Month: November 2021

HMRC has taken action to ensure that discovery assessments relating to certain aspects of the High Income Child Benefit Charge (HICBC), Gift Aid Donations and different pension charges act as intended.

According to HMRC, this new measure does not change this policy but makes a technical point to clarify the law to provide legal certainty and maintain the status quo. The change applies both retrospectively and prospectively and does not impose any additional liability.

A recent Upper Tribunal case found that HMRC did not have the power to recover an individual’s HICBC by issuing a discovery assessment. HMRC is appealing the decision to the Court of Appeal. However, in advance of that appeal, this new measure will provide certainty that HMRC may recover HICBC through the issue of a discovery assessment.

The legislation will not apply retrospectively to those individuals who previously received a discovery assessment and who appealed on or before 30 June 2021, the date at which the Upper Tribunal handed down its decision in the relevant case. However, HMRC will be hoping to win their Court of Appeal case which would make this a moot point.

The government announced back in September that the introduction of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) has been delayed by one year until April 2024. There had been widespread concerns on the speed of the MTD for ITSA rollout and the delay was widely welcomed.

In tandem with this announcement, the government also announced that proposals for Income Tax basis period reform would also be delayed until the 2024-25 tax year with 2023-24 being a transitional year. The proposals change the basis period from a ‘current year basis’ to a ‘tax year basis’. Under the current rules there can be overlapping basis periods, which charge tax on profits twice and generate corresponding ‘overlap relief’ which is usually given on cessation of the business. The new method of using a ‘tax year basis’ removes the basis period rules and prevents the creation of further overlap relief. 

HMRC has published a new policy paper on this change. The paper confirms that the measure will only affect businesses which draw up annual accounts to a date different to 31 March or 5 April (mainly seasonal businesses and large partnerships), and businesses that commence from 6 April 2024. On transition to the tax year basis in the tax year 2023 to 24, all businesses’ basis periods will be aligned to the tax year and all outstanding overlap relief given.