The UK government provides state benefits for parents with dependent children whose partners have passed away, in the form of Bereavement Support Payments.

Previously, bereaved parents were only eligible for these benefits if they were married to or in a civil partnership with their cohabiting partner at the time of their death.

However, the law is now changing to provide financial support for more grieving parents raising children after losing their partner, regardless of the legal status of their relationship.

This means parents who were cohabiting with their partner, whom they have at least one child with, can now apply for Bereavement Support Payments (BSP).

Does this change in the bereavement benefit law affect you? Here’s what you should know about the new rules and who is now eligible to apply.

How are bereavement benefits changing?

Despite just over 1 in 5 couples in the UK living together without being married or in civil partnerships as of 2021, the UK government has brushed off most suggestions for cohabitation law reforms that would give these couples similar legal rights if they split up or a partner passes away.

Cohabiting couples are often treated unfairly by legal frameworks that don’t consider them equal to married couples or civil partners. For example, the joint income of a cohabiting couple is taken into account for state benefit claims like Universal Credit, yet they are classed as unrelated individuals for Inheritance Tax (IHT) purposes.

In the last several years, two cases challenging this differential treatment took the government to court concerning bereavement benefits. The government lost both cases – but not because of discrimination against unmarried couples. Instead, the courts found that the couples’ children were being treated unequally, against the European Convention of Human Rights.

In any case, three years after the second court judgment, the government is now introducing legislation revising the original law. The change means that if an individual in a cohabiting couple with dependent children passes away, the surviving partner is entitled to the same rate of bereavement benefits as a married spouse or civil partner would be.

This has also been backdated to the first Supreme Court ruling in the aforementioned cases, which was on 30th August 2018. It covers the legacy benefit Widowed Parent’s Allowance (WPA), too, which was replaced by Bereavement Support Payment (BSP) in April 2017.

Who can apply for backdated bereavement benefits?

The eligibility criteria changes came into effect on 9th February 2023, meaning that cohabiting parents whose partner passes away after this date may now be able to claim BSP. This is expected to help up to 1,800 more families a year, who would otherwise be struggling financially and unsupported by the state following the death of a parent and partner.

For cohabitating partners who were bereaved before this date, the Department for Work and Pensions (DWP) has opened a 12-month
application window for retrospective claims.

The Childhood Bereavement Network (CBN) estimates that around 21,000 widowed parents will now be able to make a retrospective claim. If the claimant is eligible, the government could make payments dated back to August 2018.

These families could even have been bereaved as far back as 2001
– if the partner passed away before 6th April 2017 and the survivor would have met the eligibility criteria for the replaced WPA on or after 30th August 2018, they could now apply for backdated BSP.

The amount the claimant will be entitled to depends on when their partner passed away, their partner’s National Insurance Contributions (NICs), their age, and whether they were pregnant with their partner’s child at the time of their death or have been entitled to/receiving Child Benefit for at least one child with their partner.

Unfortunately, this means that only unmarried couples with dependent children are eligible for BSP, so cohabiting couples who don’t have dependent children are still excluded and can’t make a claim.

How to claim Bereavement Support Payments

To apply for BSP, you can either use the trial online service, call the Bereavement Service helpline, or download and print a BSP1 Form to send in the post. You can find more details on Bereavement Payment Support eligibility and the information you’ll need to provide on the government website.

BSP is usually awarded as an initial lump sum of £3,500, followed by up to 18 monthly payments of £350. You may receive fewer payments depending on when your partner died, or different amounts depending on when and how they died if you are applying for WPA instead.

While BSP is a tax-free benefit, any payments after the first year of receiving it could then affect other benefit claims, such as Universal Credit. It’s important to consider how these payments, especially larger back payments, may affect your entitlements and liabilities.

While the BSP rates were set back in 2017, they haven’t been adjusted since, which means inflation has now reduced their value by up to a fifth. This is yet another reminder that the state’s ‘safety net’ for cohabiting couples is inadequate, showing how important it is to build your own financial safety net to protect your family both in the present and the future.

Here at GBAC, we provide a selection of helpful financial planning services for individuals and businesses, from tax consultancy
to wills and probate. If you would like professional fiscal advice and support with managing your family finances, contact our accountants in Barnsley to find out how our services could benefit you and your family.

During the COVID-19 pandemic, the government provided millions of pounds in support to struggling businesses, which would eventually have to be paid back. Meanwhile, the closures of courts created a backlog in insolvency cases, along with restrictions on cases against debtors whose inability to pay resulted from the pandemic.

Since the temporary restrictions were lifted and the courts are catching up, HMRC is now ramping back up when it comes to chasing debt.

With a tax gap of up to £32 billion, the tax agency is under increasing pressure to collect the missing money. As a result, HMRC is filing more and more winding-up petitions against companies in serious tax debt to recover the tax from their liquidated assets.

These debt enforcement measures come at an especially bad time for most UK businesses, who are already struggling with the strain of inflation, high interest, and decreased consumer spending.

The last quarter of 2022 saw a 36% increase in companies in financial distress compared to the previous year, with winding-up petitions increasing by 131% compared to 2021. This January, compulsory liquidations resulting from winding-up petitions were up by 52%
year-on-year.

With so many businesses in financial crisis, what happens if a winding-up petition is filed against you? Read on to learn more about how you could avoid this by communicating with HMRC.

How does a winding-up petition work?

A limited company that cannot pay its debts could be liquidated (‘wound up’) if the person or organisation they owe applies to the courts. They can get a court judgment or a statutory demand officially requesting payment, or apply for a winding-up order, which would force the company to close and liquidate its assets.

Applying for a winding-up order is known as a winding-up petition. If the petition is accepted by the court, they will set a hearing date, during which they will decide whether the company should be deemed insolvent. The company can attempt to dispute the petition if the debt in question is inaccurate, or the petition isn’t valid.

Otherwise, if the court decides that the company is not capable of paying its debts, a winding-up order will be issued, and an Official Receiver appointed to irreversibly liquidate the company. The debtor will have 5 working days from its issue to apply to rescind the order if they can prove that they can pay their debts in some other way.

For example, if the company can negotiate a Company Voluntary Arrangement (CVA) with the creditors then they can apply for a stay of proceedings. Alternatively, they could override the order by hiring an insolvency practitioner (IP) to move the company into administration.

If an unchallenged winding-up order goes ahead, the company accounts will be frozen so the business can no longer trade, and it will be public knowledge that the company has been forced into liquidation to distribute the assets to its creditors.

Will HMRC help if a company cannot pay its tax debts?

If your company owes money to HMRC, there is a chance that the tax agency will work with you to arrange an alternative agreement for repayment, rather than applying for a winding-up petition against you. However, this depends on your company’s financial situation.

HMRC is willing to work with businesses experiencing temporary financial setbacks or short-term cash flow issues, but only if they have a viable future. The agency will consider the company’s overall financial position, including any outstanding COVID-19 loans and bank debt alongside tax liabilities.

If there is little chance of the business recovering financially from its debts, HMRC is unlikely to agree to an alternative repayment plan for tax debts. Instead, they’re likely to enforce debt collection.

If the company cannot pay and continues to accrue debt, this may result in a winding-up petition application. This is even more likely if the business doesn’t communicate with HMRC at all.

The best thing for a company accruing tax debt to do is to contact HMRC and discuss its position as early as possible. Engaging with the tax agency early could avoid investigations and subsequent enforcement action, as HMRC could allow the business to set up a Time to Pay arrangement.

What is a Time to Pay (TTP) arrangement?

HMRC recognises that circumstances outside of a company’s control can lead to missed deadlines and financial difficulties. In cases where a business is experiencing genuine financial difficulty and needs additional time to pay off tax arrears – including VAT, PAYE, and Corporation Tax – the agency may allow them to set up a Time to Pay (TTP) arrangement.

A TTP agreement provides a repayment schedule for paying off outstanding tax debt, typically through monthly payments for a period of up to 12 months. The length of the arrangement and the monthly amount should be reasonable, so the debt is paid off as quickly as possible, but the repayments are still affordable for the business.

There is no legal right to be granted a TTP
arrangement, so a company applying for one would have to provide a solid case to HMRC. The tax agency will want to know about financial prospects and previous efforts to raise funds. For example, selling assets to raise money for repaying tax liabilities.

The larger the tax liability, the more diligently HMRC
will investigate the company’s finances. A good record of tax compliance could sway things in the company’s favour, while a history of late payments and previous applications for government support could decrease their chances of success.

A key aspect of the TTP scheme is that the company must keep up with current tax payments at the same time as paying off arrears. HMRC
will monitor and review the business for continued tax compliance, and if they fail to keep up, the TTP arrangement may be cancelled and the debt recovered immediately in full – potentially through a winding-up petition.

Should you apply for a Time to Pay agreement?

If your business has been facing financial difficulties and you’ve found yourself with mounting tax arrears, you may want to consider applying for a Time to Pay (TTP) arrangement. You may be able to successfully negotiate a repayment schedule if:

You can find more information on how to contact HMRC about Time to Pay on the government website. If you would prefer to have someone liaise with the tax agency on your company’s behalf, you may want to hire a tax consultant to help get your tax affairs in the best shape possible and manage ongoing HMRC enquiries for you.

Our accountants in Barnsley provide professional financial advice and tax management services for a variety of businesses. Whether your company is large or small, you can contact GBAC to get started with improving the financial position of your business.

The new points-based penalty system for late VAT return submissions began on 1st January 2023, meaning the first monthly returns to be affected were due by 7th March. The first quarterly returns affected are due by 7th May.

This new regime replaces the old default surcharge system, along with a separate penalty regime for late VAT payments and a new system for charging interest.

From the start of 2023, the late submission penalties will apply for all accounting periods if a VAT return is submitted late – including nil VAT returns and repayment returns.

This means that if you keep missing VAT return
deadlines and accrue too many late submission penalty points, you could be hit with a £200 fine. Keep reading to learn how the points system works and how to avoid getting a financial penalty.

Late VAT penalty points thresholds

VAT-registered businesses are expected to submit a Value Added Tax return by the deadline for their accounting period. Every time a trader misses a deadline, whether it’s monthly, quarterly, or annually, they will receive 1 penalty point.

There is a different points threshold depending on the submission frequency, but if the trader continues to miss deadlines after the first time and receives a certain amount of penalty points, they will have to pay a £200 fine.

These are the points thresholds for each VAT accounting period, indicating how many late submissions you can make before having to pay a fine:

VAT accounting period

Penalty points threshold

Monthly

5

Quarterly

4

Annually

2

Some late VAT returns will not receive a penalty point in certain circumstances. For example, the first submission for a newly VAT-registered business, the final submission after de-registering, or a one-off submission covering a different period.

Late VAT return compliance

The points threshold is not a limit, meaning you can continue to accrue penalty points and further fines. If the trader passes the threshold and then misses further submission deadlines, HMRC will charge an additional £200 for each late submission.

In order to avoid this and reset their penalty points to zero after hitting the threshold, the trader must submit every consecutive VAT return on time throughout a minimum ‘compliance period’. Here are the compliance periods for each VAT accounting period:

VAT accounting period

Compliance period

Monthly

6 months

Quarterly

12 months

Annually

24 months

For example, from the fifth late monthly submission onwards, a £200 fine would be charged for every late return. If the trader was on 4 penalty points and wanted to avoid the fine, they would have to submit 6 consecutive returns on time for their points balance to reset.

Penalty points can only be removed and the balance reset to zero if the trader ensures that all outstanding VAT returns from the previous 24 months have been submitted, and follows the relevant compliance period.

Otherwise, individual penalty points will expire after 24 months (if the submission deadline wasn’t on the last day of a month) or 25 months (if the return was due on the last day of a month).

Late payment penalties and interest

In addition to getting penalty points for late filing, traders also have to bear in mind that submitting their return late makes it likely that they’ve also missed the payment deadline.

With the exception of the Annual Accounting Scheme, returns must be filed and outstanding tax paid no less than 1 calendar month and 7 days from the last day of the accounting period.

If a trader doesn’t pay their tax bill on time, the outstanding balance (including any fines) will begin to accrue daily interest charged on top at the Bank of England rate plus 2.5%. They won’t be charged more if they pay off the outstanding tax bill within 15 days.

However, a percentage of the late payment owed will be charged as a penalty, as follows:

Of course, interest will be charged until the total is cleared, so it can be easy for financial penalties to rack up over time if a trader doesn’t stay on top of their tax returns and payments.

Get help with late VAT penalties

More information about the new VAT penalty system can be found on the government website. The regime shouldn’t worry you too much if it’s rare for you to miss a deadline, but for traders who consistently submit tax returns late or miss payment deadlines, these mistakes can be costly.

Avoiding tallying up penalty points and fines can be difficult without careful planning. It’s important to stay on top of your online VAT account, and take steps to address penalties as quickly as possible. Depending on your circumstances, you may be able to appeal against a VAT penalty.

If you need help with VAT management, including dealing with penalties, enquiries, and appeals, our accountants in Barnsley can assist you. Browse our website to learn more about what we do and contact GBAC to get started with our tax consultants.

Tax codes for the 2023–2024
tax year, which begins on 6th April 2023, have already been issued for most employees and directors.

Employers will use these codes to collect Income Tax
and National Insurance Contributions through PAYE – but what if you’ve been assigned the wrong tax code?

This could result in you paying too much tax, which can affect your monthly budgeting, or paying too little tax, which could lead to an unexpected Income Tax bill.

The last thing anyone wants is to overpay tax and have to fight for a refund, or to underpay tax and suddenly owe significant back payments.

Here’s what you should know to make sure you’re on the right tax code and paying the appropriate amount of Income Tax in 2023.

Income Tax codes and allowances

In the UK (excluding Scotland), Income Tax is charged as a percentage of an individual’s earnings from employment and/or profits from self-employment. It may also be due on some pensions, savings, and investments.

Everyone has a Personal Allowance of £12,570, which is the amount you can earn tax-free. Any income or profits over this amount are liable for Income Tax at progressive rates:

The new tax year sees the upper threshold of the higher rate and the lower threshold of the additional rate drop from the previous £150,000 to £125,140 – this is because your Personal Allowance is reduced by £1 for every £2 you earn above £100,000.

This means that some higher earners will be pushed into the additional rate tax band and receive a new tax code. The threshold for basic rate tax and the lower threshold for higher rate tax have been frozen until 2028, which also means that lower earners may be pushed into a higher tax bracket as wages increase.

What is my tax code?

HMRC assigns every employed earner a tax code, which employers and pension providers use to deduct the appropriate amounts of Income Tax from the earner’s pay or pension. This code is made of numbers and letters that indicate your tax allowances, based on your circumstances.

The most common tax code is 1257L, which indicates that the earner is entitled to the standard £12,570 tax-free allowance. This applies to most people in employment with one job – but if you have more than one job or pension, you’re likely to have more than one tax code.

You can find your tax code on your payslips, coding notices from HMRC, P60s at the end of the tax year, P45s when changing jobs, and in your personal information in the HMRC app.

If you aren’t sure what the letters at the end mean, you can check this tax code letters guide. The letters should indicate whether you’re entitled to the full Personal Allowance, which rate of Income Tax you’re paying on this income stream, and whether you’re using a Marriage Allowance.

Why is my tax code wrong?

Ending up on the wrong tax code invariably means paying the wrong amount of tax, and while HMRC’s mistake is a hassle for the taxpayer, it’s actually the individual’s responsibility to check they’re on the right code and notify HMRC if there’s an issue.

There are many reasons why you may be on the wrong tax code, and why HMRC might update your tax code incorrectly at the start of a new tax year – such as:

This usually happens because HMRC has outdated information about your income and allowances, which affects their ability to calculate your current tax liabilities. Allowable expenses and taxable benefits can change from year to year, so it’s important to make sure your employer keeps their PAYE system up to date.

Emergency tax codes

If your employment circumstances or income level change, but HMRC doesn’t receive enough information about this to adjust your tax liabilities, then you may be given an emergency tax code.

If your tax code ends in W1, M1, or X, you could be paying emergency tax. Meaning everything earned above the Personal Allowance is taxed, without accounting for any other allowances or benefits you may be entitled to.

This is usually only temporary, as HMRC should adjust your tax code as soon as they receive up-to-date information about your change in circumstances, but it can still cause cashflow problems for taxpayers. If your changing circumstances mean you haven’t been paying the correct amount of tax, you’ll stay on the emergency code until you’ve caught up.

If your tax code ends in K, this isn’t an emergency code, but it does mean that you have taxable income worth more than the Personal Allowance from another source that is now being taxed through PAYE. For example, repaying previously owed tax through your wages or pension, or receiving taxable benefits (state or company). No more than half of your pre-tax wage or pension can be taken when you have a K tax code.

What to do if you’re on the wrong tax code

In most cases, your employer should supply the updated information to HMRC when your circumstances change, and HMRC will then update your tax code automatically. When this doesn’t happen, you’re highly likely to end up on the wrong code, so it’s worth checking your tax code sooner rather than later.

You can view your current tax information by logging into your personal tax account with your Government Gateway ID, or using the HMRC app. If you are worried that you have the wrong tax code, you can use the ‘check your income tax’ service on the government website to make sure your employment details are correct.

You can also use this service to update HMRC with your current employment details and notify them of any income changes that may have affected your tax code. Alternatively, you can do this by contacting HMRC directly – you may be asked to provide details of your annual income and any benefits or pension payments you receive.

If your tax code needs to be changed, HMRC will contact you and your employer and/or pension provider with the revised code. This should show on your next payslip, along with any adjustments to your pay if you had been paying the wrong amount of tax.

The tax agency should send you either a P800 tax calculation letter or a Simple Assessment letter to notify you if you’ve been paying too much or too little tax. If you’ve overpaid, you could receive a refund via a tax deduction for the current year, or a cheque for previous years. If you’ve overpaid, you’ll either receive an outstanding tax bill to pay, or be put on an emergency tax code until you’ve paid off the outstanding Income Tax.

Save money with efficient tax management

With fiscal drag pulling more and more people into a higher tax band, and the cost of living crisis cutting into budgets across the country, it’s not a good time to find out you haven’t been paying enough tax because you’re on the wrong tax code.

Of course, it would be a great time to find out you’ve been overpaying, and are actually due a tax rebate instead – but either way, you won’t find out unless you check your personal tax account and stay on top of your tax code information.

Do you need help managing your tax affairs? Whether you’re an individual dealing with a HMRC enquiry
over a tax code dispute or an employer looking to outsource payroll services
for more efficient management, our accountants in Leeds and Barnsley
could provide a solution.

Contact us on 01226 298 298 or at info@gbac.co.uk
to speak to GBAC, accountants in Barnsley, team today, and find out how our tax planning services could benefit you.

HMRC used to focus on cash sales when looking at businesses declaring suspiciously low turnovers. Now, thanks to the decline of cash – exacerbated by COVID-19 – there has been a rise in businesses using electronic sales suppression (ESS) tools to falsify their sales records.

Electronic sales suppression involves hiding the true amount of sales or the true value of sales with ESS software, hardware, or computer code scripts. This is done at or after the point of sale, with the electronic records appearing to be credible and compliant, while really reducing the amount of tax that the business should be paying.

This counts as tax evasion, so HMRC is cracking down on individuals and businesses who use ESS tools to commit tax fraud. Criminal investigations into ESS can result in financial penalties and even prison sentences – so time is running out for anyone who has used ESS tools to reduce tax to come clean to HMRC.

What are the penalties for ESS?

HMRC has legal powers to request certain documents and information from individuals and businesses to confirm their tax position. If the person or company does not comply with a notice from HMRC, the tax agency can open a full investigation – and if evidence of electronic sales suppression is found, HMRC can charge them with significant penalties.

Penalties can apply whether you are in possession of an ESS tool, or made, supplied, or promoted an ESS tool. You don’t need to have actually used an ESS tool to suppress your sales or actively avoid tax; possessing or distributing the tool, or even trying to access one, is enough to warrant a penalty.

Penalties for possessing ESS tools

The initial penalty for possessing an ESS tool is up to £1,000, plus up to £75 a day until HMRC is satisfied that the taxpayer no longer possesses the tool. The daily penalties can run up to a maximum of £50,000. Of course, this is all in addition to the avoided tax that must be paid back – including any fraudulent VAT, income tax, or corporation tax reductions.

The taxpayer may be able to avoid the initial penalty if they can prove that the tool is no longer in their possession within 30 days
of receiving the notice from HMRC. However, if the taxpayer has already been subject to a similar penalty before, HMRC will enforce the fixed penalty.

HMRC can also charge further penalties for filing inaccurate tax returns, providing false information, and failing to notify the tax agency of taxes due. As card payments for unreported sales are often routed through offshore bank accounts, it can be difficult to prove that concealing such information wasn’t a deliberate act of tax fraud.

Penalties for making, modifying, supplying, or promoting ESS tools

The penalties for creating or distributing ESS tools are a little more complicated. HMRC may not charge an initial penalty if you can prove that you weren’t aware the tool was intended for electronic sales suppression, or if you have already been criminally convicted for your involvement.

HMRC can charge a maximum penalty of £50,000 per incident of making, supplying, or promoting an ESS tool, but the penalty will typically be a percentage of this amount. The percentage will be calculated based on the complexity of the ESS tool and whether the fraudulent activity was disclosed voluntarily or following prompts from HMRC:

Complexity of the ESS tool

Unprompted disclosure

Prompted disclosure

Low

10% – 40%

20% – 40%

Medium

30% – 80%

45% – 80%

High

50% – 100%

70% – 100%

If you make a ‘quality disclosure’ – working as honestly and co-operatively as possible with HMRC to provide all the information requested – then the tax agency may reduce the penalty. If the maximum reduction available is 100%, HMRC may offer 30% for telling them about the tool and your involvement, 40% for helping to identify others involved in spreading the tool, and 30% for giving them access to records of users, suppliers, and promoters.

Should your business disclose ESS?

The best way to avoid such penalties from HMRC is to not use or engage with ESS tools at all. You should not install ESS tools on any devices, configure settings within electronic point-of-sale (EPOS) systems to activate ESS, or access someone else’s ESS tool in any way.

Of course, you should also be maintaining complete and correct financial records for your business activities. This will ensure that you don’t accidentally under-report your turnover, and will make it easier to provide the required evidence if you do receive a notice from HMRC.

You can find detailed ESS guidance on the government website. If you have been involved with electronic sales suppression, whether accidentally or intentionally, the government is allowing voluntary ESS disclosures about misusing till systems until 9th April 2023
– doing so could reduce any penalties you may be liable for.

Should you need professional assistance with bookkeeping and VAT, or managing HMRC enquiries
and tax investigations, you can turn to GBAC. Our accountants in Barnsley, and Leeds, work with individuals and businesses of all sizes to provide efficient tax management services – so get in touch today to learn how we can help you.

The cost of living in the UK increased sharply in 2022, with annual inflation reaching its highest rate in over 40 years at 10.5% – up from 5.4% in 2021.

The Office for National Statistics (ONS) states that this is the highest annual inflation rate since 1981, but what caused this drastic effect? Its research into the components of inflation in 2022 reveals the biggest contributors to soaring prices.

Causes of inflation in 2022

To calculate inflation, the ONS monitors the prices of everyday items in a hypothetical ‘basket of goods’ – known as the Consumer Price Index (CPI). The inflation rate is tracked with monthly figures, which hit an all-year high at 11.1% in October 2022.

The ONS ‘basket’ above is presented as a hierarchy graph, showing the annual inflation rates for 12 categories, which are weighted according to the average household expenditure in each category. As you can see, not all components faced an inflation increase in the double digits.

While ‘transport’ was the sector with the highest inflation, households spent less proportionally on this category than three others with slightly lower rates.

The largest spending category had the second-highest inflation rate at 13.1% – with ‘housing, water, electricity, gas and other fuels’ coming in at just 0/1% below transport. Unsurprisingly, gas and electricity were the largest contributors to inflation in this section, with prices shooting up as a result of supply pressures brought about by the war in Ukraine.

The next largest category after this was ‘food and non-alcoholic beverages’ at 11.6%, which was also influenced by the war and international sanctions on Russia, as these affected agricultural exports such as wheat. Other factors, like Brexit, also contributed towards rising prices for goods such as milk, cheese, olive oil, sugar, honey, chocolate, and soft drinks, amongst others.

As the main categories contributing to inflation – food and fuels – saw prices rise because of the Russia/Ukraine war, this should hopefully stabilize now we’re over a year on from the invasion.

Will inflation go down in 2023?

With supply chain bottlenecks easing and wholesale gas prices falling, the Bank of England anticipates that inflation will begin to fall by the middle of the year, and should drop to about 4% by the end of 2023 – on track to lower to the government’s target of 2% in 2024.

Prices are likely to remain high for the time being, so financial pressures will ease slowly enough that many people may not notice a difference in their month-to-month expenditure. Inflation will also still be high enough that long-term financial planning should take this into account.

If you could use financial planning services to help you manage your expenses, including taxes, our accountants in Barnsley and Leeds would be happy to hear from you. Call us on 01226 298 298 or email info@gbac.co.uk to discuss your requirements and learn more about what we can do for you.

The official HMRC app was launched several years ago, but the revamped version launched in 2022 has been gaining popularity as a particularly helpful resource for self-assessment taxpayers.

On top of encouraging taxpayers to use the app, HMRC
is also trialling a text messaging service to help people who contact them by mobile phone to find relevant information online.

Here’s a summary of how the app and text message service work, and a reminder of what you can do to avoid being caught out by scammers pretending to be HMRC.

How to use the HMRC app

To set up the HMRC app on your smart device, you must first download it from the App Store for iOS or the Google Play Store for Android. Apple users have given the app an average rating of 4.5/5 stars, while Android users rate it 4.7/5 stars.

Once you’ve followed the instructions to download and set up the app, you’ll need to sign in using your existing Government Gateway ID and password. If you don’t already have an account, you can register to create one. After this first log-in, you can set up fingerprint or facial recognition or a six-digit PIN, so you can log in faster next time.

Any time you access the app, you can use it to check important tax details, including:

The app allows you to update your address, report changes, and claim refunds for overpaid tax. There is also an in-app tax calculator that you can use to work out your take-home pay after National Insurance contributions and Income Tax deductions.

New HMRC texting service

In January 2023, HMRC launched the trial version of its new SMS/text message service. It’s designed to redirect individuals who call the helpline about routine matters to digital services that could provide the relevant guidance, rather than waiting to be put through to an adviser.

Some callers will be offered the choice between holding for an adviser, which could take a while, or receiving a text message with information that matches the key words used to describe their tax query. If the caller opts to receive the text, the call will be disconnected after this is confirmed.

The technology may automatically send a text and disconnect the call without the option to hold for an adviser if it’s considered a routine query, such as:

The message received may point the caller to guidance published on the government website (gov.uk) or to alternative contact information for the appropriate HMRC department. If the caller finds this insufficient and wants to call back, they must use different wording for their query.

Be wary of HMRC scammers

The app and messaging service are part of HMRC’s efforts to reduce customer service backlogs by directing routine queries to secure sources of information. Unfortunately, the news that HMRC is sending official text messages may encourage criminals to conduct phishing scams, pretending to be the tax agency in order to steal sensitive information or money.

You should always remember that messages from HMRC
will never ask you to provide personal details or financial information, nor will they include phone numbers or links to non-government websites (other than their official survey platform). Check the HMRC scam guide if you’re unsure, and report any scams that you identify to phishing@hmrc.gov.uk before deleting them.

If your tax affairs are too complex to manage individually through the app, or you’re concerned about getting stuck in a text message loop instead of being able to speak to an adviser, you might prefer to hire a tax consultant. Contact GBAC, accountants in Barnsley, today to learn more about our tax consultancy
and HMRC enquiry
services.

Following the dramatic increase in the number of people earning a living online since the lockdown days of the COVID-19 pandemic, HMRC
is now sending ‘nudge letters’ to those who may have failed to declare taxable income from online activities in the last few years.

These letters are currently targeting over 2,000 people who earn money or accept gifts in exchange for content creation on social media platforms such as TikTok, Instagram, and YouTube. HMRC also plans to send another wave of letters to 2,000 sellers regarding their income from online marketplaces such as eBay, Etsy, and Facebook.

This ‘nudge letter’ exercise is part of the tax agency’s attempts to keep up with the digital economy, using data analytics from a range of online platforms to identify people whose online activities may have resulted in undeclared taxable income.

If you participate in online trading, content creation, or sponsored influencing, you may have already received one of these letters – or can expect to receive one soon. This blog explains what these HMRC notifications could mean for you, and the next steps you should take.

Why is HMRC contacting content creators and online sellers?

Online trading and content creation have experienced a boom in activity in recent years. A global study by the software company Adobe revealed that ‘content creators’ in the UK doubled from 8 million in 2020 to 16 million in 2022, with 76% using this as a ‘side hustle’.

Despite the majority of these content creators being millennials or Gen X, there are many young people in their teens and twenties who don’t know much about tax, meaning they may not even realise that they should be paying income tax on the money they earn online.

The same goes for online sellers and influencers, who may not realise that there is an annual tax-free allowance of £1,000
for trading and miscellaneous income, and that turning a regular profit or accepting gifts for promotional purposes is likely to exceed it.

With content creators and influencers in the UK earning an average of £94–122 an hour according to Adobe’s study, it’s not surprising that HMRC is chasing down high online earners to recoup missing tax revenue.

However, the letters they’re sending out aren’t accusing individuals of tax evasion, so you shouldn’t panic if you get one. The agency is simply informing people that they might owe unpaid tax, and giving them the opportunity to declare their income.

What counts as online trading or online income?

Some people believe that they only need to worry about the Personal Allowance, which currently allows people to earn £12,570 income tax-free, but this isn’t the case. Many aren’t aware that all profits made from online activity are taxable, or that there is a yearly allowance of £1,000
earnings from such activities before income tax is chargeable.

There are no special rules for different types of online income – individuals need to register with HMRC and submit an annual self-assessment tax return if their online income exceeds the allowance. Alternatively, if you decide to set up a company for your online activities, you have to register for corporate tax instead.

Essentially, if you earned more than £1,000 from online activity within a tax year, you need to declare this to HMRC. It doesn’t matter whether you consider yourself self-employed, full-time or part-time, or not – any online activity you participate in with the aim of making a financial profit can be considered trading activity, with income that must be declared via self-assessment.

This applies even if you’re a content creator or influencer exchanging promotional activity for gifts rather than actual money. The cash value of the goods at the time you received them counts towards your earnings, so you must calculate what they’re worth and report this to HMRC if their value exceeds the allowance.

There are many ways to earn additional income from one-off activities, so if you aren’t sure whether your ‘side’ earnings are taxable, the government website has an online tool that can help you to figure out whether you need to submit a self-assessment tax return or not.

What should you do if you receive a tax letter from HMRC?

If you get one of these letters from the tax agency, it will ask you to submit a ‘certificate of tax position’ within 30 days
of receiving it. They recommend using the government’s secure online disclosure service to voluntarily disclose your additional income, after which you’ll have 90 days from receipt of the letter to pay any outstanding tax calculated.

You’re not legally obligated to complete the certificate of tax position and return it to HMRC, but not responding to their ‘nudge’ will only draw more attention. The agency may open an investigation into your tax affairs, and deliberate avoidance could result in financial penalties and even court action on top of having to pay the outstanding tax and interest you’re liable for.

Under no circumstances should you ignore the letter. It’s much better to respond before the deadline by making a voluntary disclosure, or explaining a valid reason why your online income didn’t need to be declared. Compliance will make the process faster and easier for you, potentially reducing late tax penalties and allowing you to arrange a tax repayment plan.

To work out the total amount you should declare, you’ll need to keep track of all the money and cash equivalents you’ve earned, as well as any tax-deductible expenses you may be able to claim.

Tax advice for online sellers and influencers

HMRC is making its message clear – anyone with undisclosed income from online or digital activities urgently needs to take action to bring their tax accounts up to date. If they don’t, they risk becoming the subject of a tax investigation and having to pay additional fines and penalties.

The ongoing process of keeping financial records and filing tax returns can seem stressful and complicated to online traders and content creators who are new to tax matters, but the government has published a step-by-step guide
on setting yourself up as a self-employed sole trader.

If you’d rather have an expert handle your tax affairs on your behalf than wrangle accounting software on your own, GBAC can help with a range of accounting services, including:

Contact us, accountants in Barnsley on 01226 298 298 or email info@gbac.co.uk to find out how we can help you, so you can spend more time concentrating on growing your online business or following.

The UK government’s current Energy Bill Relief Scheme (EBRS) is continuing to offer discounted energy costs for non-domestic consumers of wholesale gas and electricity until the end of March.

This six-month scheme, which started on 1st October 2022
and will end on 31st March 2023, was always intended to be a temporary measure to help businesses continue to operate throughout the cost of energy crisis over the winter.

Now this is coming to an end, the government will be replacing it with the new Energy Bills Discount Scheme (EBDS) from 1st April 2023 until 31st March 2024. This twelve-month scheme will be less generous, as there is no ‘government supported price’ cap, and businesses with energy costs below a certain amount will not qualify.

Here’s how the new energy bill support scheme for businesses will work, and how it could affect your business in the next year.

How will the Energy Bills Discount Scheme work?

Just as the Energy Prices Act 2022 gave the government powers to create the EBRS, the EBDS will also be regulated under this law. While the previous scheme was based on fixed prices, the EBDS will only provide a discount on existing wholesale energy prices.

These per-unit discounts are applied in MWh (megawatt hours), whereas energy is typically billed in kWh (kilowatt hours). The conversion results in a discount of around 2p per unit for electricity and 0.5p per unit for gas, which isn’t much of a reduction.

Who is eligible for the Energy Bills Discount Scheme?

As with the first scheme, the EBDS will be available for all energy consumers on a non-domestic contract. This includes businesses, organisations in the voluntary sector, and public sector organisations – including charities, hospitals, care homes, and schools.

To be eligible, your business must be on an existing fixed-price contract that began on or after 1st December 2021, signing a new fixed-price contract, out of contract on a standard variable tariff, or on a flexible purchase contract.

Again, as per the earlier scheme, eligible customers don’t need to apply. Energy suppliers will apply the reductions automatically, and the government will compensate them for the savings they’re passing on to their non-domestic consumers.

The discount should be detailed on customers’ energy bills in p/kWh (pence per kilowatt hour), with individual bills continuing to vary across different contracts, tariffs, and usage patterns.

What about energy intensive businesses?

Some businesses in Energy and Trade Intensive Industries (ETII) may be eligible for a greater discount, but they’ll have to apply for this level of support. The higher discount only applies to 70% of the energy volume, with the following thresholds:

The government has shared a list of eligible ETII sectors for the higher level of support under the EBDS, and energy suppliers should be sharing application procedures for their business energy customers in due course.

Other energy bill support options for businesses

Though most businesses won’t need to take any specific action to receive the energy bill reduction under the EBDS, all businesses should still be considering how the changes in government support for energy costs will impact their cash flows from April 2023.

To this end, you may also want to look into other energy bill discounts for businesses to make sure you’ve been receiving the support your business has been eligible for, including:

If your business is making the most of government support for energy bills, but you still have concerns about your cash flow, you may benefit from professional accounting services. Contact our accountants in Barnsley and Leeds to learn more about how GBAC could help your business.