HMRC extends MTD for VAT pilot scheme to all eligible firms

HMRC has extended its Making Tax Digital for VAT (MTD for VAT) pilot scheme to all eligible businesses.

MTD for VAT is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the current VAT registration threshold of £85,000. As part of the initiative, firms must keep some records digitally, and must submit their VAT returns via an Application Programming Interface (API).

Any business utilising MTD for VAT whose turnover subsequently falls below the VAT threshold must stay in the regime, unless they deregister for VAT. Additionally, any firm exceeding the registration threshold after 1 April 2019 must comply with MTD for VAT, and is given 30 days to ensure that the appropriate digital software is in place.

As part of the pilot scheme, all eligible businesses are permitted to test out HMRC’s MTD for VAT system. The pilot scheme was first launched in April 2018, and was subsequently opened to half a million UK firms in October 2018.

Commenting on the pilot scheme, Clare Sheehan, Deputy Director for MTD for Business, said: ‘The MTD pilot is now available to all businesses who will need to use the service from April. This marks a significant milestone towards our delivery of a modern tax administration.

‘We encourage all eligible businesses to join and try out the service before they are mandated to use it.’

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Data reveals significant number of taxpayers filed tax returns over festive period

Data published by HMRC has revealed that more than 10,000 self assessment tax returns were filed over the festive period.

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According to HMRC, 2,616 individuals filed their return on Christmas Day, with the peak filing hour proving to be between 1pm and 2pm.

Meanwhile, 8,465 taxpayers submitted their tax return on Boxing Day, with the majority of returns being filed between 8am and 4pm.

More than 11 million taxpayers are required to complete and file their self assessment tax return by 31 January 2019. HMRC recently urged the 5.5 million taxpayers who have not yet submitted their tax return to do so before this time.

Angela MacDonald, Director General for Customer Services at HMRC, said: ‘The self assessment deadline on 31 January is fast approaching, but there is still time for customers to file their tax returns online and on time to avoid any unnecessary penalties.’

Those who are late in submitting their return face a penalty of £100, even if there is no tax to pay, or if the tax has been paid on time. Additional penalties are due for continued late payments and late filing.

As your accountants, we can assist you in preparing and filing your self assessment tax returns – please contact us for more information.

LITRG urges HMRC to publish MTD for VAT exemption guidance

The Low Incomes Tax Reform Group (LITRG) has called for HMRC to publish detailed Making Tax Digital for VAT (MTD for VAT) exemption guidance.

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MTD for VAT is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the current VAT registration threshold of £85,000. As part of the initiative, firms must keep some records digitally, and must submit their VAT returns via an Application Programming Interface (API).

The LITRG stated that it is ‘very concerned’ that HMRC has so far failed to publish guidance on how someone might be able to claim exemption from MTD for VAT.

The Group said that without detailed guidance, some taxpayers may ‘worry unnecessarily’ as to how they will cope, and others could be left with ‘very little time to prepare’ if their application for exemption is turned down.

‘We are very concerned that HMRC has not yet published any detailed information as to how exemption from MTD for VAT may be obtained, with the start date so close,’ said Victoria Todd, Head of Team at the LITRG.

‘HMRC has said that people should contact the VAT helpline to speak to an adviser if they think they should be exempt. We would like to see more specific guidance which explains what information and evidence HMRC will require from a caller, and what they can do if their application is turned down.’

UK businesses urged to prepare now for potential ‘no deal’ Brexit

HMRC has written to 145,000 UK businesses to urge them to begin preparing now for a potential ‘no deal’ Brexit scenario.

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The letters, which have been sent to VAT-registered businesses which trade only with the EU, explain changes to customs, excise and VAT in the ‘unlikely event’ that the UK leaves the EU without a deal.

The letters urge affected firms to take three actions now:

  • Register for a UK Economic Operator Registration and Identification (EORI) number.
  • Decide whether a customs agent will be used to make import and/or export declarations, or whether declarations will be made by the business via software.
  • Contact the organisation responsible for moving goods (for example, a haulage firm) in order to ascertain whether the business will need to supply additional information to complete safety and security declarations, or whether it will need to submit these declarations itself.

HMRC intends to write to businesses in the future in order to instruct them on any additional actions they will need to take, and when.

Further information on the issue can be found here. Businesses can keep up-to-date with the latest Brexit advice by registering for HMRC’s EU Exit Update Service here.

Report suggests HMRC ‘treating taxpayers unfairly’

A report published by the Economic Affairs Committee has suggested that HMRC is ‘treating taxpayers unfairly’, and has called for the Revenue’s tax avoidance and evasion powers to be reviewed.

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The Committee stated that HMRC is failing to ‘discriminate effectively’ in regard to the full range of behaviours and circumstances it classes as tax avoidance.

The Committee said that a ‘clear difference’ exists between deliberate tax avoidance and ‘naïve decisions’ made by ‘unrepresented’ taxpayers.

‘Clearer distinctions’ are needed in relation to the government’s approach to dealing with tax avoidance, the Committee affirmed.

Commenting on the matter, Lord Forsyth of Drumlean, Chair of the Economic Affairs Committee, said: ‘HMRC is right to tackle tax evasion and aggressive tax avoidance. However, a careful balance must be struck between clamping down and treating taxpayers fairly.

‘Our evidence has convinced us that this balance has tipped too far in favour of HMRC and against the fundamental protections every taxpayer should expect.’

A government spokesperson responded: ‘We’ve taken unprecedented action to crack down on avoidance and evasion, making sure people pay their fair share of tax and securing funding for our vital public services.’

HMRC writes to taxpayers ahead of introduction of Welsh rates of income tax

HMRC has started to write to taxpayers ahead of the introduction of the Welsh rates of income tax (WRIT) on 6 April 2019.

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From this time, taxpayers will pay the WRIT if their main residence is situated in Wales. The Welsh government will set the rates. It intends to use the money raised by the WRIT to fund public services, such as the NHS and schools.

Workers with a main residence in Wales will pay tax at the Welsh rates via Pay as You Earn (PAYE). HMRC will add a ‘C’ to the start of individuals’ tax codes so that affected taxpayers pay the correct rates.

Those who opt to file their self-assessment tax return online will be required to tick a box in order to tell HMRC that they pay the WRIT.

Commenting on the matter, Angela MacDonald, Director General for HMRC Customer Services, said: ‘We want to help people pay the right tax, so we’re writing to customers to let them know that they’ll now be paying WRIT.

‘Customers don’t need to do anything right now, but should make sure to keep HMRC informed if their details change in the future.’

Additional information on the WRIT can be found here.

OTS calls for overhaul of inheritance tax regime

The Office of Tax Simplification (OTS) has urged HMRC to overhaul the UK’s inheritance tax (IHT) regime.

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In January 2018, Chancellor Philip Hammond commissioned the OTS to carry out a review of the IHT regime, and outline ways in which the tax can be simplified.

In its report, which is the first of two, the OTS stated that many individuals’ concerns relate to administrative issues. The report revealed that 38% of those who chose not to use an adviser spent over 50 hours on estate administration. An additional 65% of individuals stated that, despite there being no IHT to pay, they still had to provide ‘significant amounts’ of information.

The OTS has outlined a range of measures designed to ‘help make IHT simpler and easier to understand’. According to the OTS, HMRC should consider implementing a ‘fully-integrated’ digital system for IHT; changing the current IHT forms to ‘reduce and simplify’ the administration of estates; and reviewing its IHT guidance to ensure it is ‘clear, consistent and easy to navigate’.

Commenting on the report, Paul Morton, Tax Director at the OTS, said: ‘It has been hugely positive to have had the benefit of so many personal insights into the experience of dealing with IHT, alongside deep engagement with many professional advisers.

‘This has been key to informing the overview of the tax that the report provides, and will underpin the OTS’s continuing work on its second report.’