Category: General

A recent Supreme Court decision examined in some detail HMRC’s powers in relation to issuing a discovery assessment. HMRC generally use discovery assessments where the statutory time limit for looking into a return has expired.

If certain conditions are satisfied, then HMRC can make a discovery assessment:

• 4 years from the end of the year of assessment in which the further liability to tax arises where the loss of tax is not due to careless or deliberate behaviour
• 6 years from the end of the year of assessment in which the further liability to tax arises where the loss of tax is due to careless behaviour of the relevant person.
• 20 years from the end of the year of assessment in which the further liability to tax arises where the loss of tax is due to deliberate behaviour of the relevant person.

The case in question centred on two main issues. Firstly, whether there had been a deliberate inaccuracy in a 2007-8 tax return enabling HMRC to issue a discovery assessment within the extended 20-year limit and secondly, whether HMRC had made a valid discovery.

The First-tier Tribunal (FTT), the Upper Tribunal (UT) and the Court of Appeal all decided that HMRC could not assess the taxpayer. The Supreme Court held that the interpretation of the tax return by HMRC did not properly consider the whole document and that there was no inaccuracy. Commenting further, the Judges opined that even if there was, they would not have been satisfied that such an inaccuracy was deliberate. The Supreme Court also rejected the notion of 'staleness' in respect of the discovery assessments.

The low-emission vehicles plug-in grant can help you save up to £2,500 on the purchase price of new low-emission vehicles. The scheme was first launched in 2011 and is available across the UK with dealers using the grant towards the price of eligible new cars. The paperwork for the grant application is handled by the dealer. The scheme is open to qualifying purchases by private individuals and businesses.

HMRC publishes a list of qualifying cars and only cars listed are eligible for the grant. There are also grants available for specified motorcycles, mopeds, small vans, large vans, taxis and trucks.

The grant is available for cars with CO2 emissions lower than 50g/km and a 'zero-emission' range of at least 112km. To qualify for the grant, the cars must have an 'on the road' price cap of less than £35,000. This means that many popular environmentally friendly electric cars are not available under the scheme as their sale price exceeds the price cap.

There are separate criteria for other vehicle classes. This includes motorcycles, mopeds, small vans, large vans, taxis, small trucks and large trucks. For example, for motorcycles that have no CO2 emissions and can travel at least 50km between charges.

The Office of Tax Simplification (OTS) was established in July 2010, to provide advice to the Chancellor of the Exchequer on simplifying the UK tax system. The Financial Secretary to the Treasury has recently written an extensive letter to the OTS regarding the conclusions of the first five-year review and to respond to the OTS reviews into Inheritance Tax (IHT) and Capital Gains Tax (CGT).

The letter confirms that after careful consideration, the government has decided not to make any changes to the IHT lifetime gifts rules at the current time. It was also confirmed that changes to the design and operation of CGT will be kept under review.

The government has accepted the following five recommendations from the OTS report on the technical and administrative issues with CGT:

1. Integrate the different ways of reporting and paying CGT into the Single Customer Account. This is part of a long-term strategy.
2. Extending the reporting and payment deadline for the UK Property return to 60 days. This has been completed.
3. Extending the ‘no gain no loss’ window on separation and divorce. This will be subject to consultation over the course of the next year.
4. Expanding the specific Rollover Relief rules which apply where land and buildings are acquired under Compulsory Purchase Orders (CPO). This will be subject to a final consultation. 
5. Various improvements in CGT guidance on specific areas. HMRC has already completed a review and expansion of the guidance on the UK Property Tax Return and will proceed in other areas identified in the OTS report.

The government will also consider five other recommendations by the OTS including the treatment of separate share pools, the practical operation of Private Residence Relief nominations and a review of the rules for enterprise investment schemes.

At the Autumn Budget 2021, it was announced that there would be a dedicated day this Autumn where the government would set out further plans to continue building a modern, simple and effective tax system. This 'day' was on 30 November 2021, and referred to by HMRC as the aptly named, Tax Administration and Maintenance Day.

A number of documents were published including:

• An update on reforms to Small Brewers Relief.
• A technical consultation setting out further detail on the conclusions to the government’s review of business rates.
• A report on Research and Development (R&D) tax reliefs, providing further details on announcements made at the Budget which included refocusing relief in the UK, targeting abuse, and supporting innovation by expanding qualifying expenditure to capture cloud and data costs. 
• A Call for Evidence on reforming registration for Income Tax Self-Assessment (ITSA) to give taxpayers a better understanding of their tax obligations and support available to them.
• Publishing a summary of responses to the Call for Evidence on the Tax Administration Framework Review (TAFR), including plans to reform several areas of the tax administrations system to simplify and modernise it.
• A Call for Evidence on the role umbrella companies play in the labour market to improve our understanding of the sector.
• Publishing the first five-year review of the Office of Tax Simplification (OTS) launched in March 2021 to examine the effectiveness of the OTS.
• A consultation on potential changes to the Stamp Duty Land Tax reliefs for mixed-property and multiple dwellings to ensure they operate fairly and to reduce the scope for misuse.

The introduction of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) has been delayed by one year until April 2024. This change was announced in a Written Statement to Parliament. The reason for the delay was given as combination of the issues many UK businesses and their representatives are facing as a result of the pandemic as well as feedback from interested parties.

MTD for ITSA will fundamentally change the way businesses, the self-employed and landlords interact with HMRC. The regime will require businesses and individuals to register, file, pay and update their information using an online tax account. From April 2024, the rules will apply to taxpayers who file Income Tax Self-Assessment tax returns with business or property income over £10,000 annually.

General partnerships will not be required to join MTD for ITSA until a year later, in April 2025. The date other types of partnerships will be required to join will be confirmed in the future. The new system of penalties for the late filing and late payment of tax for ITSA will also be aligned with the new MTD dates.

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the MTD for ITSA. The pilot is not affected by the delay and will be extended in 2022-23 in preparation for larger scale testing in 2023-24. Under the pilot, qualifying landlords and sole traders (or their agents) can use software to keep digital records and send Income Tax updates instead of filing a Self-Assessment tax return.

The MTD regime started in April 2019 for VAT purposes only when businesses with a turnover above the VAT threshold were mandated to keep their records digitally and provide their VAT return information to HMRC using MTD compatible software. From April 2022, MTD will be extended to all VAT registered businesses with turnover below the VAT threshold of £85,000.

HMRC is warning new students starting university that they could be targeted by scammers trying to steal their money and personal details. As new students start the academic year, they can be particularly vulnerable to tax scams. This is especially prevalent if they have a part-time job and are new to interacting with HMRC. This year, there is a significant increase in the numbers of students attending university and means that more young people may choose to take on part-time work. 

Many tax scams are directly targeting university students. Fraudulent emails and texts will regularly include links which take students to websites where their information can be stolen. Between April and May this year, 18- to 24-year olds reported more than 5,000 phone scams to HMRC.

These scams often offer fake tax refunds which HMRC does not offer by SMS or email.  Students can also be approached to act as ‘money mules’, with offers of various rewards for transferring funds through their own, genuine financial accounts, inadvertently laundering criminal funds.

Commenting on the warning, HMRC’s Head of Cyber Security Operations at HMRC, said: 

‘Our advice is to be wary if you are contacted out of the blue by someone asking for money or personal information. We see high numbers of fraudsters contacting people claiming to be from HMRC. If in doubt, our advice is – do not reply directly to anything suspicious, but contact HMRC through GOV.UK straight away and search GOV.UK for HMRC scams’ .

The Prime Minister, Boris Johnson has set out the government’s autumn and winter plan for managing Covid. 

The government is aiming to sustain the progress made and prepare the country for future challenges, while ensuring the National Health Service (NHS) does not come under unsustainable pressure.

The government plans to achieve this by:

• Building our defences through pharmaceutical interventions: vaccines, antivirals and disease modifying therapeutics.
• Identifying and isolating positive cases to limit transmission: Test, Trace and Isolate.
• Supporting the NHS and social care: managing pressures and recovering services.
• Advising people on how to protect themselves and others: clear guidance and communications.
• Pursuing an international approach: helping to vaccinate the world and managing risks at the border.

This is known as Plan A. There are of course a number of variables that could change the expected outlook including the outbreak of new variants and other seasonal respiratory diseases such as the flu.

If the data suggests the NHS is likely to come under unsustainable pressure, the government has prepared a Plan B for England. It is hoped that this plan will not be required but the plan contains certain measures which can help control transmission of the virus while seeking to minimise economic and social impacts. 

This includes:

• Communicating clearly and urgently to the public that the level of risk has increased, and with it the need to behave more cautiously.
• Introducing mandatory vaccine-only COVID-status certification in certain settings.
• Legally mandating face coverings in certain settings.

The Chancellor of the Exchequer, Rishi Sunak has confirmed that the next UK Budget will take place on Wednesday, 27 October 2021. This will be the Chancellor’s third Budget and the first one to revert back to the Autumn Budget schedule that was interrupted first by Brexit related issues and then by the coronavirus pandemic. It means that this year, 2021, will see 2 Budget’s the first that took place in March and the second that has been scheduled for October.  

Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s speech in October.

The Budget will be published alongside the latest forecasts from the Office for Budget Responsibility (OBR). The OBR has executive responsibility for producing the official UK economic and fiscal forecasts, evaluating the government’s performance against its fiscal targets, assessing the sustainability of and risks to the public finances and scrutinising government tax and welfare spending.

The Chancellor also confirmed that the 27 October 2021 will also see the government spending plans set out under the Spending Review 2021. The three-year review will set UK government departments’ resource and capital budgets for 2022-23 to 2024-25 and the devolved administrations’ block grants for the same period.

The government has announced new plans to cap social care costs in England from October 2023. This change is expected to see the introduction of a new £86,000 cap on care costs across an individual’s lifetime.

There will also be the following measures of financial assistance for those without substantial assets:

• Anyone with less than £20,000 of assets will not have to pay anything towards their care from their savings or the value of their home.
• People with between £20,000 and £100,000 of assets will be eligible for some means-tested financial support on a sliding scale. 
• The new upper capital limit of £100,000 is more than four times the current limit of £23,250. This means more people will be eligible for some means-tested Local Authority support.

If someone’s assets are over £100,000 then full fees must be paid. However, the maximum that a person will have to pay over their lifetime towards personal care costs will be £86,000 as a result of the new cap. If the payment of these fees means that their remaining assets fall below £100,000 then some further financial support should be available. Once the £86,000 cap is reached, Local Authorities will pay for all eligible personal care costs.

Individuals may choose to “top up” their care costs by paying the difference towards a more expensive service, but this will not count towards the cap. There is also an important exception for ‘living costs’ which could amount to additional significant costs. There will be a lot more detail on these changes to come and of course the old limits will continue for the next 2 years, and any monies paid will not be part of the new cap.