Guidance

Issue 108 of Agent Update

Published 24 May 2023

This month’s content

Technical Updates and Reminders

Developments and changes to legislation and allowances relating to UK tax.

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

Employment related securities (ERS) — end of year return deadline

The deadline for filing annual ERS returns is 6 July 2023. Missing the deadline may result in late filing penalties being charged to the employer.

Returns, including nil returns, must be submitted for every scheme that has been registered.

If a scheme has been registered in error, or it is no longer required, the employer must ensure they cease the scheme.

As an agent, you will not be able to cease the scheme on behalf of an employer.

Once a scheme is ceased, an annual return must still be submitted for the tax year in which the final event date falls.

Your authorisation as an agent allows HMRC to deal with you on your client’s behalf, but any liability for penalties for late returns, or errors legally remains with the employer.

Tax Administration and Maintenance Day — Spring 2023

On Thursday 27 April the government announced a package of further tax administration and maintenance measures following on from Spring Budget 2023.

This package sets out a number of technical tax policy proposals that build on measures announced at Spring Budget with particular focus on:

• simplifying and modernising the UK’s tax system
• supporting HMRC’s efforts to maintain downward pressure on the tax gap

Read all publications and announcements related to tax administration and maintenance.

Tax Administration Framework Review — publication of new legislative pilots discussion documents

The Government has published two documents as part of the wider Tax Administration Framework Review. The publications are open for 12 weeks and will close on 20 July 2023.

1. Creating innovative change through new legislative pilots discussion document — a publication exploring the benefits and challenges of HMRC introducing a new approach to testing and piloting where certain legal obligations could be suspended or altered for participants.
2. Information and data powers call for evidence — a publication seeking views on how to update and reform HMRC’s information and data powers and accompanying safeguards which aims to improve taxpayers’ experience and reduce administrative burdens.

In addition to the Simplifying and modernising HMRC’s Income Tax services through the tax administration framework discussion document, which was published at Spring Budget 2023, these documents complete a trio of live publications which take forward the next stages of the Tax Administration Framework Review.

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

The rules HMRC uses to work out sole traders’ and partners’ profits for Income Tax in a Self Assessment return are changing for many businesses for 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 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 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 will 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) 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. HMRC 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 tax year 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, provided these figures are recorded in HMRC systems. Taxpayers should ring the HMRC Self Assessment Helpline and agents should ring the Agent Dedicated Line if they need this information to complete a 2021 to 2022 tax return.

HMRC is currently developing an online form for submitting overlap relief requests, to provide an easier way to submit requests and to ensure that these are dealt with separately from general post. Alongside this online form, HMRC is training more officers to deal with overlap relief queries and is developing an internal tool to collect and quickly play back overlap relief information. This training and tool will help officers provide ongoing support for requests made through the new online form.

HMRC is planning to launch the online form and additional support this summer.

Overlap relief information can only be provided if these figures are recorded in HMRC systems, taken from information submitted by taxpayers as part of previous tax returns. If this information has not been submitted in tax returns, HMRC will not be able to provide it.

The overlap relief information is the information provided on submitted tax returns in the past. In some cases (for example following an enquiry) the actual amounts of overlap relief may be different.

When looking at a request for overlap relief information, HMRC needs some information about a business to be able to find the correct figures to report back to the taxpayer. When submitting requests, HMRC ask that you provide as much of the following information as possible:

• taxpayer name​
• National Insurance number or Unique Taxpayer Reference (UTR) ​
• name and/or description of business​
• whether this business is self-employment or part of a partnership
• if the business is part of a partnership, the partnership’s UTR
• date of commencement of the self-employment business, or date of commencement as a partner in partnership (if not known, then the tax year of commencement)
• the most recent period of account or basis period the business used

Ahead of further guidance being published on GOV.UK, information on basis period reform is provided in the Business Income Manual. Information is also available in a GOV.UK news article on basis period reform.

Plastic Packaging Tax — monthly update

Please see details of Plastic Packaging Tax announcements and guidance updates for this month.

Mass balance approach for chemical recycling announcement

On 27 April 2023 HMRC announced that it will launch a consultation to explore the use of a mass balance approach (MBA) to account for chemical recycling for Plastic Packaging Tax (PPT).

HMRC will publish further details on the public consultation later in 2023, where they will welcome views from organisations with an interest in MBA and chemical recycling.

HMRC Evaluation List

In 2021 HMRC published the first evaluation list, setting out the department’s future evaluation publications. This has recently been updated to include Plastic Packaging Tax.

You can read more about HMRC’s approach to evaluation in the Evaluation Framework.

Penalties guidance

If you fail to register or register late, from 1 April 2023 you may be charged a ‘failure to notify’ penalty.

The penalty is calculated as a percentage of the ‘potential lost revenue’. This is a percentage of the amount of the Plastic Packaging Tax which is unpaid because of the failure to notify.

You can find out more about Plastic Packaging Tax penalties.

Spring Budget and Finance Bill 2023 — uprating by Consumer Price Index

As announced at Spring Budget, the Plastic Packaging Tax rate increased from £200 per tonne to £210.82 per tonne in line with the Consumer Price Index from 1 April 2023. This change will maintain the real term value of the price incentive to use recycled plastic and supports the government’s environmental goals.

The new PPT rate applies to all plastic packaging manufactured or imported into the UK on or after 1 April 2023. Any packaging that has been manufactured or imported prior to 1 April 2023 will be charged at the existing rate of £200 per tonne.

Read further guidance on the PPT rate change.

Tax credit negative Statutory Instrument consultation running from 9 to 22 May 2023

HMRC are proposing a minor amendment to legislation about how to claim a tax credit. This will ensure that the legislation aligns with guidance and the PPT online service. A technical consultation on the draft legislation is currently running from 9 May to 22 May 2023.

Learn more and share your views on the Plastic Packaging Tax consultation page

Registration and returns

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

You need to register for PPT if:

• you expect to manufacture or import 10 or more tonnes in the next 30 days (the ‘forward look’ test)
• you have manufactured or imported 10 or more tonnes of plastic packaging since 1 April 2022 (the ‘backward look’ test)

To find out more visit the Plastic Packaging Tax collection page.

Guidance

Guidance for PPT is available at our collection page. We continue to enhance the PPT guidance pages to help address your frequently asked questions.

HMRC has produced the following resources to support businesses:

• guidance — visit the collection page for the latest guidance, including:
  • updates to the importers’ guidance on the Temporary Admission procedure for reusable packaging not intended for sale
  • examples of packaging in and out of scope of PPT
• step by step guides — read to learn about what is in scope, who is liable and needs to register:
  • check if you need to register and are liable for PPT (Welsh version)
  • check if your plastic packaging is in scope of the PPT (Welsh version)
• find our more information about the accounting periods and deadlines for returns and payment dates for 2022 to 2023

Mae’r holl arweiniad craidd ar y Dreth Deunydd Pacio Plastig bellach ar gael yn Gymraeg ar y dudalen gasgliad ar GOV.UK. All core guidance on PPT is now available in Welsh at the collection page on GOV.UK.

Research and Development (R&D) tax relief reform — updated draft guidance published

Updated draft CIRD guidance

HMRC has published an update to draft Corporate Intangibles Research & Development (CIRD) guidance which was originally published for consultation in December 2022. Thank you to all those who submitted feedback.

The guidance, which also incorporates information on how companies and agents can access additional information forms and an update on requirements for large business customers, will be incorporated into the CIRD manual once Finance (No2) Bill 2022 receives Royal Assent later this summer.

Reminder — requirements for claiming R&D tax reliefs as of 1 April 2023

For accounting periods starting on or after 1 April 2023:

• some customers will be required to provide claim notification ahead of a claim for R&D tax relief — claim notification must be provided via an online form and submitted no later than six months after the end of the period of account that the claim falls into
• customers will be able to claim qualifying expenditure on data licences and cloud computing costs.

Read more on how to access the claim notification form, including what is required and when to submit.

From 1 August 2023:

• all companies will be required to submit an additional information online form before your company’s Corporation Tax return containing the claim

Read more on how to access the additional information form, including what is required and when to submit.

Reminder — technical note on additional tax relief for Research and Development intensive small and medium enterprises

At Spring Budget 2023, a technical note was published concerning a new additional tax relief for Research and Development intensive small and medium enterprises. This provides stakeholders with information before draft legislation is published later in the year.

Self Assessment threshold change

From tax year 2023 to 2024 onwards, the Self Assessment threshold for customers taxed through PAYE only, will change from £100,000 to £150,000.   

Affected customers do not need to do anything now as the Self Assessment threshold for 2022 to 2023 tax returns remains at £100,000.  They will receive a Self Assessment exit letter if they submit a 2022 to 2023 return showing income between £100,000 and £150,000 taxed through PAYE and they do not meet any of the other criteria for submitting a Self Assessment return.

For the 2023 to 2024 tax year onward customers will still need to submit a tax return if their income taxed through PAYE is below £150,000 but they meet one of the other criteria for submitting a Self Assessment return, such as:

• receipt of any untaxed income
• partner in a business partnership
• liability to the High Income Child Benefit Charge
• self-employed individual and with gross income of over £1,000

Customers can check whether they need to submit a return.

Marriage Allowance — new print and post claim form to be published

To support agents who are unable to use the online process to apply for Marriage Allowance we have developed a new print and post claim form.

The new print and post claim form is accessed through GOV.UK and will be available May 2023.

The form needs to be posted to the address printed on the form.

The new form has been developed with input from agents and ensures we have all the information we need to process claims fully and helps us to improve customer experience.

Loan relationship unallowable purpose rule — updated guidance

Generally, under the corporation tax regime applicable to loan relationships of companies, a company can obtain a tax deduction for any interest, losses, or expenses which it incurs in respect of a loan relationship. However, the ‘unallowable purpose’ rule can operate to limit the deduction in cases where the loan has a non-commercial, or ‘unallowable’, purpose.

HMRC has published updated guidance on the rule at CFM38100 to CFM38200.

Making Tax Digital

Changes to the HMRC VAT online account from 15 May — make sure businesses are software-ready

VAT registered businesses must be using software from mid-May for tax returns.

Please remind your networks that from 15 May, VAT-registered businesses are required to keep digital VAT records and submit their returns to HMRC using Making Tax Digital (MTD) compatible software, unless they are exempt. This applies to those who have previously filed their VAT returns annually using their VAT online account as they will no longer be able use this online service, as of 15 May 2023. They must now file their returns using compatible software instead.

Businesses will not be able to file their VAT Return via any other system, and they could receive a penalty if they don’t file on time via compatible software.

Find a list of software that’s compatible with Making Tax Digital for VAT, including free options.

How to apply for an exemption from using software

If your client is already exempt from filing VAT returns online or if they or their business are subject to an insolvency procedure, they’re automatically exempt. You can check if they can apply for an exemption.

Find more information about compatible software and how submit VAT Returns.

HMRC Agent Services

Repayment agent registration — check if you need an agent services account to submit repayment claims

Following the 2022 consultation, Raising standards in tax advice: protecting customers claiming tax repayments, the government announced, on 11‌‌‌ ‌‌January 2023, a number of measures to improve transparency in the repayment agent market and protect customers. This included a commitment to introduce a new requirement for repayment agents to register with HMRC. As set out in the summary of responses, the government committed to provide further details on the approach to registration for repayment agents in spring 2023.

The government will now require paid agents to register with HMRC via the agent services account (ASA) if they want to continue to submit claims for income tax repayments. Such agents will be given a 3-month window to register with HMRC, starting on 2‌‌‌ ‌‌May 2023.

Agents that are already registered on the ASA do not need to re-register. Non-paid, pro-bono organisations and individuals not charging fees will also not be required to register.

Additionally, those who submit repayment claims as part of wider Self Assessment services for their clients and who already have an agent code do not need to register on ASA.

Check if you need an agent services account.

Continuing to support customers to interact digitally

Following a recent trial where callers to HMRC were offered a digital alternative rather than staying on the line, we’re expanding this further in May.

This trial saw more than 38 per cent of callers who received a text message about our quicker digital services, leaving the call without needing to call us back within 7 days. HMRC will now continue running the SMS service and expand it to more helplines and queries as part of a larger trial.

The SMS service directs routine helpline calls to online services, where queries can be resolved quickly and easily without waiting to speak to anyone. This gives them a quicker alternative, while also freeing-up our advisers to help those who need us most.

From 4 May, customers calling about routine queries which could be answered online will be given the option to either receive a link via text message or remain on the phone. These queries and requests are:

• proof of entitlement document for Child Benefit
• voluntary National Insurance Contributions and checking National Insurance record
• applying, amending or cancelling Marriage Allowance claims
• checking for receipt of a voluntary National Insurance payment
• chasing HMRC for when a reply is expected

We’ll continue to automatically redirect these routine queries:

• finding your UTR number
• registering for HMRC online services
• lost or forgotten online service password or user ID

The following routine queries will be redirected to online services automatically:

• claiming tax credits (while signposting to benefit entitlements information as tax credits has been replaced by Universal Credits)
• state pension forecasts (a service provided by the Department for Work and Pensions, but HMRC often receives calls about it)

HMRC’s Advance Valuation Ruling service (AVRS) is here

Traders can now get legal certainty on their chosen valuation method for imported goods, for a period of three years.

We understand that customs valuations are complicated, and we are introducing this new service to make things simpler.

Traders do not have to use this service but it will help to facilitate trade by providing certainty on the correct method of customs valuation.

How to sign up

If traders want to sign up for AVRS, they need:

• a Government Gateway ID
• an EORI number

Read more information on applying for an advance valuation ruling.

Update on employer direct debits

If your clients want to set up a recurring direct debit for employer PAYE, this needs to be done at least 6 working days before the payment due date of 22nd of the month.

The direct debit payment will always be collected shortly after the 22nd day but your client will not now receive a late payment generic notification. You might see interest being charged if you access the online account between the 23rd and the date the payment is taken but this will be reversed once the payment is processed.

If your clients want to set up either a direct debit or a Time to Pay arrangement, they will need to do this themselves, agents are unable to do it. To set themselves up they will need to be enrolled for PAYE Online for employers.

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.

Please be aware that our toolkits are currently being updated.

Here is the breakdown of toolkits by category:

• 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 ensure 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

Learn more about 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

Countdown Bulletin 53 has been added to the National Insurance Services to Pensions Industry collection.

Pension schemes newsletter

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

Revenue and Customs briefs

The Revenue and Customs briefs 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 (IOG)

Self Assessment repayment delays

A bespoke meeting with the Issues Overview Group is scheduled to take place on 24 May. Self Assessment subject matter experts will discuss with the group, activities that can improve performance in this area. This can include improved communications, guidance, and technology to strengthen the flow of Self Assessment repayments.

To avoid the possibility of repayment delay, rather than submit a repayment request on a voluntary return, agents are requested to register their client for Self Assessment first and await the notice to file a return before submission. This will ensure the return flows smoothly through the process and does not drop out of the automated system, which can delay repayment.

VAT registration

Issues Overview Group members have requested a further update on the VAT registration service, this will be included in the discussions at the bespoke meeting on 24 May.

Marriage Allowance

A bespoke meeting with Issues Overview Group members, on Marriage Allowance took place on 29 March. Subject matter experts are continuing to manage the concerns raised. An update on the outstanding issues will be included in the next edition of Agent Update.

Linking emails to clients

Thank you to the agents who have submitted examples of HMRC emails they have received which they are unable to link to their clients. Our digital teams are currently reviewing whether and how we can add this information.

Coding allowances for working from home

Many employees became eligible to claim a tax allowance for working from home during the Covid pandemic. However, since the Covid restrictions ended, that eligibility may have ceased. Check if you’re still eligible to claim the tax allowance.

For customers in Self Assessment who may have claimed a working from home allowance alongside other allowances, they may have had this allowance added to their tax code for a year they are not eligible. Customers are therefore advised to check their continuing eligibility now to ensure their tax code is correct and avoid future underpayments of tax. Find out more about checking your income tax in the current year.

Agent Forum etiquette

Agents are asked to ensure that posts on the Agent Forum refer to or provide evidence of potential systemic issues. This will enable Agent Forum moderators to reply to relevant queries within a timely manner. Recently, Agent Forum moderators had to redirect several cases which are client specific and would therefore be more appropriately placed within the Customer Forum.

Agents are also reminded that posts should be evidence based. Posts that are primarily opinions may be removed.

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 Margaritelli
• IFA John Edwards
• VATPG Ruth Corkin

If you are not a member of a professional body, please email team.agentengagement@hmrc.gov.uk.