HMRC notices

There are special procedures for moving goods in and out of Northern Ireland. Under the Northern Ireland Protocol, all Northern Ireland businesses continue to have access to the whole UK market. 

HMRC lists the following six-steps that should be considered before you move goods between Northern Ireland and non-EU countries (including Great Britain):

1. If you plan to move goods between Northern Ireland and non-EU countries (including Great Britain), you will need an EORI number that starts with XI.
2. If you plan to move goods between Northern Ireland and Great Britain or bring goods into Northern Ireland from outside the UK, you can sign up for the free Trader Support Service.
3. If you are not using the Trader Support Service, you can get someone to deal with customs for you, or find a training provider to help you.
4. If you bring goods into Northern Ireland, you can find out how to make sure the right tariff is applied to the goods you bring from Great Britain (including whether you can claim preferential rates of duty on goods covered in the UK’s deal with the EU) or from countries outside of the EU and the UK.
5. If you import goods regularly, you can apply for a duty deferment account to delay paying most customs charges.
6. To understand any duty or other measures that apply to your goods, you need to find the right commodity code to make your declaration when you bring goods in or send goods out of Northern Ireland.

HMRC also lists the following four-steps that should be considered before you move goods between Northern Ireland and the EU:

1. If you plan to move goods between Northern Ireland and the EU, you will need to tell HMRC so that you are identified as trading under the Northern Ireland Protocol.
2. You will need to add an ‘XI’ prefix before your UK VAT number on all documentation when communicating with EU customers or suppliers. This is so VAT can be accounted for correctly on transactions between Northern Ireland and the EU using rules on intra-EU movements.
3. If you make sales of goods from Northern Ireland to consumers in the EU check how to pay VAT using the One Stop Shop (OSS) Union scheme.
4. If you import eligible low value goods into Northern Ireland and have registered for the VAT Import One Stop Shop (IOSS) in the EU, find out how to tell HMRC your IOSS registration number.

HMRC has powers introduced in the Finance Act 2022 to name tax avoidance schemes and their promoters. Under this legislation HMRC can name avoidance scheme promoters, publish details of the way they promote tax avoidance schemes and name the schemes they promote.

This allows HMRC to warn users and potential users of these schemes at the earliest possible stage, of the risks associated with use of the scheme, and to help those already involved to leave these avoidance arrangements. The latest list was published on 19 January 2023 and includes details of five further tax avoidance schemes.

Three of the schemes make use of complex company structures and directors’ loan accounts to extract profit, providing directors with income where Corporation Tax, Income Tax and National Insurance contributions were not correctly paid. The other two schemes make one payment to users that is close to National Minimum Wage and then another disguised payment, which the promoters claim is non-taxable and Income Tax and National Insurance are not correctly deducted.

HMRC will continue to regularly update this list by publishing the details of other tax avoidance schemes and their promoters. It is important to note that there are other schemes and the fact that a scheme is not included in HMRC’s list does not mean that the scheme works or is in any way approved by HMRC.

The Trader Support Service was designed to help businesses moving goods under the Northern Ireland Protocol after the Brexit transition period came to an end. Under the Northern Ireland Protocol, all Northern Ireland businesses continue to have access to the whole UK market. 

The service was due to end this year but has been extended until the end of December 2023. The digital platform helps businesses and traders of all sizes continue to trade seamlessly between Great Britain and Northern Ireland.

The service is free to use and:

• Offers comprehensive education, training and advice about the changes to the way goods move under the Northern Ireland Protocol.
• Can complete customs and safety and security declarations when these are required, for movements between Great Britain and Northern Ireland, so that businesses do not have to access HMRC systems directly.

Since the Trader Support Service was launched more than 47,000 businesses have signed up.

There are special rules to help ensure that goods sent from abroad are taxed appropriately and do not disadvantage UK businesses supplying goods in the UK. For example, by having to compete with VAT free imports. This includes goods that are new or used and bought online, bought abroad and shipped to the UK and goods received as gifts.

This means that in order to receive goods you may have to pay VAT, Customs Duty or Excise Duty if they were sent to:

• Great Britain (England, Wales and Scotland) from outside the UK.
• Northern Ireland from countries outside the UK and the European Union (EU).

VAT is charged on all goods (except for gifts worth £39 or less) sent from:

• outside the UK to Great Britain; and
• outside the UK and the EU to Northern Ireland.

Online marketplaces that engage in facilitating the sale of goods are usually responsible for collecting and accounting for the VAT. If the VAT has not been collected, VAT will have to be paid to the delivery company either before the goods are delivered or when goods are collected. If you have to pay VAT to the delivery company, it’s charged on the total package value which includes the value of the goods, postage, packing, insurance and any duty owed.

Generally, there are no Customs Duties payable on non-excise goods worth £135 or less. There are various rates payable above this level and on excise goods of any value.

HMRC’s Shared Workspace is a service that allows businesses and tax agents to share sensitive data, for example, accounts or employee information, with HMRC. 

According to HMRC, the service allows members to ‘share’ information in a ‘space’ where they can work together in real time. More than one person can view or edit material at the same time, with all amended versions being automatically saved and organised.

In order to use the Shared Workspace users must be invited by HMRC or request HMRC online service. Shared Workspace is available to qualifying businesses and agents, not individuals. 

Shared Workspace is very versatile and can be designed to meet the needs of customers who may deal with the different parts of HMRC. This also includes more complex and specialist work involving HMRC.

Before requesting to use this service, HMRC recommends contacting your local HMRC office and they will see whether the service is suitable for your needs.

An overdrawn director's loan account is created when a director (or other close family member) 'borrows' money from their company. Many companies, particularly 'close' private companies, pay for personal expenses of directors using company funds. Where these payments do not form part of a director’s remuneration, they are usually posted to the director’s loan account (DLA). 

The DLA can represent cash drawn by a director as well as other drawings by a director (including personal bills paid by the company). Whilst it is quite common for small company accounts to show an overdrawn position on a DLA, this can create some unwelcome consequences for both the company and the director. The rules are further complicated if the loan is for more than £10,000 as interest must be charged. 

There are also further Income Tax costs if the loan is written off or 'released' (not repaid) by the company. If this happens, the company must deduct Class 1 National Insurance through the company’s payroll. The director will be required to pay Income Tax on the loan through their Self-Assessment tax return.

There are no set rules for the way in which you keep your tax records, but they are usually evidenced on paper, digitally or as part of a software program.

If you are keeping records used to complete a personal (non-business) self-assessment tax return, you must keep records for 22 months from the end of the tax year to which they relate. This means that you should keep all records for the tax year ended 5th April 2022 until at least the end of January 2024. If you file a late self-assessment return, then you will need to keep your records for at least 15 months after the date you filed the tax return. 

The types of records you should keep include those relating to:

• Income from employment e.g., P60, P45 or form P11D forms.
• Expense records if you have been required to pay for items such as tools, travel or specialist clothing for work.
• Income from employee share schemes or share-related benefits.
• Savings, investments and pensions e.g., statements of interest and income from your savings and investments.
• Pension income e.g., details of pensions (including State Pension) and the tax deducted from it.
• Rental income e.g., rent received and details of allowable expenses.
• Any income which is open to Capital Gains Tax.
• Foreign income.
• State benefits.

Please note, this is not a complete list. You should retain any other important records that were used in preparing your self-assessment return. 

If you need to keep records for other reasons, there are different time limits to consider. For example, self-employed individuals must keep business records for at least five years from the 31 January submission deadline for the relevant tax year. This means that for the 2020-21 tax year – when online filing was due by 31 January 2022 – you must keep your records until at least the end of January 2027. There are penalties for failing to keep proper records or for keeping inaccurate records. 

There are special rules known as the miscellaneous income sweep-up provisions that seek to charge tax on certain income. This unusual provision, which is broad in scope, catches income that would not otherwise be charged under specific provisions to Income Tax or Corporation Tax.

Amongst the types of income covered are:

• payment for a service where it was agreed that the service would be provided for reward.
• income received under an agreement or arrangement, which is not otherwise taxable.
• payment for the use of money that is not interest or does not fall within the loan relationships legislation.

HMRC is keen to stress that although the provisions are sweep-up provisions, this does not make all miscellaneous income taxable.

Specifically, the provisions do not tax:

• capital accretions on isolated transactions in assets.
• voluntary receipts such as gifts and gratuities.
• gambling winnings from wagers and bets.
• certain post-cessation receipts.

The settlement legislation seeks to ensure that where a settlor has retained an interest in property that the income arising is treated as the settlor’s income for all tax purposes. A settlor can be said to have retained an interest if the property or income may be applied for the benefit of the settlor, a spouse or civil partner. In general, the settlements legislation can apply where an individual enters into an arrangement to divert income to someone else and in the process, tax is saved. 

However, in most everyday situations involving gifts, dividends, shares, partnerships, etc. the settlements legislation will not apply. For example, if there is no “bounty” or if the gift to a spouse or civil partner is an outright gift which is not wholly, or substantially, a right to income.

HMRC’s manuals provide the following two indicative examples of how the legislation applies to non-trust settlements.

Direct gift of shares to minor children

Mr and Mrs X each own 50 of the 100 issued ordinary shares in X Ltd. They each decide to give 10 shares to each of their children aged 12 and 15. The children each then hold 20 shares, 10 from each parent. We would treat the dividends paid to the children as the income of their parents.

Indirect gift of shares from parent

Mr J owns 60 of the 100 issued £1 shares in J Limited. Mr J is the sole company director and is the person responsible for making all the company’s profits because of his knowledge, expertise and hard work. On starting up the company, Mr J allowed his mother to subscribe £40 for 40% of the shares but shortly afterwards she gifted them to her grandchildren. The circumstances are such that the decision to issue 40 shares at par is a bounteous arrangement (as were the shares in Jones v Garnett). The true settlor here is Mr J rather than the children’s grandmother. ITTOIA/S629 therefore applies and attributes the dividends received by the children to Mr J for tax purposes.

The tax gap for the 2020-21 tax year has been published and remains at 5.1%. This is the second lowest recorded percentage and remains unchanged from the previous 2019-20 tax year.

The tax gap is basically the difference between the amount of tax that should have been paid to HMRC and the amount of tax collected by the Exchequer. The gap includes tax that has been avoided in the UK’s black economy, by criminal activities, through tax avoidance and evasion. However, it also includes simple errors made by taxpayers in calculating the tax they owe as well as outstanding tax due from businesses that have become insolvent. 

In monetary terms, the tax gap is equivalent to lost tax of £32 billion. This is £2 billion less than the tax gap in 2019-20. This is due to the fact that total amount of tax due fell from £672 billion in 2019-20 to £635 billion in 2020-21 because of the economic impact of COVID-19.

The key findings from HMRC’s Measuring the Tax Gap publication include:

• The UK tax gap in 2020-21 is estimated to be 5.1% of total theoretical tax liabilities (£32 billion), which means HMRC protected 94.9% of all tax due.
• The tax gap reduced from 7.5% in the tax year 2005-6 to 5.1% in 2020-21. 
• The tax gap for Income Tax, National Insurance contributions and Capital Gains Tax (IT, NICs and CGT) is 3.5% in 2020-21 at £12.7 billion – this is the biggest share of the total tax gap when viewed by type of tax (39.5%).
• The tax gap for VAT is 7% in 2020-21 and is the second biggest share of the total tax gap at £9 billion (28.0%).
• The tax gap for Corporation Tax reduced from 11.5% in 2005-6 to 9.2% in 2020-21 reaching a low of 6.5% in 2011 to 2012 and remaining stable since 2014-15.

HMRC’s press release on the tax gap states that ‘the reduction is a result of the government’s action to help taxpayers get their tax right first time, whilst bearing down on the small minority who are deliberately non-compliant’. The tax gap was estimated to be as high as 7.5% in 2005-6.