Guidance

Issue 123 of Agent Update

Updated 26 November 2024

Technical updates and reminders

Developments and changes to legislation and allowances relating to UK tax including:

Tax

Making tax Digital

HMRC Agent Services

Tax

Register as an employer — online process

At the end of September 2024, as part of a gradual process of modernising our systems, we will be updating some of the links and options available on GOV.UK as part of the online employer registration process. These updates will only affect a small number of digital pathways — including those used by charities. Most customers will not notice any difference.  

The updates will not affect the ability of any employer or payroll agent to register for a PAYE (Pay As You Earn) scheme and obtain a PAYE reference number. However, frequent users of the process may notice minor changes to some of the options available. In some cases, applicants may be prompted to call the Employer Helpline when previously they did not need to do so.  

We estimate that the changes will affect less than 5% of online registrations. The digital pathway for limited companies with 1 to 9 directors (which is by far the most common form of employer registration) is completely unaffected.   

Alcohol Duty new digital service: information for compounders and rectifiers, and cider makers

This month we are writing to approved compounders and rectifiers, as well as cider makers who produce low amounts of alcohol, to tell them about the new digital service we’ll be launching in March 2025 and how to get ready.

What compounders and rectifiers need to know

When the new digital service launches in March 2025, compounders and rectifiers will no longer need to use an excise warehouse for production. Instead, they will need to be approved as an alcoholic product producer in the new digital service, and submit monthly duty returns and payments. 

HMRC will migrate existing compounder or rectifier licenses to the new Alcohol Products Producer Approval (APPA) and issue an identification number — the ‘APPA ID’.

What cidermakers need to know

Cidermakers of all sizes — including the smaller ones — will need to get approval to produce cider in the new digital service, due to launch in March 2025.

The smallest cidermakers, who produce less than 5 hectolitres of alcohol in a 12-month period, will not need to submit a return on the new digital service. However, when they go over this threshold, they will need to submit a monthly duty return.

HMRC will issue a new Alcohol Products Producer Approval to currently exempt cidermakers, and issue them with an identification number (the ‘APPA ID’) so that they can use the digital service.

How agents can support compounders and rectifiers, and cidermakers

If you support approved compounders and rectifiers, or those cider makers who received the letter from HMRC, they may speak with you about it and the new digital service launch in March 2025.

HMRC will share further details on the new digital service closer to its launch date, including details on how to access it.

In the meantime, please remind customers that they need to accurately account for Alcohol Duty using the current processes.

Before submitting their monthly Alcohol Duty return, they need to make sure they apply the correct Alcohol Duty rates and check if they can take advantage of the two reliefs:

• Small Producer Relief
• reduced rates for draught products

Basis Period Reform

All sole trader and partnership businesses must now report their profits on a tax year basis, beginning with the Self Assessment tax return due by 31 January 2025 (covering the tax year 2023 to 2024).

Any business that previously had a non-tax year accounting period must declare profits from the end of their basis period in 2022 to 2023 up to 5 April 2024, with the additional profit (after overlap relief) being transition profit. The transition profit will be spread by default over 5 years including 2023 to 2024. Accounting periods ending on 31 March will now be treated as equivalent to those ending on 5 April. This also applies to property businesses.

Businesses remain free to choose their accounting date. Any business that continues to have a non-tax year accounting period after 6 April 2024 will need to apportion profits from their accounting periods to the tax year.

We have now launched a full package of online interactive guidance to support completion of the return and working out transition profit for these cases. 

We have provided an online service to ask HMRC what the overlap relief figure is according to our records. We have recently seen a major increase in demand and at present response times are not as quick as we would like, but we are now clearing the backlog of requests. Please do not contact us directly.

If you have applied and have not heard back, you can check the progress of your request on GOV.UK.

If you’re doing a paper tax return, you must submit it by midnight 31 October 2024. If you are still awaiting a response in request for your overlap relief figure for a paper return, please file your return using provisional figures, and amend this when you have received the correct figure.

Please help us by only using the online form if it is necessary, as it is not intended to be used to ‘check’ a figure that you already hold and there is no requirement to use the service before filing a return. Dealing with these cases can slow down our response times for all.

Customers can find further guidance and support for Basis Period Reform on GOV.UK.

Machine Games Duty and Gaming Duty

If you have clients that run pubs or clubs with gaming machines, please make sure they register for the correct duty where required.  

Machine Games Duty (MGD) is an excise duty charged on games played on a gaming machine, whether of chance or skill, in the UK, where the prize exceeds the cost to play. Your client must register for MGD if they are responsible for premises where machine games are offered for play or if they are the tenant of a pub with gaming machines.  

Gaming Duty is an excise duty paid on casino gaming profits and does not apply to dutiable machine game play.  

Your clients can register and submit returns for MGD online or by paper. The online option is quicker, easier and more secure. 

More information is available on the Machine Games Duty — Overview  page on GOV.UK. 

Points to consider for deregistration

You can help to make sure your client’s registration is cancelled if they stop being responsible for MGD, because they:

• cease trading 
• no longer provide dutiable machine games for play 
• are no longer the tenant of premises where dutiable machine games are provided for play 
• wish to join a group or a partnership 

HMRC will issue a return for any whole or part accounting period immediately prior to deregistration, for which a return has not been received. This return must be completed and any duty liability paid. 

If the registration isn’t cancelled, HMRC will continue to send out requests for returns and payment based on estimates of what your client owes (known as ‘central assessments’).  

Find more information on GOV.UK Change your details or cancel your registration page. 

Calculating Machines Games Duty 

Please ensure you use the correct calculation to work out your client’s MGD liability. Do not use the VAT fraction. The correct calculation is as follows:  

Multiply your net takings (what you charge to play the games minus the amount you pay as winnings) by the correct MGD rate:  

• lower-rated machines (type 1) x 5%
• standard-rated machines (type 2) x 20%
• higher-rated machines (type 3) x 25%

For example, £100 net takings x 20% MGD rate = £20 duty .

Find more information on MGD rates and how to correctly calculate the duty in Machine Games Duty (Excise Notice 452) on GOV.UK.

Navigating transfer pricing compliance: best practices and considered insights

The search for an arm’s length price has become clearer with HMRC’s newly published Guideline for Compliance (GfC7): Help with common risks in transfer pricing approaches. These guidelines offer UK businesses an insight into HMRC expectations of transfer pricing best practices and highlight common errors to avoid.

The GfC helps businesses understand the most common risks and offers practical insights into best practice alternatives. Helping to ensure multinational enterprises (MNEs) stay on track with their transfer pricing approaches and reduce their regulatory risks to prevent an enquiry.

HMRC guidelines provide considered insights into how UK risk leads can minimise compliance risks through effective checks and controls. Risk leads do not need to be transfer pricing experts but through understanding their business and risk indicators, it allows them to implement best practice approaches effectively.

We collaborated with experts within HMRC, and external stakeholder representatives to identify the most common transfer pricing errors. These typically arise during functional analysis. This insight gives transfer pricing specialists a framework to help businesses to focus their resources in high-risk areas. Reviewing cross-border related party transactions against the risk framework can provide greater clarity on a business’s risk profile.

While the risk framework does not guarantee immunity from enquiries or penalties, it provides an insight into our risking process and why a business may be selected for an enquiry. We have recommended alternative best practices to the high-risk indicators as well as providing a list of useful business records that can use to support the arm’s length price in Annex A.

Corporate Interest Restriction — appointment of reporting company by HMRC

HMRC has published additional guidance on the limited situations in which we will appoint a reporting company on behalf of a group for the Corporate Interest Restriction (CIR).

CIR allows groups to appoint a reporting company, which must then submit Interest Restriction Returns (IRRs) for the group.

It is expected that it will be beneficial for most groups that are potentially affected by CIR to appoint a reporting company. The use of a reporting company simplifies the administration of the rules and allows the group to access elements of the rules that would otherwise not be available.

In certain cases, groups can have substantially higher Corporation Tax liabilities for either the current period or future periods if they have not appointed a reporting company.

It is the group’s responsibility to ensure they have appointed a reporting company before submitting an IRR, and that they can evidence this to HMRC. 

In the June 2023 Agent Update 109, HMRC clarified the situations in which we will appoint a reporting company for a CIR group.

HMRC has now published additional guidance on the subject. This confirms that there may be exceptional circumstances where HMRC will appoint on behalf of a group where the group has been prevented from making their own appointment. The new guidance provides some examples of situations in which HMRC usually will or will not appoint a reporting company.

Further guidance is available on GOV.UK:

• CIR restriction for groups
• CIR return

Change of bank details for Customs Declaration Service (CDS)

The bank details for all payments which are made into the Customs Declaration Service account have now been changed. 

This will future proof HMRC’s account in the event of migrating our banking services to another banking provider. The new bank details are now permanent and will not change.

Please advise all customers to use the following details when paying their Customs Declaration Service payments by Faster Payments, Bacs (Bankers Automated Clearing System) or CHAPS (Clearing House Automated Payment System):

• sort code — 08 32 10
• account number — 14077970
• account name — HMRC Customs Duty Scheme

These details are slowly cascading into the banking industry platforms and will be a positive match when input. Customers who have this banking information stored on their banking apps will need to change the details to reflect the new sort code and account number.

Any customers who pay by Direct Debit do not need to take any action as the changes will be made automatically.

Change of bank details for HMRC

The bank details for the following tax regimes have changed:

• Plastic Packaging Tax
• Biofuels or gas for road use — Fuel Duty
• Economic Crime Levy
• Soft Drinks Industry Levy
• Trust Registration Penalty

These details have changed to allow HMRC to future proof our accounts in the event of migrating our banking services to another banking provider.  The new bank details are now permanent and will not change.

Please advise all customers who are making payments for the above-mentioned regimes by Faster Payments, Bacs or CHAPS to use the following details:

• sort code — 08 32 10
• account number — 12529599
• account name — HMRC General Business Tax Receipts

These bank account details will show as a Confirmation of Payee match when input manually within payment screens in your banking provider app or online platform.

Customers who have this banking information stored on their banking apps will need to change the details to reflect the new sort code, account number and account name.

On occasion, the customer may be offered two further options when selecting an account name if searching HMRC or HM Revenue and Customs by business:

• HMRC General Business Tax Receipts 14 — please select this if the reference number they will be quoting has 14 characters
• HMRC General Business Tax Receipts 15 — please select this if the reference number they will be quoting has 15 characters

Any customers who pay by Direct Debit do not need to take any action as the changes will be made automatically.

What an authorised agent can do on a client’s behalf

We wanted to give agents advance notice that we have enhanced the letters we will be sending to customers when they authorise an agent to act on their behalf via the Online Agent Authorisation service. 

The changes are designed to make it clearer to customers what actions an agent will be able to carry out for them, once authorisation is complete and the following has been added to the letter: 

What an authorised agent can do

They’ll be able to deal with your tax for you, including:

• exchanging information with us about your tax
• filing your Self Assessment tax returns
• making claims for tax relief in your tax returns
• providing bank details so we can pay back any tax if you’ve paid too much. This includes the ability to nominate someone else’s bank account rather than your own.

The letter also now reinforces the fact that the customer remains responsible for their own tax affairs with the addition of the following paragraph.

Even if you use an agent, you’re still legally responsible for your own tax.

This means you must:

• check and confirm in writing to your agent — that each Self Assessment tax return your agent submits on your behalf is correct and complete to the best of your knowledge before they send it to us.
• pay the tax you owe on time.

 The changes to the letter will take affect from later in September. We hope you find it helpful to have advance notification of these changes.

Making Tax Digital

Get your clients ready for Making Tax Digital for Income Tax

Making Tax Digital (MTD) for Income Tax will be introduced from April 2026, when self employed individuals and landlords with gross income from self-employment and property over £50,000 will be legally required to keep digital records. They will also need to send quarterly updates to HMRC using compatible software. 

Join testing now

We’re thoroughly testing the service to ensure it meets yours and your clients’ needs. If you sign up for testing now, you’ll gain hands on experience of the new system, and build your confidence in the new processes before they become a legal requirement.

To take part in testing, you’ll need to be registered with HMRC for an agent services account (ASA). You can use the digital handshake to be authorised by your client to act on their behalf if you aren’t already authorised. Once you have done this, you can sign them up in 4 steps:

1. Read the eligibility criteria and consider which clients you can sign up now. When signing up, you’ll be asked some questions to confirm whether your client is eligible.

2. Speak to your clients to check they are happy for you to sign them up for testing, and that they have record-keeping software that is suitable and compatible with MTD.

3. Ensure that you have MTD compatible software ready to submit returns on behalf of your clients. Before signing up, check the available software options on GOV.UK and contact your chosen provider. They will provide you with guidance about their MTD testing onboarding process.

4. Sign up your clients to the testing.

Many customers are already eligible to take part in testing, but anyone who is not currently eligible should be able to sign up later in 2025.

Help when you volunteer for testing

If you sign up, you’ll have access to HMRC’s dedicated MTD Customer Support Team. The team will help you and your client on MTD issues and with the individual’s wider personal tax affairs for the 2024 to 2025 financial year.

HMRC Agent Services

Guidelines for Compliance — Help with VAT compliance controls

HMRC has recently published Guidelines for Compliance — Help with VAT compliance controls.

These guidelines are for UK VAT registered businesses who use invoice accounting, meaning they generally account for VAT when invoices are issued and received. 

They set out HMRC’s recommended approach and are designed to help clients and customers understand our expectations as you plan, carry out, and review the accounting and compliance processes that ensure VAT is accurately declared by your business.

The guidelines are a practical product for customers to refer to. You should read them alongside HMRC’s existing guidance.

The guidelines:

• help you make informed decisions and consider if you have sufficient controls within your VAT systems and processes.
• should be applied to reflect the complexity and scale of your own business.
• are not intended to be exhaustive or expected to apply equally to all businesses.
• help you identify risks and enable you to develop a robust strategy to reduce those risks.

Guidelines for Compliance are part of HMRC’s ongoing commitment to publishing practical guidance to support customers. They can help you better understand what HMRC considers to be good practice. They can clarify our view in complex, widely misunderstood or new areas of the tax system.

More information on Guidelines for Compliance, including our other publications can be found on GOV.UK.

If your clients are preparing for retirement

Did you know that the HMRC app has features that your clients could use to prepare for their retirement and get in control of their money and tax?

Your clients can use the app to check their State Pension Forecast, allowing them to see their potential State Pension age, view their forecast State Pension amounts based on potential contributions, and the amount their State Pension would currently be worth, based on their National Insurance contributions to date.

The app can also be used to check their National Insurance contribution years, and view any gaps in their record, including how many weeks they have paid and how much they need to pay for it to become a full qualifying year.

If they have any National Insurance gap years, they may be able to make voluntary payments online or via the HMRC app.

If your clients do not already use the free HMRC app you can suggest they download it today from GOV.UK.

Register for Self Assessment by 5 October 2024

The deadline for registering for Self Assessment for the 2023 to 2024 tax year is 5 October 2024.

If you have clients who need to register, please ensure they’re signed up for Self Assessment before the deadline. 

If you’re unsure if your client needs to submit a tax return, you can use our online tool to help decide if they need to submit one.

It’s important for those already in Self Assessment but who no longer need to be, to let us know. Otherwise, your client will continue to get reminders and they may be charged a penalty if we don’t receive their tax return on time.

Information about registering and some of the common myths about Self Assessment can be found in our news item on GOV.UK.

Introduction of branded messages in October

HMRC will begin replacing some of the texts and Short Messaging Service (SMS) messages we currently send many of our customers with branded messages. We’re not changing the content, but branded messages will look different. They show HMRC as the sender and include the HMRC logo.

Branded messages use some of the features of Rich Communications Services (RCS), which modernises and improves SMS messaging. They are also verified, which will help build customer engagement and trust. Though they are more secure, we are still advising customers they should follow HMRC’s advice on identifying suspicious contact.

Customers may receive branded messages from us if they have: 

• an Android phone
• RCS messages enabled in Google Messages

Customers who do not have a compatible Android phone will continue to receive the communication as an SMS message.

This is a first step to giving customers a richer experience through our mobile messages. 

Research and Development reforms update

As mentioned in August Agent Update, HMRC has updated the Additional Information Form (AIF) to accompany the changes to the R&D regime which came into force from April 2024 (abolishing the SME scheme and creating the merged Research & Development Expenditure Credit (RDEC) and Enhanced R&D Intensive Support (ERIS) schemes).

The updated AIF was published on 12 September 2024 so businesses can now use that to make claims for the new schemes: it’s the right place to put all information for a claim in relation to an accounting period beginning on or after 1 April 2024.

The regulations which make the completion of the AIF mandatory in its new form were made and laid on 11 September 2024.

There will be a subsequent amendment to the Corporate Intangibles Research and Development (CIRD) manual to reflect the additional fields in the AIF, which we hope to publish in the next few weeks.

Businesses and agents, especially of large businesses, should note that the updated AIF requires details of the 10 largest R&D projects. We are aware that some large businesses agreed a different set of 10 projects to share, however the AIF minimum requirement is for the 10 largest. Businesses can always choose to provide information about more than 10 projects.

Meeting the Additional Information requirements — proper completion of AIF

There have been examples of businesses not completing the AIF correctly or referring to other documents.

Claimants should remember that completing the AIF is a mandatory part of an R&D claim. Not answering all the questions substantively (for example seeking merely to refer to other documents or returns) does not meet the requirements and will lead to claims being rejected, or a full compliance enquiry being opened.

Check whether you need to submit a claim notification

For many customers with 12-month accounting periods, the time limit for submitting a claim notification will be September.

If your company is making its first claim to R&D, or its first claim for 3 years, you should check now whether you need to submit a claim notification.

If your company is required to notify its claim, but a valid claim notification is not made by the end of the notification period, the company will be prevented from claiming R&D relief for that accounting period.

Read the guidance on when to Tell HMRC that you’re planning to claim Research and Development (R&D) tax relief by making a claim notification on GOV.UK.

Tick the box and support Gift Aid Awareness day

On Thursday, 3 October we’re supporting the Charity Finance Group’s (CFG) initiative, Gift Aid Awareness day and encouraging donors to #TickTheBox.

You can also get set for Gift Aid Awareness Day 2024 by using and encouraging your clients to use the refreshed toolkit from the Charity Finance Group.

Gift Aid allows charities and Community Amateur Sports Clubs (CASCs) to claim an extra 25p for every £1 on most donations. Individuals donating to charity need to make a Gift Aid declaration for the charity to claim and they will provide a form to sign.

For the tax year to April 2024, tax reliefs for charities and their donors were just over £6 billion, including £1.6 billion in Gift Aid paid to charities. However, it is estimated that around £560 million of Gift Aid eligible to charities goes unclaimed every year.

HMRC is working with industry to look at how the Gift Aid service can be improved for everyone who uses it. We continue to review current processes for claiming Gift Aid, but also communication and guidance to help charities better understand where they are eligible for tax relief.

Support for customers who need extra help

We have principles of support for customers who need extra help. These set out our commitment to support customers according to their needs, and underpin the HMRC Charter. 

Find out how to get help and what extra support is available. 

Contact

Complain to HMRC

You can complain to HMRC.

To make a complaint to HMRC on behalf of your client you must be appointed as their tax adviser.

Where’s my reply for tax agents

Find out when you can expect to get a reply from HMRC to a query or request you have made.

There is also a dedicated service for tax agents to: 

• register you as an agent to use HMRC Online Services

• process an application for authority to act on behalf of a client

Manuals

You can check the latest updates to HMRC manuals or subscribe to automatic notification of changes. You can also suggest improvements for pages of our manuals by using the feedback options in the page footer.

Online

You can find online training material and useful resources through the HMRC email updates and webinars for tax agents and advisers page.

HMRC videos on YouTube, online learning modules, and live and pre-recorded webinars are available for tax agents and advisers providing you with free help, learning and support on topical subjects.

Contact Information for professional and representative bodies

• AAT: [email protected]

• ACCA Jason Piper: [email protected]

• AIA David Potts: [email protected]

• ATT: [email protected]

• CIMA: [email protected]

• CIOT Technical: [email protected]

• CIPP Lora Murphy: [email protected]

• CPAA Alison Hale: [email protected]

• IAB: [email protected]

• ICAEW Caroline Miskin: [email protected]

• ICAS Tax Team: [email protected]

• ICB Steven Worrall: [email protected]

• ICPA: [email protected]

• IFA: [email protected]

• VATPG Ruth Corkin: [email protected]