‘FRESH THINKING’ NEEDED IN REGARD TO MTD FOR ITSA

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The Institute of Chartered Accountants in England and Wales (ICAEW) has written to HMRC regarding how Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) can be better shaped to suit the needs of small property businesses and the self-employed.

On 19 December 2022, HMRC announced the deferral of MTD for ITSA’s start date and an informal review into the initiative.

The ICAEW has written to HMRC to outline key points that it believes should be considered before the implementation of MTD for ITSA. These include rethinking the ‘disproportionate’ administrative burden associated with quarterly updates; decoupling the requirements to maintain digital records and to submit details of income from self-employment and property directly from software; and refocusing the MTD for ITSA initiative on digital record keeping and filing from software.

HMRC intends to make its final recommendations on MTD for ITSA to the Financial Secretary to the Treasury in June 2023.

Internet link: ICAEW

AIRBNB HOSTS TARGET BY HMRC INVESTIGATION

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UK Airbnb hosts suspected of not declaring their rental earnings are facing a potential tax investigation from HMRC that covers six years of income information, as part of a wider crackdown on the sector’s activities by the UK tac authority.

It comes as Airbnb was forced to share the income details of all UK hosts on its platform dating back to the 2017-2018 financial year with HMRC, which has set out to identify owners who rent out their properties as short-term lets without declaring how much they are earning each year.

HMRC reported that it had sent 800 letters since February to hosts that it believed had not paid sufficient tax, following previous suggestions by the Treasury that more than 50 per cent of owners did not realise it was necessary to pay tax on their incomes earned from renting out their properties.

Airbnb hosts have been made aware that their data is being disclosed to HMRC and the company is promising to support them when it comes to understanding tax compliance and their obligations.

Under the current laws, since data sharing began back in 2018, hosts renting out properties through online rental platforms are able to make £1,000 a year before tax under a ‘tax allowance’, with any profits above that amount needing to be declared to HMRC. However, those renting out a single room in their property have a much higher income threshold of £7,500 before they have to pay tax as part of the government’s ‘Rent-a-Room’ scheme.

However, those who fail to pay their income duties are being warned that they could face criminal prosecution as well as strict penalties of up to 30 per cent of the tax they owe. Should HMRC uncover evidence that hosts have not paid any or enough tax in previous financial years, it would also have the authority to open an investigation to obtain evidence dating back 20 years under so-called ‘discovery laws’.

Hosts or owners deemed to have made an innocent error or to have been careless could potentially face no penalty at all, though those deemed to have made deliberate errors in disclosing their incomes would likely face harsher penalties and possible criminal charges.

If you believe you may be affected by this and need any help disclosing income to HMRC, please contact us at 01492 593345.

HMRC INCREASES LATE PAYMENT INTEREST RATE

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Following the Bank of England’s latest increase in the base rate, HMRC has increased both late paid tax and the rate paid on repayments of tax.

The Bank increased the base rate to 4.5% from 4.25% on 11 May, the 12the consecutive rise.

The late payment and repayment interest rates follow this rise and are applied to the main taxes and duties that HMRC currently charges and pays interest.

The late payment interest rate will increase by 0.25% to 7% from 31 May. This is the highest rate since the start of the financial crisis in November 2008.

Late payment interest is payable on late tax bills covering income tax, National Insurance contributions, capital gains tax, corporation tax pay and file, stamp duty land tax, stamp duty and stamp duty reserve tax. The corporation tax pay and file rate also increases to 7%.

Repayment interest will also be increased from the current 3.25% rate to 3.5%.

Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments rose to 5.25% from 5% a week earlier on 22 May.

Internet link: GOV.UK