In this month’s Enews we consider the latest news on Making Tax Digital for Income Tax Self Assessment. We
also update you on rising inflation and interest rates and the impact of the increase in national insurance
contributions. With guidance for employers and a warning for new homeowners, there is a lot to update you on.
MTD for income tax pilot extended
HMRC is extending the pilot for Making Tax Digital for Income Tax Self Assessment (MTD ITSA) to more
self-employed workers and landlords.
From July, those taking part will be able to test MTD ITSA before April 2024, including their own internal
processes for managing MTD.
Agents and customers are already taking part, and HMRC wants more agents to start signing up a small number of
their clients to trial the system. It is noted that clients will need to have an accounting period that aligns
with the tax year in order to take part in the pilot.
From April 2024, all businesses with annual income from self employment or property above £10,000 will have to
follow MTD rules.
Under MTD, the quarterly reporting is a summary, providing a total of the incomes and outcomes going through
the business per quarter. As a result, there is not necessarily a need to report under each property address as
it is an accumulation of all the data that is required, HMRC said.
‘We want to ensure this is well tested before mandation, and that agents and customers have
opportunities to feedback on how it will work in practice. That’s why we’re running a
pilot, inviting agents to recommend clients who can help us test and learn.
‘The pilot is still a test environment. Those taking part have the benefit of testing the MTD ITSA before
April 2024, including their own internal processes for managing MTD.
‘Agents and customers are already taking part, and we would like to encourage more agents to start signing
up a small number of their clients.’
Internet links: GOV.UK
HMRC criticised over IR35 implementation
HMRC needs to demonstrate that off-payroll working rules, commonly known as IR35, can operate effectively and
fairly in the real world, according to a report by the Public Accounts Committee (PAC).
The tax authority should also investigate whether the costs and unintended consequences of IR35 are
proportionate to the additional tax revenue that the reforms raise.
The PAC concluded that it is too difficult for workers to challenge incorrect status determinations.
It also said that HMRC is not doing enough to understand the impact of the reforms on workers and
Dame Meg Hillier MP, Chair of the PAC, said:
‘While workers in the gig economy have challenged their work and tax status in the courts, there is no
recourse for workers deemed subject to IR35 tax rules despite the confusion and non-compliance that persist
even in central government itself.
‘After years of fiddling with these reforms and with central government spending hundreds of millions of
pounds to cover tax for individuals wrongly assessed as self-employed, the fundamental problems underlying UK
taxation of work remain.
‘It is now up to HMRC to demonstrate that the system can work fairly in the real world; to prove that it is
correctly claiming revenues under the system and that the additional revenues raised are worth the costs and
unintended consequences in the labour market.’
Internet links: UK Parliament website
Inflation hits 40-year high of 9.1% amid cost-of-living crisis
UK inflation rose to 9.1% in May from 9% in April as the cost-of-living crisis continues, according to data
from the Office of National Statistics (ONS).
It was a slight increase on the 9% figure of the previous month, which was driven upwards by April’s
unprecedented rise in the energy price cap and is estimated to be the highest since 1982.
The ONS said rising prices for food and non-alcoholic drinks, compared with falls a year ago, pushed up the
inflation rate. In monthly terms, consumer prices were up 0.7% in May.
Economists expect the rate to lurk within the 9%-10% range in the coming months before leaping again in October
when the next adjustment to the energy price cap is implemented.
Chancellor Rishi Sunak said:
‘I know that people are worried about the rising cost of living, which is why we have taken targeted action
to help families, getting £1,200 to the eight million most vulnerable households.
‘We are using all the tools at our disposal to bring inflation down and combat rising prices – we can build
a stronger economy through independent monetary policy, responsible fiscal policy which doesn’t add to
inflationary pressures, and by boosting our long-term productivity and growth.’
Internet link: ONS website
Bank of England raises UK interest rates to 13-year high of 1.25%
The Bank of England (BoE) has raised UK interest rates to a 13-year high of 1.25% and is now
predicting inflation will hit 11% this autumn, when energy bills are set to rise again.
Six out of nine Monetary Policy Committee (MPC) members voted for a 0.25 basis point hike, leading to a fifth
It is the first time since January 2009 that the rate has been higher than 1%. Three members of the MPC voted
to raise interest rates to 1.5%, which would have been the biggest rise since 1995.
David Bharier, Head of Research at the British Chambers of Commerce (BCC), said:
‘While expected, the decision to raise the interest rate will add further concern to businesses amid a
weakened economic outlook, soaring cost pressures and labour shortages.
‘The increase signals the Bank’s intention to tackle inflation but businesses have been raising the alarm
about spiralling prices since the start of 2021 and a higher interest rate is unlikely
to address many of the global causes of this.
‘The increase could impact smaller businesses who may be reliant on banking or overdraft facilities, for
instance, those buying goods in bulk in an attempt to offset raw material shortages.’
Internet link: Bank of
NICs increase has immediate impact on businesses
Four out of five employers stated that they were immediately impacted by the increase in national insurance
contributions (NICs), according to research by the British Chambers of Commerce (BCC).
The BCC surveyed more than 1,100 UK employers and found that the NICs increase has caused negative impacts to
81% of businesses.
Firms said the rise in employer NICs from 13.8% to 15.05% has increased staffing costs, forced some to put up
their prices and meant they would be limiting their investment.
As part of its call for an Emergency Budget, the BCC said the rise should be immediately reversed for at least
a year, as firms battle surging costs on multiple fronts.
The BCC is calling for action to give businesses a chance to keep a lid on rising prices, boost productivity
and ease cost pressures.
Hannah Essex, Co-Executive Director at the BCC, said:
‘Businesses are telling us that the rise in NICs has been a body blow as they try to get back on their
feet. With firms’ profits also taking a further hit, after two years of the pandemic, it is
no surprise that their investment intentions are also weakening.
‘But it is not too late to change tack and push the increase back until firms are in a better place to take
on the extra burden. The costs crises facing firms and people in the street are two
sides of the same coin. If we can ease the pressure on businesses, then they can keep a lid on the price
Internet link: BCC press release
Manufacturers call for support package
Manufacturing trade body Make UK is calling for an emergency, pre-recess package of business support
The call comes after a Make UK survey showed growth and orders slowing significantly with exports close to a
Make UK has made recommendations for measures the government can introduce now to address rising business
- waiving or reducing business rates for the next 12 months
- implementing VAT deferrals for larger businesses and waiving completely for SMEs
- temporarily freezing the Climate Change Levy
- reviewing the efficacy of the business interruption loan schemes introduced during the pandemic and
deploying a successor scheme
- extending the 130% super-deduction tax break, due to end in March 2023
- making the increase in the Annual Investment Allowance (AIA) permanent.
Stephen Phipson, chief executive of Make UK, said:
‘Whilst industry has recovered strongly over the last year we are clearly heading for very stormy waters in
the face of eyewatering costs and a difficult international environment. This threatens
to shatter expectations of a sustained recovery from the pandemic.’
Internet link: Make UK website
Latest guidance for employers
HMRC has published the latest issue of the Employer Bulletin. The June issue has information on various topics,
- paying Class 1A National Insurance contributions due on 22 July 2022
- Enterprise Management Incentive: Covid-19 easement ending
- Save as You Earn: Covid-19 easement ending
- guidance on how tips, gratuities and service charges are taxed.
Please contact us for help with tax matters.
Internet link: Employer Bulletin
New homeowners warned over tax refund claims
New homeowners are being warned about cold calls from rogue tax repayment agents advising them to make
speculative Stamp Duty Land Tax (SDLT) refund claims, which could leave them with large tax bills.
The warning comes after a recent spate of Stamp Duty refund claims to HMRC failed to meet specific
The agents have been known to call new property owners after finding them through Land Registry records and
property search websites, promising money back on ‘unknowingly overpaid’ SDLT.
Recent analysis undertaken by HMRC suggests that up to a third of claims for ‘multiple dwelling relief’ refunds
HMRC raises enquiries on these claims, but sometimes that is after the agent has taken their fee, leaving the
homeowner to pick up the difference. Incorrect refund claims must be repaid with interest, with some
potentially facing penalties as well.
Nicole Newbury, HMRC Director for Wealthy and Mid-sized Business, said:
‘We are seeing obviously spurious refund claims that are never going to succeed; but will lead to an
unnecessary bill for the customer.
‘So, we are warning new homeowners not to get caught out by tax repayment agents promising easy money on a
‘no win, no fee’ basis. If it sounds too good to be true, it probably is. We want to help people get it right
and avoid unnecessary tax bills, so treat promises of easy money with real caution.’
Internet link: HMRC press release