Within a few years, many taxpayers that are presently required to file a tax return, and most businesses, will be required to file quarterly data with HMRC using the Treasury Making Tax Digital portal.

In which case, the present annual filing obligations will be replaced by quarterly filing obligations.

Paying tax in arrears

Apart from salaried or waged individuals who have their tax and NIC liabilities deducted at the time they are paid self-employed traders and companies pay their tax in arrears.

For example, for the tax year 2021-22, individuals registered for self-assessment pay two estimated instalments – based on previous year’s profits – January and July 2022: and any balancing amount 31 January 2023.

Companies pay their corporation tax bill nine months and one day after their accounting period end.

Which means the Treasury does not get its hands on current tax dues (apart from income subject to PAYE) for some time after the income and profits are earned.

The demands of Making Tax Digital (MTD)

There are two major demands that taxpayers and companies affected by MTD will need to comply with when they are drawn into the MTD regime:

• Upload quarterly data to HMRC.
• Keep their records in an electronic format that will facility the quarterly uploads.

For many taxpayers and traders this will be a simple transition if they have already embraced a digital approach to record keeping – particularly if software has been adopted that is already compliant with MTD technology.

Readers who have not made this transition should consider their options. Please call as we can help.

Will MTD lead to quarterly payments?

When HMRC are provided with information on a quarterly basis it is a short step that they request taxpayers to make quarterly payments on account rather than half-yearly or annual payments in arrears.

At present, there is no indication that HMRC will make this transition, but once MTD is bedded in across the range of taxes (particularly income tax and corporation tax), the change to quarterly payments based on actual data submitted would seem to be the logical next step.

MTD implementation diary

The present implementation dates for MTD are:

• MTD for VAT – already mandated for all VAT registered businesses.
• MTD for Income Tax and self-Assessment – from April 2024 for the self-employed and those with income from property and from April 2025 for most partnerships.
• MTD for Corporation Tax – launch date April 2026 (but may be later).

If you employ students to manage your staff needs over the summer break period, you will need to add them to your payroll and apply PAYE and NIC rules.

Students should be advised that they will pay tax and NIC if:

• they earn more than £1,048 a month on average, and
• pay NIC if they earn more than £190 a week from 6 April 2022 to 5 July 2022 and more than £242 from 6 July 2022 to 5 April 2023.

Students can also apply for a possible tax refund if they work for part of a tax year.

Students who normally live and study in the UK but work abroad during the holidays will need to pay:

• UK tax on anything they earn above their Personal Allowance, currently £12,570, and
• National Insurance if they work for a UK employer.

If students work for a foreign employer, they do not need to pay National Insurance in the UK, but may have to pay contributions in the country they are working in.

The scope of tax fraud seems to be taking on new forms according to a recent press release issued by HMRC.

The latest attempt involves the use of software to suppress sales recorded at point of sale. The systems even warrant a new acronym, ESS.

Electronic Sales Suppression (ESS)

Businesses involved in making, supplying or promoting ESS systems that help users hide or reduce the value of till sales, now face fines of up to £50,000 and criminal investigations. Users also face fines as HMRC increases efforts to target the tax evasion practice.

HMRC investigators hit the road

On 18 May 2022, thirty businesses were visited, including shops, takeaways and restaurants, across nine counties to tackle ESS and two men and a woman were arrested in Nottinghamshire as part of a criminal investigation into the alleged supply of ESS software.
The men, aged 43 and 58, were arrested along with a 56-year-old woman on suspicion of fraud offences and cheating the revenue.
A search warrant was executed by HMRC officers at three addresses and computers, digital devices and paperwork was seized. All three suspects have been released under investigation.

How does ESS work?

ESS users will either have access to specialist software or will configure their Electronic Point of Sale (EPOS) device in a specific way that allows them to consciously hide true sales and the resulting tax that is due.
Sales processed through the till give the impression they have been recorded as normal; however, the end of day report is deliberately manipulated behind the scenes to reduce reported takings.

Further information

New powers to tackle ESS were included in the Finance Act (2022) introduced in February this year.

HMRC recently visited businesses suspected of being associated with ESS practices in Derby, Nottingham, Alfreton, Ashbourne, Stoke, Chesterfield, Nuneaton, Warwick, Pershore, Leeds, Hull, Scarborough, Whitby, Cleethorpes, Canvey Island and Ashford.

HMRC have noticed an increase in claims for Stamp Duty refunds that are incorrect

In fact, new homeowners are being warned about cold calls from rogue tax repayment agents advising them to make speculative Stamp Duty Land Tax (SDLT) refund claims, which could leave them with large tax bills.

Claims are failing HMRC checks

The warning comes after a recent spate of Stamp Duty refund claims to HMRC failed to meet specific criteria.

The agents have been known to call new property owners after finding them through Land Registry records and property search websites, promising money back on ‘unknowingly overpaid’ Stamp Duty.

Recent analysis undertaken by HMRC suggests that up to a third of claims for ‘multiple dwelling relief’ refunds were incorrect.

Homeowners’ risk

HMRC raise enquiries on these claims, but sometimes this is after the agent has taken their fee, leaving the homeowner to pick up the difference. Incorrect refund claims must be repaid with interest, with some claimants facing potential penalties.

What to do if you are approached

Anyone approached about a Stamp Duty refund claim should check with their original conveyancer, take independent professional advice and check HMRC’s guidance by searching ‘Stamp Duty Land Tax’ on GOV.UK. You can also contact the HMRC helpline on 0300 2003 510.

Examples of recent claims

In a recent example, a letter from a rogue agent suggested a homeowner may have overpaid £60,000 worth of Stamp Duty. The agent claimed the home could be designated as two properties, despite it clearly being one. This is not an isolated example – other cases include:

• a claim that a bedroom could be a separate dwelling and in line for claiming ‘multiple dwellings relief’ because it had an en-suite and a built-in wardrobe which could be a kitchen if you added a microwave and a kettle,
• an individual who claimed their house was not wholly residential because a paddock behind the garden was used occasionally to keep a neighbour’s horse – the agent advised that they were due lower stamp duty rates because the presence of the paddock made the transaction a mix of residential and non-residential property, which would incur a lower Stamp Duty payment
• a new owner of a six-bedroom house claimed it was not a wholly residential property because a room above a detached garage was used as an office

HMRC are watching

HMRC has nine months to enquire into a claim and would look to recover the full tax, with interest, and penalties charged where appropriate from those found to be incorrect.

1 June 2022 – Due date for corporation tax due for the year ended 31 August 2021.

19 June 2022 – PAYE and NIC deductions due for month ended 5 June 2022. (If you pay your tax electronically the due date is 22 June 2022).

19 June 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2022.

19 June 2022 – CIS tax deducted for the month ended 5 June 2022 is payable by today.

1 July 2022 – Due date for corporation tax due for the year ended 30 September 2021.

6 July 2022 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2022 – Pay Class 1A NICs (by the 22 July 2022 if paid electronically).

19 July 2022 – PAYE and NIC deductions due for month ended 5 July 2022. (If you pay your tax electronically the due date is 22 July 2022).

19 July 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2022.

19 July 2022 – CIS tax deducted for the month ended 5 July 2022 is payable by today.