HMRC Stakeholder Digest - 1 May 2024

Please see the following message from HMRC, which we are sharing for information:

The HMRC Stakeholder Digest provides a round-up of our latest news and updates, which we’d be grateful if you could share with your clients, customers, or members.

Updates

Changes to reporting income from self employment and partnerships

From April 2024, sole traders and partners in a business will have to report their profits on a tax year basis, if they don’t do so already. This is also known as basis period reform. 

This reform will remove complex computational rules which are widely misunderstood and lead to errors and double taxation in the early years of trade. It replaces them with a simpler system where all self-assessment taxpayers pay tax on the profits they earn in the tax year. The changes help with the introduction of Making Tax Digital and also mean there is no longer any incentive to choose a different accounting date to delay tax on profits.

Interactive guidance to work out your transition profit was published on 8 April 2024 to help the self-employed manage their overlap relief and transition profit figures, which must be included in their next Self Assessment return, and in all future returns.

Overlap relief is a relief that is usually only available when a business ceases or changes its accounting date. It reverses the double taxation of profits where basis periods overlapped, which will have been at commencement or on a previous change of accounting date. All outstanding overlap relief is being made available in 2023/24 as part of basis period reform, with no further deductions possible from 2024/25 onwards.

Transition profit is the “extra” profit generated in 2023/24 due to basis period reform. In most cases it is the profit from the business’s usual accounting date to 5 April 2024. For example, for a business that usually accounts to 31 December it will be the profits from 1 April 2024 to 5 April 2024. Transition profit is reduced by any overlap relief, and any remainder is spread over 5 years to lessen the impact of these profits on tax liabilities.

We wrote to self-employed customers who do not have a tax agent in February, to explain the change and tell them how to access support.

A video to help explain the changes is available on YouTube, and further information is available on GOV.UK.

Self Assessment threshold change

People earning between £100,000 and £150,000 will no longer automatically have to file a Self Assessment return, after the threshold was raised.

For the 2023-24 tax year, the Self Assessment threshold for customers taxed through Pay As You Earn (PAYE) only, will change from £100,000 to £150,000.   

Relevant customers should have received a letter from HMRC to confirm that they do not need to complete a tax return, if they submitted a 2022-23 tax return showing income of between £100,000 and £150,000 that is taxed through PAYE, and they do not meet any of the other criteria for being in Self Assessment.

For the 2023-24 tax year, 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, such as:

• they receive any untaxed income over £2,500
• they are a partner in a business partnership
• they must pay the High-Income Child Benefit Charge
• they are self-employed with gross business income over £1,000

From the tax year 2024-25 onwards, the income threshold to complete a tax return for PAYE only taxpayers will be removed completely. Customers will still be required to submit a return if they meet any of the other criteria listed above.

Your clients and members can use our online tool to check whether they need to submit a tax return on GOV.UK.

Helping contractors steer clear of tax avoidance schemes  

You can help us to protect contractors from unexpected tax bills by telling them about our ‘Tax avoidance - don’t get caught out’ campaign, and by sharing or liking our posts through your organisation's social media channels.

We have plenty of support on offer to help contractors spot the warning signs of tax avoidance, get support to leave schemes and report suspicious companies.  

We also publish details of tax avoidance schemes and their promoters to steer clear of on GOV.UK. This is not a complete list, and there may be others that we cannot currently publish. Remember, HMRC never approve tax avoidance schemes for use.

This month, on Tax Administration and Maintenance Day the government announced, that to support workers and businesses that use umbrella companies, HMRC will publish new guidance later this year which includes an online pay checking tool.

Opportunity for businesses to get involved with Single Trade Window testing

In its UK Border Strategy, the Government committed to delivering a world-leading Single Trade Window (STW). When fully operational, the system will provide a digital gateway between businesses and UK border systems, allowing users to meet their border obligations by submitting information to government once and in one place.  

The Single Trade Window will be introduced through a series of releases, and we’re now in the testing phase of the first release, with invited traders able to submit customs import declarations for free via the STW user interface.  

​We’ll test and add more features to this first release over the coming months including functionality for the October 2024 Border Target Operating Model requirements on Safety and Security (ENS) declarations, before making it publicly available late summer. 

​If any of your clients or members with businesses that import goods to the UK are interested in supporting STW testing, now or in the future, please contact us at [email protected].  

Further information about the Government’s 2025 UK Border Strategy is available on GOV.UK.

Other Consultations

Consultation on the VAT Treatment of Private Hire Vehicles  

The Government has published a consultation on the potential tax impacts of the recent High Court rulings on the private hire vehicle (PHV) sector. This consultation also invites views on potential government interventions that could help to mitigate any undue adverse effects on the PHV sector and its passengers. This consultation closes at 11:59pm on 8 August 2024. More information about the Consultation on the VAT Treatment of Private Hire Vehicles is available on GOV.UK. 

Freeport and Investment Zone employer National Insurance contributions reliefs  

The government welcomes views on draft regulations which provide for a reporting change for the Freeport and Investment Zone employer National Insurance contributions (NICs) reliefs. This consultation closes at 11:59pm on 15 May 2024. More information about Freeport and Investment Zone employer National Insurance Contribution reliefs on GOV.UK.

Small businesses should act now to have their say in the annual Tell ABAB Survey 2024

The Administrative Burden Advice Boards’ annual Tell ABAB Survey 2024 will close on Friday 3 May. The survey provides crucial insight on the big issues faced by small businesses dealing with the tax system. The survey takes approximately 10 minutes to complete.

For your clients and members who are one of the 5.5 million small businesses (including sole traders/self-employed/micro-business/organisations or agents with fewer than 51 employees) in the UK, the survey is your opportunity to provide ABAB with insight on the tax system which the Board can then use in their scrutiny of HMRC’s work to support small business owners and reduce the burdens on them.

Results from the survey will be published in the ‘Tell ABAB’ Report, which will be published on GOV.UK in summer 2024. 

ABAB is an independent body who are passionate about listening to and understanding the needs of the small business community. Board members come from a range of businesses and professions, and their goal is to support HMRC to make the tax system simpler for small businesses. 

ABAB challenges HMRC on its performance, and provides robust scrutiny of key initiatives, such as Making Tax Digital. Their annual report, which is sent directly to Treasury ministers, reviews HMRC’s progress against ABAB’s priorities.

If you have any questions about the 2024 survey, please email [email protected].

Raising standards in the tax advice market – strengthening the regulatory framework and improving registration  

This consultation discusses the government’s intention to raise standards in the tax advice market through a strengthened regulatory framework. It sets out the 3 possible approaches to strengthening the framework: mandatory membership of a recognised professional body, joint HMRC– industry enforcement, and regulation by a separate statutory government body. The consultation also explores approaches to strengthen the controls on access to HMRC’s services for tax practitioners. The consultation will run until 29 May 2024. More information about the consultation on raising standards in the tax advice market is available on GOV.UK.