Brexit and EORI numbers
A reminder that if the UK leaves the Eu with no deal, VAT registered businesses who trade in Europe will need to apply for an EORI number if they have not already done so. HMRC are trialling outbound calls; starting with traders who have applied for an EORI number but taken no further action, with the aim to help businesses take all actions that they need to do. Responses will be monitored to test the impact and ensure that resources are targeted to get the best results. There will also be a published ‘Myth buster’ and additional guidance for EORI numbers.
HMRC will now auto issue an EORI number to all VAT registered businesses that have not already applied. You can find more information regarding this here.
We are now at the stage of the uploading of the second VAT return under MTD for those businesses with a VAT quarter ending September 2019. HMRC have issued the following statistics and updates concerning the first quarter VAT returns under MTD.
- 75% met the deadline with a record number of software submissions on the deadline of 7th August.
- Significant milestones include 1 million customer sign-ups and 1 million MTD VAT submissions filed.
- Resources were strengthened on the VAT helpline to ensure response times were met.
- Sign up is on track for the 7th September stagger 2 and emails have been sent to encourage those who are still to register.
- On 17 and 19 August, there was a new release for agents to allow them to view clients’ VAT certificates online.
- Businesses who signed up voluntarily with a turnover below £85,000 can now opt-out via their Business Tax Account.
- Press release issued after Q1 deadline confirmed that 120,000 penalties were waived, confirming HMRC’s light touch.
Agent online forum
HMRC have an agent online forum at which tax agents can post queries and receive comments. The primary function of the forum is to allow HMRC to engage directly with Agents and Professional Bodies to identify widespread issues in relation to all HMRC services. Case-specific issues and client details should not be included. Content is moderated daily to identify trends and key issues for escalation.
If you have not already signed up for this, the link to the registration page is here.
HMRC Tax Agent Survey
HMRC have issued the results of their survey with tax agents (held in 2018) to collect views on the service they provide. 64% of those surveyed were accountancy firms and 27% were bookkeeping businesses. All were confirmed as being bonafide tax agents for their clients. 67% of all those contacted were registered with a professional body. Tax agents with a smaller number of clients (0-9) and with no employees were less likely to be members of a professional body.
The summary conclusions were:
- Half of the agents gave a positive rating overall which is an increase since 2015.
- Two-thirds of agents who replied gave a positive rating of the HMRC online services and the Dedicated Agents helpline.
- Priority areas raised were the resolution of queries and getting tax transactions correct
- Two-thirds of agents felt that HMRC treated their clients fairly, whilst half found it easy to deal with tax on their clients’ behalf.
- Forty per cent were confident in how HMRC did its job.
The full report can be found here.
The Tax Gap (2017/18)
HMRC have released the latest figures for measuring the tax gap (2017/18) which is estimated at £35 billion (5.6% of the expected tax revenues). The tax gap is the difference between what HMRC expects to collect in tax and what it actually receives and the difference arises for a number of reasons:
- Errors in tax calculations by tax payers
- Insufficient care taken in preparing and submitting returns
- Legal interpretations
- Tax evasion, avoidance and criminal attacks on the tax system
- Tax not recoverable from businesses that are insolvent
The actual size of the gap has increased slightly over the past three years and is the highest it has been since 2005/6 although the percentage figure has dropped from 7.2% (2005/6) to 5.6% for 2017/18 (thus showing a higher increase in expected tax revenues overall).
The biggest share of the gap comes from income tax, national insurance contributions and capital gains tax (£12.9 billion) followed by VAT at £12.5 billion. Corporation tax accounts for £5.2 billion of the gap.
Small business form the largest group contributing to the tax gap, amounting to 40% of the gap overall. Larger business account for 22% and 14% of the gap originates from criminal activity.
The full report can be downloaded here.
Disguised Remuneration Loan charge
The disguised remuneration Loan Charge was introduced to tackle contrived schemes where a person’s income is paid as a loan from a limited liability company which does not have to be repaid.
Disguised remuneration loan schemes were used by tens of thousands of people, and concerns have been raised about the use of the Loan Charge as a way of drawing a line under these schemes. The government is clear that disguised remuneration schemes do not work and that their use is unfair to the 99.8 per cent of taxpayers who do not use them.
The loan charge is being reviewed in time for the January tax filing deadline.
Cycle to work scheme
For the past 20 years, the government has promoted the health benefits of cycling and offers a ‘cycle to work’ scheme which is intended to attract more cyclists to ride to work, at an affordable price. For businesses, it means increased productivity and increased footfall in shops. And for society as a whole, it means lower congestion, better air quality, and vibrant, attractive places and communities. Some 40,000 businesses have signed up to the scheme with around 1.6 million commuters now cycling to work.
The scheme is an employee benefits scheme that enables employees to hire cycles for active travel and/or cyclist’s safety equipment from the employer, or from a third party, in return for a deduction from their earnings known as salary sacrifice.
There are a number of options available:
- A loan scheme where the employer loans that employee an amount to purchase a cycle, in much the same way as a loan can be provided for buy a season ticket for train travel to and from work.
- A pooled scheme where the employer purchases the cycles and allows employees to use the cycles on either a one to one basis or as a pool for borrowing for short time periods. This is useful if irregular, local journeys are made for (say) meetings to avoid the use of cars.
- A salary sacrifice scheme where there will be a separate hire agreement, typically between the employee and the employer, who has either purchased the equipment or leased it from a third party (such as a retailer or a specialist leasing firm). The employee pays for the hire via the salary sacrifice arrangement with the employer. In some cases, the hire agreement may be between the employee and a third party, such as a scheme provider, who hires the goods to the employee and is remunerated by the employer from the salary sacrifice proceeds. There are a number of cycle providers offer such a scheme and a simple search in a browser will show those who are participating and how it works for both the employer and the employee.
In the salary sacrificed scheme, since a portion of the salary is foregone, the employee pays less tax and NICs. The scheme must fulfil a number of requirements to be allowable for tax and includes adapted cycles for those with a disability, where this is appropriate. The original scheme had a limit (in certain circumstances) of a maximum £1000 but this has now been extended.
At the end of the hire period the employee may have three options:
- Option 1: extend the hire agreement;
- Option 2: return the cycle and equipment;
- Option 3: buy the cycle and equipment under a separate agreement entered into at the time
You can read the full guidance here.