Guidance

Issue 104 of Agent Update

Published 18 January 2023

This month’s content

Developments and changes to legislation and allowances relating to UK tax, including:

Tax

Making Tax Digital

HMRC Agent Services

Details of live consultations and links to responses, changes to HMRC service and guidance, including:

Agent Forum and Engagement

Latest updates from the partnership between HMRC and the main agent representative bodies, including:

Technical Updates and Reminders

Tax

Find out about the Income Record Viewer

The Income Record Viewer gives you access to your client’s:

• PAYE information for the current year and the 4 previous tax years
• employment records, including time in employment, taxable benefits and any gap where no record is held by HMRC
• income record
• state and private pension information

Find out how to get access to the Income Record Viewer for agents.

Plastic Packaging Tax — time to submit quarter 3 returns and pay by 31 January 2023

Plastic Packaging Tax (PPT) was introduced on 1 April 2022. If your clients manufacture or import 10 or more tonnes of plastic packaging within a 12 month period they must register for Plastic Packaging Tax on GOV.UK, even if their packaging contains 30% or more recycled plastic.

PPT also applies to plastic packaging that is imported already filled with goods — but your clients only need to account for the weight of the plastic packaging towards the 10-tonne threshold.

If your clients are liable to register or have already registered, from 1 January 2023 they must submit their PPT return and pay any tax due by 31 January 2023.

To find out more and support your clients can read guidance on Plastic Packaging Tax on GOV.UK.

HMRC has produced the following resources to support businesses:

• guidance on Plastic Packaging Tax
• help for manufacturers and importers to decide if they need to register for PPT
• examples of packaging in and out of scope of PPT
• recorded PPT webinar sessions on GOV.UK

Customs Declaration Service exporter deadline extended to 30 November 2023

HMRC has announced that exporters will now have until 30 November 2023 to move across to the Customs Declaration Service for their export declarations.

This decision was taken in consultation with the border industry and will make sure businesses have enough time to prepare, and that they have the right level of support in place to help them move across.

HMRC will provide further information about the timeline for Customs Declaration Service exports by the end of January 2023. Businesses can provide their preferred email address on GOV.UK to receive updates and notifications about the Customs Declaration Service.

GOV.UK guidance for self-employed

We can confirm that GOV.UK guidance has been updated for self-employed people. This is in line with the previously announced National Insurance threshold changes affecting both the 2022 to 2023 tax year and the 2023 to 2024 tax year.

Read more about the self-employed National Insurance rates.

Agents will remember the following changes were introduced for the self-employed:

• the National Insurance Lower Profits Limit is £11,908 a year for tax year 2022 to 2023
• those with profits above the Small Profits Threshold (£6,725) and no more than the Lower Profits Threshold (£11,908) are not liable to pay Class 2 National Insurance contributions (NICs) from April 2022 and will still be entitled to access contributory benefits
• from 6 November 2022 the headline rates of National Insurance contributions were reduced by 1.25 percentage points
• from 6 April 2023 the self-employed can earn £12,570 before paying either Class 2 or Class 4 National Insurance contributions

You may want to remind your Self Assessment customers that they need to file returns in order to have contributions treated as paid and allocated to accounts, even if they have no National Insurance contributions liabilities because they are earning between the Small Profits Threshold (£6,725) and Lower Profits Threshold (£11,908).

Your assistance in building awareness of these changes among the self-employed, qualifying landlords and self-employed people currently living outside the UK, would be much appreciated.

Guidance for settling a CT61 debt by issue of funding bonds

If a UK resident company is unable to pay the interest due on a loan, it can issue a funding bond, payment-in-kind (PIK) note or loan note to the creditor. The issuing company has an obligation to deduct tax on the interest at source by withholding a proportion of the funding bond from the creditor.

The UK company must declare the tax deducted on a CT61 return for the quarter in which the deemed interest was paid. The CT61 form should be completed using the value of the funding bond at the date of issue as the amount of interest paid by the funding bond. This may not be the same as the face value of the funding bond.

The company may decide to pay the tax deducted with a monetary payment or by funding bond. If payment is by way of funding bond, they must send the original funding bond to HMRC’s nominee company, RN Ltd (company registration number 279190). The funding bond must be in the name of RN Ltd, not HMRC.

The communication address of RN Ltd is:

RN Ltd c/o HMRC
Company Accounts Team
4th Floor, Teville Gate House
25 Railway Approach
Worthing
BN11 1UR

To pay the income tax deducted by funding bond, send the CT61 form and the original funding bond to the RN Limited communication address. Include a covering letter providing the following:

• the amount of interest paid by funding bond (which should be the value at issue) and included on the CT61 form
• if different, the face value of the funding bond at issue — this will help HMRC to consider the valuation of the funding bonds
• an explanation of the method and the factors taken into account when valuing the funding bond at issue
• the amount of Income Tax deducted from the interest paid by funding bond
• the direction reference number, if the rate of Income Tax deducted is less than the basic rate due to a double taxation treaty

Send any queries about to RN Limited by writing to their communications address or by email to RNLimited.finance@hmrc.gov.uk.

Publication of guidance on the transfer of assets abroad legislation

HMRC has published new guidance on the transfer of assets abroad legislation in the International Manual INTM600000 onwards.

The transfer of assets abroad legislation can be found in sections 714 to 751 of the Income Tax Act 2007. It is a wide-ranging anti-avoidance provision which renders UK-resident individuals liable to Income Tax where they seek to avoid an Income Tax liability. This is done by transferring assets to a person abroad while still being able to benefit from the income that the assets generate.

Extensive draft guidance was published as part of a consultation exercise in July 2013. The guidance being published now is a rewrite of this, taking on board stakeholders’ comments. It also includes additional guidance following the changes that were made to the legislation in 2017 and 2018 following the introduction of the deemed domiciled rules.

This new guidance replaces the existing guidance, which is at INTM600000 of the International Manual and provides far greater detail regarding the application of this legislation.

Reporting cryptoasset related gains

If your client sold or exchanged any cryptoassets in the 2021 to 2022 tax year, they may need to report the gains and pay any tax due by 31 January 2023. They may also want to report any losses.

If they have not received a notice to file a tax return, they can register online for self-assessment or use the real time Capital Gains Tax service.

Read how to check if you need to pay tax when you sell cryptoassets.

Preparing for the new tax year basis — Income Tax Self Assessment

The rules HMRC use to work out sole traders’ and partners’ profits for Income Tax in a Self Assessment return are changing for many businesses from the tax year 2023 to 2024 onwards. This may affect the return that they must submit by 31 January 2025. It will also affect subsequent returns.

This change is not affected by the delay to the introduction of Making Tax Digital for Income Tax Self Assessment announced on 19 December 2022.

Only taxpayers with an accounting date other than 31 March or 5 April are affected by this reform.

Under the new rules, from 6 April 2024, businesses will be taxed on profits for the tax year and not, as now, the profits for the accounting year ending in a tax year.

For tax year 2024 to 2025 and future years where accounting years are different from the tax year end, the taxable profits will be worked out by apportioning the profits for the 2 accounting periods that straddle the tax year.

The tax year 2023 to 2024 is a ‘transition year’ in which self-employed businesses will move to the new way of calculating taxable profits for the tax year.

Businesses will need to declare the total profits from the end of the last accounting date in tax year 2022 to 2023 up to 5 April 2024. This means that profits generated over a longer period will be taxable in the transition year.

In the tax year 2023 to 2024, businesses can use any overlap relief resulting from overlap profit when the business first started. By default, any remaining additional profit can be spread over 5 years.

As an example, if a business’s accounting date is 31 December 2023, they must declare profits from 1 January 2023 to 5 April 2024 (15 months rather than 12 months) in their tax return for the tax year 2023 to 2024, which is due by 31 January 2025.

The transition year 2023 to 2024 will present an opportunity for all businesses currently trading, regardless of accounting date, to use any overlap relief due.

From tax year 2023 to 2024 onwards, some businesses might have to use provisional figures on their returns. The government will relax its guidance to give businesses the normal amendment time limits to submit their final figures if they have submitted provisional figures as part of their tax return.

Where a business’s accounting date is changed in tax year 2022 to 2023, the current change of accounting date rules will apply. Where a business decides to change its accounting date from 2023 to 2024 onwards, these rules will not apply, and a change can be made regardless of past changes.

For businesses changing accounting date in the 2021 to 2022 tax year, HMRC will be able to provide details of overlap relief figures, or historic profit figures, on request, these figures are recorded in HMRC systems. Taxpayers should phone the HMRC Self Assessment Helpline and agents should phone the Agent Dedicated Line if they need this information to complete a 2021 to 2022 tax return.

Taxpayers looking to change accounting dates and use overlap relief in tax years 2022 to 2023, or 2023 2024 should wait until further information on the provision of overlap relief figures for these tax years is announced.

Ahead of further guidance being published soon on GOV.UK, the basis period reform policy paper provides background information. Information is also available in a GOV.UK news article on basis period reform.

Making Tax Digital

Government announces more time to prepare for Making Tax Digital for Income Tax Self Assessment becoming mandatory

The UK Government have announced there will now be a phased introduction of Making Tax Digital for Income Tax Self Assessment becoming mandatory from April 2026, rather than April 2024.

From April 2026, businesses, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through Making Tax Digital compatible software.

Those with an income of between £30,000 and £50,000 will need to do this from April 2027.

The government will now review the needs of smaller businesses, and particularly those under the £30,000 threshold. This will look in detail at how the Making Tax Digital for Income Tax Self Assessment service can be shaped to meet the needs of smaller businesses and the best way for them to fulfil their Income Tax obligations.

Once that review is complete and in consultation with businesses, taxpayers and agents— the government will lay out the plans for Making Tax Digital for Income Tax Self Assessment to become mandatory.

You can find more information about Making Tax Digital for Income Tax Self Assessment on GOV.UK.

Changes to VAT penalties and interest from 1 January 2023

On 1 January 2023 we introduced simpler penalties for late submission of VAT returns and paying VAT late.

The new penalties replace the default surcharge and now also apply to customers who submit nil or repayment returns.

The way we calculate interest on late VAT payments and repayments of VAT that we owe businesses has also changed for VAT periods starting on or after 1 January 2023.

We’ve published new guidance to help you and your clients understand these changes to VAT penalties and interest on GOV.UK.

It’s important you and your clients are ready for these changes. You can also watch our recorded webinar on VAT penalties and VAT interest changes on GOV.UK for an overview of the changes.

HMRC Agent Services

Helping more customers use our online services

To access our online services, customers need a Government Gateway user ID and password. This includes anyone who previously used GOV.UK Verify.

As part of the Government Gateway setup process, customers can now use an alternative way to prove their identity. The new identity checking app lets them use the camera on their mobile phone to confirm a match with either their UK driving licence or ePassport.

To use the app, customers must:

• have a working camera on their device
• use the Chrome browser if they’re using phone running Android software
• have an iPhone 7 or above if they’re using an iPhone

We’ll be adding more options for proving your identity during the early part of 2023.

Customers who have HMRC sign-in details and are already using our online services are unaffected.

Customers can continue to provide 2 forms of evidence instead of using the new app if they prefer.

Agents should never ask for or use a client’s HMRC sign-in details to access their tax account.

Form FBI2 to be withdrawn

The authorise a tax agent to use PAYE and Construction Industry Scheme (CIS) online services (FBI2) form is being taken out of circulation, as all of the information in it can be found in the revised authorising your agent 64-8 form that was introduced in March 2022.

By removing the FBI2 form, we are making life simpler for our customers, their agents and HMRC.

The form will be removed from GOV.UK on 31 January 2023.

Agent Talking Points

All agents will be aware of our popular Agent Talking Points webinars, for which most agents receive regular Monday morning updates.

Support for customers who need extra help

We have principles of support for customers who need extra help. These set out our commitment to support customers according to their needs, and underpin the HMRC Charter.

Find out how to get help and what extra support is available.

Tax agent toolkits

HMRC have 20 tax agent toolkits available for you to download and use. They have been designed to address the most common errors seen from previous years. They include checklists of the key issues to consider and links to HMRC technical guidance and manuals.

Be aware that our toolkits are currently being updated.

Here is the breakdown of tax agent toolkits:

• Capital Gains Tax toolkits
• toolkits for companies
• employer toolkits
• toolkits for individuals
• property rental toolkit
• trusts and estates toolkits
• VAT toolkits

By identifying the most common errors this may prompt a conversation between you and your clients to make sure submissions are correct.

Contact

Complain to HMRC.

To make a complaint to HMRC on behalf of your client you must be appointed as their tax advisor.

Where’s my reply for tax agents.

Find out when you can expect to get a reply from HMRC to a query or request you have made. There is also a dedicated service for tax agents to:

• register you as an agent to use HMRC Online Services
• process an application for authority to act on behalf of a client

Manuals

You can check the latest updates to HMRC manuals or subscribe to automatic notification of changes. You can also suggest improvements for pages of our manuals by using the feedback options in the page footer.

Online

Online training material and useful resources for tax agents and advisers.

HMRC videos on YouTube, online learning modules, and live and pre-recorded webinars are available for tax agents and advisers providing you with free help, learning and support on topical subjects.

Publications

Employer Bulletin.

The latest edition of Employer Bulletin is now available and contains topical and useful information about PAYE processes and procedures. For employers to be informed when it is available on the website, they must first register to receive the email alerts.

National Insurance Services to Pensions Industry — countdown bulletins.

Pension schemes newsletter.

This newsletter is published by HMRC’s Pension Schemes Services to update stakeholders on the latest news for pension schemes.

Revenue and Customs Briefs.

These are briefs announcing changes in policy or setting out the legal background to an issue. They generally have a short lifespan, as announced changes are incorporated into permanent guidance and the brief is then removed.

Agent Forum and Engagement

Issues Overview Group

Professional body members of the Issues Overview Group (IOG) attended the December meeting of the Representative Bodies Steering Group (RBSG), a forum for engagement with senior management of HMRC.

Senior HMRC management provided an update on service interruptions during the previous month, and the actions being taken to improve performance. Efforts will continue to improve the provision of information on service availability on the relevant GOV.UK pages.

Professional bodies welcomed the launch of the Income Record Viewer and requested increased information on what clients need to do to enable access for agents. There was a discussion on the provision of service level information on the agent dashboard.

Development of this information may reduce calls to the Agent Dedicated Line.

Measures to strengthen performance of the Agent Dedicated Line during the Self Assessment (SA) peak period, leading up to the 31 January 2023 deadline, were outlined.

Professional bodies asked that communications to agents on the January focus on Self Assessment, provided clear guidance as to where information could be obtained as an alternative to phoning the Agent Dedicated Line, and appreciated the challenging environment agents were operating in at this time.

Handling of post was a particular concern to IOG members who wished to understand more about mail processing, and how professional bodies and agents may assist improvements in this area. HMRC management responsible for the handling of post will provide an overview of the process at a future meeting.

IOG members also welcomed the presentation at the November IOG meeting from the Agent Forum management team, outlining how answers to Agent Forum queries were sourced.

There was an increased appreciation of the complexity and efforts required in securing responses to queries on the Agent Forum.

IOG members suggested that increased sponsorship for the Agent Forum, as a source of information and a service to agents and professional bodies, would be beneficial.

HMRC survey of Agent Online Forum members

HMRC are undertaking a questionnaire of all Agent Forum members to gain wider insight of performance of the service. The online questionnaire is open between the 19 December 2022 and 6 January 2023. The feedback, together with that from the recent CIOT and ATT survey will assist the development and improvement of the Agent Online Forum service.

Agent Online Forum escalated issues

SA-11680 — Linking emails to clients: Examples have been received where SA1 form and Construction Industry Scheme (CIS) submissions would benefit from acknowledgements containing a reference. Additional examples are still required to enable a full investigation and agents are asked to continue to submit further examples less than 28 days old to agentforum.wt@hmrc.gov.uk.

Others-21180 — Agent Maintainer Team: Following an escalation request from professional bodies, the manager of the Agent Maintainer Team met with several members of the IOG to understand feedback, and provide an overview of the team.

A review is being initiated, and Agent Maintainer Team management will discuss the findings with the IOG.

Update from Bespoke Issue Meetings

VAT Services

Professional bodies and agents in practice met with the HMRC Head of VAT Operations and VAT Subject Matter Experts on 8 December 2022 to discuss operation of VAT services.

The discussions covered current performance levels, challenges faced, and actions being implemented. Themes identified included improving performance, consistency of messaging, improved guidance, partnerships, groups, overseas, as well as insolvency practitioners. Updates will be provided at the next meeting of the group in February 2023.

Contact Information for professional and representative bodies

• AAT
• ACCA Jason Piper
• AIA David Potts
• ATT
• CIMA
• CIOT Technical
• CIPP Lora Murphy
• CPAA Alison Hale
• IAB
• ICAEW Caroline Miskin
• ICAS Tax Team
• ICB Jacquie Mount
• ICPA Tony Margarit elli
• IFA John Edwards
• VATPG Ruth Corkin

If you are not a member of a professional body, contact the Agent Engagement mailbox.