TAX BRIEFING AUTUMN 2022.
COST OF TRAVELLING TO WORK
Travelling to the workplace may now be unaffordable for some employees
but employers who help by reimbursing travel expenses could
be creating an extra tax burden for themselves and their employees.
The journey between an
employee's home and
their permanent workplace is treated as ordinary commuting and
is not a tax-deductible
expense. If the employer pays the employee
a mileage rate or reimburses bus or train fares for ordinary commuting,
that payment must be taxed as salary under PAYE.
A tax-free mileage allowance (up to 45p per mile)
or reimbursed public transport costs can be paid
where the employee travels to a temporary workplace. This is somewhere that the employee goes to
perform a task of limited duration or for some other temporary purpose. For example a care worker
visiting a client at their home will be travelling to a
A workplace is always a permanent workplace if it
cannot be shown to be a temporary workplace.
An employee can have two or more permanent
workplaces, eg they may be based partly at their
home and partly at the company's office. If the indi-
vidual is required to attend the office for certain pe-
riods, say one day a week, the office is a permanent
workplace as well as the employee's home.
Where the employment contract specifies that the
individual is based at home but they are required to
attend the office for specific meetings, the travel to
the office for those meetings is tax-deductible and
the employer can reimburse those travel costs to
Where the employee's normal place of work has
changed (perhaps to their home) their employment
contract needs to be updated with the location of
the new permanent workplace and whether the
employee now has two permanent workplaces.
We can help you ensure that any assistance giv-
en to your employees meets the tax legislation
We can help you
any assistance given
to your employees
meets the tax legislation requirements.
ELECTRONIC SALES SUPPRESSION
Programming an electronic till to suppress the recording of sales amounts to tax
evasion and HMRC can impose some serious penalties on retailers who do this.
HMRC are initially seeking out the producers and promoters of electronic till soft-
ware that can be used for electronic sales suppression (ESS). Once they find a soft-
ware distributor that is selling ESS software they will track down all the businesses
that have purchased the software.
If HMRC discover that you have purchased ESS enabling tools they will send you a
notice to remove the software from your tills within 30 days. If you ignore that notice
HMRC can impose a penalty of up to £50,000.
To avoid such high penalties take extra care when purchasing or upgrading your
till software. Check the credentials of your software supplier
and make sure you are buying an authentic product.
To avoid high
extra care when
purchasing or up-
grading your till
WORKING AT HOME DEDUCTIONS
There are now almost 10 million people who work from home
and can benefit from the tax-free allowance of £6 per week
(£26 per month) which their employer may choose to pay.
Employers can reimburse larger
amounts to home-based employees if
the employees can prove that their increased variable costs from working at
home, including heating, exceed £6 per
The host is expected to provide rent-free
accommodation for at least six months although
they can ask the refugees to contribute towards the
cost of meals provided and extra energy and water
used. The host cannot claim expenses against the
If you do not receive a homeworking allowance and
you are required to work at home by your employ-
er, you can claim a tax deduction of £6 per week
from HMRC. However you must have a homeworking agreement in place with your employer which
sets out the conditions under which you work from
Where your extra costs of working at home are
higher than £6 per week you can claim
a deduction from HMRC for the actual
additional costs. With electricity and gas
bills climbing, the cost of heating a room
to work in may well exceed £6 per week.
HMRC may ask to see proof of those
costs so keep the bills as evidence.
You can claim the homeworking deduction on your
self-assessment tax return or by using the online
form P87. Where a similar claim has been made in
an earlier year you can renew that claim by phoning
We can help you calculate the additional costs of
working at home.
We can help you
additional costs of
working at home.
As an employer you can pay PAYE to HMRC using a direct debit (DD) but each
authority only applies for a single payment, so the effort is hardly worth it.
The good news is that from
mid-September you will be able
to set up a recurring DD facility to
pay your PAYE liabilities as you can
for your regular VAT payments.
This new DD facility will be ac- cessed via your online Business
Tax Account (BTA) on gov.uk.
When you next log in to your BTA,
look for a new link titled 'set up a
direct debit'. When you activate
this link it will give HMRC authori- sation to collect the exact amount
of PAYE shown as owing on your
RTI returns. You should also see
a new line in your BTA: 'manage
your direct debit' which will allow
you to cancel or change the DD
PAYE settlement agreements
(PSAs) are used to pay PAYE on
one-off benefits that apply to
many employees. Setting up a
PSA is a pain as it requires a pa- per form (PSA1). If you have some
employees who are resident in
other tax jurisdictions, such as
Scotland, a separate PSA1 form
was - until now - needed for each
However HMRC have launched
a new online PSA1 which can be
completed just once for all employees irrespective of where
they are resident. This should
mean that HMRC can process the
PSA1 quicker and there will be
BEWARE OF EARLY RTI RETURNS
Employers must send their PAYE reports to HMRC on or before the day they pay their employees. The full payment submis-
sion (FPS) report sets out what has been paid and the deductions made.
If the FPS report is more than three days late HMRC
will send you an education letter and if it is late
again you may well get a penalty.
With a regular workforce paid the same amount
each month it is tempting to prepare and submit
the FPS reports well in advance of the payment dates but this can
HMRC's computer is not programmed to read the
dates on each FPS report; it only checks that the
correct number of FPS reports has been submitted for each payroll
For example for monthly payrolls the
computer expects to receive 12 FPS re- ports submitted within the appropriate
months. If additional FPS reports are received in a
month HMRC make no attempt to allocate those re- ports to the correct month. If HMRC do not receive
the FPS report in the period it relates to, or shortly
afterwards, they assume that the report is missing
and automatically issue a penalty.
The HMRC approved software (PAYE Ba- sic Tools) permits employers to submit
RTI returns early and there is nothing in
the law to prohibit you from being su- per-efficient and submitting the FPS re- port early. However the HMRC computer
may consequently generate unnecessary penalties.
If you receive a penalty for submitting your FPS re- port late but you think it was on time or early please
contact us without delay. We can help you appeal
against any incorrect penalties.
We can help
against any incorrect penalties.
LOANS TO EMPLOYEES
Many employers will advance modest loans to employees to meet
upfront costs which they necessarily incur to enable them to
work, such as a travel season ticket or a deposit for childcare costs.
Such loans can also be provided to help towards
other unexpected costs such as a car repair or gas
The loan needs to be properly documented with
clear repayment terms but there is no obligation on
the employer to charge interest on the outstanding
Where the total value of loans made by the employ- er to the employee does not exceed £10,000 in the
tax year there is no benefit in kind to declare. A larger total will have to be declared on the annual form
P11D for the employee and the benefit is calculated
as the interest that the employee should have paid
at the official rate (currently 2.5%).
If the loan is advanced to individuals connected with
the company (eg directors or shareholders) it must
be declared on the company's tax return. The company must pay tax on any loan balance outstanding
more than nine months after the end of the accounting period in which the loan was provided.
We can help you calculate any tax charges connected with loans provided to employees or directors.
PAYING YOUR INCOME TAX BILL
Many self-employed people will find January 2023 a tough month as it is predicted
that domestic fuel bills will increase again and income tax payments will be due.
If you are worried that you will struggle
to pay your tax bill there are two things
you can do to help.
First get your tax return for 2021-22 final-
ised now. This will give you a clear view
of how much tax will be payable by 31
January 2023. We can help you forecast
your cash flow to see how much you can
put aside each month to meet your bills.
If you are happy to pay an amount each week or
month towards your tax bill you could set up a
Budget Payment Plan with HMRC. You must be up
to date with your tax payments (tax due by 31 July
must have been paid) and not have a Time to Pay
arrangement in place to pay old tax debts.
The Budget Payment Plan is set up on-
line and you need to agree to make
direct debit payments to HMRC. Unfor-
tunately you must do this yourself as we
will not have authority to set up a direct
debit from your bank account but we
can show you how.
The second action is to reduce your tax
payments on account for 2022-23, the first of which
is payable by 31 January 2023. For this we need to
forecast what your profit will be in the current year.
If this is likely to be less than you made in 2021-22
the payments on account can be reduced.
If you are worried that you will
struggle to pay
your tax bill there
are two things you
can do to help.
REPORTING UK PROPERTY GAINS
In 2020 HMRC introduced a new system for paying capital gains tax
(CGT) due from selling residential property in the UK, but many solicitors
and estate agents are still unaware of the new requirements.
You need to report to HMRC your gain from selling
a home on:
the UK Property Account (normally
online) within 60 days of completing
the property sale - and pay the CGT
due by the same date; and
your self-assessment (SA) tax return
by 31 January after the tax year in
which the sale was made.
If you make a loss when selling (or giving away) the
property, or the gain is covered by CGT exemptions
- for example because you lived in the property as
your main home - you do not have to report the
transaction within 60 days. However you may still
need to report the loss on your SA tax return.
If you have not completed the UK Property Account
to report your gain by the time your annual SA tax
return is due you must complete the UK Property
Account first. The HMRC system will not
allow you to complete your UK Proper-
ty Account online after your SA return
has been accepted so you will need to
submit the UK Property Account on a
paper form, which is a pain. There will
be penalties to pay for submitting a
late UK Property Account.
We can help you calculate the tax due when you
sell a property but please inform us promptly of the
sale to avoid penalties arising on late returns or late
There will be penalties to pay for
submitting a late UK
VAT PORTAL TO CLOSE
All VAT registered businesses are now required to file VAT returns us-
ing MTD-compatible software and keep VAT records in a digital format.
This applies from the start of the first VAT period for
newly registered businesses.
The old way to submit VAT returns was to type the
figures into a web-based form and some software
would perform this function. That old web-based
portal will close on 31 October. If you submit your VAT return using the old portal
before it closes you may receive a penalty
of between £100 and £400 (dependent
on your turnover) for submitting your VAT
return in the wrong manner.
If your VAT return is late, or you pay your VAT bill
late, you will receive a surcharge on the second or
third late submission or payment, depending on the
business turnover. This surcharge increases on every
subsequent late filing or payment from 2% to 15%
of the outstanding VAT.
The other requirement under the MTD regulations
is to keep digital VAT records. HMRC may be minded
to inspect your VAT records if you submit your VAT
return in the wrong manner or not at all. Where the
VAT records are not held in a digital format HMRC
can issue a penalty of up to £15 per day.
Complying with the MTD for VAT regulations need not be onerous; a spreadsheet
plus bridging software suffices for simple
businesses but an accounting software
package may be a better solution for a
We can help you comply with the MTD for VAT
We can help
with the MTD for
This newsletter is written for the general interest of our clients and is not a substitute for
consulting the relevant legislation or taking professional advice. The authors and the firm
cannot accept any responsibility for loss arising from any person acting or refraining from
acting on the basis of the material included herein.