What's popular this month?

    Each month we review the emerging themes from the calls to our tax advice lines. Below is a short summary of the key points our team has been discussing with accountants in September.

    Simple Assessment

    From this month, HMRC is going to remove the need for some individuals with straightforward tax affairs to complete a tax return.

    Two particular groups will be affected to begin with:

    • New state pensioners with income in excess of the personal allowance for the tax year ended 5 April 2017
    • Individuals paying tax under PAYE who have underpaid tax, which cannot be collected through their tax code


    HMRC will use information it already receives to compute their tax position and will issue either a P800 calculation or PA302 Simple Assessment letter.

    Exemptions

    All existing state pensioners, who complete a tax return and whose state pension is more than their personal allowance, will be removed from self-assessment in the 2018/19 tax year.

    All those individuals paying tax under PAYE whose tax affairs are more complex, or where HMRC does not receive all of the information necessary to raise a Simple Assessment, will continue to be dealt with under self-assessment.

    How will it work?

    HMRC receives information from employers, pension providers, banks, building societies and other institutions.

    This data will be used to calculate the additional tax due.

    A P800 calculation may then be issued by HMRC if:

    • one employment has ceased and another has started in the same month, with payment being received from both employers; or
    • a pension has begun; or
    • employment and Support Allowance or Jobseeker’s Allowance has been paid.


    A PA302 Simple Assessment letter may be sent by HMRC if:

    • the debt to HMRC is more than £3,000; or
    • the tax owed cannot automatically be collected from the income received; or
    • state pension is paid for the first time.


    The recipients of the calculation or letter then simply need to make sure the pre-populated information is correct and make payment by the deadline shown in the correspondence received.

    What if it is wrong?

    In the event a mistake has been made in the calculation, the individual has 60 days to contact HMRC.

    There is also the possibility to use Extra-Statutory Concession (ESC) A19 if HMRC failed to properly act on information supplied by:

    • the individual themselves; or
    • the employer provided incorrect data; or
    • the Department for Work and Pensions passed on inaccurate pension details.


    HMRC will then respond to the challenge to the Simple Assessment with a decision. The decision will either confirm, amend or withdraw the Simple Assessment.

    If the individual remains unhappy with the response from HMRC, then there is the opportunity to make an appeal within 30 days of the decision.

    Interest and penalties

    Interest and late payment penalties will also apply to Simple Assessment and mirror the provisions which are in place for self-assessment.

    For further information regarding Simple Assessment please contact the author of this article, our Head of Technical Research, Guy Smith at g.smith@abbeytax.co.uk.

    Capital Allowances

    We continue to receive questions concerning capital allowances on our tax helplines, particularly surrounding commercial property conversions, when a larger unit has been split by the landlord into smaller modules for let.

    Any expenditure that results in an alteration or improvement will usually be capital in nature and will not be an allowable deduction against the rental income received.

    Having said that, HMRC does accept that the replacement of single glazed windows with double glazed is an allowable ‘repair’; on the basis double glazing is merely the modern day equivalent and does not constitute an improvement.

    With regard to other related expenditure:

    S21 CAA 2001 – sets out the fact that expenditure on the provision of ‘plant and machinery’ does not include expenditure on the provision of a ‘building’. The term building includes amongst other things: walls, floors, ceilings, doors, gates, shutters, windows and stairs.
     
    S23 CAA 2001 – lists items that are unaffected by S21CAA 2001 and so treated as plant and machinery.
     
    S28 CAA 2001 – Refers to ‘thermal insulation’ qualifying as plant and machinery. 
     
    S33A CAA 2001 –Refers to ‘integral features’ qualifying as plant and machinery.
     
    For further information regarding capital allowances please contact the author of this article, our Head of Advisory Services, Margo McKenzie at m.mckenzie@abbeytax.co.uk.