Late tax returns
On 7 January, HMRC announced that there would be no automatic late filing penalties provided that tax returns are filed by midnight on 28 February 2022. Anyone seeking to take advantage of the extra month should keep in mind that it is the penalty trigger, not the filing deadline itself, that has moved. This means that where a return is filed in February there will be no penalty, but the enquiry window will be extended to the relevant quarter day in 2023, i.e. 30 April.
There will also be no late payment penalty where outstanding tax is paid in full, or a time to pay arrangement is agreed, by 1 April 2022. Interest will still apply from 1 February.
VAT penalty overhaul delayed
The default surcharge system of penalties for late VAT returns and payments was scheduled to be replaced in April 2022, coinciding with the extension of Making Tax Digital for VAT to all VAT-registered businesses. However, the roll out date has been pushed back to 1 January 2023.
Business rate relief abuse
A perceived loophole that allows owners of multiple properties to avoid council tax is to be closed from April 2023. Under the current system, those who own second (or more) homes in England can bring the properties into the business rates regime by stating an intention to let them to holiday makers. Small business rates relief can then be claimed.
In practice, there is concern that many of these statements are false, and the reality is that the properties remain empty for much of the time. No proof of occupation as a holiday let is required.
From April 2023, this will change. In order for a property to fall within the business rates regime, the owner will need to provide evidence that it has been available to let for at least 140 days, and actually let for 70 days in the previous year, and that it will be available in the coming year for 140 days. The lettings must be short-term, and on a commercial basis.
Draft legislation should make the details of these tests clear in due course. It remains to be seen as to whether there will be similar elections available as exist under the furnished holiday lettings legislation to protect periods of sparse activity.
The current Finance Bill has been amended to ensure HMRC can use the Discovery Assessment provisions in s.29 TMA 1970 to recover unpaid tax arising from the higher income child benefit charge or certain pension-related charges. Sections 95-97 achieve this by shifting the focus of the legislation away from “undeclared income” to “an amount of tax that ought to have been assessed”. Of particular interest is s.95(3), which provides that the amendments will have retrospective effect, unless the assessment is subject to an appeal notice that was given to HMRC before 30 June 2021.
HMRC is inviting responses to a consultation on uncertain tax treatment, in relation to new rules affecting large businesses from 1 April 2022.
HMRC is considering the situation where an employee is reimbursed by the employer for the actual cost of electricity used in charging an electric vehicle for business purposes. This is to determine what evidence can be provided, to allow the employer to claim the related VAT, subject to the normal rules. Simplification measures are also being considered.
Finally, the government has opted not to change the VAT status of land and property supplies to taxable by default following consideration.