Deed of assignments won’t be treated as nominations for income tax

The ability to legally assign an income tax repayment, or the right to an income tax repayment, to a third party has been removed by HMRC from March 15 this year, meaning any repayment will remain the legal property of the taxpayer in question.

The change affects those who may have used a business, an accountancy firm, or a tax agent to facilitate their access to a repayment, along with any company involved in helping individuals in this way.

Why has this happened?

HMRC has made this ruling in a bid to protect taxpayers from unscrupulous operators in this sector, and to make the tax rebate system fairer and simpler for all. The Government wants to maintain trust in the sector, and to ensure that when taxpayers are entitled to claim a tax repayment, they can do so “easily and freely”.

There have also been some concerns around consumer protection issues in the “repayment agent” market, according to Gov.uk.

What are people being protected from?

There are contracts that many repayment agents ask their clients to sign which transfer the legal entitlement to the income tax repayment to them. What many people don’t understand is that to revoke this assignment, both parties must agree – it cannot be done by one side alone. Under these contracts, rogue agents can charge excessive fees to their clients and at times the client won’t benefit from other payments that they may not be aware of.

The bottom line is that you should either make the income tax repayment yourself, or work with an accountant you know and trust. In any case, at the very least, you should make sure you understand the implications of any piece of paper you’re signing.

We can help you meet your obligations

If you think you are due an income tax rebate, then we are happy to help advise you on the best way to get this sorted.

ECL now open online for registrations and returns

Any regulated businesses that need to sign up for the Economic Crime (Anti-Money Laundering) Levy (ECL) can now both register and make returns via the online service. Registrations and returns cannot be made by tax agents, so every affected business must sign up and make their returns directly.

To file a return online, businesses must have registered with the ECL and have requested their access code. Once they have both they can file their returns.

The ECL online service is accessible via GOV.UK and if your business needs to register, you will need:

• information about its UK revenue for the last financial year;
• the date when the organisation started anti-money laundering regulated activities;
• the contact details of a responsible person in their organisation, including all the following:
  • name;
  • role;
  • email address;
  • telephone number;
  • the business sector the organisation operates in.

Source: Gov.uk.

How often you file and pay depends on your collection authority

Depending on who your relevant collection authority is, you may need to file a return and pay a fee every year. It will be one of the Financial Conduct Authority, the Gambling Commission, or HMRC. You can find out background information on ECL at GOV.UK.

If your collection authority is HMRC, for example, then affected customer will only register for the ECL once but must submit a return and pay the ECL every year your UK revenue exceeds the threshold. This must be done by September 30 each year, so the payment for April 1, 2022, to March 31, 2023, is due on September 30, 2023.

Let us help you

If you think you may need to sign up to the ECL or have already signed up and need help with filing your returns, please get in touch and we will help guide you through the process.

Alcohol duty changes – what it means for pubs, stores and small brewers

Up to 38,000 pubs and bars which have seen cuts in the tax they pay on the draught products they serve will be better off thanks to changes to the way that Alcohol Duty is calculated from August 1, 2023.

The cuts will make pints and other products sold on tap 11p cheaper than supermarket equivalents, in a bid to help the hospitality industry. It means they can finally compete on a level playing field with supermarkets and continue to be a key part of their local communities, according to the Government.

What are the new duty rates?

The changes are designed to modernise and simplify the Alcohol Duty system which has been in place for the last 140 years – changes the Government claims are only possible to make now the UK has left the EU.

The key changes are:

• all products taxed in line with alcohol by volume (ABV) strength, rather than different duty structures for different drinks;
• fewer main duty rates, from fifteen to six, to make it easier for businesses to grow and operate;
• there will be lower taxes on lower alcohol products – those below 3.5% alcohol by volume (ABV) in strength – a huge growth area in the drinks industry;
• all drinks above 8.5% ABV will pay the same rate regardless of product type.

Source: Gov.uk

This means Irish cream will fall by 3p, cans of 5% ABV ready-to-drink spirit mixers will be 6p cheaper, Prosecco will fall by 61p and 500ml of 3.4% pale ale will cost 20p less per bottle, according to Government data.

However, it also means other drinks with more than 8.5% ABV will become more expensive. For example, those partial to a port or sherry will see their favourite tipple rise by £1.30 and 97p per 75cl bottle respectively, according to the Wine and Spirits Trade Association (WSTA). Vodka will also go up 76p per 70cl bottle, and a typical 12% ABV bottle of red wine will go up by 44p.

New tax relief for small drinks producers to increase innovation

There is also new relief for small producers to help them increase innovation and add to the growth in the UK alcoholic drinks market, which is up 6% year-on-year and is now worth just under £50 billion. Booze sales are forecast to reach £60.9 billion in 2026.

So, the Small Producer Relief extends the Small Brewers Relief scheme and now allows businesses producing alcoholic products with an ABV lower than 8.5% to benefit from reduced rates of alcohol duty on qualifying products. This should help them experiment and innovate in new types of drink production, and also benefit from the increased trend towards lower alcohol drinks.

Barry Watts, Head of Policy and Public Affairs, Society of Independent Brewers, said: “[This] is the culmination of five years of consultation on the future of Small Breweries’ Relief – a scheme that has made the huge growth of craft breweries possible over the past twenty years. These changes will finally address the ‘cliff edge’ which was a barrier to small breweries growing and build on the scheme’s success by applying it to other alcoholic products below 8.5%.”

The Brexit Pubs Guarantee

Along with these changes to alcohol duty, the Government has also promised that the price of alcohol in pubs will always be less than retailers – something known as the Brexit Pubs Guarantee.

Prime Minister Rishi Sunak said: “I want to support the drinks and hospitality industries that are helping to grow the economy, and the consumers who enjoy the end result.

“Not only will today’s changes mean that that the price of your pint in the pub is protected, but it will also benefit thousands of businesses across the country.

“We have taken advantage of Brexit to simplify the duty system, to reduce the price of a pint, and to back British pubs.”

We can help you

If you need help with calculating the duty you need to pay for your business, please get in touch with us and we will help you understand what you need to do.

Pension tax overpayments – £56m returned in Q2 2023 alone, so here’s how to claim

People making the most of flexible pension withdrawals have been facing tax overpayments due to miscalculations by HMRC. In Q2 2023 alone, the taxman repaid £56,243,842 to people who had been taxed more that they should on their pension withdrawals. This amounts to an average of £3,551 per person.

The figure is up nearly £8m on the amount overpaid in the first quarter of the year and is nearly double the £33.7m collected in the same period last year. As the cost-of-living crisis continues to wreak havoc on people’s wallets, this is money that would be better being with the people who need it most.

How do you know if you have overpaid?

The people affected by the tax overpayment are those who are starting to access their pension, and it is because of an oddity within the PAYE system, according to Jon Greer, head of retirement policy at Quilter.

He added: “This emergency tax situation can be particularly frustrating for people trying to access their funds quickly. It arises due to an oddity within the PAYE system when people start to take money from their pension as they are not taxed using the correct tax code.”

The problem with emergency tax codes is that you will often end up being charged more in tax than you should be, so reclaiming the overpayment is essential. To do this you would need to use form P55 if you have flexibly accessed part of your pension, form P50Z if you have emptied your pension pot, or P53Z if you have received a serious ill-health lump sum or have accessed your pension while you are still working or receiving benefits.

However, you should always check the tax code that is being applied to any income you receive to make sure you are not paying too much tax.

How many people are reclaiming tax?

It seems plenty of people are putting in their tax claims to make sure they are getting the money they are due. For example, just in Q2 2023, HMRC said it has processed 11,232 P55 forms, 2,987 P53Z forms, and 1,620 P50Z forms, suggesting people are accessing their pensions more readily to help cope with the cost-of-living crisis.

Even though inflation has dropped slightly in the last month, wage growth means we could see additional base rate rises implemented by the Bank of England before the end of the year, according to some experts.

Flexible pension access is a way of increasing your income

If you are over 55 and want to access your pension – the minimum age can depend on the scheme rules for your employer or the insurance company that provides your pension plan – then you can begin to make withdrawals.

The first 25% of your pension can be taken tax-free, and this is easy to calculate if you take your pension pot as whole. But if you choose to take your pension out in a flexible way – which means taking a bit at a time – then you will need to pay the relevant amount of tax on that income.

It becomes more complicated if you are still working and have additional income to take into consideration for tax. This is where the tax overpayments are typically happening. One way around this is to work with a tax professional who can help make sure your tax code is correct, and that you are not going to be paying more than you need to the taxman.

This helps to reduce the risk of overpaying your tax in the first place, allowing you to keep the money in your pocket rather than having to wait for the taxman to give it back to you, which can take some time.

Contact us

If you are considering accessing your pension soon, or you have already accessed it but don’t know whether your tax code is correct, then please get in touch and we will check that you are not overpaying tax or that you have any tax rebates due from HMRC.