hmrc business plan 2021

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HMRC Business Plan Indicator and Quarterly Data Summary

Business plan indicators are initial management information to provide an indication of HMRC's performance, and are therefore subject to revision and audit. Final performance figures will be made available when the annual audited accounts and departmental report are published.

The quarterly data summary (QDS) is designed to fit on a single page to provide a quarterly snapshot on how each department is spending its budget, the results it has achieved and how it is deploying its workforce. Before using this data people should ensure they take full note of the caveats noted in the measurement annex and treat it with necessary caution.

At the moment, people should not be using this QDS data to make direct comparisons between departments for several reasons. Firstly, the business of each department is unique and it does not make sense to compare some measures across all departments. Secondly, many of the measures are not directly comparable because they do not have common definitions, time periods, or data collection processes. The link for Quarter 3, 2023 to 2024 has been updated to reflect Digital Assistant interactions correction.

UPDATE : From Q1 2013/14, the Cabinet Office now publish this QDS data on the Government Interrogation Spending Tool (GIST) website http://www.gist.cabinetoffice.gov.uk/ .

More from this publisher

Related datasets.

• Cabinet Office Business Plan Quarterly Data Summary
• Defra Business Plan Quarterly Data Summary
• Department for Transport business plan quarterly data summary (QDS)
• DCLG Business Plan Quarterly Data Summary

Contact HM Revenue and Customs regarding this dataset

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• HMRC's small and medium enterprise action plan for 2021 to 2022

HMRC’s small and medium enterprise action plan for 2021 to 2022

Published 31 january 2022.

An outline of initiatives to make HMRC’s procurement activity more accessible to small and medium enterprises (SMEs).

The purpose of our action plan is to outline initiatives we are putting in place to raise the proportion of HMRC procurement expenditure with small and medium enterprises (SMEs). Our action plan focuses on 5 key areas:

• promoting the SME agenda
• simplifying the procurement process
• SME engagement
• supply chain engagement
• improving SME data collection

View HMRC SME Action Plan 2021 to 2022 here.

• Tax Newsletters
• Corporate Tax News
• Issue 60 - November 2021
• UNITED KINGDOM - Autumn Budget includes significant changes to corporate tax regime

UNITED KINGDOM

Corporate Tax News Issue 60 - November 2021

Autumn Budget includes significant changes to corporate tax regime

The UK Autumn Budget 2021, delivered by the Chancellor on 27 October 2021, contains a number of measures that affect companies. Having previously confirmed the 2023 corporation tax rate increase, the Chancellor promised—and delivered—a largely technical budget, including often subtle but not insignificant changes to the UK corporate tax regime. The budget also takes account of the fact that the country is recovering from a “period of unparalleled global economic uncertainty” due to the COVID-19 pandemic so there are measures to “build back better” by investing in strong public services, driving economic growth, leading the transition to net zero, and supporting people and businesses.

This article focuses on the most important measures that will affect businesses.

Corporation tax rate, bank corporation surtax

The Chancellor confirmed that the main corporation tax rate will increase from 19% to 25% as enacted in Finance Act 2021, with a small profits rate of 19% applying where profits do not exceed GBP 50,000, with marginal relief for profits between GBP 50,000 and GBP 250,000.

As anticipated, the Chancellor announced a cut in the UK bank corporation tax surcharge rate from 8% to 3%. In addition, the surcharge allowance—the taxable profits above which banks pay the surcharge—will increase from GBP 25 million to GBP 100 million.

The announcements mean that the combined corporation tax rate for banks above GBP 100 million will rise by 1%, to 28% for accounting periods beginning on or after 1 April 2023.

R&D tax relief

Three major changes to the R&D tax relief legislation will come into effect from 1 April 2023:

• The expansion of R&D qualifying expenditure to include data and cloud computing;
• A restriction or possible prohibition on the inclusion of overseas costs in UK R&D claims; and
• Further targeted anti-avoidance measures to counter abuse of the R&D tax relief regime.  

The likely prohibition of overseas costs will particularly impact UK-headquartered multinational groups with development centres located overseas since a large proportion of their qualifying expenditure typically consists of overseas costs. The Chancellor noted that while companies claimed UK tax relief on GPB 48 billion of R&D spending, UK business investment was around half of that, at just GBP 26 billion. However, the change brings the UK R&D regime in line with most R&D regimes worldwide, which focus purely on domestic expenditure.

Conversely, the expansion of qualifying expenditure to include cloud computing and data development costs in R&D claims will be welcomed by many claimant companies, in particular, those that have a digital presence or are active in the financial services industry as these costs represent a significant proportion of their software development spend.

More detail on the above reforms to the R&D legislation and the additional anti-avoidance measures will be released later this year, and all changes will come into effect from 1 April 2023.

Diverted profits tax

Diverted profits tax (DPT) charges tax at the rate of 25% and aims to deter and counteract the diversion of profits from the UK by large groups. 

Currently, companies charged to DPT and avoided permanent establishments (PEs) are permitted to amend their corporation tax return during the first 12 months of the review period to enable profits to be taxed at the corporation tax rate of 19%. Amendments to the legislation will extend this period to the entire review period except the last 30 days. The changes will also ensure that an enquiry into the company tax return for the accounting period may not be closed during the review period. 

Legislation will also be introduced in Finance Bill 2022 to make DPT one of the taxes for which, subject to the terms of the relevant tax treaty, a mutual agreement procedure (MAP) outcome can potentially be implemented. As a result, a taxpayer may obtain relief from the DPT if it succeeds under a MAP.

The changes will have effect for any DPT review periods that are open as at 27 October 2021 or opened after this date and for any MAP decisions involving DPT that are reached after 27 October.

Cross-border loss relief

As the UK has left the EU, the legislation permitting UK companies to claim group relief (in limited circumstances) for losses incurred in the EEA will be repealed. In addition, legislation that limits the amount of losses that an EEA resident company trading in the UK through a UK PE can surrender as group relief will be amended to align the rules for EEA-resident companies with companies resident elsewhere in the world.

Following the 2015 decision of the Court of Justice of the European Union in the Marks & Spencer case, the group relief provisions were amended to allow cross-border group relief subject to certain conditions to comply with the UK’s obligations as an EU member state.

The group relief provisions currently allow non-UK resident EEA companies to surrender losses as group relief to UK companies in limited specific circumstances. In addition, EEA companies trading through a UK PE can surrender losses of its UK PE only if those losses have not been actually deducted from non-UK profits of any person. Any other non-UK resident company can surrender losses of a UK PE only if it is not possible for those losses to be deducted from non-UK profits of any person for any period.

These changes will apply for accounting periods ending after 27 October 2021, and where a company’s accounting period straddles this date, it will be deemed as separate accounting periods for the purpose of applying these changes.

Hybrids: Transparent entities 

A new draft clause will extend the current exemption for partnerships in the hybrid rules to certain other transparent entities, such as U.S. limited liability companies, by deeming members in those entities to be partners for the purposes of the rules. However, this extension should not apply to a transparent entity established in territory that does not charge tax on income.

The extension is expected apply retroactively to 1 January 2017, which will leave some taxpayers in a challenging situation prior to December filing deadlines if the new clause is expected to be beneficial but is not yet within UK tax law.

This clause is the replacement of the change to the definition of a hybrid entity originally included in Finance Bill 2021 before being removed. The draft clause will be included in the Finance Bill 2022. 

Notification of uncertain tax treatments regime

The government is pressing ahead with the introduction of a new requirement for large businesses to notify the UK tax authorities (HMRC) where they adopt an “uncertain tax treatment,” with penalties for noncompliance.

The notification requirement will broadly apply to companies and partnerships where annual turnover or balance sheet assets exceed GBP 200 million or GBP 2 billion, respectively. The rules are to be legislated in Finance Bill 2021-22 and will apply to certain returns due to be filed on or after 1 April 2022. Amounts of corporation tax, income tax or VAT via self-assessment or PAYE will be considered “uncertain” if the tax treatment adopted meets one of two triggers:

• Provision has been made in the accounts for the uncertainty; or
• The tax treatment is not aligned with HMRC’s known position.

HMRC notes that a third trigger previously under consultation will be revisited and may be included later. This is where there is a substantial possibility that a tribunal or court would find the taxpayer’s position to be incorrect in material respects.

The aim is to improve HMRC’s ability to identify issues where businesses have adopted a different legal interpretation to HMRC and will largely impact large businesses that do not have open and transparent relationships with HMRC in real time via their HMRC Customer Compliance Manager (CCM).

The proposed financial threshold test appears unchanged; uncertain tax treatments, singular or related, of GBP 5 million or more will be notifiable by large businesses where a trigger is met. HMRC still intends to provide for certain exemptions from the notification requirement, principally where HMRC is already aware of the uncertainty through various mechanisms such as the CCM relationship, IMOC provisions, statutory clearances, etc.  

Overall, there remains a movement towards encouraging large businesses to have open dialogue with HMRC around tax uncertainties. It remains clear that HMRC expects strong compliance with the uncertain tax treatment provisions. We expect it will feature in HMRC’s Business Risk Review + process in due course. 

An estimated 2,300 large businesses need to consider compliance without delay given many relevant returns will be filed soon after the 1 April 2022 introduction. They need to document/safeguard decisions not to notify and build relevant processes into their overall tax governance approach.

Re-domiciliation of foreign-incorporated companies

The government published a consultation on a UK-redomiciliation regime that would make it possible for companies to move their domicile to and relocate to the UK. The consultation is seeking comments until 7 January 2022.

Currently, a foreign-incorporated company is not able to re-domicile and change its place of incorporation to the UK while maintaining its legal identity as a corporate body. The government intends to change this and is seeking views on a UK re-domiciliation regime. The consultation also considers the merits of outward re-domiciliation that would potentially allow a UK-incorporated company to re-domicile to a foreign jurisdiction.

In addition to the corporate law and regulatory requirements, a number of tax considerations would have to be worked through as part of any change. For example:

• A company is UK tax resident if it is incorporated in the UK or its central management and control is in the UK, subject to being treated as non-UK tax resident by virtue of a double tax agreement. Would re-domiciling a foreign company to the UK automatically make the company UK tax resident or would the central management and control of the company also need to be moved to the UK?
• If the UK tax residence of a company is migrated to the UK, from re-domiciliation, what would be the capital gains and intangible tax base of the company’s assets?
• Currently, when a company migrates its tax residence to the UK from an EU jurisdiction, assets are brought in at their market value. Should this be expanded to non-EU jurisdictions?

The consultation also considers whether there is a need to bring in additional anti-avoidance provisions around the loss importation rules, together with personal taxation changes for the owners of companies, VAT, stamp duty and stamp duty reserve tax, including if an outward re-domiciliation regime is introduced.

Tonnage tax

The government has announced its first substantive reforms to UK tonnage tax since it was introduced in 2000. Following the UK’s departure from the EU, the Chancellor’s aim is to maintain the UK’s status as a leading country in the maritime industry by creating a more flexible and attractive system that will encourage overseas shipping groups to relocate to the UK.

The main changes to the tonnage tax regime are:

• The complex flagging rules imposed on the UK by the EU will be abolished. Instead, the UK flag will be a more important factor in determining whether a company satisfies the strategic and commercial management requirement for entry into the tonnage tax regime. This is a welcome simplification to the rules for shipping companies already in the regime, especially where these rules may have impacted commercial decisions on flagging in the past.
• The current 10-year exclusion on re-joining the tonnage tax regime will be reduced to eight years. There will be greater discretion to admit companies that missed an election window, if there are good reasons; further guidance on what HMRC will accept as good reasons will be key. The ability to grant an additional election window into tonnage tax remains in place but there is no indication on whether this will be made available to companies that previously qualified and, therefore, would need to rely on an additional election window to enter the tonnage tax regime.
• The guidance on qualifying vessels will take account of developments in technology to allow additional types of vessels to potentially qualify for tonnage tax. This will be combined with a review of existing guidance of HMRC to reflect the importance of investment in decarbonization and pollution control when looking at the qualifying status of vessels.
• The permitted ancillary passenger-related income limit will be raised from 10% to 15%. This should improve administration andessels carrying passengers should benefit from the increased limits, in respect of income such as on-board sales and gambling.
• A further review of whether the scope of tonnage tax will be extended to include ship management activities was announced. In practice, this may assist UK-based operations but many groups prefer to locate their technical management teams abroad. Therefore, the changes may not influence commercial decisions on the location of these activities.

Overall, these changes should make the tonnage tax regime more attractive without any cost to the UK Treasury. A review of existing powers regarding the cadet training commitment was indicated in the announcement and many shipping groups will want to understand these future changes as well before considering their tonnage tax position.

Other announcements

The Autumn Budget 2021 also contains announcements on the following:

• Annual investment allowance (AIA): The temporary increase in the GBP 1 million limit per annum will be extended from 31 December 2021 to 31 March 2023 to align with the end dates of the super deduction and special rate allowance. The AIA is expected to revert back to the permanent level of GBP 200,000 from 1 April 2023.
• Residential Property Developer Tax (RPDT) : RPDT will be introduced from April 2022 at a rate of 4% on company profits from residential property development trading activity. This will be treated as an extension to corporation tax and will be payable on group profits from residential property development activity above GBP 25 million. Special rules and exemptions will apply in certain cases.
• New regime for qualifying asset holding companies (QAHCs) : The government has published a policy paper on the regime but it does not contain any significant new information beyond the previous consultation documents and the draft legislation for part of the regime published in July 2021. The paper confirms that the QAHC regime will come into effect from 1 April 2022 and the key criteria to qualify as a QAHC.
• Insurance Premium Tax (IPT): Legislation is announced in relation to the location of risk for IPT purposes. The measure is not expected to substantively amend the location of risk criteria; the intent of the legislation will be to ensure that risks located outside the UK continue to remain exempt from UK IPT. 
• Loss relief rules for companies adopting IFRS 16 : The government is proposing to legislate in Finance Bill 2021-22 changes to the loss relief rules to ensure that companies using IFRS 16 are not disadvantaged. To achieve this, the changes will be retroactive as from 1 January 2019.  
• IFRS 17: The government confirmed that it will introduce powers in Finance Bill 2021-22 to issue regulations for insurance companies to allow the spreading of the transitional adjustment for IFRS 17 for tax purposes. The commencement date for IFRS 17 is 1 January 2023, although the government is expected to consult on the design of the rules and the likely timeframe for the spreading period of the transitional adjustment.
• Creative sector : A series of measures were announced to support the creative sector, including the enhancement and extension of tax reliefs available.

BDO’s comprehensive analysis of the provisions in the Autumn Budget can be found here .

HM Treasury - Autumn Budget and Spending Review

Jon Hickman [email protected]

Back to overview

• Practical Law

Spring 2021 Budget: key business tax announcements

Practical law uk legal update w-029-2695  (approx. 38 pages).

• A number of revenue-raising measures, including a rise in the rate of corporation tax to 25% for larger companies from financial year 2023 and the freezing of the income tax personal allowance and the higher rate threshold for a period of four tax years, starting with 2022-23.
• The extension of various COVID-19 reliefs, such as an extension to the temporary increase in the SDLT residential nil-rate band to £500,000 to 30 June 2021 and an extension of the temporary reduced rate of VAT of 5% for certain supplies relating to hospitality until 30 September 2021.
• The location of eight freeports, along with details of their proposed tax benefits.

Spring 2021 Budget

• "Overview" is the HMRC/HM Treasury: Spring 2021 Budget: overview of tax legislation and rates.
• "HM Treasury: Budget 2021" is the Budget report Red book.
• "Finance Bill 2021" is the Finance Bill 2020-21, which will be introduced to Parliament on 11 March 2021 and is expected to receive Royal Assent before parliament's Easter recess, which begins on 25 March 2021.
• "Finance Bill 2022" is the Finance Bill 2021-2022.

Budget timetable

Avoidance and evasion, strengthening powers to tackle tax avoidance.

• Give HMRC additional power to issue DOTAS scheme reference numbers (SRN). This power would be exercisable where HMRC has reasonable grounds for suspecting that arrangements that have not been notified are notifiable and HMRC has not, within 30 days of notifying its request, received any or an adequate explanation for the failure. For further information, see Legal update, Draft Finance Bill 2021 legislation: key business tax measures: Tackling promoters of tax avoidance – HMRC additional power to issue DOTAS reference numbers .
• Give HMRC power to issue stop notices (which prevent the promotion and selling of arrangements). Following consultation responses, the government proposes to change the conditions for issuing stop notices. Rather than the test being based on a reasonable suspicion of a main tax advantage benefit, the test will require the authorised officer to "consider that it is likely that arrangements/proposed arrangements will not be able to obtain a tax advantage". The first promoter condition (that the promoter previously breached the POTAS regime) will be tightened so that the condition is met only where the promoter is subject to a conduct or monitoring notice. The power to issue stop notices will also be extended to cases where promoters fail to provide information and HMRC issues an SRN (see above).
• Allow HMRC to attribute POTAS threshold conditions and conduct and monitoring notices to a new entity set up by a person who had significant influence or control over a previous entity.
• Extend the length of conduct notices from two to five years. For further information about these measures, see Legal update, Draft Finance Bill 2021 legislation: key business tax measures: Tackling promoters of tax avoidance – extension of POTAS regime .
• Clarify that HMRC can use its Schedule 36 to Finance Act 2008 information powers to obtain information about enablers and can issue penalties in multi-user schemes. Following consultation responses, these changes will apply from the date the Finance Bill 2021 receives Royal Assent. For further information, see Legal update, Draft Finance Bill 2021 legislation: key business tax measures: Tackling promoters of tax avoidance – strengthening HMRC powers to combat avoidance enablers .
• Amend the General Anti-Abuse Rule (GAAR) to ensure it can be used to tackle avoidance using partnerships. The government intends to amend the legislation to allow any member of the partnership to take corrective action in respect of their own liability. A number of technical amendments will also be made to remove ambiguities. For further information about the changes to the GAAR, see Legal update, Draft Finance Bill 2021 legislation: key business tax measures: Tackling promoters of tax avoidance – GAAR procedural requirements applied to partnerships .
• Tax avoidance schemes: high risk promoters: conduct and monitoring notices .
• Enablers of defeated abusive avoidance schemes: sanctions .
• Disclosure of tax avoidance schemes under DOTAS: direct tax .
• General anti-abuse rule (GAAR) .

Follower notice penalties

• Striking out the taxpayer's substantive appeal on the grounds that it has no reasonable prospect of success or is an abuse of process and the proceedings are not reinstated.
• Making a statement (on HMRC's application), which is not overturned, that the taxpayer (or its representative) acted unreasonably in bringing or conducting (the relevant part of) that appeal.
• The government rejects suggestions that taxpayers should be given the right to appeal a follower notice.
• HMRC will, after engagement with representative bodies, expand and update its guidance on follower notices later in 2021.
• The 20% penalty will not be subject to reduction for co-operation and the only ground of appeal will be that it had been issued in error.

Powers to counter use of electronic sales suppression (ESS) hardware and software

• Identify developers and suppliers in the ESS supply chain.
• Access software developers’ source code and the locations of code and data.

Tackling the hidden economy: new checks on license renewals for taxis and private hire vehicles

Corporation tax to rise to 25% for larger companies from financial year 2023, diverted profits tax to rise to 31% from financial year 2023, carry-back of trading losses temporarily extended.

• Claims in respect of losses below the £200,000 de minimis limit may be made outside a return, permitting relief to be claimed for such amounts before the corporation tax return is filed. However, a stand-alone claim can only be made after the accounting period in which the loss occurs has ended, and it must be quantified appropriately. As with other claims for this relief, there must be sufficient information and evidence (such as draft accounts or management accounts) to enable the validity and accuracy of the claim to be verified. For unincorporated businesses, a loss-relief claim affecting more than one year may be made outside a tax return. It must specify the name of the business, the period for which the loss is made, the amount of the loss, and how the loss is to be used, and may be made as soon as the basis period for which the loss is made has ended and the loss has been calculated.
• Claims (and repayment) cannot be made before the Finance Bill 2021 receives Royal Assent, and repayment may be delayed until any enquiry concerning the period to which losses are carried back is concluded.
• Provision for interest on overdue tax and repayments will be identical to those applying to loss relief under section 37 of CTA 2010 and section 64 of ITA 2007.
• If an accounting period ending within the duration of the proposed extension of relief is less than 12 months, the £2 million cap is not pro-rated.
• Although the relief is only for trading losses, carry-back will be against total profits. For individuals, although the amount of income tax relief that can be given for trading losses is capped at £50,000 (or 25% of adjusted total income, if higher), and no change is proposed to that limit, it does not apply to the setting of losses against profits of the same trade. Therefore, claims for losses set against profits of the same trade of the previous year, as part of a claim for trade loss relief against general income, will not be subject to that limit.
• The relief will also be available for losses of a furnished holiday lettings business that are treated as trade losses for the purposes of Part 4 of ITA 2007 and will be available in computing the amount of profits subject to Class 4 NICs.
• Existing restrictions applicable to loss relief claims in Part 4 of CTA 2010 and Part 4 of Chapter 2 of ITA 2007 will apply to losses for the purposes of the proposed relief.
• Losses cannot be carried back to displace existing group relief claims, with the time for group relief claims remaining two years from the end of the relevant accounting period.
• The section 269ZZB of CTA 2010 definition of group, which is used in identifying a group for allocation of the group deductions allowance for the loss restriction, will be used to identify a group for the purposes of the proposed relief.
• The group reporting requirements will not be triggered if all companies in the group make claims for the £200,000 de minimis amount of losses, and the group cap will not apply if all group companies are only able to make such claims (even if the total of the claims exceeds £2 million).
• The £200,000 de minimis applies to all accounting periods ending within the relevant period, and in calculating whether the total amount of relief given by the claim does not (or could not) exceed that amount, any available amounts that could be claimed (such as capital allowances) that would increase the loss must be taken into account, along with amounts remaining after carry back to the previous accounting period but before any surrenders of group relief.
• Companies within the oil and gas ring fence regime will be entitled to claim the relief, with trading losses made on ring fence activities being capable of being carried back against all profits whether or not they are within the ring fence.
• For companies, in respect of losses arising in accounting periods ending in the period 1 April 2020 to 31 March 2022.
• For unincorporated businesses, in respect of losses arising in tax years 2020-21 and 2021-22.

Super-deduction and special rate first year allowances

• Only companies within the charge to corporation tax will benefit from the super-deduction and special rate first year allowance.
• The general exclusions in section 46(2) of the Capital Allowances Act 2001 will apply and assets used wholly for the purposes of a ring-fenced trade will be excluded. (Special rules will apply for main rate assets used partly for the purposes of a ring-fenced trade and partly for the purposes of a qualifying activity.)
• Expenditure on used and second-hand assets will not qualify, and nor will expenditure incurred under contracts entered into before 3 March 2021.
• Additional qualification requirements will apply to plant and machinery expenditure incurred under hire-purchase and similar contracts.
• Capital allowances on property transactions .
• Enhanced capital allowances (ECAs) for investment in environmental technologies .

Temporary increase in annual investment allowance extended to 31 December 2021

• Before 1 January 2022 is based on the £1 million limit.
• On or after 1 January 2022 is based on the £200,000 limit.

Refinements to Finance (No 2) Act 2017 loss relief rules

• The loss restriction calculation will cap the figure of relevant profits at nil where the allocated deductions allowance exceeds qualifying profits, and only in-year reliefs actually claimed will be included in the loss restriction calculation.
• The formula for allocating the group deductions allowance to group companies will be amended to allow the nominated company to allocate the deductions allowance as they choose.
• The time limits for submitting an original group allowance statement will be extended to include the enquiry time limits.
• The nominated company will no longer be required to submit a group allowance statement where no group companies have used any carried-forward losses in the period.

Freeport tax sites

• Stamp duty land tax (SDLT) relief on purchases of land or property within the freeport, which is used for a qualifying commercial purpose.
• Enhanced structures and buildings allowances (see Practice note, Capital allowances for structures and buildings ), allowing the investment to be written off for tax purposes over ten years rather than 33.3 years and enhanced capital allowances for plant and machinery purchased for use in the freeport, which can be written off over one year.
• Business rates relief for five years and relief from secondary (employer's) NICs.

Tax deduction for business rates repayments

Reform of penalties regimes and interest harmonisation for vat and income tax self-assessment.

• Income tax self-assessment taxpayers with business or property income over £10,000 per year (who are required to submit digital quarterly updates through Making Tax Digital (MTD) for accounting periods beginning on or after 6 April 2023.
• Other income tax self-assessment taxpayers for accounting periods beginning on or after 6 April 2024.

Late submission penalties

• 2 points for annual returns.
• 4 points for quarterly returns.
• 5 points for monthly returns.

Penalties for deliberately withholding information

Late payment penalties.

• 2% of the outstanding tax if the taxpayer pays the tax, or agrees a time to pay arrangement (TTP), between days 16 and 30 after the due date; and
• 4% of the outstanding tax if the taxpayer fails to pay the tax, or agree a TTP, by day 30 after the due date.
• The second charge arises if tax remains outstanding, or a TTP has not been agreed, on day 31. It is 4% per annum, calculated on a daily basis on the outstanding tax.

Interest harmonisation

Assisting the transition for taxpayers, civil information powers.

• Correct a drafting error in Schedule 36 to FA 2008 that governs the issuing of increased daily penalties for failure to comply with an information notice.
• Introduce a rule to prevent a third party telling the taxpayer about a third-party information notice, where the tribunal has decided that that is appropriate.
• Make a consequential amendment to provisions dealing with exchange of information requests made in accordance with the EU Mutual Assistance Recovery Directive to meet the UK's obligations under the Withdrawal Agreement and Northern Ireland Protocol.

Review of tax administration for large businesses

Power to implement oecd model rules requiring reporting by digital platforms, extension of making tax digital for vat, cross-border, repeal of withholding exemption for interest and royalties paid to eu companies.

• Remove the exemption from income tax (in section 578 of ITTOIA 2005) for receipts from intellectual property if the repealed provisions would have applied. (In relation to the income tax charge, see Practice note, Income tax: calculation of investment and sundry income profits: Intellectual property income .)
• Remove the diverted profits tax (DPT) credit under section 100 of FA 2015 for amounts that would have benefitted from exemption under the repealed provisions. (In relation to DPT, see Practice note, Diverted profits tax .)
• Amend the intangible property tax avoidance provisions in section 42 of FA 2016 (see Practice note, Intangible property: taxIntangible property: tax: Anti-avoidance provisions ) to specify that, instead of being excluded from the repealed provisions, a royalty will be treated as arising from avoidance arrangements for the purposes of section 917A of ITA 2007 if it is reasonable to conclude that (one of) the main purpose(s) of the creation or assignment of the relevant intellectual property right was to take advantage of the Interest and Royalties Directive.

Government to consult on regulations implementing OECD's mandatory disclosure rules

Off-payroll working from 6 april 2021.

• The introduction of a targeted anti-avoidance rule to ensure that the definition of intermediary cannot be exploited.
• A requirement for the intermediary as well as the worker to confirm whether the intermediary is caught by the rules.
• The extension of the fraudulent information provisions to apply to any UK-based party in the supply chain as well as the worker and persons connected to the worker.

IT exemption and NICs disregard for COVID antigen tests

Extension to temporary income tax and nics exemption for home-office expenses, environment, plastic packaging tax.

• The £200 per tonne tax rate for packaging with less than 30% recycled plastic.
• The registration threshold of 10 tonnes of plastic packaging manufactured in or imported into the UK in a year.
• The scope of the tax by definition of the type of taxable product and recycled content.
• The exemption for manufacturers and importers of small quantities of plastic packaging.
• Who will be liable to pay the tax and need to register with HMRC.
• How the tax will be collected, recovered and enforced.
• Tax relief on exports.

Decommissioning tax relief available for expenditure incurred before approval of abandonment programme

Amendments to hybrid mismatch rules.

• States that the Finance Bill 2021 will clarify the meaning of "dual inclusion income" in the provisions discussed in Practice note, Hybrid tax mismatches: Mismatches from hybrid payer entities . It is not clear whether this merely refers to the provisions discussed in Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: Double deduction rules or refers to something additional.
• Refers to the draft legislation discussed in Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: Allocating dual inclusion income within groups .
• Suggests the possibility of a widening of the scope of the 10% investor provision discussed in Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: "Acting together" . The updated paper does not refer to section 259ND of TIOPA 2010, or to partnerships or collective investment schemes; instead, it states that the Finance Bill 2021 will introduce new provisions to ensure that counteractions are disapplied if they arise in respect of participants in transparent funds that hold investments of less than 10% in those funds.
• In relation to the provisions discussed in Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: Exempt investors in hybrid entities , refers only to recipients being qualifying institutional investors rather than "akin to" such investors.
• In relation to the first provision discussed in Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: Interaction with transfer pricing , specifies that the Finance Bill 2021 will introduce new section 259KE of TIOPA 2010 to limit the size of counteraction under the rules discussed in Practice note, Hybrid tax mismatches: Imported mismatches proportionately by reference to the imported mismatch payment made, taking account of any transfer pricing adjustment to that payment (see Practice note, Transfer pricing ).
• In relation to the second provision discussed in Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: Interaction with transfer pricing , specifies that the proposed change will be made through new section 192A, rather than amendment of section 192, of TIOPA 2010.
• In relation to the first provision discussed in Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: Mismatches from hybrid payee entities , states that sections 259BE(2) and (3)(a) and (b) will be amended to apply only to "territories relevant to the particular structure being considered" (rather than "the UK or any other relevant territory" as in the original paper).
• In relation to the provision discussed in Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: Illegitimate overseas deductions , does not (unlike the original paper) refer to the "immediate" investor (the word "immediate" being omitted).
• Includes a new provision to amend the connection test in the condition relating to control groups discussed in Practice note, Hybrid tax mismatches: Imported mismatches . This is to ensure that, in the absence of a structured arrangement, counteraction is not triggered if the parties to an overseas mismatch are connected to each other but not to the underlying UK payer.
• States that the provision discussed in Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: Definition of foreign tax will take the form of a new section rather than an amendment to section 259B of TIOPA 2010.
• Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: Securitisations and investment trusts in relation to ordinary income of investment trusts; or
• Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: Mismatches from hybrid payee entities in relation to US limited liability companies (LLCs).
• Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: Definition of foreign tax (see also above in relation to this provision); and
• Legal update, Draft Finance Bill 2021 legislation amending hybrid mismatch rules: Double deduction rules (see also above in relation to these provisions) although companies will be able to apply for these provisions to apply retrospectively.
• States that the new provision on imported mismatches (see above) is to have effect from Royal Assent to the Finance Bill 2021.
• Does not seem to specify an effective date for new section 192A of TIOPA 2010 (see above); previously, the relevant provision was to have effect from Royal Assent to the Finance Bill 2021.

Amendments to interest deductibility restriction rules

Review of banking company tax surcharge, catering for libor withdrawal, updating banking company tax rules.

• The bank levy (see Practice note, Bank levy ).
• The banking company tax surcharge (see Practice note, Banking company tax surcharge ).
• The loss relief restriction for banking companies (see Practice note, Corporation tax losses: Banks and building societies ).
• The deduction restriction for compensation payments (see Practice note, Lending activities: tax: Commercial loans: corporation tax ).

IP, media and R&D

Review of research and development taxation (scope of qualifying expenditures for r&d tax credits).

• Use of the SME and RDEC schemes, how they compare and whether there would be disadvantages if the schemes were merged.
• The extent to which the rates of relief available affect investment decisions.
• Method of claiming relief, whether it should be separate from the annual corporation tax return, whether HMRC can improve the quality of its advice and facilitate the claims process.
• Whether R&D reliefs could be used to incentivise development in certain fields, such as green technology.
• The value to businesses of the ability to obtain tax relief on R&D outsourced to companies overseas.

Owner-managed businesses

Self-employment income support scheme, relief for gifts of business assets anti-avoidance rule to be amended, personal tax and investment, cgt annual exempt amount frozen until 2026, freezing of income tax personal allowance and higher rate threshold, income tax: starting rate for savings, private equity and venture capital, social investment tax relief (sitr) extension, temporary increase in sdlt residential nil-rate band extended, leasing of plant and machinery covid-19 easement, vat registration and deregistration thresholds maintained until 31 march 2024, vat deferral: new payment scheme and bespoke penalty, vat reduced rate for tourism and hospitality, tax rates, allowances and thresholds for 2021-22, previously announced measures that remain unchanged.

• Alternative PENP calculation (see Tax legislation tracker: employment: Alternative PENP calculation ).
• Nil rate benefit charge for zero-emissions vans (see Tax legislation tracker: employment: Nil rate benefit charge for zero-emissions vans ).
• Preventing abuse of research and development tax relief for SMEs (PAYE cap) (see Tax legislation tracker: intellectual property: Preventing abuse of research and development relief for SMEs ).
• SDLT and ATED relief for housing co-operatives (see Tax legislation tracker: property, energy and environment: SDLT and ATED relief for housing co-operatives ). However, the commencement date for the SDLT relief is now 3 March 2021, rather than the date of the Autumn 2020 Budget.
• SDLT surcharge for non-UK residents (see Tax legislation tracker: property, energy and environment: SDLT surcharge on foreign buyers of residential property ).
• Tackling construction industry scheme abuse ( Tax legislation tracker: property, energy and environment: Tackling construction industry scheme abuse ).
• HM Treasury: Chancellor Rishi Sunak's 2021 Budget speech .
• HM Treasury: 2021 Budget (landing page).
• HM Treasury: Budget 2021 .
• Notes on Finance Bill 2021 Resolutions .
• HMRC: Budget 2021: overview of tax legislation and rates (Overview).
• HMRC: 2021 Budget: tax related documents (landing page).
• HM Government: Budget 2021: policy costings .
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What to include in your business plan for an SEIS/EIS Advance Assurance Application

5 extra tips for seis / eis pitch decks:, michael stresing.

Across the hundreds of SEIS/EIS Advance Assurance applications we see every month at SeedLegals, no two look exactly alike. HMRC are picky about having a clear and concise understanding of the company, but are flexible when it comes to how that information is presented to them.

Often, the best answer to “What should my Pitch Deck look like?” is “It should look however it looks now”. Any materials you have already prepared to show investors are usually the best starting point. Nonetheless, we suggest every pitch deck sent to HMRC, for Advance Assurance review, include the following 10 topics:

• The ‘Problem’
• Our Solution
• Our Business Model
• Intellectual Property and Structure
• Competitors and Market Size
• Risk to Capital [SWOT]
• The Team Profile
• History and Progress

These might each take several slides, depending on the stage you’re at, and the nature of the business, but for SEIS/EIS purposes it is important that the deck touches the following areas:

1. The ‘Problem’

This outlines the problem which the company is poised to fix. This isn’t too touchy or pertinent from HMRC’s perspective, but is a fairly common starting point for most pitch decks.

2. Our Solution

Following on from Slide 1, the solution slide is crucial. This must be a clear and concise statement of what the Company does. This section should cover HMRC’s requirement to see ‘details of all trading or other activities to be carried on by the company’ . Avoid Jargon, this needs to be comprehensible to someone with no sector specific knowledge!

3. Our Business Model

Here, it’s important to cover how the business will be making money. Do you have an affiliate agreement in place? Where do you charge fees? From whom are those costs taken? This section should set out a profile of who your customers are.

4. Intellectual Property and Structure

If the business has any intellectual property uses, especially regarding Patents, it would be important to include all of the details of who will be owning and licensing these rights. In addition to this it is essential to provide any relevant details on employment structure. Who will be hired? What work will be outsourced? What external software or IP will you be licensing? This type of information is essential to HMRC, especially under the new Risk to Capital condition .

5. Competitors and Market Size

Equally important, to demonstrate an understanding of the risks and marketplace, is to show a snapshot of the market. This is often demonstrated with market sizing metrics, and a chart plotting the main direct or indirect competitors. Clearly identify the customers you serve.

6. Risk to Capital [SWOT]

The clearest way to address the Risk to Capital is by including a brief  SWOT analysis with focus on the Weaknesses and Threats of your business. It’s a good idea to explain how these factors contribute to the risk of the investment and/or show the company’s objective to develop and grow.

7. The Team Profile

Within the pitch deck, it’s usual to include a slide which displays all of the founders, NED’s, and founding team. There’s not too much to worry about with SEIS / EIS here.

8. History and Progress

Typically, it’s important to provide a brief background to the project – usually to demonstrate traction. This often is presented in the form of a company timeline. This provides a more detailed indication to HMRC of when you began trading, and what the Company has been doing prior to (or since) that point. Traction should also provide some metrics associated with the current scale of the Company.  Be clear as to whether or not you are currently trading.

No worries if you’re at a very early stage – this would be a great place to demonstrate your idea valuation.

The Roadmap is potentially the most essential slide (or slides) for HMRC. It is essential that you demonstrate an intention to grow the business in the long term (especially if you work in film production or work on multiple discrete projects). Here’s more on applying for Advance Assurance as a tv / film or production company .

Here, you must set out the plans to grow the Company. This ranges from new geographical markets, new products or product-features, new lead generating streams, etc… It is also important to ensure that your roadmap for the funding is set out. How are you going to spend your thousands (or millions)? HMRC are looking for a demonstrated intention to grow, and that the SEIS and EIS funds will only be used on qualifying business activities. Check out HMRC Venture Capital Scheme Manual to read more on qualifying business activities.

10. Financials

This is often attached to the application as a separate document (as many Companies will already have a fully set out excel file covering all of the finances). The minimum requirement here is a basic chart within the business plan which sets out the 3 year (from the time of application) projected profit and losses.

If you already have a more complete file covering this, it would be best to attach this, rather than worrying about including a summary within the pitch deck.

11. The Ask

Finally, it’s common to provide a summary of your funding plans. No worries on this one! We’ve already done the work for you here, free to use our Fundraising Page template. An important note here is that you don’t Advertise SEIS or EIS eligibility until HMRC approve you. The purpose of Advance Assurance is to be able to advertise yourself as eligible, so HMRC don’t like founders making this call for themselves. (Of course, it’s totally fine to say that you are applying for SEIS and EIS, and that eligibility is pending)

• There’s no need to include page long NDA’s or FCA notices. These usually aren’t necessary. But… you should always have a ‘Capital At Risk’ slide on a pitch deck. (NDA’s don’t work in venture, so it’s a good hack to safeguard your idea).
• Don’t use fancy language, just tell it how it is.  If you are creating an Uber-esque service for hamsters, then say so, don’t call it a technology driven transportation system for Mesocricetus Auratus.
• Make sure to be careful about liberal usage of the word ‘partnerships’ and ‘partnering’! HMRC often interpret this to mean Legal LLP arrangements (which aren’t SEIS / EIS eligible). Whilst everyone loves to ‘partner’ with everyone, it is best to be clear. Some companies are better described as suppliers or distributors, or even just creative collaborators.
• Ensure to be unequivocally demonstrating a risk for investors and a long-term intention to grow!
• Be careful about mentioning exits. You are not eligible for SEIS / EIS if you have any pre-arranged exits. No start-ups we deal with fall under this category, however plenty of companies still include grand (and unwarranted) exit hypotheses.
• Of course – it is best to provide this as a PDF. Make sure this is roughly 5MB or less (the total application across all documents must be under 8MB). If your file is too large, we suggest using www.smallpdf.com

If you are uncertain on any of the above, it’s best to reach out to us directly! We’ve seen hundreds of SEIS/EIS applications, and provide all of our customers with a detailed review of their Pitch Deck. Hit the chat feature in the bottom right corner to speak to a member of the team!

And if you’re not already using SeedLegals, here’s how easy we make it easy to secure Advance Assurance from HMRC .

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• Corporate & Business Organizations
• Financial Institutions & Banking
• United Kingdom

In recent weeks, HMRC has published two policy papers explaining its approach to collecting tax debts, including details of how it will support UK businesses in the coming months. The two papers are:

Collecting tax debts as we emerge from coronavirus (COVID-19)

Tax debt, government lending schemes and Company Voluntary Arrangements (CVAs)

Based on these policy announcements, can a UK business assume HMRC will support it if it is struggling to meet its tax liabilities? The simple answer is no; HMRC support is not a “given” and, therefore, should not be assumed.

This might, on the face of it, appear to go against the message from HMRC that it will take an “understanding and supportive approach” to dealing with tax debts as UK businesses emerge from the pandemic. However, it is important to remember that, as the UK’s revenue authority, HMRC’s primary function is to collect taxes. HMRC does not exist to “prop up” a business that is not ultimately viable by allowing tax debts to continue to accumulate that are unlikely to be paid. When taxes fall due, they are payable in full. However, in the right circumstances and with the right approach, HMRC support can be obtained.

This alert considers the approach that HMRC is expected to take for post-COVID-19 tax collection and explains the practical steps that business owners can and should be taking.

When Will HMRC Support a Business?

The answer to this question very much depends on the shape of the business and its finances.

HMRC’s policy documents make it clear that it intends to work with businesses to find a solution where a business has “temporary cash flow issues” or “temporary financial set backs” but as the language itself indicates, HMRC will only support a viable business with short-term remediable cash difficulties – it is not there to “bank roll” the business.

It is critical for a business that has accumulated tax debts during the pandemic to determine the overall financial health of the company in order to assess how (and if so, the appropriate extent to which) HMRC might be able to support the business moving forwards and, if not, what other options (such as restructuring the business) are available to protect the business, directors and interests of creditors.

Given that HMRC will also look at the overall financial position of the business, owners will need to consider the cost of repaying any COVID-19 borrowings and other bank debt and creditors alongside accumulated or expected tax liabilities. How much is owed and when is payment due? Can arrangements be put in place with other creditors to defer payment or spread out the cost – such as by using the Pay as You Grow (PAYG) scheme (discussed in more detail later in this alert)? If payments are already deferred, at what point will the company be required to pay and can it pay? Does the business have access to additional finance? HMRC will not consider their position in isolation; it will want to understand the financial position of the business as a whole in order to assess its long-term viability.

For directors, they should also be mindful of their directors’ duties when trying to restructure (even informally) debt repayments, to avoid potential personal liability if the business runs into financial difficulties in the future, and by engaging the company’s professional advisors to assist, this may reduce personal risk.

HMRC’s approach is to continue to support viable businesses where it can – but the emphasis here is very much on viability.

When Will HMRC Not Support Businesses?

If, having assessed the overall financial health of the company, it appears there is little chance for the business to recover, HMRC is unlikely to agree a repayment plan with the business in relation to its tax debts and will seek to enforce payment as liabilities become due and payable. If the business fails to pay amounts due and continues to accrue tax debts, HMRC will consider winding up the company. Presently, winding up petitions are prohibited (unless the reason for non-payment is non-COVID-19 related) but that restriction is expected to lift on 30 September 2021 and HMRC has indicated that, from that date, it will recommence its enforcement processes.

In this situation, it is imperative that directors take advice on their position and act in accordance with their duties as directors to protect the business, its creditors and, ultimately, themselves from personal liability.

HMRC is also likely to commence enforcement where businesses are unwilling to engage with HMRC, whether to discuss a repayment plan or by ignoring HMRC’s attempts to contact the business. It is vital, even for viable businesses, to engage with HMRC as soon, and as transparently, as possible.

What Can a Business With Accumulated Tax Liabilities Expect to Happen?

If relevant businesses do not themselves contact HMRC, they will be contacted by HMRC by phone, post or text message to discuss their position and, if appropriate, agree a way to proceed. Businesses should respond to any communication from HMRC as soon, and as fully, as possible. A failure to respond or engage increases the risk that HMRC will think that a business is unable, or simply refusing to pay its tax debts. This will increase the risk of greater investigation and intervention, and, ultimately, of enforcement action being taken.

Even if a business cannot pay straight away, it is better for a business to get in touch with HMRC to discuss its position, than ignore any correspondence. HMRC may be able to offer a short term deferral (i.e. nothing would need to be paid for a set period of time, and no further action to collect the tax debt would be taken until that time has lapsed) and will also explore other options with the business, such as the PAYG scheme. A company’s professional advisors will also be able to assist with negotiations and ensure that all relevant information is provided to HMRC to give the business the best chance of agreeing a repayment plan.

Early engagement with HMRC is crucial. If a business does not respond to initial correspondence from HMRC, HMRC is likely to escalate matters to the next stage, which is likely to result in officers attending the business’ premises to make further enquiries about the financial position of the company, to make sure the company is aware of the tax debt and to discuss options.

As already noted, from the end of September 2021, if a business has failed to engage with HMRC, or has been unable to convince them of its plans to return to long-term profitability, HMRC may consider starting debt collection proceedings. These could include presenting a winding up petition, taking control of goods, summary warrants or court action. Although HMRC has stressed that insolvency proceedings will only be used as a last resort, if a business is deliberately non-compliant, or continues to accrue debt with no realistic prospect of being able to settle existing debts, it is likely to face a petition.

While HMRC will take a “cautious approach” to collecting debts, it is clear that a business should proactively and candidly engage with HMRC (and should do so as soon as possible) to protect itself against what could be avoidable recovery proceedings. Again, being mindful of and acting in accordance with directors’ duties will also be important.

HMRC’s Attitude Towards Company Voluntary Arrangements (CVAs)

Since December 2020, HMRC has been a preferential creditor in insolvency proceedings in respect of certain tax debts. This change will be felt most keenly if a company proposes a CVA, because a CVA cannot vary the rights of a preferential creditor without their consent. Accordingly, unless HMRC agrees otherwise, the company will have to pay HMRC in full.

In its recent policy paper, HMRC says that it will adopt a commercial approach when reviewing a proposal and will support proposals that are fair to all creditors, but again, early engagement is key because without HMRC support (perhaps through a time to pay agreement) a CVA may be unviable.

What Is Time to Pay?

In circumstances where a taxpayer is unable to meet its tax liabilities immediately, HMRC has a discretion to allow the taxpayer to pay tax after the due date, over an agreed period, and without incurring late payment penalties. This is known as “Time to Pay” (TTP). The primary purpose of TTP is to assist HMRC to collect taxes due efficiently and effectively. It is worth emphasising that there is no right for taxpayers to be granted TTP. It is also important to understand that HMRC is obliged to agree and operate any TTP arrangements in a particular way and in accordance with its published guidance.

HMRC recognises that in certain circumstances, outside of the control of businesses, a tax deadline can lead to commercial difficulties. TTP is intended to allow viable businesses, which genuinely cannot pay tax on the date it is due, to pay it over a realistic period of time. Most arrangements will last for a period of months and will involve regular monthly payments. They rarely exceed 12 months (and so will only do so in exceptional circumstances).

Who Is Eligible for TTP?

There are no fixed rules. The same principles should be applied to all taxpayers, with each case being considered on its merits and the level of risk to the Exchequer (that is, of non-payment of tax). As a result, any TTP arrangement should be agreed “on a case-by-case basis and ... tailored to individual circumstances and liabilities”.

Generally, larger tax liabilities, requests for longer TTP periods and a questionable compliance record are likely to attract greater due diligence, information requests and investigation by HMRC. The business’ previous compliance record is likely to be especially important in relation to the success or otherwise of obtaining TTP.

Where a business has a good record, and has made tax payments on time, HMRC is more likely to consider a request for TTP to be genuine. In contrast, a poor record, previous late payments and repeat applications will result in closer scrutiny. Even in COVID-19 situations, HMRC is likely to view previous payment problems as symptomatic of deeper problems and will be less likely to agree TTP.

Making a successful application for TTP depends on the business being able to show it is:

In genuine difficulty;

Unable to pay its tax on the due date; but (crucially)

Able to pay if HMRC allowed more time – this necessitates not only proving that it has (or will have) the means to meet the scheduled TTP payments, but also that it can meet any other tax liabilities that will (or may) become due during the TTP period.

HMRC will seek to make the TTP period as short as possible. Importantly, in light of improving post-COVID-19 trading conditions, where a business’ ability to pay improves during the TTP period, it has an obligation to contact HMRC to increase its payments and clear the debt more quickly.

Briefly put, the business must be ready to engage and be fully prepared to explain, and provide evidence for, the situation in which it finds itself. It should be willing to enter into reasonable negotiations with HMRC in relation to the terms and conditions of the TTP arrangement, including in relation to the amount covered and the overall time period involved.

Business Viability – Cannot Pay or Will Not Pay?

TTP is only available to viable businesses. Before agreeing to TTP, HMRC will try to understand why a business cannot pay (in COVID-19 situations, this will be pretty straightforward) and, just as importantly, what it is doing to address this in the future. HMRC will assess whether the business’ plans (whether to reduce costs or increase sales) are realistic in the context of the size of the tax debt relative to the business’ turnover. This will be the benchmark against which any TTP agreement will be monitored.

Critically, the TTP arrangement must be reasonable. Neither the business nor HMRC will want to enter a TTP arrangement that commits the business to a repayment schedule that it cannot afford, such that it results in further default. Equally important, to HMRC at least, is that the business does not request a period that is longer than absolutely necessary to clear the debt. In deciding whether a business is eligible for a TTP arrangement, HMRC will draw a distinction between:

Eligible “cannot pay” businesses – That is, those that want to make the payment but currently do not have the means to do so, or, although they do, making that payment could force them out of business (because other liabilities could not be met). HMRC will expect businesses to have explored accessing new or increased borrowing facilities before approaching HMRC for a TTP arrangement, including taking full advantage of the various government lending and other support schemes. It should be noted that wanting to pay, however genuinely held, is not enough: a business that cannot pay, or cannot satisfy HMRC that it has a realistic plan to ensure it can afford its future liabilities, will be refused TTP.

Ineligible “will not pay” businesses – That is, those that can, but will not, pay the tax. HMRC will refuse TTP and is likely to take swift enforcement action in such cases.

HMRC will be looking to the business to prove that it is eligible for TTP. Therefore, when preparing to apply, the business should be ready to provide HMRC with as much information as is relevant to support the submission. This will ideally include providing:

Detailed financial information – This should include recent management accounts and (even more importantly) future budgets and cash flow expectations.

Details of the steps the business has taken to seek support from other stakeholders – This might include outlining discussions the business has had concerning new or additional financial support from existing or new lenders, current shareholders, management and any other forms of support (e.g. extending credit or relaxing payment terms) from other creditors and suppliers.

HMRC will consider the position in the round including whether the business has explored all practical steps to take full advantage of the government support schemes. For example, for businesses that have taken out a “bounce back loan”, there are a number of options available to a business to manage repayment of that loan under the Pay as You Grow (PAYG) scheme. HMRC will expect a business to have “drawn on the full range of financial support and opportunities available to them to keep up to date with their tax repayments”. In the right circumstances, borrowing further finance via the Recovery Loan Scheme may be appropriate.

An important point to note is that HMRC will expect future tax liabilities to be paid when they arise and that will also need to be factored into the submission.

Early engagement, followed by regular and transparent communications, with HMRC by the business will be imperative, especially in situations where the facts and particular circumstances are not straightforward. As might be expected, many businesses affected by COVID-19 will be contacting HMRC to discuss their tax affairs and, possibly, to seek a TTP arrangement. Businesses should expect delays in the system. Such delays will be exacerbated by complex situations that HMRC will want to examine more closely.

Businesses will need to factor the possibility of delay into their plans and endeavour to ensure their own negotiations are as smooth as possible by contacting HMRC early and gathering together as much information as possible in support of their submission.

Monitoring, Review and Enforcement

Even if a TTP arrangement is in place, businesses should be aware that HMRC will actively monitor and review the agreement to ensure compliance. HMRC will be looking to confirm that:

The agreed payments are being made as agreed on time

Other tax liabilities are being met

Tax administration and compliance obligations are being satisfied (i.e. computations and returns are being submitted)

At the same time, HMRC is likely to be using the data it collects to identify any change in the business’ ability to pay the tax due.

Nonetheless, once it agrees to it, HMRC is bound by a TTP agreement and businesses should take a degree of comfort from the fact that, provided they continue to abide by the terms and conditions of TTP, HMRC cannot seek to unilaterally accelerate recovery of the tax debt.

That said, HMRC will assert its right to withdraw from (i.e. cancel) a TTP arrangement in the following specific circumstances:

New facts come to light that mean TTP is no longer appropriate or available in the circumstances, or mean recovery of the tax due is at increased risk

The business has misled or lied to HMRC

The business defaults on the terms or conditions of the arrangement

In cases where HMRC believes a business is in breach of a TTP agreement, its first course of action will be to contact the business by issuing a reminder letter. In cases where an instalment payment has been missed, the reminder letter will set out the amount of tax that is now overdue, demand immediate payment and explain that failing to comply will mean the TTP arrangement will be cancelled.

If the business fails to respond, HMRC will issue a cancellation letter. At that point, the TTP arrangement falls away and HMRC will demand full payment of all tax amounts overdue. The chance of agreeing a new TTP arrangement at that point is remote and, if the tax is not paid, HMRC will initiate enforcement proceedings utilising all and any of the (growing number of) powers at its disposal.

It is worth reiterating that the restrictions on winding-up petitions (introduced as a direct result of the pressures on business arising from COVID-19) remain in place until 30 September 2021. The moratorium is being observed by HMRC and so provides a layer of protection against any immediate HMRC action. However, when the restrictions lift, businesses are best advised to ensure that they proactively manage their tax affairs, ensuring they are up-to-date with payments and submissions, processes are efficient and effective, and everything is well documented.

Time to Pay?

TTP is a valuable formal procedure that will protect viable, compliant businesses facing genuine difficulties in meeting their tax liabilities on time. The protection a TTP arrangement affords can provide a business with critical time to plan for recovery without tax liabilities weighing on its cash flow.

However, it is also important to appreciate that TTP merely defers the point at which the tax is payable; the liability does not go away and will instead simply fall due under the TTP schedule. In addition, new tax liabilities and compliance obligations will continue to arise.

Entering into a formal arrangement with HMRC for the payment of overdue tax provides certainty, but also brings additional compliance obligations and opens the business to greater scrutiny from HMRC. A TTP arrangement should not be sought lightly and, once it is obtained and agreed, a business must make every effort to comply with its terms and conditions. It is crucially important that businesses do not overpromise under TTP, continue to monitor their own compliance and promptly communicate any change in circumstance that could affect the agreement (positively or negatively) to HMRC.

HMRC examines requests for TTP carefully and will be monitoring a business’ compliance with an agreement equally as carefully. It is worth remembering that the primary purpose of HMRC is to collect taxes due and protect the Exchequer.

In appropriate cases, HMRC uses TTP as a tool to help it achieve that aim. However, where there is a breach of a TTP agreement, HMRC will not shy away from exercising its enforcement powers to recover the tax owed.

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• Personal tax
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300,000 file tax returns in the first week of the tax year

300,000 early birds file their Self Assessment tax return in the first week of the new tax year.

Almost 300,000 Self Assessment customers filed their tax return in the first week of the new tax year, almost 10 months ahead of the deadline, HM Revenue and Customs ( HMRC ) has revealed.

Customers can file their Self Assessment returns for the 2023 to 2024 tax year between 6 April 2024 and 31 January 2025.

Almost 70,000 people filed their return on the opening day this year (6 April) and HMRC is encouraging people to do it early and not to leave it until January.

Visit GOV.UK to find out more about Self Assessment and how to file a tax return.

By filing tax returns early, people can take their time to complete their returns – making sure the information is accurate and avoiding the stress of last-minute filing.

It can also help with budgeting and helping spread the cost of their tax bill. Customers can set up a budget payment plan to make weekly or monthly direct debit payments towards their next Self Assessment tax bill.

Refunds of overpaid tax will be paid as soon as the return has been processed. Customers can also check if they are due a refund in the HMRC app.

In recent years, HMRC has seen more and more customers file their tax returns early. Last year, more than 246,000 people submitted their Self Assessment between 6 and 12 April 2023.

Myrtle Lloyd, HMRC ’s Director General for Customer Services, said:

Filing your Self Assessment early means people can spend more time growing their business and doing the things they love, rather than worrying about their tax return. You too can join the thousands of customers who have already done their tax return for the 2023-24 tax year by searching ‘Self Assessment’ on GOV.UK and get started today.

HMRC has updated guidance on filing tax returns early and help around paying tax bills on GOV.UK.

Anyone who is new to Self Assessment and thinks they might need to complete a tax return for the 2023 to 2024 tax year can use the Self Assessment online tool to check whether they need to register for Self Assessment and submit a return.

People may need to complete a tax return for the 2023 to 2024 tax year and pay any tax owed if:

• they are a self-employed individual with an income over £1,000
• they have received any untaxed income over £2,500
• they are renting out one or more properties
• they claim Child Benefit and they or their partner have an income above £50,000
• they are a partner in a partnership
• their taxable income earned from savings and investments is more than the £10,000 personal savings allowance
• their taxable income earned from dividends is more than £10,000
• they have paid Capital Gains Tax on assets that were sold for a profit above the Capital Gains threshold

A full list of who needs to complete a tax return is available on GOV.UK.

Pensioners are required to pay Income Tax on any taxable income, including their pension income, above their Personal Allowance threshold. There are different ways to pay any tax owed, depending on the individual’s circumstances, including:

• if they already complete a Self Assessment tax return, they will need to report and pay via this route
• if they have a PAYE tax code, HMRC will automatically collect any tax through their tax code

Alternatively, if a pensioner does not already pay tax via Self Assessment or PAYE, HMRC will send them a Simple Assessment summary. The Simple Assessment will tell them how much Income Tax they need to pay and the deadline – usually by 31 January following the end of the tax year. HMRC produces the Simple Assessment from the information it already holds so people do not need to do anything - there is no form to complete. More information about Simple Assessment is available on GOV.UK.

It is important that customers let  HMRC  know if there are any  changes in details or circumstances  such as a new address or name, or if they are no longer self-employed or their business has closed. They should not assume someone else will update  HMRC  on their behalf. If customers  no longer need to do Self Assessment , they will need to tell  HMRC . There are videos on YouTube that explains how to stop Self Assessment.

Criminals use emails, phone calls and texts to try to steal information and money from taxpayers. Before sharing their personal or financial details, people should search ‘ HMRC phishing and scams’ on GOV.UK to check the sender or caller is genuine.

Customers should never share their HMRC sign-in details. Someone could use them to steal from them or claim benefits or a refund in their name.

Further information

Breakdown of filing data:

*weekend days

To deal with increasing demand we’re enhancing and expanding our digital services to give customers the quick and easy ways to manage their tax affairs that they expect. Our helpline and webchat advisers will always be there to support those who are vulnerable, digitally excluded, or have complex tax affairs.

The High Income Child Benefit Charge threshold increased to £60,000 from 6 April 2024, which will apply to tax returns for the 2024 to 2025 tax year.

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