Nichola's SME Tax W-update 15 June 2023

Hello

HMRC needs to have a re-think to find ways to simplify their Making Tax Digital (MTD) project in order to avoid vast future cost overruns. A National Audit Office (NAO) report this week shows that HMRC is currently 400% over budget. As far as throwing money into a vast 'black hole', few thought that anything could beat the IT disaster that was the COVID-19 Track n' Trace app. I hope that this is a wake-up call for all concerned. The MTD project now needs to be reviewed and aptly refined to ensure that it keeps up with technological change, delivers value for money and creates a significant improvement in tax reporting.

Some people might want to know whether HMRC's vast pool of IT contractors working on its projects are all now working within the off-payroll rules. This did not use to always be the case and it is quite difficult to determine these things from official data sources. The results of a recent private sector survey show that contractors definitely prefer self-employed worker status and will avoid contracts that bring them within IR35 and Off-Payroll Working.

One way you might try to avoid the UK's tax rules is by exploring options for a new kind of work/life balance. If you have a skill and can work online, why not set yourself up as a 'digital nomad'? We are exploring this business model in our next Tax Workout which is on 27th June, and we are following that with a general tax update for SMEs and their owners. Do book the workout from the link below.

Other news to note is that the cut-off for topping up voluntary National Insurance Contributions (NICs) has been extended again. That is not a good sign, as it shows that more government systems are not working efficiently.

We have a new HMRC Employer Bulletin for you this week: HMRC is allowing people to store their NI numbers in their Apple Wallets. This news led us to wonder whether employers can now provide tax-free smartwatches to employees. The 'wholly exclusively and necessary for the proper performance of the job' rule will apply in the absence of any specific enabling rule in ITEPA 2003. As a smartwatch can be used as a pager and a tracker I can see that basic rule might be met, but then again, maybe employees won't appreciate being tracked. 

More news, updates and guides below.

Back soon, 

Nichola Ross Martin FCA CTA (Fellow)
Tax Director

www.rossmartin.co.uk

Your Virtual Tax Partner® online PRACTICAL support for accountants, tax advisers BY accountants and tax advisers.

Quick News (Freeview)  

Oops! MTD costs 400% more than HMRC estimated
A National Audit Office (NAO) report reveals a cost overrun for HMRC's Making Tax Digital project of over £1 billion. Some £1.5 billion of upfront costs were excluded from HMRC’s forecasts. 

Survey shows limited impacts of the Off-Payroll Working rules
In terms of their current engagements, two thirds of professional contractors still favour working via the established model of a personal service company. There is also good news for HMRC: its Check Employment Status Tool is given acceptable results for contractors.

HMRC drops SA helpline bombshell
The Self Assessment telephone helpline will be dropped for three months in order to re-direct staff to clear up the postal backlog. Taxpayers who have tax queries are now being directed to search for answers to their queries online.

HMRC acts on Pandora Papers leak
The Chartered Institute of Taxation (CIOT) has reported that HMRC have commenced their compliance response to the Pandora Papers, a large leaking of documents containing sensitive offshore financial investment data.

Scottish Deposit Return Scheme
The Scottish Deposit Return Scheme (DRS) will now not be introduced until October 2025, at the earliest. It is an 'environmentally ambitious' scheme for single-use drinks containers.

NI devolution of tax powers condoc responses
The Northern Ireland Assembly Department of Finance (DoF) has published 'Consultation Response Report - Devolution of more fiscal powers', this considers stakeholders' views, including the public's responses on the recommendations made by the Independent Fiscal Commission in 2022.

Pension: Check National Insurance records by 5 April 2025
The government has extended the voluntary National Insurance contribution deadline again, from 31 July 2023 to 5 April 2025. This gives taxpayers more time to fill gaps in their records to maximise their future State Pension benefits.

Tax Cases (Freeview)

Accountant's CJRS claim documents edited
In Top-Notch Accountants Limited v HMRC [2023] TC08833, the First Tier Tribunal (FTT) found that the Coronavirus Job Retention Scheme (CJRS) conditions were not met. Documents produced in support of the claim had been deliberately manipulated.

Editor's Pick 

Employer’s What’s On: 2023/24
Subscribers' CPD: Our employer update for advisers and their clients covering measures that are new in 2023-24, now updated for the latest information for employers from HMRC.

Fancy work/life as a Digital Nomad?
Join us online for our new season of Virtual Tax Partner(Vtax)® Tax Workouts commences with an exploration of exciting new innovations in working and the workplace. 

Tax Tools 

Tax calculators
FREE for subscribers: We have a suite of useful tax tools that help agents, business owners and sole traders calculate their taxes. 

Tax Tools
FREE add-on for subscribers, or available separately

Calendar of tax deadlines and new tax measures
UPDATE: This is a freeview 'At a glance' rolling calendar of common recurring tax deadlines, new tax measures and other tax significant events.  

Guides & Updates (subscription content)

Self-Employed 

Sole Trader v Limited Company 2023-24
Is it better from both a tax and legal point of view to run your business as a sole trader or as a company? Are there tax advantages in running a business as a company? What legal protections apply?

Employers

Employer Bulletin: June 2023
HMRC have published their Employer Bulletin for June 2023. We have summarised the key content for you, with links to our detailed guidance on the topics covered.

Directors & Companies

Purchase (repurchase) of Own Shares
UPDATE: How can a company repurchase its share capital? What are the Companies Act requirements? What are the tax consequences for the company and shareholders?

Land & Property

Furnished Holiday Letting
UPDATE: What is Furnished Holiday Letting? How do you qualify for Furnished Holiday Letting? What are the rules for Furnished Holiday Letting?

Welsh Land Transaction Tax (LTT)
UPDATE: What is Land Transaction Tax? How does it operate? What reliefs are available? 

LBTT: Land and Buildings Transaction Tax
UPDATE: What is Land and Buildings Transaction Tax (LBTT)? What are the rules?

Capital allowances

Full expensing & First Year Allowances
UPDATE: What is full expensing? When does it apply and what is the rate of allowance? How are disposals of full expensing assets dealt with? What assets qualify for the 50% First Year Allowance (FYA)? How do I deal with disposals of 50% FYA assets? How do I make a claim?

Dwelling house for capital allowances
What is a dwelling house for capital allowance purposes? Can capital allowances be claimed in respect of a dwelling house? What expenditure qualifies? 

Private Client & Estate Planning

Client Briefing: Making gifts & IHT
What gifts can you make without triggering Inheritance Tax (IHT)? What are the rules on making tax-effective gifts for IHT purposes?

Pensions: Tax rules and planning
What tax rules apply to pensions? What tax relief is available? What tax charges can arise? What planning opportunities are there?

Incorporation

Incorporation: Businesses & Trades
The incorporation of an existing business is the process by which the business of an existing sole trader or partnership is transferred to a new company. 

Incorporation: Partnership, Step-by-step
This guide explains step-by-step how to incorporate a partnership.

CPD for Lunch

Byte-sized chunks of lunchtime CPD for subscribers

• NEW: CPD: Purchase of Own Shares (POS)
• UPDATE: CPD: Non-Resident CGT: UK Property  
• UPDATE: CPD: Dividend Taxation
• CPD: Stamp Duty Land Tax

More at CPD Index

VAT Cases & Guides

VAT direct debit does not change VAT due date
In WWM Rose & Sons Ltd v HMRC [2022] TC08830, the First Tier Tribunal (FTT) dismissed an appeal against a VAT surcharge for late payment. An agreement to pay by direct debit payment did not change the statutory VAT due date. Time To Pay must be agreed before the due date.

R&C Brief 6 (2023): VAT liability of digital publications
HMRC have published 'Revenue and Customs Brief 6 (2023): VAT liability of digital publications — Supreme Court decision in News Corp and Ireland Ltd' which gives an update on the VAT treatment of supplies of digital newspapers and other digital publications before 1 May 2020.

Transfer Of a Going Concern (TOGC)
Buying a business and VAT, do you take over the old owners' VAT registration? What is a Transfer Of a Going Concern (TOGC)? What conditions must be met? What are the consequences of a TOGC? 

Tax Queries?

UK Agent for registration of Overseas Entities
Do you require assistance in the registration and verification of an overseas entity that owns UK land or property?

Virtual Tax Partner© Support
Have a tax query? Need a second option? Open a ticket and ask a question. A team of tax experts with a very wide range of expertise: covering direct and indirect tax, as well as accounting, R&D claims, reorganisations and much more.  

Missed last time's Web-update?

Nichola's SME Tax W-update 8 June 2022

• Agent Update: May 2023
• Spotlight 62: Dividend diversion scheme used to fund education fees
• HM Treasury review of SAYE and SIP schemes  
• Named tax avoidance schemes, promoters, enablers
• Restructuring did not change commercial reality of loans
• Lack of knowledge not reasonable excuse for late ATED
• Wider business purpose prevents £34 million P&L deduction
• Pony paddock not residential for SDLT
• Reoganisations Index: Start here
• Capital Allowances: What's new 2023-24
• Agency Workers
• Reasonable care: How do you pick a tax agent?
• Employee Ownership Trusts: An exit route for owner-managers UPDATE
• Structures & Buildings Allowance (SBA) UPDATE
• Estates: Income Tax and Capital Gains Tax UPDATE
• Scottish Income Tax: Am I a Scottish taxpayer? UPDATE
• Energy-Saving Materials
• UPDATE: CPD: Non-Resident CGT: UK Property  ...More

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