Employment tax update - July 2023

04 July 2023

HMRC have now released their June Agent Update (Issue 109).

We have summarised the content most relevant to employment taxes and reward activities which includes: a filing reminder for 2022/23 tax returns; advice on steering clear of tax avoidance schemes; detail on overlap relief requests; and new interactive guidance for self-employed individuals (including LLP members) working abroad.

Filing reminder for 2022/23 self-assessment tax returns

  • As the 2022/23 tax year has ended, individuals can now file their 2022/23 self-assessment tax returns.
  • While the deadline for filing a 2022/23 return is 31 January 2024, HMRC are encouraging individuals (and agents) to file their returns early – it is worth noting that, where a return is filed early, individuals will still have until 31 January to make any necessary payments.
  • We have detailed some possible motivations for early filing below.
    • Financial planning – individuals will find out what they owe in advance of having to make any payments which may help with budgeting and investment planning.
    • Payments on account – knowing how much is owed may mean payments on account due to be made in July could be reduced.
    • Penalties – filing early will help avoid late filing penalties.
    • Refunds – individuals will find out sooner if they are due a refund.

Steering clear of tax avoidance schemes

  • HMRC regularly publish a list of tax avoidance schemes and their promoters to help individuals/businesses steer clear of, and/or exit, them. The current list contains details of over 35 schemes and is continually updated.
  • HMRC also run a "Tax avoidance – don't get caught out" campaign to help individuals and contractors identify signs of tax avoidance and get support where required.
  • One avoidance scheme specifically mentioned in Issue 109 of the HMRC Agent Update refers to Spotlight 62, a dividend diversion scheme. This scheme is marketed towards owner managed companies and is designed to divert dividend income away from the company owner and towards their minor children and is stated as a tax efficient way to fund school fees.
  • HMRC’s view is that the scheme does not work and is caught by the anti-avoidance legislation in ITTOIA 2005. As such affected individuals are encouraged to leave the scheme and settle their tax affairs as outlined in the Spotlight.

Overlap relief – preparing for the new tax year basis

  • HMRC have plans to launch an online form to submit requests regarding overlap relief and will be publishing accompanying guidance covering the changes to the rules for the new tax year basis. For a reminder of the new tax year basis, see our last Employment tax update.
  • Affected taxpayers will need to find out the details of their overlap relief ahead of submitting returns for the 2023/24 transitional year. This information can only be provided by HMRC where the relevant figures are recorded in HMRC’s systems (having been taken from information submitted by taxpayers as part of previous tax returns).
  • Ahead of more guidance being published, individuals can look at the Business Income Manual for immediate information on overlap relief and basis period reform.

New interactive guidance and online form for self-employed customers working abroad

  • HMRC have introduced new interactive guidance to support customers working abroad who are applying for a certificate to confirm they pay UK National Insurance. The interactive guidance asks individuals to answer a few simple questions and will then direct them to the correct application form.
  • For customers who’ll be self-employed while working abroad, HMRC have also created a new online form to apply for A1 certificates. The form is designed to streamline the A1 application process and includes an email validation service to give quicker access to customers without a Government Gateway or Business Tax Account.