HMRC have issued their Agent Update for January 2024. We have summarised the key content for you with links to our detailed guidance on the topics covered.
Horizon Shortfall Scheme compensation: tax treatment
- The Horizon Shortfall Scheme (HSS) was established by Post Office Ltd to compensate postmasters who made good apparent losses caused by the Horizon system.
- HSS compensation payments are subject to Income Tax and National Insurance Contributions (NICs), meaning that recipients may have to file a tax return to account for Income Tax and NICs.
- Postmasters in the HSS are due to receive top-up payments to make sure that the amount of compensation they receive is not unduly reduced by tax.
- Postmasters in the HSS who do not receive their top-up payment in good time to file their Self Assessment return before 31 January 2024 will not have to pay any late filing or late payment penalties or interest.
Inheritance Tax and applying for probate
- From 17 January 2024, taxpayers applying for probate in England and Wales, will no longer need to complete an IHT421 Probate Summary to submit with their IHT400.
- The letter sent by HMRC confirming receipt and processing of the form IHT400 will provide a unique code and the details of the estate values which will be needed to make a probate application.
- This unique code should be used to apply for probate using the HM Courts and Tribunals Service (HMCTS) online portal.
- Applications for probate where an IHT400 has been submitted to HMRC will not be possible without the unique code and estate values.
Phasing out the employers’ payment booklet
- From April 2024, employers will no longer receive or be able to request a replacement payment booklet to make PAYE payments at a bank or building society or to send with a cheque in the post.
- Current payment booklets can continue to be used at a bank or building society or with a cheque in the post until 5 April 2024.
- From April 2024, employers can either pay online or via post using a cheque with the reference number written on the back of the cheque.
2022-23 tax returns
Agents have access to a number of online resources:
- The Self Assessment online service for agents, to file your client’s tax return online, view their statements and payments, get their PAYE coding notice and update their contact details
- The Income Record Viewer (IRV). The IRV gives agents access to clients' pay, tax, employment history, pension (private and state) and tax codes.
- HMRC’s service dashboard to check HMRC's performance and service levels for post and online services. Agents can see when they can expect a response, with processing dates for Self Assessment refunds, tax return amendments, registering and more.
- Tool to check if you need to do a tax return.
- A video on how to register online including information on setting up as a delegate to complete, amend and review a client's self-assessment registration.
- Video on How to go online to stop your Self Assessment.
2022-23 self-assessment exclusions
- HMRC's self-assessment exclusions document for individuals, which sets out whether taxpayers should file a paper tax return rather than an online one, has been updated.
Repayment agent registration
- From 26 February 2024, all agents submitting a P87 or Marriage Allowance transfer repayment claim on behalf of their clients will need to use the new standard HMRC forms. Claims made in an incorrect format will be rejected.
- The new forms will be made available for download on GOV.UK from 12 February 2024.
- Form claims submitted before 26 February 2024:
- Only the current version of form P87 should be used.
- Either the current or new version of the Marriage Allowance transfer claim form may be used.
- From 26 February 2024, agents wishing to receive repayment on behalf of their client will need to provide their agent reference number when submitting the relevant form and ensure the section of the form relating to whether the taxpayer is nominating a professional to act on their behalf is completed.
- Failure to do so will result in the repayment being made directly to the taxpayer.
Changes to Scottish Income Tax from 6 April 2024
- The Scottish Government have announced changes to Scottish Income Tax, which will take effect from 6 April 2024, including the introduction of a new tax band called Advanced Rate.
Tax simplification update: January 2024
- A package of measures intended to simplify and modernise the tax system has been announced. These include:
- Mandatory payrolling of Benefits In Kind (BIKs) from April 2026.
- Creating a new online service for employees to claim tax relief on non-reimbursed expenses.
- Creating a method for parents and carers to apply for National Insurance (NI) credits for tax years where they did not claim Child Benefit.
- Amending the existing Capital Gains Tax (CGT) rules so that, where property is used as collateral to raise finance, the CGT outcome is the same whether alternative finance or conventional finance is used.
- Reforming UK law for transfer pricing, permanent establishments and Diverted Profits Tax.
DIY Housebuilder Scheme digitalisation
- On 5 December 2023, the DIY Housebuilders Scheme was digitalised.
- The previous process of making paper-based claims will remain an option for those who cannot use the digital service.
- The time limit for making a claim has also been extended from three to six months.
- Individuals who are eligible to make a claim will be able to do so for six months after completion for any eligible construction or conversion completed on or after 5 December 2023.
- Agents who are claiming on behalf of clients should complete the form with the relevant details requested and attach a copy of the 64-8 with the eligibility documents.
Changes to paternity leave and pay
- The way paternity leave and pay can be claimed and taken is changing from 8 March 2024.
- Fathers and partners will be eligible to claim Statutory Paternity Pay and Leave (SPPL) under the new rules if the expected date of birth of their baby is after 6 April 2024, or if the child is born early and before this date.
- HMRC’s PAYE payroll software will be updated with the new paternity leave and pay terms by 6 April 2024.
- Employers of fathers or partners whose babies are born early may choose to take SPPL before 6 April 2024, and before the PAYE software has been updated.
- This means some employers may need to claim repayment for Statutory Paternity Pay (SPP) paid under the new rules, but before the PAYE software has been updated.
- Employers should identify employees who have given or will give notice of their intent to claim SPPL, and whose babies have an expected week of birth after 6 April 2024.
- If no employees meet those conditions by that date, it is not necessary to consider the following transitional guidance.
Transitional Guidance on reclaiming ‘new rules’ statutory Paternity payments before 6 April 2024
- If an employee took one block of SPPL before 6 April 2024, their employer will be able to claim Statutory Paternity Pay (SPP) repayment for one consecutive block of SPPL taken. A block can be one or two weeks. Employers can reclaim payment through their payroll software or as they normally would.
- If an employee took two non-consecutive blocks of SPPL before 6 April 2024, their employer will only be able to claim repayment for one block before 6 April 2024. Employers will be able to claim repayment for the second SPP block by this date when the PAYE system has been updated.
- Small and Medium-sized Employers (SMEs) can claim payment for SPP costs in advance. If a SME paid £45,000 or less in Class 1 NI (ignoring reductions such as Employment Allowance) in the last complete tax year and it cannot afford to make statutory payments, the SME can apply for HMRC to pay it in advance. The SME can apply up to four weeks before they want the first payment.
Basis period reform
- There are no changes currently planned to the SA800 for partnerships as a result of basis period reform. Partnerships will continue to fill out the SA800 in the same way as they do currently.
VAT taxable turnover
- Clients registering for VAT must make sure that accurate estimated (or projected) taxable supplies and turnover values are provided when registering.
- They could use their turnover figure from the last 12 months if it is realistic.
- Clients must cancel their VAT registration if they are no longer eligible to be VAT registered or if they cease trading or making taxable supplies.
- Form VAT 427 may be used to reclaim VAT on business costs relating to the taxable period after VAT registration has been cancelled.
VAT and insolvent companies
- If your client becomes bankrupt or their company enters liquidation or administration, it does not mean that their VAT registration is automatically cancelled. The insolvency office holder may continue to make taxable supplies.
- If bankrupt, it is your client’s responsibility, or the liquidator or administrator of the VAT registered company, to cancel their VAT registration, when they cease making taxable supplies on behalf of the business.
- Companies that are dissolved have no entitlement to be registered for VAT.
- Clents applying to voluntarily dissolve their company, are required to deregister for VAT and submit a final VAT Return for the period up to and including the date they ceased making taxable supplies.
- If a client’s company is being dissolved after a liquidation or administration, it is the responsibility of the liquidator or administrator to deregister their company for VAT.
VAT and intending traders
- Your clients can register for VAT before making taxable supplies as an ‘intending trader’ if, on the date of the registration request, they are carrying on a business and have not started making taxable supplies.
Reducing the risk of employees paying too much student loan
- HMRC will send a student or postgraduate loan start notice either online or by post if an employee is liable to repayments for either.
- It is important to use the correct start date and loan or plan type as shown on the notice.
- Deductions should continue until HMRC advises to stop.
- If the employee’s earnings are above the repayment thresholds and the employer does not take deductions, HMRC will send a generic notification service prompt as a reminder.
- If deductions still do not commence, HMRC may make direct contact with the employer.
- If the employee’s earnings are below the respective student loan and postgraduate loan thresholds, the employer should update the employee’s payroll record to show they have a student loan or postgraduate loan and file the start notice.
New National Insurance (NI) tool for employees
- The main Class 1 employee NI rate was reduced from 12% to 10% from 6 January 2024.
- HMRC have launched an online tool for anyone to Estimate how the January 2024 NI contributions changes will affect them.
Research and Development (R&D) changes
- The current Small or Medium Enterprise (SME) and Research and Development Expenditure Credit (RDEC) schemes will merge from 1 April 2024.
- For accounting periods beginning on or after 1 April 2024, there will only be two R&D schemes available. These are:
- The merged scheme.
- The enhanced relief for loss-making R&D intensive SMEs scheme.
- Contracted out R&D: for accounting periods beginning on or after 1 April 2024, there will be one set of rules determining whether a customer or contractor can claim relief for R&D undertaken, which will apply across both schemes.
- Subsidised expenditure: the intended operation of the contracted-out R&D rules means that rules relating to subsidised expenditure in the existing SME scheme are no longer relevant. These sections have been removed from the legislation for the merged scheme.
Enhanced tax relief for loss-making R&D-intensive SMEs
- The ‘SME intensive scheme’, for the most R&D intensive loss-making SME applies for R&D expenditure from 1 April 2023.
- A company is considered R&D intensive where its qualifying R&D expenditure is 40% or more of its total expenditure.
- For accounting periods beginning on or after 1 April 2024, the threshold to be considered R&D intensive will be reduced from 40% to 30% of total expenditure.
- A one-year grace period will be introduced for R&D-intensive SMEs for accounting periods beginning on or after 1 April 2024.
- For businesses wanting to claim the enhanced rate for SMEs for expenditure incurred after 1 April 2023, a revised additional information form will become available after the Finance Bill has received Royal Assent. HMRC will confirm in a future agent update once that system is live and businesses can submit claims for the ‘SME intensive scheme’.
Restricting nominations and assignments
- For claims submitted on or after 1 April 2024, HMRC will only pay out an amount of R&D tax credit or RDEC (to be known as ‘R&D tax credit payments’) direct to the claimant company.
- This is subject to the following exceptions:
- Connected party nominees: companies wanting HMRC to pay to a connected nominee after 1 April 2024, will need to write to HMRC and explain how the party is connected with the claimant.
- Exceptional circumstances: further guidance will be published in due course.
- New assignments of R&D tax credit payments made on or after 22 November 2023 will be void once the Autumn Finance Bill receives royal assent unless the assignment was made to carry out an agreement that was entered into before 22 November 2023.
- HMRC will continue to honour nominations for claims received before 1 April 2024.
Taxpayers using a ‘Group Tax Manager’ account to submit R&D additional information forms
- Taxpayers who have ‘Group Tax Manager’ accounts are unable to submit an R&D Additional Information Form (AIF) using these government gateway credentials.
- The AIF guidance page states that an agent may use an agent services account or a company may use its own government gateway credentials to submit an AIF.
- Each company that wants to submit an AIF themselves in support of their R&D claim will need to set up an ‘organisation account’ by following the guidance at HMRC online services: sign in or set up an account.
- The account will need to be linked to the Corporation Tax reference for that company. Separate government gateway credentials will be required by each company making an R&D claim within a group.
- Linking government gateway credentials to a company Corporation Tax Unique Taxpayer Reference (UTR) can take 7 to 14 days as the authorisation is received by post.
- Some taxpayers have notified HMRC of issues with registering for a government gateway account in order to submit an AIF. If any groups are facing this issue, they should contact their Customer Compliance Manager (CCM) or contact the incentives and reliefs mailbox
Testing Making Tax Digital for Income Tax Self Assessment from April 2024
- From April 2026, Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) will require self-employed individuals and landlords with income over £50,000 to keep digital records and send quarterly updates to HMRC, using compatible software.
- MTD for ITSA applies to those with an income over £30,000 from April 2027.
- HMRC are testing the MTD for ITSA system and agents are encouraged to take part from April 2024.
- HMRC recommend that you sign up eligible clients with a range of different income types so that they can take part from April 2024.
- More information on how to sign up and who is eligible to join the April 2024 testing will be made available in the coming weeks.
Prepare for changes for goods moving from the island of Ireland to Great Britain
- From 31 January 2024, some goods will face full customs controls when moved directly from Irish ports to Great Britain.
- Goods will need to complete import processes if they are being imported directly from Ireland into Great Britain.
- Goods moving from Northern Ireland to Great Britain through Irish ports will also have to complete import processes if they are non-qualifying Northern Ireland goods, excise goods or goods which do not move directly to an Irish port once they have left Northern Ireland (for example, goods which are held in storage in Ireland).
- HMRC's guidance can be found at:
Three new countries join the Convention on Social Security Coordination
- Those moving between the UK and Iceland, Liechtenstein or Norway can now benefit from the new Convention that came into force on 1 January 2024.
- The Convention protects the social security position of cross-border workers. This means that employees, employers, and the self-employed are only liable to pay social security contributions in one country at a time. In addition, workers have access to an uprated UK state pension and reciprocal healthcare arrangements.
Tax agent toolkits
HMRC have many Tax agent toolkits available for you to download and use that address the most common errors seen in previous years.
Complain about HMRC: To make a complaint to HMRC on behalf of your client you must be appointed as their tax advisor.
Where’s My Reply? for tax agents: Find out when you can expect to get a reply from HMRC to a query or request you have made. There is also a dedicated service for tax agents to:
- Register you as an agent to use HMRC Online Services.
- Process an application for authority to act on behalf of a client.
Check the latest updates to HMRC manuals or subscribe to the automatic notification of changes.