One Month in a Minute: September 2018

PERSONAL TAXATION

ATT update on SA filing exclusions and ‘specials’

The Association of Taxation Technicians (ATT) has published an article, to follow up on a ‘Talking Points’ webinar from HMRC in early August. HMRC runs two lists:

Exclusions – where HMRC’s tax calculator algorithm will not calculate the liability correctly. In some cases, the return will be rejected, while in others, it will be accepted but the wrong (sub-optimal) outcome for the taxpayer will be calculated.

While it should be possible to file a paper return with an exclusion as late as 31 January 2019 (rather than the usual 31 October deadline for paper returns) the ATT’s article notes that several agents reported receiving penalty notices even when 2017/18 returns were submitted with paperwork explaining the problem. HMRC has advised that the face of the paper return should be marked ‘Exception’, in addition to filing supporting documentation to the effect that an exception applies.

An alternative is to file the return online (assuming that the agent’s software will permit this) and then to contact HMRC to ask for a recalculation, stating the ID-number of the relevant exclusion.

Special Cases – where it is possible to circumvent problems with online filing but only by using a workaround.

HMRC has said it will be reviewing all 2017/18 tax returns to identify exclusion cases and to correct them, in due course. However, as the ATT article notes, HMRC is still reviewing 2016/17 returns for exclusions, so it may be some time before 2017/18 problems come to light.

HMRC has said that it will be releasing its 2018/19 calculator to developers much earlier than in previous years. This should give HMRC more time to fix problems in time for tax return season proper.

BUSINESS TAXATION

Class 2 NI contributions will NOT be abolished, says government

In a Written Ministerial Statement on 6 September, the government announced that Class 2 National Insurance Contributions would NOT be abolished ‘during this Parliament (so perhaps we should not get too carried away). Class 2 NICs were originally scheduled to be abolished from April 2018 but this was postponed, at least until April 2019, to give the government time to consider the implications for ‘lower’ earners.

While the government intended simultaneously to re-configure Class 4 NICs to ensure that these ‘counted’ towards state pension entitlement, Class 4 NICs could not be paid voluntarily, leaving lower earners with NIC’able profits below the lower profits limit (E8,424 in 2018/19) unable to access their annual credit for state pension entitlement, unless they made Class 3 NICs.

To compare for 2018/19, Class 2 NICs are £2.95 a week while the Class 3 rate is £14.65 a week.

For more on National Insurance for the self-employed, click here.

TRUSTS AND INHERITANCE TAX

2018 SA900 Trusts and Estates Tax Return Guidance updated

The ICAEW has reported that HMRC has advised that the SA900 guidance for reporting interest received gross has been amended, as following the original guidance would result in the return’s being rejected:

‘The original guidance notes indicated that untaxed interest arising from an interest distribution made by, eg an OEIC, could be declared at boxes 9.2 to 9.4 when in fact, if box 9.3 is populated with ‘0’, automatic capture of the return will fail. To avoid a rejection of the trust tax return and a manual correction being applied, HMRC is advising customers to declare all types of untaxed interest at box 9.1 instead.’

TAX ADMINISTRATION

Agent Update 67

HMRC has published Agent Update 67, with the following highlights:

  • A reminder for UK storage businesses to apply for the Fulfilment House Due Diligence Scheme.
  • Advice on settling disguised remuneration schemes before the 2019 loan charge arises, with up to five years to pay by instalments (without providing detailed information of their circumstances – taxpayers may get longer to pay, if they provide sufficient information).
  • Conditional exemption (from IHT) tax incentive scheme – where the owner is able to demonstrate that woodland is of historic, scenic or scientific importance, and that the general public has a reasonable degree of access, then no IHT is due on the value of the timber or underlying land.
  • Preparing for the Customs Declaration Service.
  • Various reasons why HMRC Online may say that Class 2 NICs information is either ‘unavailable’ or ‘nil’. Apparently, if you are trying to complete your client’s return between 02:00 and 05:00, then the facility is unavailable. (Presumably, here, HMRC means ‘if you are trying to access HMRC Online between 02:00 and 05:00’ – anything else would seem rather churlish).
  • The Gigabit Voucher Scheme – worth up to £3,000 as a contribution to the cost, for a small business, of ‘full fibre connection’.

To read this article in full and for our other online tax services, email pete.taylor@bloomsbury.com for a free trial.

Lee Sharpe

Written by Lee Sharpe

Lee Sharpe is a CTA with over 20 years experience advising clients on tax matters.

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