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Here we bring you two of the latest announcements from HMRC; the closure of their self assessment helpline and a warning about BAD relief claims.
HMRC closes self assessment helpline
HMRC has announced that its self assessment helpline will be closed until September this year. Agents will be able to have self assessment queries answered on the dedicated line further to restrictions being removed from 5 June.
Jim Harra, First Permanent Secretary and Chief Executive of HMRC said in a letter outlining the position: “Our existing resource levels will not enable us to handle current forecast demand – which is set to increase significantly – for our phone and post services in line with our service standards.”
HMRC has announced that the self assessment helpline 0300 200 3310 will be closed from 12 June to 4 September 2023. Callers to that line will be directed to use HMRC’s online services including digital assistant and webchat.
This announcement follows on from the recent closure of HMRC’s helpline for VAT registrations as outlined in our May blog.
HMRC warn of BAD relief claims
On 11 March 2020 Entrepreneurs‘ Relief (ER) was renamed Business Asset Disposal (BAD) relief, and at the same time the value of gains covered by this relief was reduced from £10m to £1m. Where gains qualify for either ER or BAD relief the capital gains tax (CGT) is paid at 10% instead of at the full rate of 20%.
The £1 million figure is a lifetime cap for the taxpayer not an annual cap. What‘s more, the BAD relief is merely a rebranding of Entrepreneurs‘ Relief and any claims made under ER reduce the available limit for BAD relief.
If you made ER claims covering £1 million or more of gains by 10 March 2020, you can‘t make any further BAD relief claims, but older ER claims are not affected. However, if you hadn‘t exceeded £1 million, and you make a new BAD relief claim which takes the total of gains covered by either ER or BAD relief to over £1 million, the excess gains over £1m are not eligible for BAD relief.
This change in name for the relief coupled with the new rules of the lifetime cap has confused many people, leading to some incorrect BAD relief claims submitted on tax returns for 2020/21 and 2021/22.
HMRC communication
HMRC has been writing to taxpayers who may have made incorrect claims for Business Asset Disposal (BAD) relief because their lifetime cap has apparently been exceeded.
Letter 1 is being sent to taxpayers who had already exceeded the £1 million lifetime cap before their 2021/22 tax return was submitted. In the letter, HMRC asks the taxpayer to amend their 2021/22 tax return to remove the BAD relief claim so the gains are taxed at the normal rate, which will normally be 20%.
Letter 2 is being sent to taxpayers whose 2021/22 BAD relief claim takes them over the £1m cap. In such cases HMRC asks the taxpayer to amend their BAD relief claim to reduce the amount of gains included.
What are the ramifications?
In both situations the taxpayer will need to pay additional CGT plus interest. HMRC is also likely to charge a penalty for an inaccurate tax return on the basis that the correction is a prompted disclosure. This penalty will range from 15% to 30% of the underpaid tax for a careless mistake, or 35% to 70% for a deliberate error.
Further help
If you have any questions about Entrepreneurs’ Relief or BAD Relief, please get in touch by emailing enquiries@torgersens.com.
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