HMRC start writing to entrepreneurs
It’s all about the birthdays this week, and there’s you thinking I was going to be talking about the Political Parties Manifesto around tax policy ahead of the election. However, I’m sure by the time you have read this you will have heard everything you need to know in the national press.
Back to birthdays yes it’s the sovereign official birthday which means the honours list and although that in itself is a topical for tax, the most important thing in the Tax Matters office is that the entire tax team have had their birthdays in the last week Sibinah on Monday 10th, myself on Saturday 15th and Jon Golding on Sunday 16th. Yes, we are a team of Geminis, I will let you decide if that is a good or bad thing.
Just a quick mention about Adrian Charles the TV presenter has been stuck with a £1.7m tax bill after falling foul of the IR35 employment intermediaries legislation, this case appears to have been rumbling on for many years now and I expect this is not the last of this or IR35 we will hear about.
If you sold your business in recent years, have you claimed the correct amount of allowances, HMRC possibly believe not. Grab your coffee and your favourite biscuits and let's get started.
The King’s Birthday List
HMRC chief executive Jim Harra is set to become a Knight Commander of the Order of the Bath in the King’s Birthday Honours, joining the ranks of previous HMRC leaders who have been knighted, including Sir Jon Thompson, Dame Lin Homer, and Dame Lesley Strathie.
Harra, who was made a Companion of the Order of the Bath in 2015, is being recognised for his public service contributions. Reflecting on the honour, Harra said, “I have always been incredibly proud of the work HMRC does to support UK taxpayers and to collect the money that pays for vital public services. This recognition is very much a result of the collective hard work of everyone at HMRC – and I am truly honoured to receive it, in what is my 40th-year anniversary with the department.”
Appointed as HMRC chief executive in 2019, Harra has navigated a challenging period marked by criticism over the department’s service standards. In February, the Institute of Chartered Accountants in England and Wales (ICAEW) called for increased investment to address these issues, advocating for improvements to remove barriers to growth and productivity.
The ICAEW’s recommendations came amidst broader efforts to secure more support for HMRC. Harra faced scrutiny from the Treasury Committee following HMRC’s controversial U-turn on proposals to permanently alter its helplines. The decision drew immediate backlash from stakeholders who felt the changes were premature and lacked necessary assurances. Harra acknowledged that the consultation feedback indicated a preference to not proceed with the proposals.
I anticipate that the profession will take a sceptical view of this announcement, reading the message boards on several accounting sites over the weekend it most certainly feels as if this is not a popular decision, what are your thoughts?
HMRC Letters – Business Asset Disposal Relief (BADR)
HMRC’s wealth team has recently issued letters to taxpayers who have claimed Business Asset Disposal Relief (BADR) beyond the permitted lifetime limit.
The letter is aimed at those who exceeded the £1 million lifetime limit but still claimed BADR, previously known as entrepreneur's relief, in their 2022-23 tax returns. This campaign also includes taxpayers who surpassed the limit in earlier years.
Since 11 March 2020, the lifetime limit for BADR was reduced from £10 million to £1 million. Taxpayers who claimed £1 million or more before this date have already reached their limit, and cannot claim any further BADR.
Those affected are required to amend or remove their BADR claim within 30 days by adjusting their 2022-23 self-assessment tax return. Failure to act will result in HMRC correcting the return under section 9ZB of the Taxes Management Act 1970, imposing penalties, and charging interest on additional tax. An enquiry could also be opened, triggering a compliance check.
The letter from HMRC says: "Our records show that you’ve exceeded the lifetime limit of £1 million prior to submitting your latest self-assessment return. This means your claim is unlikely to be accepted, and you’ll need to pay tax on the capital gain at the normal capital gains tax rates."
Those receiving a letter are required to amend or remove their BADR claim within 30 days by amending their 2022-23 self-assessment tax return. Failure to act will result in HMRC correcting the return under section 9ZB of the Taxes Management Act 1970, imposing penalties, and charging interest on additional tax. An enquiry could also be opened, triggering a compliance check.
HMRC has set up a phone line for enquiries about the BADR letters, which is available for two months. However, they cannot correct tax returns or assist in calculating capital gains tax over the phone.
BADR reduces the amount of Capital Gains Tax (CGT) on the disposal of qualifying business assets after 6 April 2008, provided the qualifying conditions have been met throughout a two-year period up to the disposal date or the date the business ceased.
Letters have also been sent to accountants and tax agents representing affected clients. It is crucial for any impacted taxpayers to deal with this matter at the earliest opportunity. If you require assistance then please do not hesitate to contact me at jreeves@taxmatters.tax or call on 01442 828006