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PAYE coding out of potential underpayments.
HMRC Agent Update 76 announced HMRC now has the facility to code out self assessment (SA) underpayments in the current year (CY) tax code, rather than just in the next year (CY+1).
However we are now seeing examples of HMRC apparently using this facility to collect ‘potential underpayments’ for the CY, for non-SA cases. This can result in large PAYE deductions over a few months.
We appreciate that individual taxpayers can contact HMRC to discuss/appeal their tax coding notices but we’d like to know if other agents have also seen HMRC adopting a new policy of coding out ‘potential underpayments’ in the CY for non-SA cases and, if so, are the supposed ‘safeguarding limits’ (promised in Agent Update 76) being followed?
Query 20,095 – Codebreaker.
Does date of disposal affect tax rate?
My client company has a September year end – so in the year to 30 September 2023 it will be affected by the change in corporation tax (CT) rates which come in on 1 April. The director has told me that the company is likely to realise a large capital gain at some point in the next few months but that there is some flexibility over the timing. He has asked me whether the company will pay the same rate of tax regardless of whether the disposal will be before or after 1 April.
The profits of a company for CT include its chargeable gains (CTA 2009, s 2(2)). Typically the profits are apportioned on a time basis where this straddles a financial year (CTA 2009, s 8 and CTA 2010, s 1172). Both s 8 and s 1172 are ‘subject to any contrary provision in the Corporation Tax Acts’.
The commencement rules for the change in CT rates on 1 April 2023 provide that where an accounting period straddles the 1 April 2023 start date, it is split into two separate accounting periods (FA 2021, Sch 1 para 34(2)). Para 34(3) also states that: ‘For this purpose all necessary apportionments are to be made between the two separate accounting periods’ – but it is not entirely clear what is necessary for these purposes. The amount of chargeable gains to be included in a ‘company’s total profits for an accounting period is the total amount of chargeable gains accruing to the company in the period after deducting any allowable losses accruing to the company in the period…’ (under TCGA 1992, s 2A).
I know that for long periods of account this is split into two accounting periods and any chargeable gain is allocated based on the date of disposal, rather than adding to total profits and apportioning on a time basis. But presumably that is because there are two accounting periods and the gain has to be allocated to the accounting period in which it accrues (under the rule in TCGA 1992, s 2A).
Will the date of disposal affect the tax rate? What do readers think?Query 20,096 – Bifurcated.
Will income tax exemption apply to UK work trip?
I have been asked to provide guidance to a tax adviser in Brazil. His client is a freelance television producer who lives and works in Brazil. She will be providing production services to a media organisation which is covering the Women’s Finalissima football match at Wembley Stadium on 6 April 2023. The media organisation is accredited with UEFA. She will arrive in the UK on 30 March and plans to leave on 14 April. She expects to work from arrival until the end of 7 April, and will spend the rest of the time travelling around the UK.
Will she fall within the income tax exemption for duties connected with Finalissima (under the major sporting event regulations for Finalissima which are expected imminently), and what does the adviser need to do to make sure she does not inadvertently end up with an unexpected tax bill? Will her ‘employer’ be required to withhold tax from any payments, and would it make sense for her to vary her travel plans or change her dates? I understand the tax exemption will run across two tax years; does this make any difference?
Query 20,097 – Football Fan.
VAT challenges with multi-party deal.
One of my construction company clients is based in GB and it has an overseas subsidiary company based in Poland. The Polish company has received an order to build a new chimney for a GB based customer. It will supply all the professional expertise linked to the project – design of the chimney, safety, etc – but wants my client to provide the labour for the job due to CIS tax issues. As an added complication, all materials will be imported directly from Spain to GB.
In terms of invoicing procedures, the proposal is that the Spanish supplier will invoice the Polish company, which will then invoice my client for all its costs, including the materials. My client will then issue the final sales invoice to the GB customer for labour, materials, professional fees, adding UK VAT at 20%.
My questions relate to VAT:
- Must the Polish subsidiary register for UK VAT or is there a way around this with reverse charge issues, etc?
- How will the import of the Spanish materials be dealt with when they arrive in GB?
Query 20,098 – Chimney Clive.
Queries and replies
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