`The Chartered Institute of Payroll Professionals
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Uncertain tax treatment policy review Published: 12 January 2023 Emailed: 18 January 2023
HM Revenue and Customs (HMRC) recently implemented a policy where large businesses are required to report where uncertain tax treatments are used.
HMRC must be notified if the tax advantage is over a threshold of £5 million. This may sound like a lot, but for a lot of businesses payroll can be the largest cost and this policy includes pay as you earn (PAYE).
A tax treatment is considered uncertain if:
• a provision has been made in the accounts for the uncertainty
• the tax treatment applied is not in accordance with HMRC’s known position .
It has now been announced that a review into the policy to assess that it is achieving the stated aims, as well as if the process is proportionate. However, as the notification process is an annual process, the evaluation will need to occur over multiple reporting cycles to gather full evidence.
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Summary: HMRC performance in 2021/22 Published: 16 January 2023 Emailed: 18 January 2023
The Government has two months to respond to the House of Commons Committee report, which also outlines recommendations in regards to the HM Revenue and Customs (HMRC) Annual Report and Accounts 21-22.
HMRC employs around 63,000 people and is responsible for administering the UK’s tax system. HMRC’s vision is ‘‘to be a trusted, modern tax and customs department’’ . The HMRC Annual Report and Accounts 21-22 was published on 18 July 2022, which included information about its vision, objectives and the way it operates.
HMRC’s chief executive commented on the performance summary:
‘‘we stepped up to address huge new challenges that mattered to the whole of the UK and delivered the urgent support our customers needed quickly and effectively. As this year’s annual report shows, we carried on doing that during financial year 2021 to 2022 without losing sight of our core purpose of collecting tax and delivering financial support – and despite facing difficult decisions along the way’’.
However, the House of Commons Committee report concluded and recommends the below points:
1. HMRC has not yet returned to setting a formal compliance yield target, against which it can be meaningfully held accountable
Recommendation: HMRC should return to a formal compliance yield target with HM Treasury from April 2023 and report the target publicly
2. Resourcing HMRC’s compliance work to maintain rather than reduce the tax gap means the government is missing out on billions in lost revenue
Recommendations: HMRC should set out what level of investment in its compliance teams would be needed to reduce the size of the tax gap, and confirm what, if any, intention it has to pursue this
HMRC should also calculate and report an uncertainty range for its headline tax gap estimate to provide more transparency to users of the estimate
3. HMRC’s p lan to only recover a quarter of losses due to fraud and error on its COVID-support schemes does not go far enough
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