday life, rather than the other way around.
Team HK are recruiting for an experienced accountant to join the existing team due to growth, details can be found HERE. In addition, we are looking to find a business admin apprentice via Gloucester College to support the team.
ENGAGEMENT LETTER PROJECT
We continue with our engagement letter update project as reported in the April newsletter. If you have not been contacted yet, your new engagement pack will be coming via our new client portal Onvio and you will receive a link on how to use and access Onvio, which we will use going forward for the secure delivery of client information. To make sure we set up the system correctly for everyone, you may receive a call from Megan requesting/checking email addresses.
RECRUITMENT & RETENTION USING TAX FREE BENEFITS
Following on with our theme of providing our clients with advice and support in these testing times, this month we look at employee incentives and benefits. The big corporations with big budgets can throw lots of money at recruitment and outspend the type of businesses Harbour Key support, but this is not always the most effective approach.
With the cost-of-living crisis most employees want increased salaries, but there are ways that employees can be rewarded that can be more tax efficient than simply paying extra salary, which still improves their personal financial position. Click below to see our full blog.
HMRC TARGETED ACTIVITY
Further to the article in our April newletter regarding the total change in HMRC’s behaviour from the soft approach over the period of the Covid pandemic, to a much tougher, hardline approach, we are seeing this behaviour continue, with some further examples below.
Entrepreneurs’ Relief (now known as Business Asset Disposal Relief).
Entrepreneurs' Relief (“ER”) is the 10% tax rate that a business owner can claim on the sale of their business providing certain conditions are met. Prior to the March 2020 Budget, the lifetime allowance for the relief was £10m but this, with the renaming of the allowance, was reduced to £1m. We are seeing HMRC issuing more enquiries into ER claims and it has confirmed to the Chartered Institute of Taxation that they intend to send ‘nudge letters’ to some taxpayers. The nudge letter campaign will target those who have made substantial gains during their lifetime and may have inadvertently exceeded their ‘lifetime allowance’ for entrepreneurs’ relief and likely to look at the anti-avoidance rules introduced in the March 2020 Budget, which took effect from 6 April 2019 (although only announced in March 2020), which may have caught out some taxpayers.
We have already assisted one client who claimed the £1m lifetime allowance for a transaction in the 2021 tax year, HMRC opening an enquiry as the information they held (which is easy to find with the AI Connect IT system), they had made two previous small disposals many years ago on which the 10% tax rate applied.
Electronic Sales Suppression (“ESS”)
HMRC has new powers to tackle electronic sales suppression. ESS is a form of tax evasion where a business manipulates electronic sales records. The business does this either during or after the point of sale. This activity hides or reduces the value of individual transactions. It reduces the recorded turnover of the business and corresponding tax liabilities, whilst providing what appears to be a credible and compliant audit trail. HMRC believe that ESS is a growing form of tax evasion, and as part of its new powers will be undertaking targeted activities to challenge the practice.
Self-Employment Income Support Scheme (SEISS)
Self-employed workers who wrongly claimed the Government SEISS Covid-19 grants are being challenged by HMRC to pay the money back or face penalties. The Treasury believes some taxpayers made claims when they were never trading to the degree to which they had claimed or had ceased operating altogether. HRMC is informing those found not to have been entitled to the grant - or to have over-claimed - to pay it back within 30 days or face a penalty of 5% of the overpaid amount.
HMRC says 20% of tax rebate requests are taking longer than its 15-day target to make the repayments, attributing the delay to the fact it is carrying out an “increased level of checks”, following a surge in attempted self-assessment fraud. We have seen our clients experience much longer delays and this includes all repayments, not just self-assessment. We are also seeing, despite requesting a repayment, HMRC allocating the repayment against the July payment on account. (It used to be the case that we couldn’t get it allocated against the payment on account when requested and they would repay!)
HMRC has halted the payment of research and development (R&D) tax credits while it investigates irregularities in claims for the relief. HMRC contacted accountancy firms recently informing them of the decision to pause the payment of R&D tax credits as it investigates what it refers to as ‘irregular claims’ for the tax credit payments, to ‘ensure they prevent abuse of the relief’.
In these tough times, businesses and individuals will be desperate for their refunds, however in respect of R&D HMRC has requested that claimants do not contact the R&D helpline/mailbox to chase claims. Instead, it has asked agents and companies to review their online account for updates on the status of claims.
The Trust Registration Service (TRS) is a register of the beneficial ownership of trusts. It was set up in 2017 as part of an EU anti-money laundering directive aimed at combatting money laundering, serious crime, and terrorist financing. All UK express trusts liable to pay UK tax were required to register. New rules came into force in October 2020 that require all UK trusts, apart from a few exceptions and some non-UK trusts in existence on or after 6 October 2020, to register with HMRC by 1 September 2022, including trusts that have closed since that date.
The new rules have widened the TRS to all UK trusts including ones not liable to tax unless the trust is specifically excluded, which is not many - pension schemes, charitable trusts (both of these are reportable on other registers), will trusts that are wound up within two years of death, policy trusts paying out on death or critical illness and existing trusts with a value of less than £100 created prior to 6 October 2020. This means basically anything else, for example if you are holding shares for another, for example an adult holding shares for their child under a simple bare trust arrangement until they reach 18 – this is reportable.
- Remuneration Trusts – HMRC has announced a Settlement Opportunity to participants in a tax avoidance arrangement commonly known as Remuneration Trusts or Creditor Protection Trusts. Applications to enter the opportunity need to be submitted (along with full supporting calculations) by 31 July 2022. These arrangements were very aggressive tax planning arrangements and HMRC view has always been that the Disguised Remuneration anti-avoidance rules apply to such arrangements and that both PAYE and NIC falls due. More information can be found here.
- £400m fund launched to support SMEs - HSBC UK has launched a £15bn lending fund today for small and medium-sized businesses with £400m ring-fenced for businesses in Gloucestershire and Wiltshire.
- Tax credits - Claimants will shortly be receiving their annual renewal pack from HMRC asking them to check their details to renew claims. You must tell HMRC about any changes to your circumstances or if anything in your pack is incorrect. You must renew your tax credits by the date shown on your renewal pack. For most people, the date is 31 July 2022.
DATES FOR YOUR DIARY
- 5 July– Last day for agreeing the operation of a PAYE Settlement Agreement (PSA) for the previous tax year with HMRC.
- Deadline for submitting forms 42, Forms EMI40 and other relevant forms to HMRC to report share-related benefits provided to employees in the previous tax year. Return can only be submitted via HMRC’s online system, see our blog
- Last day for giving any relevant employees their copy of form P11D for the previous tax year.
- 31 July – Tax credit renewal deadline.
- 31 July – Second payment on account due to HMRC.
- 1 September - Trustees of trusts without a tax liability are required to register their trusts with HMRC.
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.
Please do not hesitate to give us a call us on 01452 713277