Latest Tax News
Data finds HMRC received 91,000 calls to report fraud in first months of pandemic
17 May 2021
Data published by insurer PfP has revealed that HMRC received 91,000 calls to report instances of fraud in the first nine months of the coronavirus (COVID-19) pandemic.
PfP stated that many calls were to report abuse of the government’s Eat Out to Help Out scheme, and others were to log allegations of furlough fraud.
The insurer predicts that more intensive investigations will be carried out and tougher penalties may be handed out by HMRC in the coming months.
‘With so many fraud allegations being made to HMRC during the COVID-19 crisis, there is no doubt that many of them will end up being false,’ said Kevin Igoe, Managing Director at PfP.
‘Months of lockdown restrictions have already put many businesses under huge pressure. HMRC investigations can be costly, time-consuming and can cause enormous stress for the owner-managers and directors involved.’
A spokesperson for HMRC said: ‘Since the start of the pandemic, HMRC has worked consistently to support businesses during what we know has been a uniquely challenging time for them, while continuing to tackle tax fraud and avoidance to maintain a level playing field. The suggestion that we are going to arbitrarily step-up investigations and pile unnecessary pressure on businesses as they seek to recover from the impact of coronavirus is completely false.’
HMRC sets out penalty regime for SEISS abuse
06 May 2021
The fourth Self-Employed Income Support Scheme (SEISS) grant is now live and HMRC has set out the penalties for abuse.
An overclaimed SEISS grant includes any amount of grant which the self-employed were not entitled to receive or was more than the amount HMRC said the applicant was entitled to when the claim was made.
Overpayments must be notified to HMRC within 90 days of receipt of an SEISS grant.
When deciding the amount of any penalty, HMRC will take account whether the taxpayer knew they were entitled to the SEISS grant when they received it and when it became repayable or chargeable to tax because the individual’s circumstances changed.
The HMRC guidance states: ‘If you knew you were not entitled to your grant and did not tell us in the notification period, the law treats your failure as deliberate and concealed. This means we can charge a penalty of up to 100% on the amount of the SEISS grant that you were not entitled to receive or keep.
‘If you did not know you were not entitled to your grant when you received it, we will only charge you a penalty if you have not repaid the grant by 31 January 2022.’
Applications for the fourth grant can be made here.
HMRC contacting claimants for fourth self-employed grant
26 April 2021
The online service for applications for the fourth Self-employment Income Support Scheme (SEISS) grant is now open for claims, HMRC has confirmed.
All applications must be submitted by the individual self-employed worker and cannot be handled by accountants or tax advisers.
The fourth grant will be 80% of three months’ average trading profits, to be claimed from late April 2021.
Payment will be in a single instalment capped at £7,500 in total and will cover the period February to April 2021. The scheme has been extended to those who filed a 2019/20 self-assessment tax return prior to 3 March 2021.
Claimants must have been impacted by reduced activity, capacity and demand, or have been trading previously and are temporarily unable to do so. All claims must be made on or before 1 June 2021.
There is no requirement for an earlier SEISS grant to have been claimed to be able to claim the fourth grant. Applications for the fourth grant can be made here.
UK government cuts electric vehicle grants by £500
19 April 2021
The government has cut the Plug-in Car Grant and Van & Truck Grant by £500 and lowered the pricing cap on qualifying electric vehicles.
The Department for Transport will now provide grants of up to £2,500 for electric vehicles on cars priced under £35,000. This is a reduction from the current £3,000 available for vehicles costing up to £50,000.
This will mean the funding will last longer and be available to more drivers, the government statement said. Grants will no longer be available for higher priced vehicles, typically bought by drivers who can afford to switch without a subsidy from taxpayers.
The number of electric car models priced under £35,000 has increased by almost 50% since 2019 and more than half the models currently on the market will still be eligible for the grant.
However, Mike Hawes, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT), said: ‘The decision to slash the Plug-in Car Grant and Van & Truck Grant is the wrong move at the wrong time. New battery electric technology is more expensive than conventional engines and incentives are essential in making these vehicles affordable to the customer.’
‘This sends the wrong message to the consumer, especially private customers, and to an industry challenged to meet the government’s ambition to be a world leader in the transition to zero emission mobility.’
New claims required for home working tax relief
13 April 2021
Employees who are working from home will need to make new claims for tax relief for the 2021/22 tax year, HMRC has stated.
From 6 April 2020, employers have been able to pay employees up to £6 a week tax-free to cover additional costs if they have had to work from home.
Employees who have not received the working from home expenses payment direct from their employer can apply to receive the tax relief from HMRC.
HMRC has also confirmed that the £6 per week payment is available in full, even if an employee splits their time between home and the office.
The allowance is to cover tax-deductible additional costs that employees who are required to work from home have incurred, such as heating and lighting the workroom, and business telephone calls.
Last year an online portal was launched that allows employees to claim tax relief for working at home. The portal was set up to process tax relief on additional expenses for employed workers who have been told to work from home by their employer during the coronavirus (COVID-19) pandemic.
The portal can be found at www.gov.uk/tax-relief-for-employees/working-at-home.
Start of 2021/22 tax year brings in number of fiscal changes
06 April 2021
The 6 April start of the 2021/22 tax year sees important fiscal and business changes come into effect, including the introduction of the Coronavirus (COVID-19) Recovery Loan Scheme (RLS).
The scheme provides financial support to businesses affected by the COVID-19 pandemic. The scheme gives lenders a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The RLS is open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.
The RLS is initially available through a handful of lenders accredited by the British Business Bank.
The rules relating to off-payroll workers, commonly known as IR35, also change from 6 April 2021. The new rules shift responsibility for making the decision on employment status on each contract away from contractors and personal service companies (PSCs) and on to the client receiving their services. This has already been done in the public sector.
From 6 April, you are no longer responsible for deciding your employment status if you are working for a ‘medium’ or ‘large’ client in the private sector. It becomes the client’s responsibility instead. The change also has consequences for tax and national insurance contributions (NICs).
Additionally, for the new tax year, a nil-rate of tax applies to zero-emission vans within the van benefit charge. In 2020/21 such vans have a van benefit charge at 80% of the standard flat rate of £3,490.
Finally, the personal allowance rises to £12,570 for the 2021/22 tax year. It has been frozen at this level for the tax years 2022/23 to 2025/26.
Payment deadline looming for self assessment taxpayers
31 March 2021
Self assessment taxpayers must pay any outstanding tax liabilities in full or set up an online payment plan for the 2019/20 financial year by 1 April to avoid incurring penalty charges, HMRC has stated.
Normally a 5% late payment penalty is also charged on any unpaid tax that is still outstanding on 3 March. But this year, because of the impact of the coronavirus (COVID-19) pandemic, HMRC is giving taxpayers more time to pay or set up a payment plan.
Taxpayers can pay their tax bill or set up a monthly payment plan online and are required to do this by midnight on 1 April to prevent being charged a late payment penalty. The online Time to Pay facility allows taxpayers to spread the cost of their self assessment tax bill into monthly instalments until January 2022.
Almost 117,000 taxpayers have set up a self-serve Time to Pay arrangement online, totalling more than £437 million. Find out more about setting up a Time to Pay arrangement here.
Jim Harra, HMRC’s Chief Executive, said: ‘Anyone worried about paying their tax can set up a payment plan to spread the cost into monthly instalments. Support is available at GOV.UK to help anyone struggling to meet their obligations.’
Second home owners dealt blow after tax crackdown on holiday lets
24 March 2021
Tens of thousands of second-home owners who falsely register their properties as holiday lets in order to claim tax breaks face a clampdown by the taxman, the treasury said yesterday.
At present owners can declare they are renting out second properties – meaning they are charged business rates rather than council tax, which is higher.
A total of 60,000 properties are registered in this way. But the Treasury is concerned that many owners are getting away with paying business rates while making little or no effort to rent their properties.
Now HMRC will tighten rules to force holiday landlords to prove they have made a realistic effort to rent properties out for at least 140 days per year.
HMRC said 96 per cent of those who have registered their property to avoid paying council tax – 57,000 – have declared a rateable value of £12,000 or less.
That means they are also exempt from business rates under a Covid scheme designed to help small firms. In effect, they are getting their rubbish collected and other council services for free.
Officials also believe some owners may have claimed coronavirus support grants of up to £9,000 each to replace lost income which they suspect they would never have achieved because they had no intention of letting properties out.
VAT deferral – apply now to spread your payments
19 March 2021
The VAT deferral new payment scheme is open for all businesses who deferred VAT due between 20 March and 30 June 2020 and still have payments to make, or who are unable to pay in full by 31 March 2021. This includes those on Payment on Account and Annual Accounting schemes.
Businesses can apply now to spread these payments over a number of months – the later the join date the fewer instalments available to them. Businesses should join by 19 March 2021 to benefit from the maximum number of 11 instalments.
Businesses can join the scheme quickly and simply online without the need to call HMRC. To find out more information, including the things you need to do before joining, go to GOV.UK.
Businesses need to apply by or before 21 June 2021 if they want to join the scheme online.
Super deduction allows companies to claim a 130% first year allowance
17 March 2021
The much-vaunted super deduction allows companies to claim a 130% first year allowance (FYA) for investment incurred on ‘main pool’ items of plant and machinery acquired in the period between 1 April 2021 and 31 March 2023.
This includes the more obvious items of plant and machinery like manufacturing equipment, machines and computers, but it also extends to items of main pool plant and machinery that are fixtures in properties.
When we think of investment in new plant and machinery, we must remember that the super deduction may also be available for a proportion of construction expenditure incurred on new or refurbished buildings. This point is often overlooked but it could be a stimulus to commence building works in the period.
Individuals who started their business in 2019/20 need to provide additional evidence to HMRC
15 March 2021
HMRC is writing to up to 100,000 self-employed traders asking them to confirm their identity and prove they have been trading before they can claim fourth SEISS grant. If the trader does not respond adequately to HMRC they won’t get the grant.
Only taxpayers who started trading as a self-employed business after 5 April 2019 will receive the SEISS verification letter from HMRC and we understand that only part of that group will be contacted.
Those new traders can claim support under the SEISS for the first time if they submitted their 2019/20 tax return by midnight on 2 March 2021.
Details of fourth grant for the self-employed published
08 March 2021
HMRC has published details of the eligibility criteria for the fourth grant under the coronavirus (COVID-19) Self-employment Income Support Scheme (SEISS), which will cover the period February 2021 to April 2021.
At the 2021 Budget it was confirmed that the fourth SEISS grant will be set at 80% of three months’ average trading profits, paid out in a single instalment, capped at £7,500 for those with a turnover reduction of 30% or more.
Alternately, it will be worth 30% of three months’ average trading profits, capped at £2,850 for those with a turnover reduction of less than 30%.
To be eligible for the fourth grant, self-employed workers must have filed their 2019/20 tax return by midnight on 2 March 2021. This includes those who became self-employed in 2019/20, provided they have filed according to the deadline.
The remaining eligibility criteria are unchanged so applicants must either be currently trading but impacted by reduced demand, or be temporarily unable to trade due to COVID-19. They must also declare an intention to continue trading.
Further details on the fifth grant will be provided in due course.
Budget 2021 key points
03 March 2021
Everything you need to know as the Chancellor Rishi Sunak delivers a budget dominated by the battle to recover from the COVID-19 crisis.
- Rishi Sunak said Covid-19 has ‘fundamentally altered’ our way of life, telling the Commons: ‘Much has changed, but one thing has stayed the same: I said I would do whatever it takes – I have done and I will do.’
- He told MPs that the damage coronavirus has done to the UK economy has been ‘acute’ as he began his statement.
- The Chancellor added it will take the UK and the whole world a ‘long time to recover from this extraordinary economic situation, but we will recover.’
- Sunak said more than 700,000 people have lost their jobs since March 2020 and the economy has shrunk by 10 per cent, the largest fall in more than 300 years.
- The Office for Budget Responsibility is now forecasting, in their words ‘a swifter and more sustained recovery’ than expected in November.
- The OBR forecasts that the economy will grow this year by 4 per cent, by 7.3 per cent in 2022, then 1.7 per cent, 1.6 per cent and 1.7 per cent in the last three years of the forecast.
- Sunak said a July 2020 forecast suggested unemployment could peak at 11.9 per cent but the forecast now is for a much lower peak of 6.5 per cent.
- He said the measures to support the economy amounted to £65billion over this year and next, taking the total Government support to £407billion.
- The Bank of England will keep its 2 per cent inflation target but now its remit will also reflect the importance of environmental sustainability and the transition to net zero.
- The Chancellor confirmed the furlough scheme will be extended until the end of September, and employees will continue to receive 80 per cent of their salary for hours not worked.
- He said the support for self-employed workers will also continue until September, with the fourth grant providing three months of support at 80 per cent of average trading profits.
- The Chancellor said: “When the scheme was launched, the newly self-employed couldn’t qualify because they hadn’t all filed a 2019/20 tax return. But as the tax return deadline has now passed, I can announce today that, provided they filed a tax return by midnight last night, over 600,000 more people, many of whom only became self-employed last year, can now claim the fourth and fifth grants.”
- The Chancellor said the Government will not raise the rates of income tax, national insurance, or VAT but will freeze personal tax thresholds at the current level this year.
- The basic allowance will increase again next year to £12,570 and be held there until April 2026.
- The higher rate threshold will y be increased next year to £50,270, and will then also remain at that level until 2026.
- Sunak said the inheritance tax threshold, the pensions lifetime allowance and the annual exempt amount in capital gains tax will be held at current levels until April 2026.
Business taxation and support
- The Chancellor said a ‘new restart grant’ will be provided in April to help businesses reopen.
- He told MPs non-essential retail businesses will receive grants of up to £6,000 per premises.
- Hospitality and leisure businesses, including personal care and gyms which open later, or be more impacted by restrictions when they do will get grants of up to £18,000. That totals £5 billion of new grants, on top of the £20 billion already provided.’
- When the Bounce Back Loan and CBIL schemes come to an end a new recovery loan scheme starts with loans from £25,000 up to £10 million available through to the end of this year.
- Sunak said the 100% business rates holiday in England will continue from April until June.
- The 5% reduced rate of VAT for hospitality, holiday accommodation and attractions will be extended for six months to September 30, followed by an interim rate of 12.5% for another six months.
- Corporation tax paid on company profits will increase to 25% in 2023.
- Small businesses with profits of £50,000 or less will be kept on the current rate of 19%. This accounts for around 70% of companies – 1.4 million businesses.
- A taper above £50,000 will also be introduced to ensure only businesses with profits of £250,000 or greater will be taxed at the full 25% rate.
Domestic VAT reverse charge comes into effect on 1 March
01 March 2021
The twice-delayed introduction of the domestic VAT reverse charge for construction services will come into effect on 1 March 2021.
The change was originally scheduled to come into effect from 1 October 2019 but was deferred for 12 months after industry bodies highlighted concerns about the lack of preparation and the impact on businesses.
It was put back another five months due to the impact of the coronavirus (COVID-19) pandemic on the sector. The change will now apply from 1 March 2021 and will overhaul the way VAT is payable on building and construction invoices as part of a move to reduce fraud in the sector.
Under the domestic reverse charge, the customer receiving the service will have to pay the VAT owed straight to HMRC instead of paying the supplier if they report via the Construction Industry Scheme (CIS).
An amendment to the original legislation has made it a requirement that for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform their subcontractors, in writing, that they are end users or intermediary suppliers.
HMRC said the additional amendment is designed to make sure both parties are clear in regard to whether the supply is excluded from the reverse charge. It reflects recommended advice published in HMRC guidance and brings certainty for subcontractors as to the correct treatment for their supplies.
HMRC announces that Self Assessment customers will not be charged the initial 5% late payment penalty
19 February 2021
Today HMRC has announced that Self Assessment customers will not be charged the initial 5% late payment penalty if they pay their tax or make a Time to Pay arrangement by 1 April.
The payment deadline for Self Assessment is 31 January and interest will be charged from 1 February on any amounts outstanding. The deadline has not changed, but this year, because of the impact of COVID 19, HMRC is giving taxpayers more time to pay or set up a payment plan.
Payment plans or payments in full must be in place by midnight on 1 April to avoid a late payment penalty.
HMRC recognises the pressure affecting customers due to the pandemic, and anyone worried about paying their tax should contact HMRC for help and support on 0300 200 3822.
The self-serve Time to Pay facility allows customers to spread the cost of their tax liabilities into monthly instalments until January 2022. Customers can set up a payment plan online, on GOV.UK.
Self Assessment customers who have yet to file their tax return should do so by 28 February to avoid a late filing penalty.