Last week, the Government published its Summer Economic Statement (SES) 2023. The document sets out the Government’s medium-term budgetary strategy and outlines the fiscal parameters within which discussions will take place ahead of Budget 2024.  On the basis that inflation, though easing, is expected to remain high, Government is adjusting its fiscal parameters for Budget 2024. To protect public services, core spending will now increase by 6.1 percent next year. Over the medium term (2025-2026), as inflationary pressures moderate, core expenditure growth will return to 5 per cent per annum. Budget 2024 will provide an overall package of €6.4 billion, representing additional public spending of €5.2 billion and taxation measures amounting to €1.1 billion. Given significant capacity constraints in housing, healthcare, and other key public infrastructure, as well as an economy clearly at ‘full employment’, the Statement says that any spending beyond this would risk unnecessarily adding to inflationary pressures and overheating the economy. The statement does note that a key priority of taxation policy in the forthcoming budget will be to avoid workers paying additional tax simply because they move to the higher tax brackets due to wage growth. The Budget will be presented to Dáil Éireann on 10 October 2024. Commenting on the document, Minister for Public Expenditure, NDP Delivery and Reform, Paschal Donohoe T.D., said: “Today’s publication of the Summer Economic Statement outlines our budgetary strategy for 2024. In planning the fiscal and budgetary response, the Government will continue with the balanced approach of supporting society while being conscious of fiscal sustainability and being mindful of the need to avoid adding to inflationary pressures. Our economy and people continue to show resilience, and this has helped us to respond to the challenges that we have faced over the past number of years.” Further information is available on gov.ie.

This week we bring you news of a new form which HMRC plans to launch over the summer to provide details of overlap relief for some taxpayers. A new form is now available for claiming the marriage allowance, and HMRC’s teams have responded to queries on VAT and the self-assessment online return form. A new compliance campaign has also been opened, and HMRC is contacting companies with an identified error in an R&D tax relief claim. HMRC’s latest News and Information Bulletin is also available. Overlap relief information request form At some point over summer 2023, HMRC aims to launch an online form for overlap relief requests as part of the move to basis period reform. The Institute, in its response to the basis period reform consultation in summer 2021, recommended that HMRC provide this information to taxpayers where it was held in its systems. Any unincorporated businesses with a non-31 March or 5 April accounting period end are able, in the transitional tax year 2023/24 of basis period reform, to use an unused overlap relief carried forward. This is particularly important as any profits not already assessed for tax must be included in the assessment for 2023/24 but can be reduced by unused overlap relief. HMRC will only be able to provide this information if it has been recorded in HMRC’s systems and included within submitted self-assessment returns for previous tax years. If these details have not been recorded, HMRC intends to provide data to allow the taxpayer (or their agent) to calculate any unused overlap relief from the relevant self-employment data it does hold, and which is available in HMRC’s systems. Requests for overlap information can be made ahead of the launch of the form. The following information is required to do so:- taxpayer name; national Insurance Number or unique taxpayer reference; name/description of the business; sole trader or partnership; partnership UTR, if relevant; date of commencement (if not known, tax year of commencement); and, most recent accounting period end date. New marriage allowance postal claim form HMRC has published a new form which allows taxpayers to apply for the marriage allowance by post. This allowance can now be claimed online, via a postal application, or by a claim in the self-assessment return. Previously, it was only possible to apply by post via letter. VAT query HMRC’s VAT team was asked whether a reason can be provided when a flat rate scheme application is denied. Details of a direct contact in order to appeal the decision was also sought. HMRC’s response is as follows:- “If the decision to disallow the customer from joining the Flat Rate Scheme is appealable, then the Decision Maker will have advised the customer who to contact to appeal within their decision letter. If there are no contact details within the letter, this would be because the decision is not appealable. However, the customer may be able to get some information about why they were disallowed from joining the scheme from frsapplications.vrs@hmrc.gov.uk.” Self-assessment online form query HMRC was asked if the “for reference only” text on the Self-Assessment return (SA 100) could be removed as previously HMRC had confirmed that SA100’s printed from the GOV.UK page and posted are being accepted by HMRC hence the “for reference only” text is causing some confusion. HMRC responded as follows:- “We have noted the concern about the “for reference only” messaging and we will consider this as we monitor and review the changes to the SA100 gov.uk pages. On the SA100 forms page, there is a link explaining how to request a paper return. The link appears immediately underneath the SA100 forms in the ‘Details’ section of the page. It connects to the Self-Assessment forms ordering service rather than the SA helpline.”  New compliance campaign launched HMRC has recently launched a new compliance campaign targeting taxpayers named in the Pandora Papers. The campaign letter invites them to make use of the contractual disclosure facility or the worldwide disclosure facility and reminds taxpayers that penalties of up to 200 percent may be charged on the tax due on any overseas income and gains not declared. Since publication of the papers, HMRC has been using information to identify UK taxpayers who may have taxable income or gains they have not declared.  R&D tax relief compliance checks follow ups We understand from HMRC’s R&D sub-group forum that HMRC has been writing to/emailing around 200 companies who have made an error in recent R&D tax relief claims asking them to complete a questionnaire providing feedback on their experience of the compliance check process. All responses to the questionnaire will be anonymised and personal details held securely. All recipients of this contact were part of HMRC’s recent mandatory random enquiry programme. The questionnaire aims to help HMRC understand why the errors occurred and feedback will be used to inform HMRC processes, with an overall aim of help companies get R&D claims right first time.

Since the closure of the Office of Tax Simplification (“OTS”) which was announced in the September 2022 mini-Budget, the Institute has been discussing tax simplification with HMRC at various forum meetings. A key recommendation was the need for an annual report on tax simplification which also features in the Next Financial Year 2023 due to be published after the summer. HM Treasury has recently confirmed that it will report annually on progress on tax simplification. The confirmation came during Treasury questions, when the Financial Secretary to the Treasury Victoria Atkins told the chair of the Treasury Committee that a report will be sent to the Committee once a year setting out what progress has been made on tax simplification. The decision to do so also follows on from a House of Commons Treasury Committee report published last month which concluded that the tax system is overcomplicated and “This overcomplication creates compliance burdens, confusion, and disincentives to work or grow a business. It is an obstacle to economic dynamism. (Paragraph 8)”. The Institute continues to also recommend that an independent body is still needed to tackle tax complexity. The Treasury Committee also concluded that disbanding the OTS risks signalling that tax simplification is not a priority for the Government, and that the most important factor in securing a simpler tax system in practice would be the Chancellor taking, and acting on, the personal responsibility for simplification that he has pledged. It also concluded that the Government’s performance against its stated intention to simplify the tax system must be subject to public scrutiny.

The 2023 Adjudicator’s report confirms that despite a lower number of complaints about HMRC in 2022/23 (950 complaints compared to 1,029 in 2021/22), the upheld rate (including fully and partially upheld complaints where the AO did find something went wrong) increased to 47 percent, an increase of 15 percent. The role of the Adjudicator was created in 1993 to introduce an independent tier of complaint handling for HMRC, and various other Government bodies. The Adjudicator’s Office (“AO”) aims to provide a free, impartial, and independent service, and to investigate all complaints within their remit, and to resolve individual complaints whilst highlighting trends in both customer service, and complaint handling. The Adjudicator seeks to continue to push the various Government departments it reports on, including HMRC, to improve quality in complaint handling, so that people will only feel the need to escalate more sensitive and complex complaints to the AO. In its HMRC update and case studies section, the Adjudicator says that 2022/23 has seen HMRC recover its service standards post-pandemic “with varying degrees of success”. Although HMRC’s Customer Services Group has struggled with volume, and also significant pressure on resources “meaning that the recovery has slipped and is therefore ongoing.” According to the report, recovery in HMRC’s Customer Compliance Group has been quicker leading to a “two-tier level of service being provided in HMRC, depending on where your complaint sits.” The main reasons for taxpayer cases related to poor complaint handling by HMRC officials with the conclusion that for many, complaints were not being prioritised in HMRC’s Customer Service Group. Increasing numbers of taxpayers, often vulnerable, “are stuck in the complaints system for long periods with little or no meaningful response from HMRC.”  

The Spring Finance Bill 2023 (official title: Finance (No 2) Bill (Session 2022-23)) continues its passage through the parliamentary process with all remaining House of Commons stages completed since out last update, including Committee Stage, Report Stage, and Third Reading in the House of Commons. The Bill has now completed all House of Lords stages and is expected to receive Royal Assent tomorrow, Tuesday 11 July. The Government has also announced that “Legislation Day” will take place on Tuesday 18 July. On that day, the Government will publish draft legislation for inclusion in Finance Bill 2024, alongside explanatory notes, tax information and impact notes, responses to consultations and other supporting documents. It is expected that the draft clauses will largely cover pre-announced policy changes. Because the Spring Finance Bill is a ‘Money Bill’ the House of Lords cannot make any changes to it hence the text of the Bill is therefore essentially now final meaning it is substantively enacted for UK GAAP and IFRS purposes.

Tax revenues for the first half of the year were €40.9 billion, according to the recent June Exchequer figures. The figures represent a €4 billion increase (or 10.9 percent) on the same period last year. The 12-month rolling Exchequer surplus stands at €1.1 billion. The breakdown of tax revenues is as follows: Income tax receipts were €15.5 billion to end-June, €1.3 billion, nearly 9 percent higher than the first six months of 2022 and somewhat above profile; VAT receipts to end June were strong at €10.3 billion, €37 million (0.4 percent) higher than profiled and over 13 percent higher than to end-June 2022; and Corporation tax receipts of €10.55 billion have been collected to end-June, €1.8 billion or over 20 percent ahead of the same period last year, in line with expectations. Total gross voted expenditure to end-June amounted to €41.9 billion, €3.4 billion (8.7 percent) ahead of the same period in 2022. Commenting on the figures, the Minister for Finance, Michael McGrath T.D., said: “We have also today, published the Exchequer figures for the first half of the year. These show that, broadly speaking, we are where we expected to be in terms of tax revenue. Income tax and VAT remain robust, demonstrating the strength of our economy, but volatile corporation tax continues to pose a vulnerability for the public finances. The best way to ensure that we retain the fiscal firepower to address the issues of today and the challenges on the horizon is by maintaining a sensible budgetary policy that balances investment in our public services and infrastructure with the long-term sustainability of our public finances. The fiscal strategy for Budget 2024 that we have set out in the Summer Economic Statement today strikes that balance. Shortly, I will bring proposals to Government on the establishment of a long-term savings fund and a public investment fund to be utilised during an economic downturn.”

In this week’s EU exit corner, we bring you the latest guidance updates and publications relevant to EU exit. We also bring you key outputs from a meeting last week on the newly opened reimbursement scheme. The latest Trader Support Service and Borders Weekly Stakeholder bulletins are also available. Reimbursement scheme – more information As set out last week, the long-awaited duty reimbursement scheme was launched on 30 June. The Institute lobbied on the need to open the scheme for several years and is pleased to see this come to fruition. By way of reminder, the reimbursement scheme allows for reimbursement of tariffs paid on goods classed as being at risk which later became not at risk under the original Protocol, and on goods which will move in the new red lane which should originally have been green lane movements under the Windsor Framework. This includes the following scenarios:- Final sale of goods takes place in NI; Goods are consumed in NI; Goods are destroyed in NI; Goods are moved back to GB from NI; and Goods are exported to RoW (Rest of World) from NI. Chartered Accountants Ireland attended a meeting with UK government officials from HMRC and HM Treasury last week to discuss the reimbursement scheme in more detail. The below information was discussed in the meeting. In order to claim, the trader must gather evidence to support the claim and submit this to HMRC via an online application where a caseworker will consider the application. More evidence may then be requested by the caseworker in order to finalise and process the application. Claims can be made by: the importer for the original ‘at risk’ movement into NI, if they are established in the UK; or the appointed agent or representative acting on their behalf (if the original importer is not established in the UK, only their UK appointed agent or representative can submit the application). At the meeting it was once again confirmed that interest will not be paid on refunds received by traders; HMRC stated that the reason for this is that until the regulations underpinning the scheme were laid, there was no statutory basis on which claims for refunds could be made. The Institute is considering making representations on this given the known cash flow impact that delayed refunds have had for many traders since January 2021. It was also confirmed that reimbursements can be claimed for single or multiple movements. For goods moving from GB to NI, the full amount of the overpaid duty will be refunded. For RoW to NI movements, the duty repaid will be the difference between the UK and EU rates (if the EU rate is higher). The difficulty that some traders will have in providing evidence to support goods originally moved on the basis of “at risk” which subsequently become “not at risk” was discussed in detail, particularly for small items which often do not have a serial number and cannot be fully traced in terms of their end use. HMRC stated that they have not set out an exhaustive list of evidence which is required to support claims but were clear that using approximate apportionments will not be sufficient. Overall, HMRC will seek to be as pragmatic as possible to ensure the evidence provided is robust, whilst at the same time ensuring that the scheme is not open to abuse. It was pointed out that previous goods movements split between “at risk” and “not at risk” using the apportionment method on arrival into NI will be particularly problematic in terms of evidencing these becoming not at risk. In particular, the traceability of low-value non-serial numbered products brought into NI in bulk which then go into a parts store, and are used as required without any record kept, are likely to cause particular issues. HMRC is willing to discuss such cases in more detail. The deadline for making claims is three years from the point of the original duty being paid, where this is paid after 30 June 2023. For historic claims going back to 1 January 2021, the three-year window runs from 30 June 2023 to 30 June 2026. At the meeting HMRC also highlighted that the guidance on moving certain categories of steel into Northern Ireland without being subject to safeguard charges where relevant quotas are open has been updated. And finally, as the scheme is now open, we welcome your feedback on its operation and any issues you may be experiencing. Miscellaneous updated guidance etc. Reference Document for The Customs (Northern Ireland) (EU Exit) Regulations 2020; Report payments and view your allowance for non-customs state aid and Customs Duty waiver claims; Check if you can claim a waiver for goods brought into Northern Ireland; Data Element 2/3: Document and Other Reference Codes: Licence Types – Imports and Exports of the Customs Declaration Service (CDS); Claim a waiver for duty on goods that you bring to Northern Ireland from Great Britain or countries outside the UK and EU; Classifying edible fruit, vegetables and nuts for import and export; Reference Documents for The Customs Tariff (Preferential Trade Arrangements) (EU Exit) Regulations 2020; Reference Documents for The Customs (Tariff Quotas) (EU Exit) Regulations 2020; Notices made under s32A of the Taxation (Cross-border Trade) Act 2018; Customs, VAT and excise UK transition legislation from 1 January 2021; Simplified procedures exclusion list of procedure and additional procedure codes for CDS; Appendix 2: DE 1/11: Additional Procedure Codes of the Customs Declaration Service (CDS); Border Force customs offices list; Summary of movements of goods into Northern Ireland from Great Britain 2022; Apply for a voluntary clearance amendment (underpayment) (C2001); Get proof of origin for your goods; and Check your goods meet the rules of origin.

The European Commission recently published a progress report on Pillar One. The Commission has stated that it “will do its utmost to ensure a timely and consistent implementation of Pillar One at EU level.”

HMRC’s latest schedule of live and recorded webinars is now available for booking. Spaces are limited, so take a look now and save your place. Agent services account access groups: book now This webinar looks at access groups within the agent services account including about access groups; clients lists and transacting with clients; adding team members; managing access groups; examples; and error messages, filters, and client references. An overview of the new alcohol duty structure and rates: book now From 1‌‌‌ August‌‌‌ 2023, alcohol duty will be charged in relation to the strength of the product as opposed to the product type. This webinar will explain the new alcohol structure and rates, including the reduced rates for draught products An overview of the new alcohol duty structure and small producer relief: book now This webinar will provide a background into the new small producer relief, including eligibility criteria, and how to calculate this. Capital allowances and vehicles: book now This webinar is part of HMRC’s annual Self-Assessment programme covering the rules for cars, qualifying expenditure, pools and rates, and vehicle hire purchase. A recording is also available to register to view of the webinar UK freeports – examples of tax and customs benefit.

The European Commission is calling for feedback on its proposal to amend to Council Regulation (EU) No 904/2010 regarding VAT administrative cooperation and combating VAT fraud. The feedback period will run until Thursday 3 August.

Do you use HMRC online services? Don’t be caught out by the planned downtime to some services. HMRC are warning about the non-availability of specific services on the HMRC website, a range of services are impacted. Check the relevant page for information on planned downtime.

Check out the latest items on the Agent Forum. Remember, in order to view each item, you must be signed up and logged in. All agents, who are a member of a professional body, are invited to join HMRC’s Agent Forum. This dedicated Agent Forum is hosted in a private area within the HMRC’s Online Taxpayer Forum. You can interact with other agents and HMRC experts to discuss topical issues and processes.