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Administration and other matters

Extension to “scheme pays” for annual allowance charges
Currently, where a pension scheme member wishes to pay an annual allowance charge from their accrued pension savings, referred to as “scheme pays”, the scheme administrator has until 14 February following the end of the tax year on its Accounting for Tax Return. New legislation will be introduced to set the reporting deadline by reference to the time the administrator is notified of the charge (by the member) rather than a fixed date.

Promoters of tax avoidance
Further measures will be added to HMRC’s arsenal of powers to combat promoters of aggressive tax avoidance schemes. The new provisions, to be included in Finance Bill 2021/22 will purportedly:

– allow HMRC to freeze a promoter’s assets so that the penalties they are liable for are paid
– deter offshore promoters by introducing a new penalty on the UK entities that support them
– provide for the closing down of companies and partnerships that promote tax avoidance schemes
– support taxpayers to steer clear of avoidance schemes or exit avoidance quickly by sharing more information on promoters and their schemes

HMRC enforcement
The discovery assessment provisions in s.29, TMA 1970 will be updated to clarify that assessments may be raised in certain circumstances where special charges are applicable; namely the high income child benefit charge, gift aid charge and pension related charges, e.g. the annual allowance charge. Such charges may increase the amount of tax payable under the self-assessment system, but do not directly correspond to “income”.

HMRC recently lost an Upper Tribunal case (see HMRC v Jason Wilkes), partly on the basis that a strict interpretation of s. 29 requires a discovery of undeclared “income which ought to be assessed to income tax” in order to be valid. Strictly, while the charges relate to a level of income in one way or another, they are required to be declared separately to income on the tax return, notwithstanding that most software packages will automatically calculate them.

HMRC is appealing the UT decision; however, the legislation is also being amended to ensure that such charges are clearly within the remit of s.29 going forward.

Uncertain tax treatment
A new requirement for large businesses to notify HMRC where they take a tax position that is “uncertain” in their returns will be effective from 1 April. A policy note is available here.

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