HMRC piles pressure on taxpayers behind on payments
A further increase on interest paid to HMRC for late payment of taxes will hit taxpayers who are not up-to-date, warns Blick Rothenberg
Nimesh Shah, CEO at the firm said: ‘Following another Bank of England base rate to 1.75%, HMRC has confirmed that it will raise its interest rates on late tax bills to 4.25% on 23 August – a level not seen since January 2009.’
He added: ‘Since the start of 2022, the HMRC’s interest rate has increased by 1.5% – that’s the equivalent of an extra £225 per annum on a £15,000 tax liability. On the same £15,000 tax liability, you would suffer almost £650 of interest per annum.
‘With continuing rising costs rising across the board, HMRC have hiked up interest on late tax payments at the latest opportunity. It sets a worrying trend for some taxpayers who are struggling to pay their outstanding taxes, against the backdrop of other rising costs.
The threat of further interest rate rises this autumn, coupled with rising inflation, will likely see further increases in HMRC rates.
Shah said: ‘The worst is yet to come on this front, with some economists projecting the Bank of England could decide to increase the base rate to 2.5% by the end of 2022 – this could see HMRC increasing their interest rate on late paid tax to 5% by the end of the year.
‘Taxpayers who have outstanding tax liabilities should be mindful to settle as much as they can afford before there are further rate rises.
‘HMRC have also finally increased the repayment supplement rate by 0.25% to 0.75% – the first increase in this rate in over a decade. It’s quite shocking that HMRC have quickly increased the rate on late paid tax by six times the amount the equivalent repayment interest rate has gone up by this year.
‘HMRC’s meagre 0.75% repayment supplement rate means there is not any great incentive for HMRC to release repayments. There continues to be one rule for money owed to HMRC and another for taxpayers who are due a refund. Many taxpayers have seen significant delays to repayments over the last 12 months, but HMRC can continue to drag their heels with little cost to the Treasury.’
- Published in HMRC, Interest Rates, Tax return
HMRC reminds couples to claim marriage allowance
At the height of the wedding season, HMRC is reminding married couples and people in civil partnerships to sign up for the marriage allowance tax break
Marriage allowance allows married couples or people in civil partnerships, including those who have been together for many years, to share their personal tax allowances if one partner earns below the personal allowance threshold of £12,570, and the other is a basic rate taxpayer.
Eligible couples can transfer 10% of their tax-free allowance to their partner, which is £1,260 in 2022/23. It means couples can reduce the tax they pay by up to £252 a year. They can apply any time and, if eligible, could backdate their claims for up to four previous tax years to receive a payment of up to £1,242.
Marriage allowance is one of a number of benefits and reliefs available to boost family finances at a time when many are concerned with the rising cost of living.
Angela MacDonald, HMRC’s deputy chief executive, said: ‘We want to ensure people are receiving vital financial support at a time when they need it most. Married couples or those in a civil partnership could potentially receive tax relief worth up to £1,242, meaning extra cash in their pockets.
‘To find out if you are eligible and how to apply search ‘marriage allowance’ on gov.uk.’
More than two million couples currently benefit from marriage allowance, but there could be thousands more who are eligible to claim.
Even if couples do not qualify for marriage allowance when they first get married, a change in circumstances years later could mean they become newly eligible. These include:
- one partner retiring and the other remaining in work;
- a change in employment;
- a reduction in working hours which means their earnings fall below their personal allowance;
- maternity, paternity, or shared parental leave;
- unpaid leave or a career break; and
- one partner studying or in education and not earning above their personal allowance.
If a spouse or civil partner has died since 5 April 2018, the surviving person can still claim by contacting the income tax helpline.
Marriage allowance claims are automatically renewed every year. However, couples should notify HMRC if their circumstances change.
- Published in HMRC
PAYE will be payable by direct debit to HMRC
HMRC has confirmed plans to modernise its direct debit payment system for employer PAYE so a recurring direct debit can be set up for the first time
Currently employers can only set up a direct debit to collect a single payment, but not a recurring direct debit.
As part of its payment modernisation programme, HMRC is going to offer a recurring direct debit to employers. This is part of a wider project to create a consistent set of payment methods for all taxpayers across the tax authority, rather than the current limited service, which varies depending on the type of tax payable.
The service will be available from mid-September this year, HMRC said.
Once available, there will be a change to the business tax account (BTA) and the employers’ liabilities and payments screens. There will be a new link for ‘set up a direct debit’. This will allow client companies to set up a direct debit instruction once, authorising HMRC to collect directly from their bank account based on their return submissions.
After an employer has set up a direct debit, the link will change to ‘manage your direct debit’ and an employer will be able to view, change or cancel the direct debit online.
Payments which will be covered by direct debit will show within employers’ liabilities and payment screens for both employers and agents.
This service is not available for agents and only employers will be able to create, view, amend and cancel a direct debit.
Employer PAYE liabilities and payments viewer update
HMRC also confirmed that it has been extending employer PAYE for the agent online service on a rolling basis and that the expansion is ‘progressing well’. This service allows agents to see employer liabilities and payments records held by HMRC.
All previous restrictions will be removed by the end of July and in future all agents will be able to access the service. This will include those with the assistant as well as administrative roles.
Business expenses and tax breaks confuse self employed
One of the biggest problems for self employed taxpayers relates to confusion over allowable business expenses when completing self assessment returns
Many self-employed people experience difficulties completing self assessment returns due to ‘confusing terminology, ambiguity around allowable business expenses and uncertainty transferring figures from personal spreadsheets to HMRC’s system. These challenges resulted in a more time-consuming process and errors being made’, finds the latest HMRC commissioned research into the tax experiences of the self employed.
There was widespread consensus that the first year of self employment was by far the most challenging, with many emphasising the level of complexity and stress induced by the process of figuring out what they needed to do. This anxiety was further compounded by their fear of the potential financial repercussions of making a mistake.
The greater the number of roles and sources of income, the more taxpayers found it difficult to keep on top of their financial records, in turn impacting effective tax management.
The process of maintaining good financial records throughout the year was also challenging, presenting additional complications by increasing the difficulty of tax management.
For some self-employed customers managing cash flow was also a challenge. This difficulty was most prominent for those with irregular hybrid incomes as it was hard to predict and align the timings of their incomings and outgoings, exacerbated when combining PAYE and self-employed earnings.
Agents and accountants were mostly employed to help overcome tax management rather than financial management challenges; for example, to accurately complete self assessment returns.
Using a tax agent was also felt to provide the added benefit of saving time, particularly for those who were time-poor, and saving money, for example, by receiving guidance on the allowable expenses they could claim for.
The ‘payments on account’ process also made planning for tax payments more challenging. This stemmed from HMRC’s system of calculating tax bills based on taxpayers’ income from the previous year and ‘payment on account’ for the year ahead.
The process of planning tax payments based on this system was particularly challenging for those with irregular incomes that fluctuated significantly from year to year.
One respondent said: ‘Because my income can fluctuate, it can be quite frustrating to end up paying loads on account when you know for a fact that you’ve not earned as much. It makes it hard to plan around.’
Many self employed people experienced difficulties completing their self assessment ‘due to ambiguity around allowable business expenses, confusing terminology and uncertainty transferring figures from personal spreadsheets to HMRC’s system’. These challenges resulted in a more time-consuming process and errors being made.
Completing self assessment was seen as challenging across the range of tax and income complexity due to uncertainty around how to complete some parts of the forms. While it was said to have improved over time, the terminology within the return was still not felt to be intuitive and simple to understand due to the use of ‘jargon’ and acronyms.
As a result, some people found it difficult to understand the questions and to know which boxes to tick and where to input information. This issue was said to be compounded by the frequency of changes to the return, with these updates adding to their uncertainty each year and requiring time to process and understand.
Some also voiced frustration about the complexity of the ID number and process of retrieving this and inputting it into the Government Gateway. This was seen as a ‘convoluted system’ and was especially frustrating if the code was input incorrectly locking users out of the system.
Long-standing self-employed workers frequently stated that the tone in HMRC communications had generally improved and was more personable, which made completing the self assessment process less stressful.
Respondents suggested a number of ways for HMRC to improve their services, including helping them track their finances and plan for tax payment, for example, through real-time self assessment inputs, improving the speed and accuracy of completing returns, for example, through downloadable spreadsheets, and providing more personal and tailored support, for example, for those in their first year of self-employment.
- Published in HMRC, Self Assessment
New powers introduced as HMRC targets till fraud
Three people were arrested after HM Revenue and Customs (HMRC) officers visited businesses across the country in a day of action after new powers were introduced in the fight against till fraud
Businesses involved in making, supplying or promoting electronic sales suppression (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 investigations visited 30 businesses on 18 May 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 were seized. All three suspects have been released under investigation.
Financial Secretary to the Treasury, Lucy Frazer, said the overwhelming majority of businesses are paying their taxes and rightly want to see HMRC stepping in where needed to ensure a level playing field for all.
“Tax crime does not stand still and neither do we – the new powers available to HMRC allow them to clamp down on ESS and help recover tax revenues to fund our vital public services,” she said.
Marc Gill, HMRC’s director of individuals & small-business compliance, said electronic sales suppression gives the appearance a business is trading legitimately, when in fact they’re really just stealing money from taxpayers.
“We encourage anyone using, supplying, making or promoting ESS to report via our disclosure facility. Making a disclosure is not only the right thing to do it could also lead to a reduction in financial penalties,” he said.
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.
As part of investigations into ESS HMRC can also recover tax evaded and launch investigations that could result in criminal convictions.
HMRC has a voluntary disclosure facility and would encourage anyone using, making, supplying or promoting ESS to contact them. By making a disclosure now those using or benefiting from ESS could see their financial penalties reduced.
HMRC late payment interest rates revised
HMRC has increased its late payment interest rates to 0.75% after the Bank of England increased their base rates
The tax authority revised its interest rates for late payments after the Bank of England (BoE) increased the base rate from 0.5% to 0.75%.
HMRC confirmed that the repayment interest rate will rise to 0.75% with the rises due to come into effect shortly The repayment interest rate will remain at 0.5%.
The changes to late payment interest will come into effect on:
- 28 March 2022 for quarterly instalment payments; and
- 5 April 2022 for non-quarterly instalments payments.
HMRC’s interest rates are linked to the Bank of England’s base rate, and due to the base rate increasing HMRC automatically increases rates.
- Published in HMRC
HMRC asks businesses to label NIC rise on payslips
HMRC has emailed employers ‘strongly encouraging’ them to label the increased National Insurance contributions (NICs) rate on their employee’s payslips as ‘for the NHS’
Last month the tax authority sent out a statement in its emails and bulletins to all registered employers asking them to consider highlighting the increase in order to help employees to understand what the increase would be funding.
The statement released by HMRC said: ‘We are therefore requesting that employers include a message for affected employees on all payslips between 6 April 2022 and 5 April 2023, explaining the increased National Insurance contribution. The message should read: 1.25% uplift in NICs funds NHS, health and social care’.
The email also stated that HMRC had been in contact with payroll software providers to request that they include the message in their software and wider support models.
From 2023 the rate for NICs will return to the current level and the Social Care Levy will be highlighted on payslips.
HMRC confirmed that the suggestion had been made, however it was not mandatory for employers to include the message, but it was ‘strongly encouraged’.
An HMRC spokesperson said: ‘We have asked employers to include a generic statement on all payslips from April 2022 to help employees understand the changes they will see to their contributions and that the increase will be used to fund the NHS, health, and social care.’
In response to the request, many business owners took to Twitter to express their frustration about the email with one tweeting that the tax authority was using ‘payslips as propaganda’, stating ‘if you can’t sell it to the public, don’t expect us to’.
The former executive chair Edward Troup of HMRC in 2016-17 also tweeted that ‘it was questionable whether the request to businesses fell within HMRC’s legal powers’ as the department had asked employers ‘to push a political narrative despite it supposedly being politically neutral’.
Despite the backlash over the increase, which was announced in parliament in September last year, the government has stated multiple times that it is to continue with the move despite the current concerns over the cost of living crisis.
A large number of thinktanks, economic groups, and business bodies as well as parliamentary committees including MPs across multiple parties and members of the House of Lords, have come forward calling the government to scrap it. The Institute of Directors also launched a petition in January which received more than 180,000 signatures supporting the call for the tax rise to be abandoned.
- Published in HMRC
HMRC to end payments via Post Office accounts
HMRC is reminding about 7,500 tax credits, child benefit and guardian’s allowance customers they have just one month left to switch their Post Office card account
From 5 April 2022, HMRC will stop making payments to Post Office card accounts so customers must notify HMRC of their new account details, so they do not miss out on vital payments.
In November 2021, HMRC extended the deadline to the end of the financial year. The one-off extension to the contract meant customers could temporarily continue to receive their payments into their Post Office account, giving them extra time to set up new accounts and notify the department.
Nearly 138,800 customers have already switched their accounts and provided HMRC with updated bank account details. Time is running out for the remaining 7,500.
Customers can choose to receive their benefit payments to a bank, building society or credit union account. If they already have an alternative account, they can contact HMRC now to update their details.
Myrtle Lloyd, HMRC’s director general for customer services, said: ‘We want to make sure that no customer misses out on the benefit payments they are entitled to. If you still need to switch your Post Office card account, contact HMRC to update your bank account details by 5 April.’
Child benefit and guardian’s allowance customers can use their personal tax account to provide revised account details, change their bank account details via gov.uk or by contacting the child benefit helpline on 0300 200 3100. Tax credits customers can change their bank account details by contacting the tax credits helpline on 0345 300 3900. If customers cannot open a bank account, they should contact HMRC.
If the 5 April deadline is missed, payments will be paused until the customer notifies HMRC of their new account details.
The Money Helper website, provided by the Money Advice and Pensions Service, offers information and advice about how to choose the right current account and how to open an account.
HMRC has been contacting customers recently to encourage them to take action and will continue to contact them to remind them.
- Published in HMRC
HMRC phone lines closed on Fridays
Following a trial, HMRC will now be temporarily closing the VAT and corporation tax phonelines on several days across February and March to help the tax authority deal with a covid post backlog
Over the trial closure between December and January, on average, HMRC cleared more than 4,000 additional pieces of post each day during the test and learn. This resulted in an increased productivity rate among colleagues, above its initial planning assumptions, as staff were able to focus on the task without stopping mid-way through to take a phone call.
There was an increase in telephony contact on Monday’s following the Friday closures, with an estimated 2,500 extra calls over the three Mondays (using November as a comparator). HMRC said it was ‘able to offer an acceptable level of service to these customers despite the additional demand’.
HMRC has sent out communications to tax agents and accountants advising them of the planned closures which will affect phone lines until the end of March.
An HMRC spokesperson said: ‘We are temporarily closing two specialist phonelines on Fridays so we can work through our stocks of post more quickly to help us return to pre-pandemic service levels in these critical areas of work.
‘Temporarily closing these two phonelines was trialled in December and helped us clear more than 4,000 extra pieces of post on each day they were closed.
‘We understand the frustrations of customers and agents who are waiting for HMRC to get to their individual enquiry, we’re sorry that we can’t get to everyone more quickly and thank them for bearing with us.’
Following the success of the December test and learn, the corporation tax and VAT telephony lines will see a further telephony shuttering exercise on Fridays in February and March 2022:
- Corporation tax – 25 February to 25 March 2022; and
- VAT (excluding bereavement) – 25 February to 25 March 2022 (excluding 4 March).
HMRC said it had listened to feedback from stakeholders and has selected these dates to avoid key events on these lines, including the VAT peak.
Based on current plans, HMRC expects to see a significant improvement in service levels in these critical areas.
- Published in HMRC