HMRC published Agent Update 119 on 17 April 2024. Here is our summary of the highlights in direct and indirect tax announcements affecting SME owners and advisers.
National Insurance
- HMRC and HM Treasury have launched an online tool for estimating the monthly impact for an individual on Class 1 contributions following the changes from April 2024.
- See NICs Rates & Allowances
Basis Year reform
- 2023-24 is the first year where profits from self-employment - sole traders and partnerships - must report on a tax year basis.
- Any additional profit after overlap relief for the period from the end of the previous accounting date in 2022-23 is called transitional profit. The default treatment is to spread this over five years, starting with 2023-24.
- The final year for claiming overlap relief is 2023-24. Since September 2023 there has been an online service to ask HMRC what the overlap relief figure is.
- Accounting periods ending on 31 March will be treated as equivalent to those ending on 5 April.
- See Basis Year Reform and Accounting periods and basis periods.
Plant and Machinery Allowances
- A decision tool has been published to assist companies in checking if they can claim the 100% full expensing capital allowance or the 50% allowance for special rate expenditure. It follows a series of steps and requires the company to be able to categorise its expenditure correctly.
- There is also new guidance for calculating the balancing charge where a company claimed either of these allowances.
- See Capital Allowances: What's new 2023-24 and Full expensing and First Year Allowances
Research and Development changes
- From 1 April 2024, the previous Small and Medium-sized Enterprises (SMEs) scheme and the Research and Development Expenditure Credit (RDEC) scheme have been merged.
- To claim the higher payable credit of 14.5% SMEs have a new intensity threshold of 30% rather than the previous 40%. SMEs also have to be loss-making before any additional deduction is taken. This is referred to as enhanced R&D intensive support or ERIS.
- The newly merged RDEC is a taxable credit with a gross value of 20% of the underlying qualifying expenditure (49% for ring-fenced trades).
- In February 2024 HMRC updated the Additional Information Form to incorporate information related to a business's intensity ratio. Further changes to the form are anticipated in May 2024 to accommodate the changes in force from 1 April.
- The CT600 will not be updated until April 2025. For accounting periods beginning on or after 1 April 2024, only those that qualify for the ERIS relief should complete the SME section of the supplementary page CT600L.
- See also R&D undertaken overseas: Externally provided workers and contractors
Digital reporting service
- From 1 January 2025, UK digital platforms must report information to HMRC about the income of sellers of goods and services on their platform since 1 January 2024. HMRC will then exchange the information with the other participating tax authorities for the jurisdictions where the sellers are tax resident. A copy of the information must be given to the taxpayer to help them comply with their tax obligations.
- HMRC is developing a new reporting service which will see platform operators required to upload an XML file of the required data.
- See Side-Hustles & Tax
Paper returns for Capital Gains Tax on UK property
- Following the introduction of a paper version of the return in February 2023, a new interactive form is now available that can be completed on screen before printing and sending to HMRC. It is available for all tax years between 2020 and 2025. It is only intended to be used by those who cannot report and pay Capital Gains Tax (CGT) using the online service.
- See At a glance: Reporting CGT when & how?
Capital Gains Tax, common mistakes
- The Update lists mistakes across a range of CGT issues including matters related to property and gift holdover relief.
- See At a glance: How to calculate a capital gain or loss and At a glance: Reporting CGT when & how?
Making Tax Digital, take part in testing
- With Making Tax Digital (MTD) due to start in April 2026 for self-employed individuals and landlords, HMRC is encouraging taxpayers to participate in the testing programme.
- They have outlined How the penalty regime will apply to volunteers in recent weeks.
Raising standards in the tax advice market
- HMRC continues to be concerned in this area and launched a consultation at Spring Budget 2024.
- See Raising Standards in the Tax Market: Tax Registration
DIY housebuilders scheme
- From early May 2024, it will be possible to use agent credentials to access the digital service for completing and submitting claims on behalf of clients. Agents will also be able to submit invoices and any other information required by HMRC.
- A new version of form 64-8 will include a section on the scheme which clients will need to tick to confirm agents are authorised.
- See Land & Property: DIY Housebuilders scheme
Tax agent toolkits
- HMRC have 20 different toolkits available for download which aim to address the most common errors made.
New online complaints form
- From 8 April 2024, agents will be able to use an online form to make a complaint to HMRC rather than having to deal with it by post.
- Agents will need to inform the relevant authorisation.
- See HMRC behind on complaints handling
Useful guides on this topic
Finance Acts 2024 - 2025 and rolling tax update
This rolling planner tracks the key tax announcements that impact the 2024-25 tax year and beyond. This planner is updated on an ongoing basis.
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