UK Tax News – July 2022
20th July 2022
Our monthly round-up of the latest tax news affecting UK businesses.
This month we’re talking about:
- The latest on MTD for self-assessment draft legislation
- National Insurance threshold changes
- HMRC R&D tax fraud investigations
- Ongoing struggles with MTD
- New HMRC online tax residency tool
MTD ITSA
HMRC has published four draft notices providing further details on Making Tax Digital for Income Tax self-assessment (MTD ITSA), which is due to come into effect in April 2024.
The information contained in the draft notices includes:
- Taxpayers will need to provide the “totals of the amounts falling within the categories of transactions” within quarterly returns
- Relaxation of the rules for businesses below the VAT threshold (currently £85,000), allowing them to continue using the “three lines account” approach
- Details of the additional information that must be submitted at the end of the accounting period for each source of income within the scope of MTD ITSA
- Rules for retailers allowing them to record daily gross takings rather than individual sales transactions
- Confirmation that records must be maintained digitally using “functional compatible software” from the point of transaction to the returns being submitted to HMRC
The draft notices will primarily affect software companies developing compatible software, however they will also be of interest to self-assessment taxpayers intending to keep their digital records in spreadsheets. HMRC are requesting comments on the drafts by 28 July 2022.
National Insurance changes
The threshold at which employees start paying National Insurance has risen from £9,880 to £12,570.
The change affects employees in the Class 1 Primary threshold, however self-employed people will also see a reduction in the amount of National Insurance they pay.
Unlike employees, the change will not come into force automatically for self-employed people and they will also need to consider the potential impact to their state pension entitlement.
Please get in touch with our team if you need advice on how the threshold change affects you.
HMRC investigating potential R&D fraud
HMRC is reportedly placing some research and development tax credit payments on hold while it investigates potentially fraudulent claims, citing a recent spike in the number of irregular claims it has received.
The majority of R&D tax credit claims will not be affected, however there are likely to be delays to the current processing times while HMRC conducts additional checks.
HMRC has advised claimants to ensure they have fully completed the R&D section of their corporation tax return and submit additional information to support claims (e.g. an R&D report) to help HMRC process them more quickly.
Businesses still struggling with MTD
Results of a new survey commissioned by software company Yooz has highlighted ongoing struggles businesses are facing as they adapt to Making Tax Digital.
All VAT-registered businesses are now required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns. However, according to the survey, just 17% of businesses are fully prepared for electronic invoicing, with 68% “almost ready” or with plans in progress.
At TTR Barnes, we offer tailored one-to-one support on most major accounting software programmes and can provide guidance and advice on how to get the most out of your software. Find out more about how we can help.
Online tax residency checker
HMRC has launched a new online tool to help taxpayers check their tax residency status.
The tool uses the Statutory Residence Test (SRT) and allows users to check their residency status for tax years 2016/17 to 2022/23.
