This month we consider the impact of the pandemic on HMRC’s receipts as well as the tax details published on the first Tax Administration and Maintenance (TAM) Day.
With guidance on the rules around Statutory Sick Pay, new laws for pensions trustees and an increase to the Real Living Wage, there is a lot to update you on.
- HMRC’s tax take falls by billions due to pandemic
- Government sets out tax details on TAM Day
- Three-day wait for Statutory Sick Pay to return next year
- HMRC issues warning on self assessment scams
- New law introduced to help protect pension savers from scammers
- Services sector continues to recover despite rising costs
- Advisory fuel rates for company cars
- Costs ‘weighing on businesses’ sustainability intentions’, FSB finds
HMRC’s tax take falls by billions due to pandemic
HMRC saw a drop of almost £30 billion in tax revenues in the latest financial year because of the pandemic, according to its annual accounts.
In its 2020/21 annual report, HMRC reported that it had collected £608.8 billion in tax revenues, which is down from £636.7 billion collected in 2019/20.
HMRC said the drop was due to the ‘unprecedented economic circumstances caused by COVID-19, and because pandemic restrictions meant HMRC had to reduce its compliance activity’.
The reduction in compliance activity resulted in a drop of 18% in the additional tax generated by HMRC’s work tackling avoidance, evasion, and other non-compliance. This fell from £36.9 billion to £30.4 billion. The tax authority has estimated that the tax gap is now 5.3%.
HMRC reported that it delivered £60.7 billion in grants through the Coronavirus Job Retention Scheme (CJRS).
Jim Harra, HMRC’s First Permanent Secretary and Chief Executive, said:
‘Throughout this exceptionally challenging year, we kept all our core services running and ensured customers could access the right help when they needed it. To do this, we had to make choices about how we balanced our resources – for example, we took the conscious decision to divert some of our skilled advisers from PAYE and Self Assessment services to provide COVID-19 support because that’s what individuals and small businesses needed from us most urgently at a time of acute crisis.’
Internet link: GOV.UK
Government sets out tax details on TAM Day
The UK government marked the inaugural Tax Administration and Maintenance (TAM) Day with the publication of 30 papers covering a wide range of tax issues.
Chancellor Rishi Sunak made the commitment to have a TAM Day in the Autumn Budget. The aim was for a dedicated day for the administration and maintenance of the UK tax system. The 30 publications released by the government on TAM Day (30 November) include Calls for Evidence, Draft Regulations, Policy Papers and Corporate Reports.
The government has set out further detail on the conclusions to its review of business rates, including more frequent revaluations, improvement relief, exemptions for green technology, and administrative reforms.
A report on Research and Development (R&D) tax reliefs was published, providing further details on announcements made at the Budget which included refocusing relief in the UK; targeting abuse; and supporting innovation by expanding qualifying expenditure to capture cloud and data costs.
Additionally, an update on reforms to Small Brewers’ Relief was published, which will see the government invest around £15 million of additional funding into the craft brewing sector.
Jim Harra, HMRC’s First Permanent Secretary and Chief Executive, said:
‘As we continue our work to improve the tax system for UK taxpayers and clamp down on avoidance and evasion, we know that an open dialogue with our stakeholders is vital.
‘With thanks to the tax profession for their views, we can now announce the next steps for how we will simplify the legislative framework and raise standards in the tax advice market. We are also announcing new areas on which we are inviting views, including reforming Income Tax Self-Assessment registration for the self-employed.’
Internet link: GOV.UK
Three-day wait for Statutory Sick Pay to return next year
The standard three-day waiting time for Statutory Sick Pay (SSP) will be reinstated for coronavirus (COVID-19)-related claims from 25 March 2022, unless the government intervenes.
Under standard rules in the UK, employers do not have to pay SSP to an employee until the fourth qualifying day in the Period of Incapacity for Work (PIW). The PIW is a period of sickness lasting four or more consecutive calendar days, not all of which may be qualifying days.
During the COVID-19 pandemic, the government suspended the three-day wait for COVID-related SSP, meaning that employers must pay it from the first qualifying day.
The amendment to the SSP rules was made in the Coronavirus Act 2020 which is due to expire after two years. This means that, unless there is an intervention to continue the measure, COVID-related SSP waiting time will automatically revert to three days on 25 March 2022.
Frank Haskew, Head of the Tax Faculty at the Institute of Chartered Accountants in England and Wales (ICAEW), said:
‘The SSP rules were not really designed with a highly infectious global pandemic in mind, which is why the current easements have been welcome.
‘While some employees who are ill from coronavirus or required to self-isolate may be unable to afford not to go to work unless they are paid SSP for the first three days, there are also small businesses where the unreimbursed cost of paying three days’ coronavirus-related SSP to employees is a real burden.’
Internet links: ICAEW website
HMRC issues warning on self assessment scams
HMRC has warned taxpayers completing their 2020/21 tax returns to ‘be on their guard’ and stay vigilant in regard to tax-related scams.
Nearly 800,000 tax scams were reported in the last year, HMRC revealed. It said that fraudsters use self assessment to attempt to steal money or personal information from taxpayers.
In the last year, HMRC received almost 360,000 bogus tax rebate referrals. HMRC will send more than four million emails and SMS messages this week to self assessment taxpayers, prompting them to think about how they intend to pay their tax bill.
It is warning taxpayers ‘not to be taken in’ by malicious emails, phone calls or texts, and to not mistake them for genuine HMRC communications.
Myrtle Lloyd, Director General for Customer Services at HMRC, said:
‘Scams come in many forms. Some threaten immediate arrest for tax evasion, others offer a tax rebate. Contacts like these should set alarm bells ringing, so if you are in any doubt whether the email, phone call or text is genuine, you can check the ‘HMRC scams’ advice on GOV.UK and find out how to report them to us.’
The self assessment deadline is 31 January 2022.
Internet link: HMRC press release
New law introduced to help protect pension savers from scammers
New rules to help protect pension savers from scammers have become law.
Under the regulations, pension trustees and scheme managers will be given the power to stop suspicious transfers before cash gets into the hands of fraudsters.
Fraudsters frequently offer ‘too good to be true’ incentives to pension savers, such as free pension reviews, early access to pension cash and other time-limited offers. Lured in by these bogus offers, individuals are then tricked into transferring their savings into a scam scheme and defrauded out of their money.
Between January and May 2021, pension scam losses totalling over £2.2 million were reported to Action Fraud.
The new regulations will take force on 30 November. From this date, trustees and scheme managers will be able to prevent transfer requests if suspicious activity is suspected by giving it a ‘red flag’. If a red flag is present, the transfer cannot go ahead.
Where fraud is suspected, trustees and scheme managers will be able to pause transfer requests by giving it an ‘amber flag’. In this scenario, the pension saver will need to prove they have taken scam specific guidance from the free Money and Pensions Service before the transfer can go ahead. This is the only way a transfer can then proceed.
Nicola Parish, The pension Regulator’s (TPR) Executive Director of Frontline Regulation, said:
‘We welcome these new regulations which further empower trustees to act as the first line of defence against scammers.
‘We are pleased these new rules enshrine in legislation two of the key parts of the pledge to combat pension scams – around due diligence measures and issuing members warnings of high-risk transfers.
‘We urge all trustees and pension providers to take note of these new rules and continue to play their part in stopping scams.’
Internet links: TPR website
Services sector continues to recover despite rising costs
Optimism improved for firms across the services sector in the three months to November, according to the latest Service Sector Survey from the Confederation of British Industry (CBI).
However, cost growth continued to pick up, increasing at the fastest pace since survey records began in 1998. Additionally, business volumes continued to grow at a strong pace across the services sector, although there are signs of slowing growth.
The CBI found that cost pressures are building, with both consumer services and business and professional services seeing costs rise at the fastest pace in survey history.
As a result, selling price growth accelerated too, with expectations for significantly faster growth in the coming quarter for both sub-sectors. Despite elevated cost pressures, profitability grew in business, professional and consumer services, with the strongest growth recorded since February 2018 for the latter.
Charlotte Dendy, Head of Economic Surveys and Data at the CBI, said:
‘With COVID still a concern with impacts for consumer confidence together with cost and supply chain issues continuing to bite, a difficult winter lies ahead.
‘It is therefore vital that the government works with business to help address these challenges, ease cost and supply pressures, giving businesses the platform to ensure the recovery does not fizzle out before Christmas.’
Internet link: CBI website
Advisory fuel rates for company cars
New company car advisory fuel rates have been published and took effect from 1 December 2021.
The guidance states: ‘you can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.
The advisory fuel rates for journeys undertaken on or after 1 December 2021 are:
|1400cc or less||13p|
|1401cc – 2000cc||15p|
|1400cc or less||9p|
|1401cc – 2000cc||10p|
|1600cc or less||11p|
|1601cc – 2000cc||13p|
HMRC guidance states that the rates only apply when you either:
- reimburse employees for business travel in their company cars
- require employees to repay the cost of fuel used for private travel.
You must not use these rates in any other circumstances.
The Advisory Electricity Rate for fully electric cars is 5p per mile. Electricity is not a fuel for car fuel benefit purposes.
If you would like to discuss your company car policy, please contact us.
Internet link: GOV.UK AFR
Costs ‘weighing on businesses’ sustainability intentions’, FSB finds
A report published by the Federation of Small Businesses (FSB) has revealed that the costs associated with going green have impacted small firms’ plans for becoming more sustainable.
The FSB’s report found that the majority of UK small firms are concerned about climate change but just one in three has plans in place to combat it.
67% of firms polled stated that they have started to address their energy usage, and 18% said they have invested in microgeneration.
However, 24% of businesses said that uncertainty around return on investment has prevented them from taking action, and 22% cited a lack of sufficient capital to invest in assets as a barrier.
The business group is urging the government to launch a ‘Help to Green’ initiative and roll out a nationwide scrappage scheme.
National Chair of the FSB, Mike Cherry, said:
‘If we are to successfully transition to net zero, it’ll be through grassroots action, enabled by smart and supportive policies.
‘Whilst the Chancellor rightly embraced some of our proposed changes in this area at the Budget, it was disappointing to see that the government’s recent net zero strategy contained only four specific mentions of small business.’
Internet links: FSB website