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Help to Save accounts

The Help to Save scheme can help those on low incomes to boost their savings. The scheme was launched in September 2018, and new figures published by HMRC have revealed that over 132,000 people have signed up, depositing more than £31.4 million into Help to Save accounts. These savers are now eligible for bonuses totalling around £14 million.

Under the scheme, those receiving Working Tax Credit or entitled to Working Tax Credits and in receipt of Child Tax Credits, can save up to £50 a month for two years and receive a 50% Government bonus. The scheme is also open to those who are claiming Universal Credit and had a household or individual income of at least £569.22 for their last monthly assessment period. Payments from Universal Credit are not considered to be part of household income.

Payments under the scheme can be made by standing order on a weekly, fortnightly, or monthly basis and one-off payments by debit card are also possible. Account holders will then be able to continue saving under the scheme for a further 2 years and receive another bonus. This could see those on low incomes receive a bonus of up to £1,200 on maximum savings of £2,400 for 4 years from the date the account is opened. After the 4 years, the Help to Save account will be closed and savers will not be able to reopen or open another Help to Save account. The account balances are expected to be rolled over into successor accounts.

There are no limits on how the money used can be spent, but it is hoped that the money will be saved for urgent costs. Money paid into the account can be withdrawn at any time, but this could affect the size of the bonus payment. The Government is urging anyone else eligible to use the scheme, to look at the benefits as the take-up of the scheme has been far less than expected. It is estimated that some 3.5 million people could use the scheme.

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Last chance to join the Help to Buy ISA scheme

The Help to Buy ISA scheme will close to new savers after 30 November 2019. This leaves less than 4 months to open an account before the product is due to be withdrawn by the Government. Once opened, account holders can continue to save in their ISA account until 30 November 2029 when accounts will close to additional contributions. Bonuses can be claimed until 1 December 2030.

The scheme allows savers to claim a Government bonus of 25% on monthly savings of up to £200 on savings towards their first home. The bonus translates to an extra £50 added to every £200 saved up to a maximum governmental contribution of £3,000 on £12,000 worth of savings.

Savers can make an initial deposit of £1,200 (the monthly maximum plus an extra £1,000). The bonus is only payable on the purchase of a first home. The scheme is limited to one per person (not one per home) so two people buying a home together can both receive a bonus. The bonus is available on home purchases of up to £450,000 in London and £250,000 outside London and can only be claimed against the deposit for a new home. It cannot be used to pay solicitors, estate agents or any other costs associated with buying a home.

If you are a first-time buyer and planning to buy a property in the short to medium term future, you should consider whether you would benefit from this scheme. The scheme is open to first-time buyers aged over 16.

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Changes at HM Treasury

Within hours of entering 10 Downing Street for the first time as Prime Minister, Boris Johnson had filled most of the senior cabinet roles by undertaking a major overhaul of cabinet members.

After three years in the job, the previous Chancellor of the Exchequer, Philip Hammond resigned his position to the outgoing Prime Minister, Theresa May rather than face the sack. He has been replaced in the job of Chancellor by Sajid Javid who was already in the cabinet as Britain’s foreign secretary. The new Chancellor is a leading Brexiteer and has already vowed to release significant extra funding to ensure Britain leaves the EU on 31 October 2019 with or without a deal.

The holder of the role of Chief Secretary at the Treasury has also changed with Rishi Sunak replacing Liz Truss who has been appointed the new Secretary of State for International Trade. There was also one further new appointment to the ministerial team at the Treasury with Simon Clarke appointed Exchequer Secretary. Jesse Norman, Financial Secretary and John Glen, Economic Secretary have been reappointed to their previous roles by the new Prime Minister.

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Draft legislation for Finance Bill 2019-20

The Government has published the draft legislation for Finance Bill 2019-20, along with accompanying explanatory notes, tax information and impact notes, responses to consultations and other supporting documents. The Bill will contain the legislation for some of the tax measures that were announced by the Government at Autumn Budget 2018 many of which have since been the subject of further consultation.

The publication of the Finance Bill is in line with the approach to tax policy making set out in the Government’s documents 'Tax Policy Making: a new approach', published in 2010, and 'The new Budget timetable and the tax policy making process', published in 2017 whereby the Government committed to publishing most tax legislation in draft for technical consultation before the legislation is laid before Parliament.

This Finance Bill will see the introduction of a number of measures from April 2020 including:

  • The extension of off-payroll working rules to the private sector from April 2020. These rules will be similar to those already in effect for the public sector and small firms will be exempt.
  • The Digital Services Tax which will see major social media, search engine and online retailers subject to a 2% tax on revenues generated from UK users of their services
  • The Corporate Capital Loss Restriction will mean that companies who accrue chargeable capital gains will only be able to offset up to 50% of those gains using carried-forward capital losses, subject to certain reliefs.  

The consultations on the draft legislation will close on 5 September 2019, with measures included in the next Finance Bill. The Finance Bill will become known as Finance Act 2020 after Royal Assent is received.

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Reducing penalties for late disclosure of income

You can use the Digital Disclosure Service (DDS), if you need to make a voluntary disclosure of income or other taxable events that have not previously been reported to HMRC. 

Other current HMRC campaigns that facilitate disclosure by taxpayers, include the Card Transaction Programme – a disclosure opportunity for businesses that accept card payments and have not paid the right amount of tax due – and the Let Property Campaign for landlords who have undeclared income from residential property lettings in the UK or abroad.

There are three main stages to making a disclosure, notifying HMRC that you wish to make a disclosure, preparing an actual disclosure (within 90 days from the date HMRC acknowledged your notification), and making a formal offer together with payment.

Avoiding or reducing penalty charges

It is important to remember that there are usually lower penalties if you make a voluntary disclosure. The actual rate of the penalties will vary depending on the specific circumstances and in some limited cases there may be no penalties due. There are higher penalties for offshore liabilities. For undisclosed liabilities, the penalties could be up to 100% of the unpaid liabilities if the income or gain arose in the UK, or up to 200% for offshore liabilities.

The process of reporting income and gains in this way needs to be handled carefully, and we recommend that readers who are mindful to "bring matters up-to-date" take professional advice. Please call if you are considering your options, we can help you through the disclosure formalities. 

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HMRC security deposits

The security deposit legislation was extended to both Corporation Tax and Construction Industry Scheme (CIS) deductions from April 2019. The security deposit regime allows HMRC to obtain security from high-risk businesses for the protection of revenue where there is a serious risk that taxes owed will not be paid.

HMRC’s security deposit powers previously applied to VAT, PAYE and National Insurance contributions, Insurance Premium Tax (IPT) and some environmental and gambling taxes. This measure gives HMRC the power to require securities in relation to Corporation Tax and CIS deductions where there is a risk to the revenue.

There are many reasons for non-payment of tax to HMRC including phoenixism where businesses evade tax by becoming repeatedly insolvent only for a new company to be set-up again seeking to defraud HMRC. These measures also target businesses that build up large debts to HMRC. The extension of these powers to Corporation Tax and Construction Industry Scheme (CIS) deductions will help HMRC to target businesses that fail to comply with their tax obligations.

The required security will usually be payable by electronic payment to a specified HMRC bank account, by cheque, by banker’s draft, a specified bank guarantee or by way of a payment into a joint HMRC/taxpayer bank account. The amount of security required is calculated on a case by case basis. If the business does not meet HMRC’s security deposit requirement, they will have committed an offence and will be subject to a fine. Businesses required to pay a security deposit will have the option to appeal any decision by HMRC.

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House of Commons summer recess

The House of Commons summer recess has been confirmed after parliament voted 223 to 25 in favour of the move. This means that the House will rise on Thursday 25 July and return on Tuesday 3 September.

The timing of this five-week break whilst the Brexit issue continues to dominate the headlines has been criticised by many on different sides of the political divide. The next leader of the Conservative Party and new Prime Minister is to officially take over from the outgoing Prime Minister, Theresa May, on Wednesday 24 July. There are now just two remaining candidates for the position, Boris Johnson and Jeremy Hunt.

The agreed six-month extension to Brexit of 31 October 2019 is also fast approaching. 

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HMRC’s complaint handling process

Taxpayers may find themselves in a position where they need to make a complaint to HMRC. Complaints can relate to many different issues such as unreasonable delays, mistakes and poor treatment by HMRC’s staff. Note, there is a separate procedure to be followed by taxpayers that disagree with a decision of HMRC. In such cases the review and appeals process should be followed.

HMRC operates a formal two-tier complaints process.  Tier 1 is the first attempt to resolve a complaint and HMRC aims to resolve as many complaints as possible at this stage. Taxpayers that wish to make a complaint should in the first instance usually write or speak to the person or office they have been dealing with.

If the response is unsatisfactory, a further request can be made for the complaint to be looked at again by a different complaints handler who will take a second look at the complaint and then provide a final response. This is known as a Tier 2 complaint and is HMRC’s second and final review.

Taxpayers that are still unhappy with the response, can ask the Independent Adjudicator to look into the matter. The Adjudicator is completely independent of the HMRC. If they are unhappy with the Independent Adjudicator’s decision it is possible to contact the Parliamentary and Health Service Ombudsman via their MP.

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HMRC blocks phone fraudsters

Fraudsters have been blocked from using HMRC’s most used helpline numbers after the introduction of new defensive controls. These fraudsters had been able to make calls to taxpayers across the UK which appeared to be coming from HMRC by mimicking helpline numbers. These fraudsters are usually operating as part of large criminal gangs with deep pockets and cutting-edge technological to target taxpayers.

This scam worked as taxpayers would receive calls and, on checking the numbers online, would find they appeared to belong to HMRC. This led many people to believe the fake calls were real and thus enabled fraud. In the last year alone, HMRC received over 100,000 phone scam reports.

The new controls, created in partnership with the telecommunications industry and Ofcom, will prevent spoofing of HMRC’s most used inbound helpline numbers and are the first to be used by a government department in the UK. This does not mean that the fraudsters will be completely stopped but does mean they will have to use less credible numbers that should be easier to spot.

HMRC also confirms that they will only ever call about a debt that has already been the subject of a letter from HMRC or that you have been otherwise notified. You will also no longer be required to read aloud your card details to HMRC over the phone.

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Free television licences scrapped for over-75s

The TV licence fee has not been payable by those aged 75 or over since 2001. During 2015, the government reached an agreement with the BBC as part of the last charter renewal that it will take on the cost of free television licences for over-75s by 31 May 2020 as part of the fee settlement. 

The BBC estimated that the change would have reduced their licence fee income by around £745m a year, a fifth of the BBC’s annual budget. The BBC board has now announced that following a consultation period, free TV Licences for most over 75s are to be scrapped. Under the new rules, only low-income households where one person receives the pension credit benefit will remain eligible for a free licence. In these cases, the BBC will foot the bill.

If you are over 75 and have a free over 75 licence, you will be covered until 31 May 2020. The BBC has said they will be writing to all free over 75 licence holders in good time before 31 May 2020 to let them know how they may be affected and what they will need to do. Once the new rules come into effect, there will be penalties for non-compliance and even those aged over 75 and living in a residential care home, supported housing or sheltered accommodation will be required to hold a licence.

This announcement by the BBC and the government’s part in the change has been criticised by many charities working with the elderly. This includes Age UK, who have launched a campaign to have the government take back responsibility for funding free TV licences for everyone over 75.