HMRC have published Agent Update 120 for May 2024. Here is our summary of the highlights in direct and indirect tax announcements affecting SME owners and advisers.
New R40 repayment processing live
- Changes were announced earlier this year and are now live: see Agent Update February 2024. Agents are encouraged to use the standard HMRC version of the new R40 form for claims dated 30 April 2024 onwards.
- An Agent Reference Number (ARN) must be provided for any agents wanting to receive repayment on behalf of clients. If there is no ARN submitted the refund will be sent directly to clients.
- There is also a nomination section on the new form which must be completed in full. Only the HMRC version of the R40 will be accepted for the nomination section.
- Where the form R40 is used for claims in respect of interest paid on Payment Protection Insurance evidence must be attached at the time of submitting the claim. Guidance on acceptable supporting evidence can be found here.
- See Savings income: How interest is taxed.
Employment-Related Securities (ERS), end-of-year return deadline.
- The deadline for submission of online ERS returns is 6 July 2024. All returns, including nil returns, must be submitted by that date to avoid late filing penalties.
- It is not possible for agents to open or close a scheme on behalf of an employer.
- Once a scheme ceases, a final annual return must be submitted for the tax year of the final event date.
- See Employment-Related Securities: Reporting.
Investment Zone tax relief guidance
- There are several Investment Zones across the UK where central and local governments will work with business and local partners to encourage investment and innovation. They have been provided with up to £160 million over 10 years.
- Some of the Investment Zones will include designated special tax sites where businesses can take advantage of a range of tax reliefs.
- See Investment Zones: Tax breaks
Spotlight 64: warning for employment agencies using umbrella companies
- This Spotlight highlights signs that employment and recruitment agencies should be aware of as indications an umbrella company is operating a tax avoidance scheme.
- HMRC suggest there are both penalties and reputational damage at stake so it is important agencies take steps to protect themselves and their workers.
- See Spotlight 64: Employment agencies using umbrella companies.
Vaping Products Duty Consultation
- Vaping Products Duty (VPD) will be introduced from October 2026.
- VPD will apply to the liquid used for vaping and will be chargeable at the point of manufacture or importation.
- A policy consultation has been launched which closes on 29 May 2024.
The enhanced Check Your State Pension forecast service is now available
- For men born after 5 April 1951 or women born after 5 April 1953, there is a deadline of 5 April 2025 to pay voluntary National Insurance Contributions to cover gaps in contributions from 2006-07 to 2017-18.
- Most individuals will be able to make use of the enhanced online service to help them decide whether to make additional contributions and which are the best years to apply these.
- The service is not available to people already in receipt of State Pension, the self-employed, those currently living outside the UK with gaps that incurred while working abroad, customers within four months and eight days of State Pension Age, those already over State Pension Age, and those whose National Insurance records are being updated.
- See State Pension Age.
Reporting profits on a tax-year basis
- From 2023-24 all sole trader and partnership businesses must report their profits on a tax year basis.
- The transitional profit from the previous accounting date in 2022-23 up to 5 April 2024 must be accounted for on the Self Assessment return due by 31 January 2025. This transitional profit will be spread over 5 years by default including 2023-24.
- Accounting periods ending on 31 March will be treated as equivalent to those ending on 5 April.
- There is no change to the partnership return, form SA800, because all adjustments for transitional profit and overlap relief are made on the individual partners' returns.
- Profits of the 2023-24 tax year can be reduced by any overlap relief which is entered on the 2023-24 Self Assessment return. There is an online service to establish the amount of this relief with HMRC who warn that response times have slowed as demand has significantly increased. For this reason, HMRC is discouraging using the online service to check a figure if it is already known.
- See Basis Period reform: At a glance.
Subcontractor registrations and applications for Gross Payment Status (GPS)
- From 6 April 2024, it has no longer been possible to register for the Construction Industry Scheme (CIS) or apply for GPS over the telephone unless digitally excluded. A new digital form for registration and GPS applications has been introduced.
- See CIS: Contractors and Subcontractors.
VAT treatment of voluntary carbon credits
- HMRC published Revenue and Customs Brief 7 (2024) - VAT treatment of Voluntary Carbon Credits which explains how VAT will apply to these supplies from 1 September 2024.
- See Revenue and Customs Brief 7 (2024): VAT Treatment of Voluntary Carbon Credits
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Self Assessment threshold change
- HMRC remind us that from 2023-24 the threshold for individuals taxed through PAYE only has increased from £100,000 to £150,000. These individuals will not need to complete a tax return unless they also meet one of the other criteria, for example:
- Receive any untaxed income over £2,500.
- Are a partner in a business partnership.
- Have to pay the High-Income Child Benefit Charge.
- Are a self-employed individual with a gross income over £1,000.
- From 2024-25 onwards the income threshold for completing a tax return for PAYE-only taxpayers will be removed.
Using the payrolling Benefits In Kind service for agents
- A new service has been developed whereby agents can register employment benefits which will be taxed through their client's payroll on or after 6 April 2025. These benefits include but are not restricted to:
- Mileage and motoring expenses.
- Private medical expenses.
- Relocation expenses.
- To payroll Benefits In Kind online employers must opt in to use the Employer Liabilities and Payments service.
- Employers must continue to submit P11Ds for 2023-24 and 2024-254 for benefits that have not been payrolled.
- See Payrolling benefits in kind: at a glance
Useful guides on these topics
Savings income: How interest is taxed
What is savings income? How is savings income taxed? What allowances are available? What is the Accrued Income Scheme?
Employment-Related Securities: Reporting
If an employer gives shares to an employee or sets up a tax-advantaged share or share option scheme, the benefit is taxed within the Employment-Related Securities (ERS) regime. The employer will then have a requirement to register a share scheme with HMRC and file an annual return by 6 July following the tax year-end.
Spotlight 64: Employment agencies using umbrella companies
State Pension Age
The state pension age is gradually being increased. What is the current state pension age? How often is it reviewed?
Will I need a pension scheme?
Do I need a pension scheme, and how are pensions taxed?
Pensions: Tax rules and planning
What tax rules apply to pensions? What tax relief is available? What tax charges can arise? What planning opportunities are there?
Basis Period reform: At a glance
Basis reform: how it works and with Q&A. 2023-24 is a transitional year. All unincorporated (self-employed) businesses will be calculating their profit or loss arising up to 5 April 2024 regardless of their accounting end date.
Self Assessment Return 2023/24: What's new?
2024 Self Assessment toolkit: top tips for completing tax returns for the year ending 5 April 2024.
CIS: Contractors and Subcontractors
What is the Construction Industry Scheme? Who does it apply to? How does it work?
Revenue and Customs Brief 7 (2024): VAT Treatment of Voluntary Carbon Credits
HMRC have published 'Revenue and Customs Brief 7 (2024): VAT Treatment of Voluntary Carbon Credits' which covers the treatment of voluntary carbon credits from 1 September 2024.
Making Tax Digital: Index & timeline
When does Making Tax Digital (MTD) apply? What does MTD really mean? How will it affect you?
Making Tax Digital: Survival guide (for the self-employed & landlords)
The way that some self-employed taxpayers report their business profits to HMRC is set to change under the Making Tax Digital (MTD) for the business regime when it begins to apply to Income Tax reporting.
Penalties: Making Tax Digital
HMRC's Making Tax Digital (MTD) programme has resulted in a re-design of penalties for late filing and payment.
Payrolling Benefits In Kind: at a glance
Payrolling Benefits In Kind replaces P11D reporting, as taxable benefits are included in taxable pay when calculating the PAYE deducted from payments of wages and salaries to employees.
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