HMRC have issued their Agent Update for July 2022. We have summarised the key content for you with links to our detailed guidance on the topics covered.
Technical updates and reminders
COVID-19
VAT deferred due to COVID-19: act now to avoid a penalty
Businesses that deferred VAT payments due between 20 March and 30 June 2020 were able to:
- Pay in full by 31 March 2021.
- Join the online VAT deferral new payment scheme by 21 June 2021 to spread the payments over smaller, interest-free instalments.
- Contact HMRC to make an arrangement to pay by 30 June 2021.
You may be charged a 5% penalty or interest if you still have deferred VAT outstanding.
- Contact HMRC as soon as possible if you are struggling to pay your deferred VAT to make an arrangement to pay.
See COVID-19: VAT deferred payments
Tax
Court of Appeal finds in favour of HMRC in disguised remuneration tax avoidance case
You may be contacted by clients about the Court of Appeal decision in Hoey & Ors v Revenue & Customs:
- Mr Hoey was an IT contractor who used a Disguised Remuneration (DR) tax avoidance scheme working through an offshore umbrella company to provide services to UK-based companies.
- He received most of his earnings as interest-free loans from Employee Benefit Trusts (EBTs), which were initially claimed not to be taxable. Following the Supreme Court ruling in the Rangers case, he accepted that the contributions to the EBTs, for onward loans to him, were chargeable to Income Tax as earnings.
- There was no evidence that the UK-based companies that engaged Mr Hoey’s services had any knowledge of the tax avoidance arrangements he had entered into, or of a requirement to operate PAYE.
- HMRC exercised its discretion under ITEPA 2003 to relieve the companies of any obligation to operate PAYE. This meant that Mr Hoey had to pay the unpaid tax. The Court of Appeal accepted that HMRC had exercised its discretion lawfully, and that Mr Hoey was not entitled to a notional PAYE credit for the unpaid tax.
The decision confirms that HMRC may collect tax directly from individuals who have used employment-related DR tax avoidance schemes such as EBTs, where this is appropriate.
- If your client used a DR scheme, (including those who received loans before 9 December 2010), and wishes to settle, whether or not the loan charge applies, they can do so under the DR settlement terms 2020.
- If your client is unsure about settling, they can still make payments on account to stop interest accruing whilst they decide what to do.
See Disguised remuneration loan charge and FAQs for Disguised Remuneration Settlements
New tax residence indicator tool
HMRC has launched a new tool to help customers to determine their tax residence status here.
The tool applies the rules as set out in the Statutory Residence Test (SRT) to help determine an individual’s residence status for tax purposes and covers the:
- Automatic overseas test.
- Automatic UK tests.
- Sufficient ties test.
See SRT: Statutory Residence Test and SRT: Statutory Residence Test Toolkit
Corporate Interest Restriction: mandation of electronic filing
- The Corporate Interest Restriction (CIR) legislation aims to restrict a group’s deductions for interest expense and other financing costs for Corporation Tax purposes, to an amount commensurate with taxed UK activities.
- In 2018, HMRC introduced an online submission form (the G-form), and from July 2021, an Application Programming Interface (API), for submitting Interest Restriction Returns (IRRs) and reporting company appointments and revocations.
- For submissions on or after 1 September 2022 all IRRs and reporting company appointments or revocations must be submitted using either the G-form or the API.
- After that date, HMRC will not accept IRRs and appointments or revocations that are sent by email, post or attached to company tax returns.
See Corporate interest restriction
Employer PAYE: new recurring Direct Debit functionality
Currently, employers can set up a Direct Debit to collect a single payment, but not a recurring Direct Debit.
- HMRC has announced that they are going to offer a recurring Direct Debit to employers by mid-September 2022.
- Once available, there will be a new link on the Business Tax Account (BTA) and the employers’ liabilities and payments screens for ‘Set up a Direct Debit’. This will allow your clients to set up a Direct Debit instruction once, authorising HMRC to collect directly from their bank account based on their return submissions.
- After an employer has set up a Direct Debit, the link will change to ‘Manage your Direct Debit’ and an employer will be able to view, change or cancel the Direct Debit online.
- Only employers (and not their agents) will be able to create, view, amend and cancel a Direct Debit.
Employer PAYE liabilities and payments viewer update
- HMRC have been extending the agent online service which allows agents to see employer PAYE liabilities and payments held by HMRC.
- In mid to late-July 2022 they will remove previous restrictions and will in future allow all agents with the PAYE online for agent enrolment to access the service.
Moving to the Customs Declaration Service by 30 September 2022
The Customs Declaration Service is becoming the UK’s single customs platform and will replace the old Customs Handling of Import and Export Freight (CHIEF) system.
- After 30 September 2022, businesses will no longer be able to make import declarations on CHIEF.
- From 1 October 2022, to continue importing they will need to make their import declarations on the Customs Declaration Service instead.
- This includes traders or business travellers bringing commercial goods into Great Britain in their baggage after 30 September 2022.
- If you make customs declarations on behalf of businesses, you should have already started preparing for this change.
- The last day businesses will be able to make export declarations on CHIEFis 31 March 2023. After this date, they will need to make these on the Customs Declaration Service.
Making Tax Digital (MTD)
Making Tax Digital for VAT: make sure your clients are signed up
- All VAT-registered businesses should now be using MTD to keep digital records and submit tax returns to HMRC.
- Even if they currently keep digital records, they must use MTD-compatible software to file their VAT returns.
- If your client has not signed up to Making Tax Digital, they need to do so before they file their next VAT return, otherwise, they could receive a penalty.
See Making Tax Digital: VAT (subscriber guide)
Agent Services Account (ASA): granular permissions
The ASA currently allows all staff within a practice access to all client records and tax services if they know the right client identifiers.
HMRC are developing granular permissions functionality in the ASA to allow small to medium-sized agents with up to 1,000 employees to control who accesses client records and can opt-in/out of using it.
- To prepare for this you need to ensure you have an administrator role in your ASA. Only administrators will have access to the new feature from the ‘Manage Account’ section on the ASAhome page.
- The new functionality will be released to a small number of agents at first before being rolled out to the wider agent community.
Making Tax Digital (MTD) for Income Tax Self Assessment: pilot expansion
From April 2024, all businesses with combined annual income from self-employment or property above £10,000 will have to submit their tax return in a different way, as part of MTD for Income Tax. See Making Tax Digital: Survival guide (for the self-employed & landlords)
HMRC would now like to encourage you to start signing up a small number of your clients for the pilot scheme. You can do this by speaking to your software developer and sending an email to
Currently, to be eligible, customers need to have an accounting period that aligns exactly to the tax year (6 April to 5 April) and have Making Tax Digital compatible software .
Where customers meet the eligibility criteria HMRC would first like to only bring customers with the following circumstances into the pilot:
- Self-employment (including multiple self-employment).
- UK property.
- Gift Aid.
- Pay-As-You-Earn income, including employment income and occupational pensions (excluding those with a coded out liability).
- UK interest.
- UK dividends.
The list will grow as HMRC successfully test each criteria.
See MTD: Income Tax Pilot Tool
HMRC agent services
Updates to the VAT Registration Service (VRS) from 1 August
HMRC has been developing a new VAT Registration Service (VRS). One of the key changes is that every customer will be automatically signed up to Making Tax Digital as part of VAT registration.
- The service will go live on 1 August 2022.
- Incomplete, unsubmitted VAT applications should be submitted by 31 July 2022 at 5pm. Any partially completed, saved applications on the old service will be lost after this time.
PAYE Settlement Agreements (PSA): introducing new digital version of the PSA1 form
HMRC has redesigned the PSA1 form and introduced a more efficient digital submission route, see PAYE Settlement Agreement (PSA1)
- HMRC encourages all employers to take up the new reporting method as the new digital format offers easy, standardized reporting, improved accuracy, speedier processing times and fewer resulting queries.
- The new digital PSA1 will allow employers to submit one form for all employees regardless of their location.
See PAYE Settlement Agreements
HMRC launches consultation to address concerns about Repayment Agents
In June 2022 HMRC launched a consultation 'Raising standards in tax advice: Protecting customers claiming tax repayments' to consider ways to better protect taxpayers from Repayment Agents who make routine tax claims on people’s behalf, but can take up to half, or even more, of the payment.
- The consultation ends on 14 September 2022.
Incorrect application for Payment Protection Insurance (PPI) R40 Claims
HMRC recently asked agents to send R40 PPI forms to a new address, HMRC has noticed a number of frequent mistakes which are stopping them from processing the forms.
To make sure HMRC can process claims as quickly as possible make sure you:
- Only include the agent details on the spaces provided on the R40 form.
- If the repayment is to be sent to somebody other than the customer, make sure the customer completes and authorises the nominee fields on the form at section 12.
- Check you have correctly completed fields 3.1, 3.2, and 3.3.
- Submit individual applications for each tax year on the existing standard R40 form without any attachments.
- Do not include covering letters, evidence or any other form of attachment with the form.
- Do not include any other tax reclaim types within that R40 form.
See Reclaiming tax deducted at source on PPI interest.
The Trust Registration Service (TRS)
Reporting a discrepancy in Trust Registration Service data
- From September 2022, Relevant Persons must ask trustees or agents who are engaging in a new business relationship with them to provide proof of registration on the TRS.
- A Relevant Person or Obliged Entity is an organisation working in a professional capacity that carries out due diligence checks under anti-money laundering regulations. Agents may be a Relevant Person.
- The trustee/agent engaging in the business relationship must use the online service to download a PDF copy of a report to show proof of registration to the Relevant Person.
- If a Relevant Person finds a discrepancy in trust data when reviewing proof of registration, they will first seek to resolve this directly with the trustee or agent engaging in the business relationship. If they cannot resolve the discrepancy directly, they must report it to HMRC.
- HMRC will write to trustees if a discrepancy is reported, asking for the discrepancy to be resolved. If the trustee wishes for their agent to action the discrepancy letter, they must pass this onto their agent themselves.
- Once the trustee/agent has made the appropriate changes, they should download a new proof of registration document and supply it to the Relevant Person. If the Relevant Person is satisfied the discrepancy has been resolved, they can continue to engage in a business relationship with the trust.
Trust Data requests
From September 2022, HMRC may share information on the TRS in limited circumstances with some third parties following a Trust Data Request.
- Trust Data Requests can be submitted on or after 1 September 2022.
Legitimate Interest Trust Data Request
- Individuals or organisations must demonstrate that they are looking into a specific instance of money laundering or terrorist financing in relation to a specific trust, and that the information on the register that is the subject of the request will further that investigation.
Offshore Company Trust Data Request
- Data can be requested on a trust that holds a controlling interest in a non-EEA (‘third country’) company or other legal entity. A ‘controlling interest’ is usually where the trust holds more than 50% of the shares in the entity or can control it in some other way.
Trust Data that may be shared
The information HMRC can share about a trust will be limited to the beneficial owners that are associated with the trust.
- For individuals, this includes the name, month and year of birth, country of residence, nationality and their role in the trust.
- For companies and other legal entities, the information will be limited to their name, office address and their role in the trust.
Circumstances where HMRC will not share data
HMRC will not share data on certain types of trusts, for example:
- Non-express taxable trusts that are registered only because of a liability to UK tax and not also as a registerable express trust.
- Express trusts which are only registered because of their liability to UK taxation.
- Non-UK trusts with no trustees resident in the UK, that are registered only because they hold UK land or property.
For legitimate interest Trust Data Requests, if HMRC deems that the legitimate interest has not been adequately demonstrated, HMRC will not share information on the register. Legitimate interest is not adequately demonstrated when:
- The requestor is not requesting data in order to further an investigation into a specified instance of money laundering or terrorist financing.
- The information provided by the requestor does not sufficiently show reasonable grounds for suspicion of money laundering or terrorist financing on the specific trust on which the request has been made.
For offshore company Trust Data Requests, if TRS records do not show that a controlling interest in an offshore company exists, HMRC will not share information held on the register.
HMRC will not share information on specific individuals if exemptions apply to them e.g. the individual:
- Is under 18.
- Lacks mental capacity.
- Is at disproportionate risk of:
- Fraud, kidnapping blackmail, extortion, harassment, violence or intimidation as a result of releasing that information.
See Trust Registration Service
Government Gateway: Great Britain driving licence added as additional evidence source
HMRC recently added Great Britain (England, Scotland and Wales) driving licences as an additional evidence source for the government gateway.
HMRC need two forms of evidence to confirm a customer’s identity online selected from the following where available:
- Tax credit claim details.
- P60 or most recent payslips.
- UK passport details.
- Information held on your credit file (such as loans, credit cards or mortgages).
- Your Self Assessment tax return (in the last three years).
- Great Britain driving licence or Northern Ireland driving licence.
Phishing emails with malicious attachments
Some things to consider to help you spot and defend against attacks designed to look as though they have come from legitimate senders, such as HMRC, broadband providers, accountancy software suppliers or pension providers.
- Were you expecting the email?
- Inspect the full sender address; it will often show the email is not from who it’s suggesting it’s from.
- Inspect any links in the email. Do they redirect you to a file sharing service like Dropbox? Are they not obviously associated with the sender?
- Look at the email content. Are there spelling or grammatical errors, or dates and times that do not match?
- Inspect the file extensions of attachments and downloads. Extensions ‘.exe’ ‘.msi’ and ‘.dll’ show that the file will install software when clicked on.
- If an attachment or download is a Microsoft document, try not to be tricked into clicking an ‘enable content’ button, which can enable malicious actions.
Send suspicious emails to
Tax agent toolkits
HMRC have many tax agent toolkits available for you to download and use designed to address the most common errors seen from previous years.
Contact
Complain about HMRC: To make a complaint to HMRC on behalf of your client you must be appointed as their tax advisor.
Where’s My Reply? for tax agents: Find out when you can expect to get a reply from HMRC to a query or request you have made. There is also a dedicated service for tax agents to:
- Register you as an agent to use HMRC Online Services.
- Process an application for authority to act on behalf of a client.
Manuals
Check the latest updates to HMRC manuals or subscribe to automatic notification of changes.
Online
Online training material and useful resources for tax agents and advisers
HMRC Publications
- Employer bulletins.
- National Insurance Services to Pensions Industry: countdown bulletins
- Pension schemes newsletter
- Revenue and Customs briefs
External link
Are you enjoying our content?
Thousands of accountants and advisers and their clients use www.rossmartin.co.uk as their primary TAX resource.
Register with us now to receive our receive our FREE SME Topical Tax Update & newletter.