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Online filing
HMRC report that since 2005, online filing by tax practitioners has risen by 97%. The number of agents registered to file online is now 17,927. Nearly two million self assessment returns were filed online by the 31 January deadline this year, representing a 38% increase on last year.HMRC processed 719,913 returns which were filed online during January. Of these, 336,277 were received in the final seven days, and 216,154 in the final four days running up to the midnight deadline on 31 January.
At the peak of the influx, during the mornings of 30 and 31 January, the HMRC online service was processing around 8,700 returns an hour. HMRC comment that taxpayers and their agents were still at work right up until the final hour.
The use of third party software services to file returns increased by 72% compared to last year.
From April 2006, agents using third party software to create and file self assessment and corporation tax returns online for their clients will be able to do so without 64-8 authorisation (known as file-only). The client will no longer need to be on the agent's gateway client list in order to file returns. However, a full 64-8 authority will be required before an agent can discuss client details with HMRC offices or view liabilities and payments and statements online.
HMRC plan to introduce this facility for agents using HMRC's online tax return software at a later date.
With regard to HMRC's online tax return software, HMRC plan to improve navigation within the application by introducing a 'bookmark' so that taxpayers can go straight to the page they were on at their last visit. A 'home' link from the application back to the landing page at the portal has also been included.
Self assessment taxpayers will be able to attach one or more .pdf files to their online tax return subject to an overall size limit of 5MB. This feature is currently being developed and HMRC hope to introduce it in October 2006 in time for the 'peak filing season' for 2005-2006 tax returns. The online authorisation is equivalent to a full 64-8 authority and allows HMRC to exchange information with agents about their clients. The new service has proven popular with agents, with over 20,000 authorisations already processed through our website.From April 2006 the online agent authorisation service will be able to accept online agent authorisation requests from third party software users.
The electronic lodgement service will be withdrawn at 4 pm on 31 March 2006. It will not be possible to file returns after this time. The tax exchange module will be closed at 4 pm on 5 April 2006. This allows time for acknowledgements to be returned to agents. It will not be possible to access your mailbox after this time.
HMRC advise agents not to leave filing returns until the last two days as it can take up to 48 hours to issue acknowledgements. If the returns should be rejected, it will not be possible to file them again through the electronic lodgement service once the service has been withdrawn on 31 March 2006.
www.hmrc.gov.uk
Home computers
Further to Rufus the dog's Budget article in Taxation, 23 March 2006, page 633 concerning the Chancellor's removal of the home computer scheme exemption, HMRC have issued a further announcement explaining the change as follows:
'Following the Chancellor's budget announcement abolishing the tax exemption on the provision by employers of computer equipment for private use with effect from 6 April 2006, in response to a number of enquiries, HMRC confirm that anybody who has had a computer made available for private use before 6 April 2006 will not be affected by the change. If an employee entered into a home computer scheme arrangement with his employer before 6 April 2006, and under that arrangement the employer is committed to provide a computer to the employee, but for reasons beyond his control the employee cannot take physical possession of the computer until 6 April or later, HMRC accept that the computer exemption will apply to the provision of that computer.'
This bears out Taxation's research on Budget night, but fails to address the potential problem that HMRC will have in policing this new policy.
Charities
The anti-avoidance legislation is to be revised so that:
- a charity's dealings with its substantial donors, i.e. those giving £25,000 or more in a single 12-month period, or £100,000 or more over a six-year period, will be restricted and tax relief from the charity where the restrictions are breached removed;
- a direct link will be provided between non-charitable expenditure incurred by a charity and loss of tax relief, restricting the income and gains eligible for tax relief by £1 for every £1 of non-charitable expenditure incurred; and
- non-close companies will be subject to the same limits on benefits received as a result of a gift to charity as individuals and close companies. Non-close companies will also become subject to the same rules as close companies and individuals that apply when gifts are potentially repayable or are associated with the acquisition of property by the charity from the donor or connected persons.
These measures tighten up the existing legislation, but Smith & Williamson say that they also 'signal HMRC's determination to come down hard on what they perceive to be abuse, even where charities are involved'.
Trading activities
Another matter relating to charities concerns charities' trading activities. The new measure will provide tax relief for charities where only part of a trade is carried on for a primary purpose, or where a trade is partly (but not mainly) carried out by the beneficiaries of a charity. Relief will be available on the profits that can reasonably be attributed to the part of the trade that is carried on for a primary purpose, or that is carried out by the beneficiaries of the charity. This measure takes effect from 22 March 2006.
This measure, say Smith & Williamson, will be especially useful for charities where more than 10% of their trading activity is not attributable to their main charitable purpose. Up to now, 'they may have had to persuade HMRC that they were carrying on two or more separate trades in order to get relief on the mainly charitable part'.
