Feedback from readers: 7 May 2020

06 May 2020

Issue: 4742 / Categories: Comment & Analysis

Correspondence from readers on topical subjects: coronavirus, making tax digital and research and development tax relief claims.

Coronavirus changes

In our article ‘Coronavirus checklist’ (Taxation, 26 March 2020, page 10) we referred to universal credit and that the government was making changes to enable faster access to this during the present outbreak, including dispensing with the usual requirement for a minimum income floor.

We also said that an application for universal credit usually released HMRC from any existing time-to-pay (TTP) arrangement, with the tax debt being transferred to the Department for Work and Pensions. This was based on guidance (tinyurl.com/ycdk279u) in HMRC’s Debt Management and Banking Manual at DMBM804200:

‘HMRC is bound by the terms of arrangements that we enter into. However, we are entitled to withdraw and cancel any arrangement if … a customer makes a claim for universal credit (in this case, any existing TTPs will be cancelled and all tax credits debt for each customer will be transferred to the DWP including any debt remaining from a cancelled TTP); the DWP will advise of the rate of recovery and any discussions on this will need to be had with them.’

We have now been advised that the note above saying that ‘any existing TTPs will be cancelled’ refers only to tax credit TTPs and that arrangements relating to taxes will continue, unless the person gets in touch to with HMRC to say that their new circumstances mean this needs to change.

Also on the subject of universal credit, advisers should note that if existing tax credit claimants apply for universal credit, their tax credit award will end and – with few exceptions – they will not be able to get back into the tax credits system.

Taxation magazine.

More MTD

I have to agree wholeheartedly with Gerri Baird’s comments on making tax digital (‘Feedback’, Taxation, 19 March 2020, page 20), but then to read in the same issue (page 5) that HMRC will no longer be sending paper returns to those who have always used them is quite disgraceful. Do these people forget who pays their salaries? I am sure all those who still file paper returns are (like me) in the ‘elderly’ bracket and in many cases will have to find someone to print a form for them. Surely HMRC should be making things easier for this age group and not more difficult. I suppose it will even be too much to ask for the ‘short tax return’ to be available to print off.

I can envisage this being the final straw – retirement beckons which, while it may delight the powers that be, will greatly upset my clients who would then face a big increase in fees or, dare I say, just not bother.

Taxation reader.

Research and development tax relief

I refer to Andrew Hubbard’s comments on claims to research and development (R&D) tax reliefs under ‘Time to counter abusive R&D claims’ (Taxation, 27 February 2020, p5). My own experience and comments are as follows.

We have submitted many R&D claims on behalf of clients and for a great many years.
We have found HMRC investigates a very high percentage of them – say 25%.
We have never failed with a claim.
We have found that, sometimes, HMRC does not seem to know or follow, or both, its own published guidelines or the legislation. We therefore always recommend clients who are submitting R&D claims to take out tax investigation insurance.
We are aware of situations where businesses are being given R&D advice that seems, on the face of it, to be at odds with the rules. If that happened to one of our clients – and it hasn’t yet – we would have to do precisely what our ethical guidelines require us to do.
The linking of R&D to other tax reliefs – in particular the patent box – might increase the incidence of questionable R&D claims.

It is sad that, yet again, a valuable tax relief appears to be subject to abuse by those who appear to be both unprincipled and unprofessional.

Chris Try, Try Lunn & Co.

Issue: 4742 / Categories: Comment & Analysis