Want to complain about HMRC?

Taxpayers may find themselves in a position where they need to make a complaint about HMRC’s service. Complaints can relate to many different issues such as unreasonable delays, mistakes and poor treatment by HMRC’s staff. Note, there is a separate procedure to be followed by taxpayers that disagree with a decision of HMRC or that wish to complain about serious misconduct by HMRC staff.

Taxpayers that wish to make a complaint should in the first instance write or speak to the person or office they have been dealing with. If the complaint is not resolved or the taxpayer would prefer not to discuss the issue with the person or office they have been dealing with, then a complaint can be made using an online complaint form. A complaint can also be made by phone or post.

If the response is unsatisfactory a further request can be made for the complaint to be looked at again by a different complaints handler who will take a second look at the complaint and then provide a final response. Taxpayers that are still unhappy with the response can ask the Adjudicator to look into the complaint. If they are unhappy with the Adjudicator’s decision it is possible to contact their local MP to ask for the matter to be referred to the Parliamentary and Health Service Ombudsman.

Income excluded from UK property business

HMRC publishes a list of income streams that are excluded from a UK property business. The list includes fishing concerns, hotels and guest houses, tied premises, caravan sites, lodgers and tenants in their own home, extra services to tenants and letting surplus trade accommodation. In most cases the income from these activities will be taxed as income of a trade and not as property income.

In addition, there are certain receipts that can arise out of the use of land, and which are specifically excluded by statute from a rental business. These include yearly interest, income from the occupation of woodlands managed on a commercial basis, income from mines and quarries and income from farming and market gardening.

There is also a £1,000 property income allowance that applies to income from property (including foreign property). If a taxpayer’s annual gross property income is £1,000 or less the amount is exempt from tax and does not need to be reported on a tax return.

Rental business – post cessation transactions

There are special rules for the taxation of post-cessation transactions after a trade has ceased. The legislation clearly states that the person who receives or is entitled to the post-cessation receipt is the person who is subject to Income Tax or Corporation Tax on the income. This does not have to be the same person who carried on the original trade.

HMRC manuals are clear that a receipt, which arises from a property rental business after it has ceased, is taxable under special rules; provided, of course, the taxpayer has not already included that receipt in the computation of their rental business profits. The tax payer may also be able to claim relief for post-cessation expenses for which they have had no relief. One example might be the cost of background heating for empty premises to keep down condensation and so maintain the value of the property for later sale.

A claim for post-cessation property relief is possible if a customer ceases to carry on a UK property business and within 7 years makes a ‘qualifying payment’ or a ‘qualifying event’ occurs in relation to a debt of the business.

A claim to relief must be made on or before the first anniversary of the 31 January following the end of the tax year in which the payment is made.

Income excluded from a property business

HMRC publishes a list of income streams that are excluded from a UK property business. The list includes fishing concerns, hotels and guest houses, tied premises, caravan sites, lodgers and tenants in your own home, extra services to tenants and letting surplus trade accommodation. In most cases the income from these activities will be taxed as income of a trade and not as property income.

In addition, there are certain receipts that can arise out of the use of land, and which are specifically excluded by statute from a rental business. These include yearly interest, income from the occupation of woodlands managed on a commercial basis, income from mines and quarries and income from farming and market gardening.

There is also a £1,000 property income allowance that applies to income from property (including foreign property). If a taxpayer’s annual gross property income is £1,000 or less, the amount is exempt from tax and does not need to be reported on their tax return.

Tax if you divorce or separate

If you are a couple that is getting separated or divorced, apart from the emotional stress, there are also tax issues that can have significant implications. Whilst this is unlikely to be uppermost in your mind it is important that the tax consequences of the break-up are carefully considered.

Whilst Income Tax does not automatically cause an issue for separating couples as it is an individually assessed tax, there are other taxes that need to be considered. For example, when a couple are together there is no Capital Gains Tax (CGT) payable on assets gifted or sold to your spouse or civil partner. However, if a couple separate and do not live together for an entire tax year or get divorced then CGT may be payable on assets transferred between ex-partners.

This means that the optimum time for a couple to separate would technically be at the start of the tax year so that they would have up to a year to plan how to split their assets most tax efficiently. Obviously, in the real world most couples will have far more on their minds than deciding to get separated on a certain day, but these issues should be kept in mind.

It is also important to make a financial agreement accepted by both parties. If no agreement can be reached, then applying to the court to make a 'financial order' will usually be required. The couple and their advisers should also give proper thought to what will happen to the family home, any family businesses as well as Inheritance Tax implications.

Tariff suspension on certain imports

The UK government has announced plans to introduce a new tariff suspension scheme. This new scheme will help UK firms become globally competitive.

This will be done by allowing companies to request that duties be partially or wholly reduced for a set period. This in turn will result in lowering the cost of importing raw materials and decreasing production costs. Once a suspension has been introduced, all UK importers will be able to benefit from the reduced rate.

The new scheme will be launched from 1 June 2021 and will allocate suspensions based on the needs of firms in the UK and the wider economy. Prior to Brexit, firms had to submit applications to the EU bloc to request suspensions, which then had to be assessed by all member states.

The government has also confirmed that existing duty suspensions that the government has rolled over from the EU will be extended beyond 31 December 2021.

Importing goods into the UK

There are special procedures for importing goods into the UK. Following the end of the Brexit transition period, the process for importing goods from the EU effectively mirrors the process for all other international destinations.

Businesses, especially those that only trade with EU, should be aware of the rules and be working accordingly. Businesses can make customs declarations themselves or hire a third party such as a courier, freight forwarder or customs agent to do the paperwork.

HMRC lists the following eleven-steps that should be considered when importing goods:

  1. Check if you need to follow this process. The steps listed below apply if you are moving goods permanently to England, Wales or Scotland (Great Britain) from a country outside the UK or to Northern Ireland from a country outside the UK and the EU. There are different rules for goods that move between Great Britain and Northern Ireland or between Northern Ireland and the EU. 
  2. Get your business ready to import. This includes ensuring you have an Economic Operator Registration and Identification (EORI) number. You also need to check that the business sending you the goods can export to the UK.
  3. Decide who will make custom declarations and transport the goods.
  4. Find out the commodity code for your goods.
  5. Find out if you can delay or reduce your duty payment.
  6. Check if you need a licence or certificate for your goods.
  7. Check the labelling, marking and marketing rules.
  8. Get your goods through customs.
  9. Claim a VAT refund.
  10. What to do if you paid the wrong amount of duty or rejected the goods
  11. Keep invoices and records.

Keeping self-employed tax records

If you are self-employed as a sole trader or as a partner in a business partnership, then you must keep suitable business records as well as separate personal records of your income. 

For tax purposes, the business records must be held for at least 5 years from the 31 January submission deadline for the relevant tax year. For example, for the 2019-20 tax year where online filing was due by 31 January 2021, you must keep your records until at least the end of January 2026. In certain situations, such as when a return is submitted late, the records must be held for longer. 

If you are self-employed you should also keep a record of:

  • all sales and income
  • all business expenses
  • VAT records if you’re registered for VAT
  • PAYE records if you employ people
  • records about your personal income
  • grant details if you claimed through the Self-Employment Income Support Scheme because of coronavirus

You don't need to keep the vast majority of your records in their original form. If you prefer, you can keep a copy of most of them in an alternative format, as long as they can be recovered in a readable and uncorrupted format. For example, a scanned PDF document. 

If your records are no longer available for any reason, you must try and recreate them letting HMRC know if the figures are estimated or provisional. There are penalties for failing to keep proper records or for keeping inaccurate records. 

Small trading tax exemption for charities

The tax treatment of charities can be complex. Many charities trade either as part of their charitable interests or to raise funds. As a first step, any charity hoping to benefit from any beneficial tax treatment needs to be recognised as a charity for UK tax purposes by HMRC as well as meeting other criteria.

A charity will not pay tax on profits it makes from trade if:

  • they are making money to help their charity’s aims and objectives, known as ‘primary purpose trading’
  • their level of trade that is not primary purpose falls below the charity’s small trading tax exemption limit
  • they trade through a subsidiary trading company

The charity must pay tax on any other profits.

The small trading tax exemption limits are as follows:

Charity’s gross annual income Maximum permitted small trading turnover
Under £32,000 £8,000
£32,001 to £320,000 25% of your charity’s total annual turnover
Over £320,000 £80,000

If the charity’s small trading turnover is higher than the exemption limits, then they are required to pay tax on all of their profits from that trade.

HMRC’s new penalty regime

HMRC’s new points-based penalty regime for late submission and payment will start from 1 April 2022. The changes will apply in the first instance to the submission of VAT returns for VAT return periods beginning on or after 1 April 2022. 

The penalty regime will then be extended to Making Tax Digital (MTD) Income Tax Self-Assessment (ITSA) accounting periods beginning on or after 6 April 2023. This will be in tandem with the extension of MTD (from the same date) for taxpayers with business or property income over £10,000 annually. The penalty scheme will be extended to all other ITSA taxpayers for accounting periods beginning on or after for 6 April 2024.

Under the new regime, taxpayers will incur a penalty point for each missed submission deadline. At a certain threshold of points, a financial penalty of £200 will be charged and the taxpayer will be notified. The threshold varies depending on the required submission frequency (monthly, quarterly, annual). The penalty points will apply separately to VAT and ITSA. The penalty points will be reset to zero following a period of compliance by the taxpayer. There are also time limits after which a point cannot be levied. 

In addition, the new system will see the introduction of two new late payment penalties. A first penalty of 2% of the unpaid tax that remains outstanding 15 days after the due date. The penalty increases to 4% of any tax still outstanding after 30 days. An additional or second penalty at a penalty rate of 4% per annum will accrue on a daily basis after 30 days. This additional penalty will stop accruing when the taxpayer pays the tax that is due.

There will be an appeals mechanism for both the late submission and late payment penalties available through an internal HMRC review process and an appeal to the First Tier Tax Tribunal.