Need to know

Interest rate increase could affect late self assessment payments: Following the Monetary Policy Committee decision to increase the bank rate to 0.5%, HMRC has announced increases to interest charged on late paid tax. ICAEW’s Tax Faculty highlights what is changing and from when.

Government introduces new public interest business protection tax: The government has been concerned about failing energy companies. It is introducing a new tax designed to deter the monetisation of assets from critical public interest businesses as a result.

What to remember when auditing depreciation: Auditors should be careful not to overlook common accounting estimates when implementing the revised ISA 540.

NAO January round-up: including good practice in public sector reporting: The National Audit Office has published reports on financial modelling, tax administration and project management in government. One highlight is an interactive guide setting out good practice principles for annual reports, including illustrative examples from the public, private and charity sectors.

Climate reporting: current and future requirements: Preparers in certain organisations now need to consider climate-related impacts within their reporting. More requirements will come into force in the future.

Other technical news and updates

Central government annual reporting updates for 2021/22: Parliament is looking for a quick return to pre-COVID reporting practices while simultaneously demanding more information on some of the remaining issues.

Basis period reform: change to transition profit rules: Proposed amendments to Schedule 1 of Finance Bill 2021/22 at report stage address concerns raised by ICAEW’s Tax Faculty and other parties.

Government responds on basis periods and uncertain tax treatments: The government has responded to the recommendations made by the House of Lords Economic Affairs Finance Bill Sub-Committee in its report into two tax law changes: basis period reform and uncertain tax treatments.

Remove advantages to resolve problem of off-payroll working: Arbitrage advantages and non-compliant umbrella companies should be tackled, according to ICAEW’s response to call for evidence on the umbrella company market.

Resourcing root cause analysis: Firms setting out on their quality management journey are likely to be thinking about root cause analysis and where to start. A key question is whether to resource externally or keep it in-house.

MDR: ICAEW concerned over backdated reporting: ICAEW’s Tax Faculty welcomes that the new rules designed to implement the OECD’s model mandatory disclosure regime are targeted at those arrangements that might allow or facilitate tax evasion. However, it has concerns over the backdated reporting requirements, which exceed those of the predecessor DAC 6 legislation.

MTD VAT: fully compatible or bridging software? Research commissioned by HMRC reveals that businesses choosing fully compatible software for Making Tax Digital for VAT are more likely to experience benefits.

Business confidence declines to pre-pandemic levels: The latest Business Confidence Monitor (BCM) shows that business confidence is returning towards pre-pandemic levels. It remains high as is supported by strong domestic sales. As the economy expands, businesses are facing significant challenges with recruitment and skills shortage, transport problems and rising input costs, which could hinder further growth.

Consultations:

Why LCE audits matter: As the consultation on a proposed international auditing standard for the audit of ‘less complex entities’ (ISA for LCE) draws to a close, it’s time to make the case for why it’s needed.

Why the EU’s VAT in the Digital Age Project matters: Stephen Dale, chair of ICAEW Tax Faculty’s VAT and Duties Committee, explains the significance of the EU Commission’s public consultation on the VAT in the Digital Age Project covering e-invoicing, VAT rules for the platform economy and a single EU VAT registration.

OECD begins public consultation on the design of Pillar One and plans for Pillar Two: The draft rules for nexus and revenue sourcing have been released by OECD for consultation. Further consultations will be released in respect of other aspects of these rules, designed to tackle the increasing digitalisation and globalisation of the world economy.

Consultation highlights that SDLT needs major review, says ICAEW: HMRC’s consultation on reforming the stamp duty land tax rules for mixed-property transactions and claims for multiple dwellings relief highlights the complexity of the current rules.

ICAEW responds to consultation on modernising tax debt collection: HMRC proposed potential extensions to its powers to recover debts from businesses repeatedly failing to make tax payments. ICAEW responds to the consultation.

ICAEW responds to Business Rates consultation: ICAEW has responded to proposals aligning business rates more closely to current values and granting greater autonomy to local authorities to set rates and provide reliefs, stressing the administration burden that they would place on businesses.

ICAEW concerned about delays to local audit consultation response: The procurement process for local government auditors has begun, even though the government has yet to respond to last summer’s consultation on the local audit framework. ICAEW has expressed its concerns.

Member helpsheets and guidance:

Get ready for the MTD VAT extension: Making Tax Digital for VAT extends to all VAT-registered traders from April 2022. ICAEW’s Tax Faculty highlights some points to consider, including the government’s newly launched Help to Grow: Digital scheme.

R&D relief reforms – ICAEW responds: ICAEW’s Tax Faculty expresses concerns that certain anti-abuse measures are not sufficiently targeted and will unduly impact compliant taxpayers.

VAT: HMRC revises early termination fees and compensation payments policy: HMRC’s previous view was that these charges were outside the scope of VAT. ICAEW’s Tax Faculty explains the background to HMRC’s revised policy.

Postponed VAT accounting and businesses registered under the Flat Rate Scheme: In its latest Brief, HMRC explains the correct treatment, which must be used for periods starting from 1 June 2022. Previous returns need not be resubmitted.

Agent update highlights changes to pay and benefits reporting: HMRC’s latest agent update provides notice of a number of changes affecting employers and their agents. ICAEW’s Tax Faculty highlights some key items.