N EWS E XTRA New Year, New Tax Challenges
HMRC is proposing to make changes to how businesses run their tax affairs, according to Jason Piper senior manager in tax and business Law at the ACCA.
JANUARY IS ALWAYS a good time to look ahead and make plans and HMRC is doing its bit in that regard. HMRC’s Making Tax Digital (MTD) is an initiative to require businesses to report on their affairs, not annually, but quarterly and online Few other than HMRC liked the idea and the outcry led to MTD being shifted back; now it’s only VAT which is absolutely guaranteed to be compulsory - from April 2019. However, public criticism hasn’t stopped HMRC moving forward with plans and supporting framework for MTD. It’s going to be a huge shakeup for most businesses – so if you haven’t started planning yet, you should.
Compliance penalties HMRC has been putting plenty of thought into how to deal with anyone who gets their tax obligations wrong. For several years there’s been a steady stream of HMRC consultations on penalties, and how HMRC can achieve compliance.
Based on those
consultations and responses the government is reforming the penalty system for late or missing tax returns; soon there will be a new points- based approach in place. In essence you will start accruing penalties on annual returns after two defaults, for quarterly returns after four defaults, and for monthly the score to zero you need to make two, four or six submissions on time for each return type respectively. Your scores run independently for each tax (VAT, PAYE, CIS and Income or Corporation Tax).
Alongside this new
system the government “will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments.”
Nothing has yet been costed for any of this while
6
the other measures are still at the consultation stage. But, because they’re still consulting, you can still make a difference by getting in touch with HMRC to make your views known. The proposals include a suggestion that penalties for tax paid late should be like for prompt payment, with a 14-day grace period where no penalty would arise at all. Interest rates would change, and the existing VAT surcharge model would be replaced. But one of the conditions to get a penalty reduced is that if you can’t pay, you will have sought arrangement with HMRC; if that can be done within 14 days there will be no penalty, if completed within 28 days the penalty will be cut by 50%. The professional bodies aren’t convinced that HMRC can meet its side of the bargain to have time to pay arrangements in place within those time frames.
Operating PAYE For those businesses with employees there’s a further planned tweak to the operation of PAYE codes through the Real Time Information (RTI) system. Since May 2017 you may well have noticed an uptick in the number of PAYE codes you’ve been receiving for employees – and perhaps the number of queries from them that you’re having to a part of the new system of “dynamic coding” which aims to use the information that HMRC is gathering from various different sources to estimate an individual’s total annual income, and from that bill is going to be and adjust However, based on the results so far, the system is struggling with irregular amounts like bonuses, commission or variable pay –
let alone dividends, or income from overseas. Dynamic coding
The solution to many of these problems associated with dynamic coding lies with the employee. The easiest way to resolve the issues is for employees to activate their Personal Tax Account (PTA) so that they can check the amounts charged for themselves.
Logical move
There is a degree of logic to this. The whole idea behind tax codes is that they for the employee by not giving their employer a how much income they’re getting and from where – all the employer knows is how much (or little) each employee has left of their personal allowance, without any indication as to why the numbers might vary. In principle, of course, it’s a good idea for everyone to know exactly what’s going on with their taxes – what they’re paying, and why. But there’s a balance to be struck here, and a few people feel that HMRC has gone too far down the “forced engagement” route here. One of the big advantages of the PAYE tax withholding system, and in particular the tax codes it uses, is that it should save a taxpayer in steady employment on a steady wage having to constantly think about their tax position; it should save them time, let HMRC know what’s going on, and allow the system to collect the right payment at the right time. But with the constant HMRC has created a model where employers will be getting code updates far more frequently, and that’s something which in the short term is going to prompt more queries from employees. And whatever HMRC might
say about referring to an employee’s own PTA, plenty of individuals are still going to query their affairs with their
Faster tax debt recovery With the announcement of “Faster recovery of Self- Assessment debt”, HMRC is to use technology to recover additional Self-Assessment debts closer to real-time by adjusting the tax codes of individuals with PAYE income. This change will take effect from 6 April 2019 It’s interesting given that using RTI information to try to reduce the level of inaccuracy in the system saw them issuing around 8 million tax paid) forms, two thirds of which were for refunds where the taxpayers involved were not earning enough to coding effectively accelerated repayments by replacing the P800 forms with in-year adjustments, HMRC will now think they’ll be identifying tax that hasn’t yet been paid by Self-Assessment taxpayers, but which should have been. In simple terms, this means HMRC will be adjusting employees’ take-home pay downwards more often than upwards, so be prepared for the queries.
To conclude
Technology is aiding HMRC’s compliance but in so doing, it’s moving the burden from the state to the taxpayer for whom ignorance is no defence. Unless you want to be burdened with whatever HMRC gets passed, you need to feedback into the process. You’re unlikely to stop it but you may be able to shape how these proposals are implemented.
Comments can be sent to HMRC via
mtdta@hmrc.gsi.
gov.uk, ideally by 2 March 2018.
January 2018 BMJ
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60
