UK tax agents call for review of HMRC’s RTI reporting system

The Association of Tax Technicians (ATT) has warned that there is an urgent need for a review of HM Revenue and Customs’ (HMRCs’) Real Time Information (RTI) reporting system, as it may not be fit for purpose.

This call came after a leaked email stated that end of year tax reconciliations for thousands of taxpayers may have been recalculated wrongly, according to a recent report in The Telegraph.

In an email leaked to the newspaper, a group of senior HMRC staff and accountants were told “thousands” of mistakes were made. However, an HMRC spokesperson said the incorrect letters were “not demands” but merely tax summaries, adding that the majority of errors occurred because an employer had failed to make a final payment statement for the 2013/14 tax year. This meant that the records were incomplete, despite reminders that these submissions had to be made.

HMRC has advised that employers and their agents refrain from sending any 2013/14 earlier year updates unless requested to do so by HMRC. Also, if an employee asks about a 2013/14 P800 which they think is incorrect, they should:

  • Not repay any underpayment shown on the P800
  • Not cash any payable order they may have received

Employees will not be affected by the incorrect tax code as HMRC will issue a revised P800 before Annual Coding.

We are here to offer advice if you have been affected by this error.

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Scotland set to gain landmark powers over income tax and welfare

27 Nov 2014

The Scottish Parliament is set to gain almost complete control over income tax rates and bands and welfare spending, following the recommendations of the Smith Commission.

However, HM Treasury will retain control of personal allowances and the taxation of savings income and dividends.

The Smith Commission was set up by the UK Government following the ‘No’ vote on Scottish independence. In the words of Lord Smith of Kelvin, the recommendations set out in its report ‘will result in the biggest transfer of power to the Scottish Parliament since its establishment’.

The report recommends that the Scottish Parliament should gain the power to set income tax rates and bands on earned income, and to retain all of the income tax raised in Scotland.

Meanwhile, a share of VAT revenue is also set to be assigned to the Scottish Parliament, while Air Passenger Duty will be fully devolved.

The Scottish Parliament will also be made permanent in UK legislation, and granted new powers over how it is elected and run, including the power to allow 16 and 17-year-olds to vote.

In addition, Scotland will gain the power to create new benefits and make discretionary payments in any area of welfare. A number of benefits, including those affecting the elderly, carers and those who are ill will be fully devolved.

The UK Government will produce draft legislation based on the recommendations of the report. The legislation is set to be published by 25 January 2015.

Tax reclamation powers increased

2014

Debt recovery powers for HM Revenue & Customs (HMRC) are set to allow up to £17,000 in unpaid tax to be taken directly from salaries.

Currently, HMRC is able to take back up to £3,000 worth of debt from a debtor’s pay packet.

The £14,000 rise has prompted strong reactions, particularly from high-earners whom this new measure will affect most of all. Those earning less than £30,000 per year will only be subject to the original £3,000 reclamation limit, while a sliding scale means those earning over £90,000 will face the new £17,000 limit.

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA), said: ‘This is another creeping of HMRC’s powers which are skewed in favour of themselves and away from the taxpayers. HMRC is becoming a more confrontational and all-powerful organisation’.

The new measure is hoped to raise £115 million for the treasury.

‘Two thirds of parents’ would consider new shared parental leave

26 Nov 2014

With new shared parental leave rights coming into effect on 1 December, recent research suggests that around two thirds of working parents would consider taking advantage of the new system.

The Government has now published the final regulations governing the new rights, which will allow eligible employees whose babies are due or placed for adoption on or after 5 April 2015 to share up to one year of parental leave between them.

Under the Shared Parental Leave Regulations 2014, a mother can choose to curtail her statutory maternity leave (following an initial two week recovery period) and to share the remainder of the 52 week leave period with her partner or the child’s father.

The couple can opt to take time off together or individually, or to take time off in blocks during the 52 week period, subject to the appropriate notice being given.

Employed women will continue to be entitled to take up to 52 weeks of maternity leave, with up to 39 weeks of statutory maternity pay or maternity allowance. The existing entitlement to two weeks’ paid paternity leave will still be available to qualifying men, but additional paternity leave will be replaced by the new shared parental leave.

Employees could begin giving notice of their intention to take shared parental leave from January 2015.

Chancellor urged to ‘boost infrastructure and encourage innovation’ in Autumn Statement

25 Nov 2014

The Confederation of British Industry (CBI) has urged Chancellor George Osborne to include measures to boost infrastructure and encourage innovation in his 2014 Autumn Statement, which will be presented on Wednesday 3 December.

The leading business group has called on the Chancellor to focus on infrastructure investment, encouraging innovation and removing barriers to enterprise.

With recent research suggesting that many businesses expect transport and energy infrastructure to worsen in the coming years, the CBI has urged the Government to set out clear plans for improving UK infrastructure.

The business group is also calling on the Government to introduce a number of tax reforms, including an overhaul of the business rates system, ‘supercharging’ R&D tax credits and addressing the issue of the Annual Investment Allowance, which is due to fall from £500,000 to just £25,000 in 2016.

The CBI also wants the Government to freeze long-haul Air Passenger Duty, to support UK firms looking to export.

Commenting on the CBI’s Autumn Statement submission, Director-General John Cridland, said, ‘The UK recovery is on solid ground but it is in increasingly stark contrast to what’s happening elsewhere in the world. With Eurozone economies flat-lining, continuing political tension between Russia and Ukraine, and in the Middle East, and slowing emerging markets, we must be alert to the possible knock-on effects here’.

‘Businesses recognise the public purse is under pressure, which is why they want the Government to continue tackling the deficit, alongside targeted, affordable measures to keep UK growth motoring now, in the next Parliament, and beyond.’

UK borrowing down but deficit still stands

The Office for National Statistics (ONS) has released figures showing that Government borrowing dropped from £7.9 billion in October last year to £7.7 billion in October this year.

Overall the amount borrowed between April and October this year increased by £3.7 billion to £64.1 billion. This is in line with expectations from economists, who predicted an increase to the deficit, despite the promise of Chancellor George Osborne to reduce the amount.

In response to these figures a spokesman for the Treasury said: ‘While today’s public finance figures show borrowing is down this month compared to last year, the impact of the great recession is still being felt in our economy and the public finances.

‘At the same time, we have to recognise that the UK is not immune to the problems being experienced in Europe and other parts of the world economy. That’s why we will continue working through the plan that is building a resilient British economy’.

Tax receipts collected in October show a 12% increase of £5.8 billion on 2013, raising a total of £54.5 billion for the Treasury.

Landmark tribunal rules overtime CAN count in holiday pay

Following a ruling on 4 November 2014, millions of workers may be able to have their holiday pay recalculated to take overtime into account.

In a landmark case, the Employment Appeal Tribunal ruled that employers could not only take into account basic pay when calculating how much an employee should be paid while they are on holiday. The ruling is likely to affect workers who are required to put in overtime or be on standby for overtime. The position for those who put in voluntary overtime is still unclear. In addition, workers may be able to make backdated claims, but only if it is less than three months since their last holiday.

EU law states that staff are entitled to four weeks’ holiday pay a year but it does not provide details on how it should be calculated. Until now, the UK interpreted this law as saying that holiday pay should be at the basic rate and it is a grey area for employees who work overtime or receive variable pay. The Tribunal suggests the UK has been interpreting the law wrongly and has ruled that voluntary overtime and being on stand-by for emergency call-outs should be included when calculating holiday pay. With the ruling possibly going to the Court of Appeal, it may be some time before any claims are successfully made.

The Tribunal’s decision has been met with fierce criticism. The Government has spoken out, claiming concern about the potential impact on particularly smaller employers needing to finance backdated claims. Other business groups such as the British Chamber of Commerce, The Institute of Directors and the Federation of Small Businesses have also voiced concern.

Unions, however, are pleased with the Tribunal’s ruling, with the TUC’s general secretary stating that “British business is far more robust than some of its spokespeople would admit.”

The Government is set to assess the impact of the ruling. This If you believe your business may be affected, get in touch with us.