December 2021 Tax Update

It’s almost Christmas which undoubtedly means short days, chilly evenings and (hopefully) lots of festive celebrations. It also means another year is drawing to a close although it feels like 2020 only just ended! We can only hope that 2022 brings renewed hope for the end of the pandemic and that businesses continue to grow in its wake.

Self-assessment Tax Returns

With less than two months to go before the deadline for filing your tax return and paying your tax we gently nudge those of you who are yet to provide information to do so as soon as possible. This is in point particularly if you have a liability which you may not be able to afford to settle before the due date.

Late payment (and late filing) results in an automatic £100 penalty which increases if outstanding three months after the due date. Interest is also charged on all late payments. As with last year, HMRC have simplified the method by which an individual can arrange a payment plan if their total liability for the year is less than £30,000, their tax return has been filed, and it is within 60 days before the due date for payment i.e. any time from now.

Taxpayers who meet the above conditions can arrange the payment plan via their online tax account without the need to call HMRC (and be on hold for 30 minutes) to discuss options with an HMRC officer. It should be noted that the return must have been filed, so act now if you have concerns over meeting your liability.

IR35

Yet another IR35 tribunal case in respect of TV presenters has landed on HMRC’s side. Dave Clark, a Sky presenter, provided his personal services to Sky TV for a number of years via his limited company (LPPL). The contract, which provided for the personnel of LPPL to supply services as a ‘commentator, presenter, interviewer, guest, or other participant’ was renewed every two years. Mr Clark was the only employee and was paid between £155,000 and £160,000 for approximately 64 days of work each year.

The ‘indicators of employment’ were reviewed in turn by the judges and it was found that, whilst Mr Clark had overall control of his presenting duties and was not integrated in any way with Sky the fact that he was paid the same amount every month regardless of the number of days work he had performed was enough to demonstrate that a mutuality of obligation existed.

Perhaps unhelpful to Mr Clark’s case is the fact that, owing to the recent changes to responsibility for determining employment status for IR35 moving to the end client (for medium and large companies), Sky changed its contract arrangements with freelance presenters and employed them all in April 2020.

R&D Consultation

Following consultation, the government has this week set out plans to go ahead with changes to the criteria for R&D claims and the introduction of anti-abuse measures.

At the autumn budget the government announced the reforms to the R&D reliefs (R&D Expenditure Credit and SME R&D Relief) would come into effect from April 2023. These reforms include:

• expenditure via licence payments on datasets used directly for R&D will qualify for relief, but datasets that can be resold or have a lasting value to the business cannot;
• the cost of cloud computing services used directly for R&D will be eligible for relief, but costs of data storage or server capacity will not.
• subcontracted R&D work based outside of the UK R&D will no longer qualify, although the costs of software and consumables sourced overseas, payments to overseas clinical trial volunteers and payments for data and cloud computing services sourced overseas will.

The government will publish draft legislation in the summer of 2022 and at that time will ask for views from stakeholders on the detailed implementation of these measures.

Corporate Tax Abuse

It has recently been report that the UK and its overseas territories are responsible for contributing 39.2% (£140bn) of the estimated £359bn tax lost every year.

The report (published jointly by the Tax Justice Network, Global Alliance for Tax Justice, and Public Services International) states that £231bn of this tax loss is due to multinational corporations abusing cross-border corporate tax rules and £127bn is due to offshore tax abuse by wealthy individuals.

Lower income countries are reported to be losing 48% of their public health budgets while higher income countries lose only 9.7%.

The report calls for the responsibility for setting tax rules to move from the OECD to the UN as higher income countries are reportedly responsible for facilitating 78% of global tax losses whilst losing only 9.7% of their public health budget – lower income countries are losing 48%.

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