Preparing for a fiscal event

Now Liz Truss has been appointed the UK’s new prime minister, with Kwasi Kwarteng as chancellor, we are expecting a ‘fiscal event’ in the near future, but at the time of writing quite what it will contain we do not know.

What is the difference between a Budget and a fiscal event? A Budget requires the Office for Budget Responsibility to check the numbers, whereas the numbers presented in a fiscal event will be subject to independent review at the next Budget. It remains to be seen, though, whether we will see major changes to tax policy and direction. In advance of these appointments, we and other professional bodies were invited to a round-table meeting with senior HMRC staff to discuss possible tax policy changes, including the tax administration framework review and the future direction of Making Tax Digital (MTD) for income tax.   

Consultations and representations

We made informal written representations on a range of employment tax and national insurance contributions (NIC) matters, including early filing of PAYE real-time information full payment submissions following the recent case of Quayviews Ltd v HMRC, and the prospective variable direct debit plan for PAYE. We also attended several meetings with HMRC, covering a range of areas including a regular catch-up with HMRC’s counter-avoidance team, the timely payments consultation and the Reward and Employment Engagement group.

We also met with the HMRC team responsible for the consultation on repayment agents, which we followed with a detailed representation. Feedback from members on the latter was supportive of HMRC’s proposals, but felt that HMRC needs to do more to ensure that it is easy for taxpayers to claim refunds of tax to which they are entitled. We are also concerned that HMRC’s guidance and tools on reimbursement of electricity costs for charging company-provided wholly electric cars is not in accordance with the law. The Tax Faculty and other professional bodies are currently in discussions with HMRC about the latter correcting its guidance and tools to reflect the correct interpretation.

Making Tax Digital

We remain involved in detailed discussions about how Making Tax Digital (MTD) for income tax is likely to work in practice and whether certain parts of the project (for example quarterly reporting) and the timescale need to be reconsidered to ensure that it can be delivered by the proposed start date. In relation to MTD for VAT, disruption is also expected because of HMRC’s decision to close the existing online VAT return service from 1 November 2022. From that date, businesses and agents will only be able to file VAT returns using MTD compatible software. The online VAT return will remain available to those with a digital exclusion exemption.

Although it was always intended that this service would cease to be available in the move to MTD for VAT, our understanding is that there are at least half a million VAT registered businesses still using the online service and which will no longer be able to do so. Many of these businesses may not have a tax agent so could face severe problems when they come to file their next VAT return. MTD VAT is not quite ready to be transferred to business as usual and this should be deferred until at least January 2023.

Service standards

We remain concerned about HMRC’s service standards, which do not appear to have improved since the pandemic. We reported in previous months that there appear to be delays across many service areas and one of the latest areas reported is delays in obtaining new VAT registration numbers, which is causing some businesses significant disruption.

Tax Faculty Committee meetings

There was a meeting of the Employment Taxes and NIC Committee at which members discussed the HMRC consultation document on proposed new data gathering powers. Concerns were expressed about why HMRC would need some of the data mentioned and the admin burdens and costs of complying with new mandatory information requirements.

Meetings with others

Tax Faculty staff attended a meeting with colleagues from ICAEW’s Financial Reporting Faculty and the Chartered Institute of Taxation concerning woodlands. We met with the Office of Tax Simplification to discuss the scope of its review of hybrid and distance working and how ICAEW can contribute to that work.

Staff news

I am delighted to announce that our team has been joined by a new member, Mei Lim Cooper, as Technical Manager, Personal Tax. Mei is a chartered accountant and chartered tax adviser and was formerly with PwC as a tax manager in the Private Business and Private Client team in London. We wish Mei all the best in her new role.