Albatross Accounting

Tax rate scrutiny: Recent attention has been drawn to Rishi Sunak's tax returns, revealing that he paid a 20% tax rate on gains of £1.8 million. This has sparked debates about whether capital gains tax (CGT) rates are fair compared to income tax rates.

Impact on investors: The revelation has led to discussions among investors and taxpayers about how CGT policies could affect their investment decisions and financial outcomes. Some are questioning the disparity between CGT rates and income tax rates, wondering if reforms are needed to ensure fairness.

Political attention: Despite CGT affecting a relatively small percentage of taxpayers, it has become a politically charged issue. Policymakers are considering potential reforms to CGT rates to address concerns about fairness and equity in the tax system.

What's next?: As discussions about CGT continue to evolve, it's essential for investors and taxpayers to stay informed about potential changes that could impact their financial planning and investment strategies. Keep an eye on updates and developments in CGT policy to navigate the tax landscape effectively.

The UK tax authority, HMRC, is reaching out to around 12,000 businesses suspected of being foreign entities incorporated in the UK, potentially to dodge VAT on their UK sales. Online marketplaces like Amazon, eBay, and Etsy have been tasked with collecting VAT on sales by foreign traders since a legal change in January 2021. However, there are challenges as some traders are incorporating in the UK without a genuine presence, skirting the rules.

In response, HMRC is sending "one-to-many" letters to businesses believed to be Non-Established Taxable Persons (NETPs), giving them a chance to confirm or dispute their NETP status. NET status means that online marketplaces must collect and remit VAT directly to HMRC for the business' supplies. NETPs must register for VAT regardless of turnover, and if businesses dispute their status, they have 30 days to provide evidence of a UK establishment.

In a recent move, HMRC addresses double taxation concerns in off-payroll working rules. Changes allow the set-off of tax and NICs paid by workers against deemed employer PAYE liability, promoting a fairer distribution of tax costs.

Effective from April 6, 2024, the new policy prevents income from being taxed twice, streamlining settlement processes. Compliance cases nearing settlement may be paused for set-off consideration. The set-off approach reassures clients, ensuring a more equitable solution.

HMRC's abrupt helpline restriction before January 31 has left taxpayers grappling for assistance. Last year's move led to 1.2 million missed calls, exacerbated by 24-minute delays in October. Critics, like Harriett Baldwin from the Treasury committee, criticized this decision.

The helpline now prioritizes 'urgent' calls, essentially blocking access for others. This extended closure raises concerns about support inadequacy, potentially causing tax compliance errors. HMRC's shift from user-friendly services to cost-cutting measures raises credibility doubts.

Such unavailability could prompt taxpayers to seek paid guidance, a stark contrast to previously free HMRC assistance.

HMRC's warning landlords about a tax scheme they should be wary of. This scheme, known as the 'hybrid business model', uses partnerships and companies to cut taxes. This avoidance scheme was highlighted in HMRC’s Spotlight 63 (https://www.gov.uk/guidance/property-business-arrangements-involving-hybrid-partnerships-spotlight-63). But HMRC says it might not work and could lead to problems. They're urging people involved to take action before January 31, 2024, or they could face inquiries, extra taxes, and penalties. It's a heads-up to think twice about these tax plans to avoid future trouble with the taxman."

This simplified version aims to communicate HMRC's cautionary advice about a specific tax scheme targeted at landlords.

A group of British millionaires projected a message onto the Treasury and Bank of England buildings, calling for higher taxes on the wealthy.

They argue that instead of reducing taxes for the richest, the chancellor should raise taxes to help fund public services. Their proposal to introduce a 2% tax on assets over £10 million could generate £22 billion annually. The millionaires say this would cover the salaries of over 600,000 nurses per year. They believe such a tax could relieve financial pressure on working people and boost investments in the country.

A survey found three-quarters of Britons support this idea, and 68% of the wealthiest individuals in the country also favor implementing such a tax.



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ISA Adjustments: Potential Reforms and Their Impact
In the lead-up to the Autumn Statement, Chancellor of the Exchequer Jeremy Hunt hints at potential alterations to Individual Savings Accounts (ISAs). This exploration delves into these possible reforms and their potential outcomes.

Introduction to ISAs:
Currently, there are four types of ISAs: cash ISAs, stocks and shares ISAs, innovative finance ISAs (including peer-to-peer loans and crowdfunding debentures), and lifetime ISAs. The yearly limit is £20,000.

Anticipated Changes:
While a straightforward increase in the £20,000 annual limit is an option, more nuanced changes aim to boost the proportion of ISA investments in stocks and shares.

CIPP Involvement and Expectations:
The Chartered Institute of Payroll Professionals (CIPP) conducted sessions for payroll professionals, emphasizing the need for clear recommendations. HMRC representatives are open to considering suggestions.

Economic and Social Impact:
ISAs can benefit banks and investment firms. Proposed changes may involve simplifying rules and introducing ISAs exclusively for investments in UK companies.

Dream Home and Pension Scheme:
Questions arise about the sufficiency of £450,000 for a first home. Time constraints on ISAs may prove impractical, prompting a call for rule adjustments.

Economic and Social Impact:
Some policymakers view minor ISA adjustments as a strategy to satisfy specific circles and reduce tax liabilities, a move that won't heavily impact the treasury and may appease critics. However, changes to a relatively unpopular scheme may not resonate widely.

HMRC aims to enhance data collection, posing challenges for some payroll providers. The government's response in April 2023 outlines changes, notably in real-time information (RTI) reporting, of interest to the Chartered Institute of Payroll Professionals (CIPP).

HMRC proposes numerical reporting of hours worked, departing from the current banding system. Additionally, band "E – Other" would see exemptions for clarity. Employers, already obligated to record employee hours for NLW and NMW compliance, must adapt to these changes.

CIPP ran think tank sessions addressing in-house payroll professionals and those in bureau/accountancy practices. Attendees emphasized the necessity for clear guidance, a concern acknowledged by HMRC representatives willing to incorporate suggestions.

Bureau and accountancy attendees worry about obtaining client data for compliance, especially with the proposed mandatory numerical declarations. Data accuracy concerns may lead to compliance actions, impacting client relationships.

HMRC believes the requested data is readily available. The government asserts businesses should handle this administrative burden, aligning with existing practices. The question persists: is this too demanding for some payroll providers?

Jim Harra, HMRC's chief, aims to cut the tax authority's phone helpline volume by almost a third by the end of 2024 due to rising demand, as announced during a recent Treasury Committee meeting. Harra stressed the importance of shifting to digital channels, estimating a need to reduce call volumes by 30% to meet service targets.

"In 2022-23, we received 38 million calls, three million more than the previous year. We must counter this trend to reduce contact demand. Thankfully, there's evidence that much of this demand can be met through online self-service," Harra explained.

Earlier this year, AccountingWEB reported that HMRC receives approximately 519,000 calls each year from people seeking confirmation of their national insurance (NI) numbers. The Revenue has introduced a feature allowing taxpayers to access their NI confirmation letter online or via the HMRC app, eliminating the need to wait for the letter by post, which could take up to 15 days.

Many buildings need disabled access. VAT law offers relief for charity-owned or occupied buildings. This saves costs with minimal admin. Charity status is essential. Works on existing buildings are zero-rated. New charity buildings can also be zero-rated. Trustees should seek advice and clarify zero-rating early.

Ramps, corridors, doorways
Building ramps for entry or movement, widening doorways or corridors for access can be zero-rated.

Accessible toilets, washrooms, bathrooms
Works on these facilities are zero-rated, as are extensions or adaptations.

Lifts
Zero-rating isn't common for lifts, except in specific cases. Chair lifts for named disabled individuals can be zero-rated. Otherwise, zero-rating applies when buildings include a day centre or residential centre for disabled people.

Goods or services
Goods supplied during construction services can be zero-rated. It's wise to check with the contractor.

Certification and evidence
No formal certificate is required, but evidence might be needed. Keep architectural drawings and planning permission for six years.