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In response to our letter in October, Chartered Accountants Ireland will be meeting with the Financial Secretary to the Treasury in the next few weeks to discuss the concerns we expressed in respect of basis period reform, Making Tax Digital and tax complexity. We’d like to hear your views on these important areas. Email leontia.doran@charteredaccountants.ie by the end of this week with your views.

HMRC has recently begun writing to VAT registered businesses with turnover below the VAT registration threshold (£85,000) in advance of the requirement to comply with MTD for VAT from April 2022. The first tranche of letters began to be sent last month and continues into this month and is being sent to VAT stagger 1 and 2 quarterly filers in addition to those filing monthly or annual VAT returns. We understand that letters will also be sent to stagger 3 quarterly filers from February 2022. Some businesses may be exempt from MTD for VAT under the digital exclusion exemption. As a result, HMRC is accepting applications from those who require an exemption from April 2022.

Read the latest on Making Tax Digital in the most recent update from HMRC for October 2021.

HMRC’s latest schedule of webinars is now available for booking. Spaces are limited, so take a look now and save your place. If you have any questions, please send them to team.agentengagement@hmrc.gov.uk prior to the webinar, including the title of the webinar in the ‘Subject’ line of your email. HMRC will answer as many as possible on the day. Off-payroll working rules from April 2021: contracted out services and statements of work: Register here This webinar explains what HMRC consider constitutes a fully contracted out service and the effect of statements of work in the context of the off-payroll working rules. Off-payroll working rules from April 2021: contracted out services and statements of work: Register here This webinar explains what HMRC consider constitutes a fully contracted out service and the effect of statements of work in the context of the off-payroll working rules. Plastic Packaging Tax – admin and technical aspects: Register here In this webinar you’ll find more detail about the administrative and technical aspects of the new Plastic Packaging Tax. HMRC recommends that you watch a recording of the Introduction to Plastic Packaging Tax webinar first before attending the Plastic Packaging Tax – admin and technical aspects webinar. Risk for agencies and other businesses working with umbrella companies operating avoidance schemes: Register here This webinar provides an overview of the risks for agencies and other businesses who use the services of umbrella companies in their supply chains and is targeted at employers who use temporary labour. Making Tax Digital for VAT: Register here From April 2022, these requirements will apply to all VAT-registered businesses to include those that have a turnover below the VAT threshold. This webinar will provide some of the basics of Making Tax Digital for VAT and will include what’s changing, using software and keeping digital records, plus an introduction to penalty reform. Income from property for individual landlords – Part 1: Register here The webinar looks at restricting finance cost relief and the cash basis eligibility and computational rules. Income from property for individual landlords – Part 2: Register here This webinar looks at some of the main expenses and deductions, such as capital expenditure, revenue repairs and the property allowance. Capital Allowances and Vehicles: Register here This webinar is part of HMRC’s annual Self-Assessment programme and covers the rules for cars, including what a car is for capital allowances purposes, qualifying expenditure, pools and rates and vehicle hire purchase. Trade Losses: Register here This webinar will cover the different types of relief you can apply for, key information such as the time limits for claims and the temporary extensions applied to the loss carry back rules.

Last week the UK government announced that MTD for income tax self- assessment (“ITSA”) is being delayed one year from April 2023 until April 2024. Basis period reform is also delayed one year and transitional measures will not now commence until April 2023 at the earliest. Both of these delays are in recognition of the challenges faced by many UK businesses as the country emerges from the pandemic. Chartered Accountants Ireland wrote at the end of last month to HM Treasury calling for basis period reform and MTD for ITSA to each be delayed at least one year - the Institute’s input into the Government’s decision to defer is acknowledged in a letter from the new Financial Secretary to the Treasury, the RT Hon. Lucy Frazer who also made a statement in Parliament confirming the decision. The delay to both of these measures is welcomed and demonstrates that the Government has listened to the recommendations of this Institute and other stakeholders. As a result of the delay to MTD for income tax, general partnerships will not be required to join MTD for ITSA until April 2025. The date at which all other types of partnerships will be required to join will be confirmed later. Regulations have been laid in Parliament setting out the design and scope of MTD for ITSA and a Tax Information and Impact Note has also been published in addition to a Policy Paper designed to help different businesses understand what their transition to MTD could look like in more detail. In addition, changes to the basis period rules will not come into effect before 2023/24. This was also a recommendation of the Institute in its response to that consultation. The Government’s response to that consultation will be published in due course. At Spring Budget, the Government announced a new system of penalties for the late filing and late payment of tax for ITSA. This will now be introduced for those who are mandated for MTD for ITSA in April 2024, and for all other ITSA taxpayers in April 2025. A news release covering last week’s announcement is also available. HMRC has also updated a number of relevant publications as follows:- Making Tax Digital for Income Tax for businesses: step by step; Check if you're eligible for Making Tax Digital for Income Tax; Making Tax Digital for Business - stakeholder communications pack; Customer costs and benefits for the next phases of Making Tax Digital; Check when to sign up for Making Tax Digital for Income Tax; Find software that's compatible with Making Tax Digital for Income Tax; Apply for an exemption from Making Tax Digital for Income Tax; Using Making Tax Digital for Income Tax; and Extension of Making Tax Digital for Income Tax Self-Assessment to businesses and landlords

HMRC has published ‘Measuring tax gaps: 2021 edition’, which provides information on the 2019/20 tax gap - the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid. 2019/20 was the first year of Making Tax Digital (“MTD”) for VAT, which according to HMRC should reduce VAT errors. One would therefore expect to see a reduction in the VAT tax gap in 2019/20. However the VAT gap has increased from 7.0 percent in 2018/2019 to 8.4 percent in 2019/2020. It is questionable therefore if MTD for VAT is achieving its objective and this also calls into question the Government’s plans to further extend MTD for VAT in April 2022 as this is premised on MTD leading to a reduction in errors made. The Government’s recent decision to delay MTD for income tax self-assessment is therefore the right one in the context of both the tax gap data and the pressure on businesses as a result of the pandemic. According to the report, the overall tax gap is estimated at 5.3 percent, or £35 billion in cash terms, an increase from 5.0 percent (£33 billion) in 2018/19. Overall, there is a long-term downward trend in the tax gap, falling from 7.5 percent in 2005/06 though between 2016/17 and 2019/20 the overall percentage tax gap has remained relatively stable. Any impact of the COVID-19 lockdown and economic downturn on the tax gap is likely to be seen in the tax year 2020/21 in ‘Measuring tax gaps 2022’ edition. In ‘Measuring tax gaps 2021’ there is no material impact. For the first time HMRC have also published an uncertainty rating for each component of the tax gap.  The number of individual components where HMRC has published ranges of the tax gap has also been extended.

Read the latest on Making Tax Digital in the most recent update from HMRC for August 2021. Readers are advised that this update was written and sent to us before the recent decision to delay the commencement date of MTD for income tax self-assessment from April 2023 to April 2024.

The UK government announced yesterday that the introduction of MTD for Income Tax Self- Assessment (ITSA) will be delayed until 2024. This is in recognition of the challenges faced by many UK businesses as the country emerges from the pandemic over the last year.  Chartered Accountants Ireland wrote to HR Treasury calling for MTD for ITSA to be delayed and the Institute’s input into the decision to defer is acknowledged in a letter from the Financial Secretary to the Treasury, RT Hon Lucy Frazer.     General partnerships will not be required to join MTD for ITSA until the tax year beginning in April 2025. The date at which all other types of partnerships will be required to join will be confirmed later.  In March 2021, the government announced a new system of penalties for the late filing and late payment of tax for ITSA. This will now be introduced for those who are mandated for MTD for ITSA in the tax year beginning in April 2024, and for all other ITSA customers in the tax year beginning in April 2025.    The government laid Regulations in Parliament setting out the design and scope of MTD for ITSA and published a Tax Information and Impact Note (TIIN) setting out the projected benefit and cost impacts of MTD for ITSA, as well as a Policy Paper to help different businesses understand what their transition to MTD could look like in more detail.    It was also noted that any changes to the basis period rules will not come into effect before 2023/24. The government will respond to the recent consultation on this topic in due course providing the next steps.   A news release covering yesterday’s announcement is available here.  

In July 2020, the Government announced that it would extend Making Tax Digital (“MTD”) to those VAT registered businesses with taxable turnover below the VAT threshold (£85,000) from their first VAT period starting on or after 1 April 2022. Last week legislation was laid in Parliament  to bring this extension into effect.  HMRC is currently undertaking scheduled maintenance to its digital Enterprise Tax Management Platform services. This maintenance is designed to help ensure HMRC back-end services, that support platforms such as Making Tax Digital, continue to run smoothly. As a result of this maintenance, the Making Tax Digital for VAT and the Making Tax Digital for ITSA services will be unavailable until today Monday 13 September at 2.00pm. During the maintenance period you are unable to: sign up for Making Tax Digital; submit any returns; ·view previous submissions and payment details; set up new or cancel and amend existing direct debits; or review and update any business details. HMRC apologises for any inconvenience this may cause. 

In its response to the recent basis period reform consultation, Chartered Accountants Ireland recommends that basis period reform and Making Tax Digital for income tax (“MTD ITSA”) both be delayed given all the current upheaval for businesses and the clear need for more detailed consultation on basis period reform in particular. Separately, the Institute wrote to the Financial Secretary to the Treasury (“FST”) also setting out the need to delay these initiatives. A copy of the letter to the FST has also been sent to the NI Economy Minister. The response to the basis period consultation sets out that these proposals are especially important in the context of the Office of Tax Simplification’s review of moving the tax year end, the Tax Administration Framework Call for evidence and other major consultations which have recently taken place as it makes sense for changes to be coordinated. It is vital that the design and implementation of basis period reform is fully considered and not rushed if it is going to work for businesses and HMRC alike. Commencing these changes in just six months’ time just to suit the timetable for MTD ITSA is simply not feasible, according to the submission. In our letter to the FST, the Institute notes that the current timetable for basis period reform (commencing with the transition year 2022/23 in under six months’ time) and the commencement of MTD ITSA from 6 April 2023 is placing huge additional pressure on taxpayers, businesses and agents alike. Preparing for these changes comes at a time when many businesses have only recently reopened, are not operating at full capacity and are also dealing with trading arrangements changes and new compliance obligations as a result of the UK’s departure from the EU. Our members are also reporting to us severe resource constraints in the professional services market which have not been experienced for many years. Businesses are also grappling with other major changes including the recent changes to the IR35 rules from April 2021 and are preparing for further seismic changes from April 2022 with the extension of MTD for VAT to businesses with turnover below £85,000 in addition to the introduction of a new penalty regime. We also remain concerned that the £10,000 turnover limit for MTD ITSA is simply not workable, fair nor is it feasible to expect the smallest businesses, whose taxable profits may be such that they are not required to pay any tax, to maintain digital records and report information quarterly. To forge ahead with the current timetable for basis period reform and MTD ITSA unchanged is therefore likely to lead to more, not less errors, one of the key objectives of MTD ITSA in particular. This would severely undermine the integrity of the UK tax system and the UK’s attractiveness as an investment location.  

HMRC has made a number of updates to this notice. The accompanying HMRC message is set out below. The most recent MTD update for agents has also been published. “We received feedback from stakeholders requesting further clarification around digital links obligations. We have considered these comments and updated Section 8 of the VAT Notice 700/22 with new examples to provide customers with more clarity about the MTD VAT digital links requirements. The new examples take account of digital record keeping and reporting options, illustrating where information transfer must be digital and where it need not be. We have also introduced new narratives explaining how in each example the customer is compliant with the rules. In addition, we have clarified the relationship between digital records, functional compatible software and the ‘electronic account’ that businesses are required to maintain under the VAT Regulations. You will be aware that the soft-landing period for digital links expired on 1 April 2021 along with the digital links extension application process. The VAT Notice 700/22 has now been updated to reflect these points as well.”  

Read the latest on Making Tax Digital in the most recent update from HMRC for July 2021.

HMRC would like to make you aware of the latest version of the Making Tax Digital (“MTD”) roadmap which was issued to software developers last week. The roadmap outlines the current position regarding the delivery of functional application programme interfaces (“APIs”) to expand access to MTD for various taxpayers segments. This also indicates when such segments will be able to come in to the MTD services. The Institute continues to engage with HMRC in respect of MTD and will keep members updated via the usual channels. The accompanying email to software developers highlights that taxpayers who have received a COVID related support payment will not be able to use the MTD for income tax service in 2021/22. According to HMRC, this was a decision made to prioritise and focus on delivery of long-term core functionality for the service. HMRC continues to work closely with developers in identifying eligible taxpayers to test the service. Planned maintenance HMRC will also be undertaking scheduled maintenance to HMRC’s digital services this weekend. This is intended to deliver several technical enhancements to the MTD for VAT service most of which relate primarily to HMRC systems which will therefore mean changes will not be directly visible to the user. As a result of this maintenance, the MTD for VAT and Income Tax services will be unavailable from Saturday 24th July at 4:00pm until Monday 26th July at 4.00pm. During the maintenance period you will be unable to: sign up for MTD; submit any returns; ·view previous submissions and payment details; set up new or cancel and amend existing direct debits; and review and update any business details This, and other planned maintenance and upgrade activities, are shown on the HMRC service availability and issues page on GOV.UK. HMRC apologises for any inconvenience this may cause. 

Read the latest on Making Tax Digital in the most recent update from HMRC for May 2021.

Chartered Accountants Ireland is preparing a submission to the Call for evidence: timely payment consultation. We need your feedback to build our response to this which mainly focuses onthe potential to move to more frequent in-year tax calculation and payment. The Institute previously responded to a similar consultation “Voluntary pay as you go” in 2016 in the context of Making Tax Digital. As part of the Government’s 10-year strategy to build a trusted, modern tax administration system, this call for evidence is being badged as the start of a conversation about the benefits and challenges of the current tax payment timings, and for moving to more frequent, in-year tax calculation and payment. It focuses on Income Tax Self-Assessment (“ITSA”) and Corporation Tax (“CT”) for companies outside the quarterly instalment regime, but welcomes feedback on other taxes. This will be of interest to everyone paying Income Tax and National Insurance contributions outside existing regular payment regimes (such as Pay as You Earn) and those in Corporation Tax Self-Assessment who are not within the quarterly instalment payment regime. Tell us about your views by Monday 5 July 2021 on any of the following key questions:- Do you have any comments on the benefits and challenges of timely payment? Please provide a narrative, with examples if possible, of any other benefits, challenges or impacts which you consider should be of central concern when looking at this proposal. What are the advantages/challenges of the current payment timings for ITSA? Are there any groups who rely more heavily on these than others or are challenged or disadvantaged more than others? Do you have any comments on the specific challenges faced by non-business ITSA taxpayers (i.e. those in ITSA other than the self-employed, landlords, or large partnerships)? Do you have any comments on the specific challenges faced by new ITSA taxpayers? Do you have any initial comments specifically on the impact of basis periods on more timely payment of ITSA? What are the benefits/challenges of the existing payment timings for CT?Are there any types of company, sectors, or other distinctions which rely more heavily on the long payment window than others or make the current payment timings challenging or disadvantageous? Do you agree that if there is to be a more frequent tax payment regime, it should generally be based on current year liability? Do you have any initial comments on the benefits and challenges of different calculation options to meet diverse taxpayer needs versus one process for all taxpayers in scope? What are your views on using digital solutions to facilitate in-year calculation, and what and how could specific groups be affected negatively by this? Do you have any initial comments on the feasibility and benefits for MTD taxpayers of paying in-year instalments towards their tax bill, informed by their quarterly MTD updates? Are there taxpayers for whom MTD updates would be a particularly unreliable guide for in-year tax payments, and what alternative basis might be more reliable for them? Do you have any initial comments on how income and expenses could be reported in year for non-MTD taxpayers or on a more frequent basis than required by MTD? Do you have any initial views on the benefits and challenges of monthly, quarterly, or other, payment frequency? How could more frequent payment based on current year liability be phased in? Do you have any comments on the positive and negative cash-flow impacts for businesses of more timely payments? What wider economic impacts do you foresee from reducing the time between the income and the taxation? Do you have any initial comments on the opportunities and challenges of more timely payment of CGT? The full list of consultation questions are on page 38 of the Call for evidence.

HMRC has contacted us about changes being made in the coming weeks to the Making Tax Digital (MTD”) agent services account homepage. The changes are as follows:   An amendment to the text of the ‘Track your recent authorisation requests’ link to clarify that it is for authorisation requests within the past 30 days. The link will read, ‘Track your recent authorisation requests from the last 30 days’; A new Help & Guidance page, collating GOV.UK guidance for agents which will be accessible from the very top of the agent services account homepage (next to ‘Account home’);   Two new links will be added to the collapsible list for MTD for VAT. These are: ‘Copy across your authorisation’   ‘Requesting an authorisation’   According to HMRC, this will align MTD for VAT’s collapsible list with the other collapsible lists, so they all follow the same format.  When a + is selected the options for that section are displayed in a list. To collapse the list again select – The Trusts and estates collapsible list will also be updated to mirror the basic format as mentioned above. A new link, ‘Ask your client to authorise you’ will be added to the links for:   register trust register estate  claim the trust  use this service to update the details of your client’s trust or declare no changes on the trust register. 

The latest MTD agent update is now available.

HMRC’s latest schedule of webinars is now available for booking with upcoming webinars focused on the off-payroll working rules. These webinars are designed to provide information, guidance and tips on tax issues. Spaces are limited, so take a look now and save your place. If you have any questions, please send them to team.agentengagement@hmrc.gov.uk prior to the webinar, including the title of the webinar in the ‘Subject’ line of your email. HMRC will answer as many as possible on the day. Off-payroll working rules from April 2021: Status Determinations and Disagreements: choose a date and time This webinar explains what Status Determination Statements (SDS) are, the off-payroll working rules, and how to deal with disagreements following the status determination. Off-payroll working rules from April 2021: Contractors: choose a date and time This webinar gives an overview of the changes to the off-payroll working rules which come into effect on 6 April‌‌‌ ‌2021. It is specifically designed to help contractors understand what these changes will mean for them. Off-payroll working rules from April 2021: choose a date and time This webinar gives an update on changes to the off-payroll working rules (IR35) from April 2021 for the public sector and medium and large sized organisations. Off-payroll working rules 2021: international matters: choose a date and time This webinar explains how the off-payroll working rules interact with international and overseas issues. Off-Payroll Working Rules from April 2021: Engagement: choose a date and time This webinar looks at different types of engagements and explains when the off-payroll working rules apply and whose responsibility it is to consider them. Off-payroll working rules from April 2021: Fee-payer responsibilities: choose a date and time This webinar looks at fee-payers responsibilities under the off-payroll working rules including: who fee-payers are and their responsibilities; qualifying persons; deemed employers; and  how to work out the deemed direct payment. Making Tax Digital – digital links: choose a date and time Making Tax Digital businesses need to have digital links in place for their first VAT return period starting on or after 1‌‌‌ ‌April 2021. Sign up for one of HMRC’s webinars where digital links will be fully explained and you can learn how to meet the appropriate requirements.

Read the latest on Making Tax Digital in the most recent update from HMRC for February 2021.

As covered in yesterday's Chartered Accountants Tax News, over the weekend and until yesterday, HMRC was undertaking scheduled maintenance to the Making Tax Digital ("MTD") for VAT service. HMRC has today contacted us to advise that following this, an issue has been identified that is impacting the ability of some MTD for VAT taxpayers to submit a VAT return. HMRC is working to resolve this issue as soon as possible. In order to enable a fix to be delivered, HMRC has shuttered (i.e. temporarily halted) the ‘Return Submission’ element of MTD for VAT. As a result, it is currently not possible for taxpayers or agents to submit a VAT return through the MTD service. HMRC has advised us that all other elements of the VAT service (such as sign-up and payment) remain open. There is no interruption to applications for the VAT deferral new payment scheme. The MTD for Income Tax Self Assessment service is unaffected. HMRC expects the full service to return on the morning of Thursday 18th March. If this situation changes, HMRC will advise accordingly.