General

HMRC has launched a new consultation seeking views on proposed measures to address consumer protection issues for people who claim tax refunds through repayment agents. The 12-week consultation period started on 22 June and will end on 14 September 2022. HMRC is looking to introduce new measures to stop rip-off agents taking advantage of people and pocketing their tax repayments. 

HMRC has received increasing numbers of complaints from taxpayers who have used ‘repayment agents’. These are generally agents helping taxpayers and businesses make claims to HMRC that result in a tax repayment as their main service, without providing wider tax or accountancy services.

These businesses are often virtual, advertising on social media, and tend to operate a no-win no-fee commission-based structure with large volumes of relatively low value claims. The fees they charge are often opaque and can result in half, or even more, of a tax repayment being lost to the claimant.

HMRC’s Director General for Customer Strategy and Tax Design, said:

'We want to make sure taxpayers receive their full tax claims – putting 100% of the money they are due into their pockets – and not be taken in by the unscrupulous practices of some Repayment Agents.'

This consultation will seek views on:

• restricting the use of assignments, where contracts legally transfer the right to a repayment from a taxpayer to an agent.
• introducing measures designed to ensure taxpayers see material information about a repayment agent’s service before entering into a contractual agreement.
• requiring repayment agents to register with HMRC.

HMRC has published their latest statistics on Child Trust Funds which reveal that whilst 320,000 accounts have now matured, 175,000 funds that have matured remain unclaimed.

If you turned 18 on or after 1 September 2020 there may be cash waiting for you in a dormant Child Trust Fund (CTF). If your children recently turned 18 you should also check if they have claimed the money to which they are entitled. The average market value of a matured but not withdrawn account was £2,142 and for a withdrawn account, was £2,721. The actual amount of money depends on a number of factors.

Children born after 31 August 2002 and before 3 January 2011 were entitled to a CTF account provided they met the necessary conditions. These funds were invested in long-term saving accounts for newly born children. 

Seven million CTF accounts were set up since the scheme was launched in 2002, roughly 6 million by parents or guardians and a further 1 million by HMRC where parents or guardians did not open an account.

Around 55,000 accounts mature each month and HMRC has created a simple online tool to help young people find out where their account is held. If you are unsure if you have an account or where it may be, it is easy to track down your provider online.

The actual CTF accounts are not held by HMRC, but by a number of CTF providers who are financial services firms. Anyone can pay into the account, with an annual limit of £9,000, and there is no tax to pay on the CTF savings interest or profit.

The government has announced their intention to fundamentally reform the private rented sector marking the biggest shake up of the private rented sector in 30 years. These measures are set to include a ban on section 21 ‘no-fault’ evictions and placing a legislative duty for landlords in the private sector to meet the Decent Homes Standard to the private sector by 2030. 

Other measures announced to help tenants include: 

• Helping the most vulnerable by outlawing blanket bans on renting to families with children or those in receipt of benefits.
• For the first time, ending the use of arbitrary rent review clauses, restricting tribunals from unduly increasing rent and enabling tenants to be repaid rent for non-decent homes. This will make sure tenants can take their landlord to court to seek repayment of rent if their homes are of unacceptable standard.
• Making it easier for tenants to have much-loved pets in their homes by giving all tenants the right to request a pet in their house, which the landlord must consider and cannot unreasonably refuse.
• All tenants to be moved onto a single system of periodic tenancies, meaning they can leave inferior quality housing without remaining liable for the rent or move more easily when their circumstances change. A tenancy will only end if a tenant ends or a landlord has a valid reason, defined in law.
• Doubling notice periods for rent increases and giving tenants stronger powers to challenge them if they are unjustified.
• Giving councils stronger powers to tackle the worst offenders, backed by enforcement pilots, and increasing fines for serious offences.

There will also be changes designed to benefit landlords including the introduction of a new Private Renters’ Ombudsman to enable disputes between private renters and landlords to be settled quickly, at low cost, and without going to court. There will also be measures to help tackle anti-social tenants a new property portal to help landlords to understand and comply with their responsibilities.

It is hoped that these reforms will help to ease the cost-of-living pressures renters are facing, saving families from unnecessarily moving from one privately rented home to another and thereby saving hundreds of pounds in moving costs.

The government has announced new plans to modernise consumer credit laws to cut costs for businesses and simplify rules for consumers. This will see major reforms to the Consumer Credit Act that regulates credit card purchases and personal loans. A consultation on the direction of reform is expected to be published by the end of the year.

As part of the reform measures, the government intends to move much of the Act from statute to sit under the Financial Conduct Authority – enabling the regulator to quickly respond to emerging developments in the consumer credit market, rather than having to amend existing legislation. 

The reforms will be designed to allow lenders to provide a wider range of finance. For example, by ensuring that lenders are able to provide credit more easily for emerging and new technologies such as electric cars. At the same time measures will be put in place to maintain high levels of consumer protection. 

The reforms will build on the recommendations of the Financial Conduct Authority’s retained provisions report (published in March 2019) and the Woolard Review (published in February 2021) – which both made recommendations for a reformed regime. Leaving the EU has also created new opportunities for regulatory reform and may see some parts of EU retained legislation being repealed or replaced.

Commenting on the reforms, the Economic Secretary to the Treasury said:

'The Consumer Credit Act has been in place for almost 50 years – and it needs to be reformed to keep pace with the modern world. We want to create a regulatory regime that fosters innovation but also maintains high levels of consumer protection. That’s why I have committed to undertake this ambitious long-term reform – and it’s exactly what I’ll deliver.'

There is a distinction to be drawn between tax avoidance and tax evasion. Tax evasion is illegal and describes a situation where someone acts to deliberately evade tax. This could include deliberately submitting false tax returns, falsely claiming repayments or reliefs or hiding income, gains or wealth offshore.

Tax avoidance on the other hand can describe a situation whereby a taxpayer takes advantage of the tax rules to reduce the tax they pay without breaking the law.

However, the lines between the two can get blurred as can be seen in the comments made by HMRC below. 

HMRC’s own guidance to help taxpayers spot the signs of tax avoidance, states that ‘tax avoidance involves bending the tax rules to try to gain a tax advantage that was never intended. It usually involves contrived transactions that serve no real purpose other than to artificially reduce the amount of tax that someone has to pay. It is not the same as effective tax planning but is often promoted as such'.

There is of course no restriction on taxpayers taking full advantage of tax reliefs and allowances in the legislation. This is not tax evasion [or tax avoidance in HMRC's terms] rather just paying the minimum allowable without breaking the law. Again, the lines between tax avoidance and tax planning can also get blurred. If you are approached to take part in a tax avoidance scheme, it is important to take proper professional advice and be aware that HMRC does not condone the use of schemes that they see as promoting tax avoidance.

In the Autumn Budget 2018, the government announced that they would launch a call for evidence to learn more about the nature and scale of till fraud. This specifically looked at businesses that deliberately undertake electronic sales suppression (ESS). ESS occurs when a business deliberately manipulates its electronic sales records in order to hide or reduce the value of individual transactions. 

This type of fraud is hard to spot as it aims to reduce the recorded turnover of the business and the corresponding tax liabilities, while providing what appears to be a credible and compliant audit trail.

At Spring Budget 2021, the government announced that new powers would be introduced to tackle ESS. These new powers were included in the Finance Act (2022) introduced in February this year.

HMRC officers have now started to target businesses across the country that are suspected of being involved in making, supplying or promoting ESS systems. These businesses now face fines of up to £50,000 and criminal investigations. HMRC is also actively targeting users of these systems who will also face having to pay back tax evaded, financial penalties and possible criminal convictions.

On 18 May 2022, 30 businesses were visited, including shops, takeaways and restaurants, across nine counties and two men and a woman were arrested in Nottinghamshire as part of a criminal investigation into the alleged supply of ESS software.

HMRC continues to warn of the ever-present problem of fraudulent phishing emails, suspicious phone calls and texts. These unwanted emails, phone calls and texts are being sent from all around the world and the fraudsters are continuing to find new ways to target unsuspecting taxpayers. 

These messages typically look to obtain taxpayers personal and or financial information such as passwords, credit card or bank account details. The phishing emails and texts often include a link to a bogus website encouraging the recipient to enter their personal details.

HMRC recommends that if you have the slightest doubt that an email or text is fake:

• do not open attachments, they could contain a virus
• do not click on links, they could take you to a fake HMRC site
• do not disclose personal/confidential information
• forward suspicious HMRC text messages to 60599 (charged at your network rate)
• forward suspicious emails to the HMRC phishing team at, phishing@hmrc.gsi.gov.uk
• check our security guidance: Dealing with HMRC Phishing and scams.

If you have suffered financial loss should contact Action Fraud on 0300 123 2040 or use their online fraud reporting tool.

As expected, the Chancellor, Rishi Sunak has announced a new package of support measures in a statement to the House of Commons on 26 May 2022. The measures will be targeted to the most vulnerable members of society in a total package of measures that we are told will cost £15bn and bring the total cost of living support to £37 billion this year.

This means that, including measures already announced, all of the eight million most vulnerable households in the country will get £1,200 of one-off support in total this year to help with the cost of living.

The main measures announced by the Chancellor on 26 May 2022 are as follows:

Energy Bills Support Scheme doubled to a one-off £400.

Back in February, the Chancellor announced a number of measures to help people cope with fast rising energy costs. This included a £200 universal discount on energy bills for domestic electricity customers, with a clause that the money would need to be paid back in the future. The situation has worsened since then and the Chancellor acknowledged this in his latest statement.

We have already seen record increases in fuel bills from 1 April 2022 affecting some 22 million customers across the UK. This means the average consumer paying by direct debit has seen an annual increase of £693 from £1,277 to £1,971 per year with those paying by prepayment facing even higher costs. The price cap is updated twice a year and the head of OFGEM has suggested that the price cap could increase again to around £2,800 in October 2022.

This has prompted the Chancellor to change tack and announce a doubling of the Energy Bills Support Scheme to £400 and to cancel the repayment schedule. This means that the support will now be provided in the form of a non-repayable grant.

This support will apply directly for households in England, Scotland, and Wales with the government delivering equivalent support to households in Northern Ireland.

£650 one-off Cost of Living Payment for those on means tested benefits

The Chancellor also stressed that he was seeking to provide help to the most vulnerable people across the UK. One of these measures will help the 8 million households in receipt of mean tested benefits. These households will receive a payment of £650 this year. The DWP will make the payment in 2 lump sums. The first payment in July and the second at an as yet unspecified date in the autumn. Payments from HMRC for those on tax credits only will follow shortly after each to avoid duplicate payments.

HMRC and DWP will provide further guidance, and the government will set out the eligibility date for the second instalment, in due course. It has been confirmed that the payment will be tax-free, will not count towards the benefit cap, and will not have any impact on existing benefit awards.

One-off £300 Pensioner Cost of Living Payment

An additional one-off payment of £300 will also go to the over 8 million pensioner households across the UK who receive the Winter Fuel Payment. This amount will be paid in addition to any other one-off support a pensioner household is entitled to.

The Winter Fuel Payment is not taxable and does not affect eligibility for other benefits. The government will make these payments directly to households across the UK. This money will be paid out as top-up to pensioner households annual Winter Fuel Payment in November / December.

£150 Disability Cost of Living Payment

The Chancellor also announced a non-means tested one off disability payment of £150 to some six million people across the UK who receive the following disability benefits:

• Disability Living Allowance
• Personal Independence Payment
• Attendance Allowance
• Scottish Disability Benefits
• Armed Forces Independence Payment
• Constant Attendance Allowance
• War Pension Mobility Supplement

Many of these recipients also receive means tested benefits which means this £150 of assistance will be on top of the £650 payment for those receiving means tested benefits.

£500m increase and extension of Household Support Fund

The Chancellor also announced an extra £500 million of local support via the Household Support Fund for vulnerable households that might not receive some of the other support measures. The Household Support Fund will be used to help those most in need with discretionary support. This could include using small grants to meet daily needs such as food, clothing, and utilities. The extra support will see the Fund extended from this October to March 2023.

Energy Profits Levy

The cost of these measures will be in part paid for by the introduction of a new temporary Energy Profits Levy on oil and gas firms. Whilst the Chancellor was at pains not to refer to this Levy as a windfall tax, this is basically what is being introduced. This Levy will target firms in the sector making enormous profits because of the spike in commodity prices.

This new Levy is expected to raise around £5 billion over the next year and will be charged at a rate of 25%. The Energy Profits Levy will apply to profits arising on or after 26 May 2022. This will increase the headline rate of tax on oil and gas firm profits from 40% (made up of a 30% Ring Fence Corporation Tax and 10% Supplementary Charge) to 65%.

To help offset some of the impact on these firms, the Chancellor also announced the introduction of a new Investment Allowance to encourage firms to invest in oil and gas extraction in the UK. The Chancellor also referred to the introduction of the Levy as temporary and said that if oil and gas prices return to historically more normal levels, the Levy will be phased out. In addition, the legislation will also include a sunset clause, which will remove the tax after 31 December 2025.

The new Investment Allowance is similar in style to the super-deduction and will nearly double the tax relief available for firms on their investments. The new allowance will mean businesses will receive an overall 91p tax saving for every £1 they invest.

The UK Infrastructure Bank Bill, announced as part of the measures in the Queen’s speech, represents the final step in setting up the UK Infrastructure Bank as an operationally independent institution. The new Bank officially opened for business in June 2021 but the Bill will remove legal obstacles so the Bank can lend directly to local authorities and the Northern Ireland Executive for infrastructure projects.

The Bank, headquartered in Leeds, is tasked with accelerating investment into ambitious infrastructure projects, cutting emissions and levelling up every part of the UK. The establishment of the Bank is expected to result in a long-lasting public institution helping to drive growth across the UK.

Since its launch, the Bank has completed five deals, including financing the UK’s largest solar farm in South Wales, investing £100 million to provide high-capacity broadband to around 500,000 properties in hard-to-reach UK premises and a further £50 million to improve digital connectivity for rural homes and businesses across Northern Ireland.

The bank started with an initial financial capacity of £22bn made up of £12bn in capital and £10bn in government guarantees. This is expected to unlock more than £40 billion of overall investment in local government lending and to the private sector.

The new Financial Services and Markets Bill, announced as part of the Queen's speech, will provide increased protections for those still dealing with cash. Access to cash remains vital for many people across the UK, including the more vulnerable in society. The government has committed to preserving the use of cash as an option even as the UK becomes more reliant on digital banking and payments. 

The new Bill will support consumers by protecting access to cash and help ensure the continued availability of withdrawal and deposit facilities across the UK. The Bill will also enable the Payment Systems Regulator to require banks to reimburse authorised push payment (APP) scam losses, protecting individuals who are the victims of fraud.

HM Treasury has published the following listing of the main elements of the Bill:

• Revoking retained EU law on financial services and replacing it with an approach to regulation that is designed for the UK. This includes the Solvency II legislation governing the regulation of insurers, which the government has committed to reform.
• Updating the objectives of the financial services regulators to ensure a greater focus on growth and international competitiveness.
• Reforming the rules that regulate the UK’s capital markets, the engine of the UK economy, to promote investment.
• Ensuring that people across the UK continue to be able to access their own cash with ease.
• Introducing additional protections for those investing or using financial products, and to make it safer and support the victims of scams.

More details will be available when the Bill is formally introduced.