The Tax Round: Winter edition 2023

Welcome to the Winter edition of the Tax Round, where we have handpicked a selection of interesting tax news, insights and updates, that we hope you will enjoy reading as well as as well as some key diary dates to take note of.

In this Winter edition:

Our tax articles include the following:

• Your complete guide to the Autumn Statement
• One widget or two? Covid support still on HMRC’s radar
• New employee checks
• HMRC detective work means tax bill for eBay trader
• Paying voluntary National Insurance contributions
• Child Benefit – watch the sting in the tail
• VAT: Selfbuild DIY Claim – Online submission
• When is VAT registration required
• Beware of scammers impersonating HMRC 

If you need any further guidance or information on any of the topics covered in this newsletter, or would like to discuss your personal tax and accounting matters, do get in touch Mark Moore or Marina Trinchese who will be happy to assist you. 

Happy reading!

Your complete guide to the Autumn Statement

On 22 November the Chancellor unveiled an ‘Autumn Statement for Growth’, emphasising the importance of stimulating economic growth in the UK, against the backdrop of improving economic conditions.

The Chancellor introduced 110 measures designed to support businesses, underscoring a commitment to fostering expansion. Notable elements of the statement included significant changes to National Insurance and the reform of work-related state benefits. 

Read more and download guide.

One widget or two? Covid support payments still on HMRC’s radar

With support schemes having lost between £3.3 billion and £7.3 billion to error and fraud, HMRC isn’t letting go now.

It’s still checking that claims under schemes like the Coronavirus Job Retention Scheme (CJRS or furlough scheme), met all necessary conditions.

Any employers who used the furlough scheme, and have yet to review details of their claim, are advised to make time to do so. If this brings any errors or uncertainties to light, it is best to contact HMRC at once. Repayment of any money received in error will be needed, but it is just as important that HMRC is formally notified that support has been overclaimed. Where errors are disclosed voluntarily (rather than at HMRC prompting), and HMRC is satisfied as to the full cooperation of the taxpayer, it can reduce the amount of any penalty it may seek to charge.

Read more

New employee checks

HMRC is publicising a new way that employers can be provided with an employee’s National Insurance number (NINO).

Apple iPhone users have now been given the functionality to store the NINO in their Apple Wallet: online, or through the HMRC App. This means that new employees may increasingly provide proof of their NINO by using their Apple Wallet, rather than giving the employer the traditional NINO confirmation letter from HMRC.

HMRC is reassuring employers that this makes valid proof, and can be accepted in just the same way that the traditional letter would be. At the moment, it’s a service only available to Apple users, but HMRC is working to extend it to Android phone users in due course. It will provide an update when it’s made provisions for the NINO to be saved to the Google Wallet.

Employers should check that the employee’s name matches what they see in the Apple Wallet. If a record is needed, HMRC advises asking the employee for a screenshot.

It’s all part of HMRC’s continuing push towards digital service. Issuing confirmation letters by post can take HMRC up to 15 days: on the other hand, HMRC says that using its App to confirm the NINO should only take a matter of minutes. The Personal Tax Account can also be used to view or download, print, save or share a letter showing the NINO.

HMRC detective work means tax bill for eBay trader

Online sales: one of those areas where awareness of tax is often low.

On the one hand, someone with a day job and a sideline on eBay, who didn’t think he had any trading income. On the other hand, a bill for over £28,000 from HMRC. This was the dispute that recently came before the Tax Tribunal.

The taxpayer in question worked as a security officer. He hadn’t told HMRC he was trading and claimed that he was being harassed by the tax authority. His case rested on the argument that his eBay and PayPal accounts had been repeatedly hacked, and that many of the PayPal transactions under investigation were personal transactions, not trading transactions. HMRC looked at his various eBay names and his presence on another trading platform, noted what he offered for sale, and totted up 793 feedback entries in one twelve-month period alone. It investigated his bank account, which showed payments from Amazon and PayPal, and payments to delivery companies, like Parcel Monkey: and it drew its own conclusions.

The Tribunal did not accept the taxpayer’s version of events. ‘The explanations . . .  are not credible given the volume of transactions, the period over which they are recorded and the transfers involving his Barclays account.’ In fact, it considered that HMRC’s treatment was bordering on the generous. HMRC’s reading of the case won the day: online sales were held to amount to trading.

The case shows HMRC’s capability when it comes to trawling data in pursuit of transactions it thinks are taxable. With new rules set to apply from 1 January 2024, giving the tax authority greater access to information on the income of those using digital platforms to sell goods and services, HMRC looks set to turn digital detective more often.

Paying voluntary National Insurance contributions

It’s all about plugging holes in your National Insurance record. And that in turn, is about making sure there are enough years of National Insurance contributions (NICs), or National Insurance credits, to get the full State Pension.

Gaps in the contributions record can occur for all sorts of reasons. They can happen, for example, if you are self-employed, but have not paid contributions because of small profits; or are employed with low earnings; are unemployed and didn’t claim benefits; or have been living or working outside the UK.

It is possible to make voluntary contributions to fill in gaps in the record, though time limits and eligibility requirements apply. Usually, you can only pay for gaps in the National Insurance record for the past six years. But as part of the transitional arrangements introduced alongside the new State Pension, there is a more generous deadline, applying for certain specific tax years.

For the tax years from April 2006 to April 2017, the deadline for contributions is 5 April 2025. This is a further extension: the government’s original intention had been to allow contributions only until 31 July 2023. The provision particularly impacts men born after 5 April 1951, or women born after 5 April 1953, for whom retirement planning will be on the horizon. The new deadline gives them more time to decide whether voluntary contributions will be of benefit, and allow them to access State Pension entitlements. But it could also benefit anyone looking to make good a gap in the contributions record for the past six years.

Voluntary contributions don’t always increase the State Pension, so it’s important to check the position before making a decision. You can find out how to check your NI record, get a State Pension forecast, decide if making a voluntary contribution is worthwhile, and make a payment on gov.uk. You can also check your NI record through your Personal Tax Account.

Child Benefit-Watch the sting in the tail 

If you or your partner get Child Benefit, keep the High Income Child Benefit charge (HICBC) in mind.

High income for these purposes is lower than you might think. The charge applies if you, or your partner, individually have income more than £50,000, and

• you or your partner get Child Benefit, or
• someone else gets Child Benefit for a child living with you, and they contribute at least an equal amount towards the child’s upkeep.

The charge applies regardless of whether the child living with you is your child, or not. Note, too, that for the HICBC, partner doesn’t just mean spouse or civil partner, but includes someone you live with as if you were married.

Read more

VAT Self Build DIY Claim online submission

As part of HMRC’s continuing mission to move taxpayer interactions online and away from telephones and post, HMRC have announced the “digitisation of the self-build DIY claim process” this week, although the traditional paper format is still available for those not ready for the digital revolution.

Background of the VAT Self Build DIY Scheme

The VAT self build DIY scheme exists to place an individual who is building (or converting) their own home, in the same VAT position as if the individual had purchased the house from a property developer.

When engaging with a builder/contractor in the construction of a new build dwelling (or conversion into a dwelling), the builder/contractor would zero rate their supplies of labour, and also materials when installed by the contractor (labour).  With the DIY scheme, the individual can reclaim VAT on the costs of building materials they have purchased themselves.

Read more

You must register your business for VAT when its taxable turnover exceeds the threshold set by the government, currently set at £85,000 for 2023.

This mandatory registration will enable you to collect VAT from your customers, submit VAT returns and claim back VAT on purchases where appropriate. However, some businesses can voluntarily register for VAT before their turnover reaches the threshold, for various reasons, to make them look more professional for example. 

When is VAT registration required?

You must register your business for VAT when its taxable turnover exceeds the threshold set by the government, currently set at £85,000 for 2023.

This mandatory registration will enable you to collect VAT from your customers, submit VAT returns and claim back VAT on purchases where appropriate. However, some businesses can voluntarily register for VAT before their turnover reaches the threshold, for various reasons, to make them look more professional for example. 

Why should you register for VAT? 

 Registering for VAT is not only mandatory once you’ve reached the threshold, but it allows you to charge and collect VAT from your customers and reclaim VAT on your purchases.  

Read more

Beware of Scammers impersonating HMRC

With the festive season fast approaching and scams on the rise, we would like to remind our clients and contacts of the importance of being vigilant. The 31 January 2024 tax payment deadline is an opportune time for scammers to send fraudulent payment demands, with the correspondence sent appearing to originate from HMRC. If you are in any doubt whether communication you receive regarding your tax payment, or indeed any other correspondence from HMRC, is genuine, please contact your usual Rayner Essex contact and we would be pleased to confirm the position for you.

Guest Authors for our Spring Tax Round

If any of our associates be interested in writing content for our next Spring edition of the Tax Round, get in touch with Jenny Tryfonos and we would be happy to discuss your contribution as a guest author.

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