HMRC Stakeholder Digest – 23 June 2022

23 Jun 2022

Please see the following message which we are sharing on behalf of HMRC:

This 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.

Measuring Tax Gaps report - what you need to know

Today, we’ve published our annual ‘Measuring Tax Gaps’ report which measures the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid.

The tax gap is 5.1% in years 2019-20 and 2020-21 at the same time as a year-on-year reduction in the monetary value of the tax gap by £2 billion due to a fall in total theoretical liabilities of £37 billion.

The 2020-21 tax gap estimates are affected by COVID-19 and therefore subject to more uncertainty than usual so there is the possibility of future revisions. The overall long-term trend provides the most meaningful picture of the tax gap.

Like last year, the tax gap is published in an HTML format to make it accessible for all and to meet accessibility regulations applying to public bodies for their website content.

However, based on your feedback, we have made improvements to the report that hopefully make it easier to navigate and compare findings.  

What are the key findings?

  • the tax gap for Income Tax, National Insurance contributions and Capital Gains Tax is 3.5% (£12.7 billion) in 2020-21 – this represents the biggest share of the total tax gap by type of tax
  • the VAT gap, the second biggest share of the total tax gap by tax type, decreased from 8.5% (£12.5 billion) in 2019-20 to 7.0% (£9.0 billion) in 2020-21  
  • the Corporation Tax gap reduced from 11.5% in 2005-06 to 9.2% in 2020-21, reaching a low of 6.5% in 2011-12 and has remained broadly stable since 2014
  • the excise duty gap has reduced from 8.3% in 2005-06 to 7.2% in 2020-21 with a low of 5.0% in 2011-12 – the latest years show a broadly stable trend since 2013-14
  • the beer duty gap has increased from 9.1% in 2005-06 to an all-time high of 18.9% in 2020-21.

The tax gap publication excludes estimates of error and fraud in the COVID-19 support schemes – updated estimates of COVID-19 error and fraud will be published in HMRC’s annual report and accounts: 2021 to 2022.   

Building a trusted, modern tax and customs department

We are the only tax authority in the world that measures and publishes an annual tax gap covering a single tax year for all the taxes, levies, and duties it administers. UK tax gap estimates go back every year to 2005-06. 

We publish the tax gap because we believe that it is important to be transparent in our work.

The tax gap helps build trust with the public by providing them with important information on tax compliance while giving us the insight we need to focus our work where it can make the most difference: making things easier for taxpayers and preventing non-compliance before it can occur. 

Increase to National Insurance thresholds – calculator now available to estimate how individuals will be affected

From 6 July 2022, the National Insurance threshold changes come in for employees, who will pay less National Insurance contributions (NICs) out of their income. The NICs Primary Threshold will be £12,570 per year (increased from £9,880 per year).

A new calculator has been published to estimate how the National Insurance contributions change will affect you. 

The National Insurance Lower Profits Limit for self-employed people is also changing in line with the changes for employees.

The annual Lower Profits Limit will be £11,908 for 2022 to 2023. This will rise to £12,570 from April 2023. Self-employed people will also no longer be required to pay Class 2 NICs on profits between the Small Profits Threshold (£6,725) and Lower Profits Limit (£11,908) but will still be able to build entitlement to contributory benefits.

We will publish further information on the changes for self-employed people shortly.

Making Tax Digital - businesses must now file VAT returns digitally

The way businesses file VAT returns has now changed, as part of Making Tax Digital (MTD). This means they need to keep digital business records and file all future VAT returns using MTD-compatible software. This reduces common mistakes and makes it easier for them to manager their tax affairs.

What businesses need to do now if they haven’t already:

  1. Choose compatible software that’s right for them – they can find software that’s compatible with Making Tax Digital for VAT, including free options on GOV.UK.
     
  2. Check the permissions in their software to allow it to work with MTD.
     
  3. Sign up to MTD – find out when they need to sign up by to avoid any penalties.
     
  4. Use their software to keep digital records and file returns for all future VAT periods. 

 Businesses can find out more about MTD on GOV.UK.

Move to the Customs Declaration Service to continue importing

The last day for making import declarations on the Customs Handling of Import and Export Freight (CHIEF) platform will be 30 September 2022.

From 1 October, to continue trading, businesses will need to make all their import declarations using the Customs Declaration Service. The last day for making export declarations on CHIEF will be 31 March 2023. After this date, the CHIEF service will close completely.

Businesses must make sure they have a customs agent who is ready to make their import declarations (or set themselves up to make their own declarations) on the Customs Declaration Service by 30 September 2022. Businesses can search the register of customs agents and fast parcel operators on GOV.UK.

This is a major change, so businesses should not underestimate the time and resource it will take to move to the Customs Declaration Service and start acting today.

There are plenty of online resources available for you to share with your networks, including businesses you know are going to be affected by this change, including:

Tax responsibilities for people arriving to the UK from Ukraine

It is important that people coming to the UK from Ukraine are aware of their tax responsibilities to avoid any potential future implications or compliance activity from us.

Everybody has a responsibility to pay tax on their earnings if they earn over a certain amount. Employment status, such as self-employed or agency worker, can also affect the amount of tax paid.

If Ukrainian arrivals are employed, their Income Tax will normally be deducted at source from their salary through Pay As You Earn (PAYE).

If they are self-employed, they have to declare their income and pay any tax due through the self assessment system. More information on self assessment tax returns and when annual returns need to be sent to us is available on GOV.UK.

Ukrainian arrivals who are struggling with their tax responsibilities can contact us directly or take advice from reputable agencies.

Making it easier to send humanitarian goods to Ukraine - temporary customs easement

On 10 March 2022, we introduced temporary customs rules to make it easier for businesses, charities and/or community organisations to move aid and donations to the people in Ukraine.

This means that:

  • eligible goods designated as humanitarian aid can be moved through GB ports without the need to complete electronic customs declarations
  • some larger vehicles including HGVs will still be required to use the Goods Vehicle Movement Service between Great Britain and the EU
  • all controlled goods and dual use goods are excluded from this easement.

If you are aware of any of your members and/or networks who would like to help, we encourage that they donate cash through trusted charities and aid organisations rather than donating goods.

Further information about taking humanitarian aid out of Great Britain to support Ukraine and more information about the temporary customs easement on GOV.UK.

Repayment Agents consultation launch

Yesterday we launched a consultation on raising standards in tax advice: protecting customers claiming tax repayments.

This addresses concerns from customers and stakeholders about repayment agents.

Your views are needed on how we can protect and inform people who use specialist repayment agents to claim a tax refund. The consultation is part of the government’s agenda to raise standards in the market for tax advice and will run for 12 weeks, ending on 14 September 2022.

Please make your networks aware of the consultation and encourage them to share their views, particularly if they have been impacted by any of the issues raised.

You can share your views by emailing [email protected] or completing the survey.

Corporate Interest Restriction – join our working group

When you calculate how much UK Corporation Tax your company or group has to pay, it’s important to bear in mind that there is a Corporate Interest Restriction (CIR) which applies to individual groups of companies that have net interest and financing costs of over £2 million in a 12-month period. This limits the amount of tax relief available in relation to net interest and other financing costs.

We are aware of various technical issues with the CIR legislation and are in the process of setting up a working group to consider these issues and how we can help resolve them.

We’re keen to hear your views. If you would like to join the CIR working group, please contact Jackie Phillips by email: [email protected].

Further information around the restriction on Corporation Tax relief interest deductions is available on GOV.UK.