With the launch of our new accountants hub platform specifically to help accountants find the information they need for their clients, we know more of you are coming to the site and reading our blogs. 

We’re happy and grateful and have been thinking what else we can do to engage you while you’re here. 

As well as our usual output of interesting insolvency stories and news we thought it might be worthwhile to start producing a regular news round-up for accountants. 

A short collection of stories and news items you might have missed but that could affect you and the profession as well as raising your interest and attention. 

Let us know what you think on social or at ask@businessrescueexpert.co.uk and we’ll try and tailor future updates closer to what you’d like to see. 

HMRC tax investigations increased 7% last year

The number of investigations into the tax affairs of sole traders and small businesses increased from 232,000 in 2021/22 to 248,000 in 2022/23.

This news will increase pressure on those filing their self-assessment tax returns to avoid late returns or mistakes for fear of investigation. 

Penalties for tax return errors can be up to 30% for simple mistakes; 100% if the error is deemed to be deliberate or even 200% if the error relates to an offshore matter. 

HMRC is doing more to help the Treasury increase tax revenues in the post-covid economy and tax investigations are a reliable way of reaching this goal. 

A new AI system has been deployed by HMRC to aid their work called “Connect”. 

The “Connect” system can cross reference 55 billion different data sources and inputs from a wide range of sources to identify potential tax evasion and avoidance including data from banks, estate agents or even social media. 

If Connect detects unexpectedly low levels of bank interest or abnormally low earnings for a self-employed individual, it can indicate activity worthy of closer examination. 

Crackdown on side project tax rules unveiled

A new push aimed at internet sellers has been launched this year. 

Anybody selling items on websites such as eBay, Etsy, Vinted, Gumtree, Airbnb and Amazon Seller Central have to keep within a £1,000 tax free limit as the owners now have until January 2025 to report all sellers’ information for tax purposes. 

HMRC confirmed they are investing over £36 million in developing a system to monitor online marketplace reporting with a full-time staff of 24 working on the project. 

Anybody earning over £1,000 a year will be liable for tax and must also register as self-employed for anything over this threshold. 

In a policy paper HMRC said the new rules will “support the government’s work to help taxpayers get their tax right first time, and to bear down on tax evasion.”

They also acknowledge that the “customer experience for digital platforms could be negatively affected as this change is complex and may require them to perform tasks they do not currently perform. 

“HMRC has consulted on the new regulations in the UK and will, in due course, issue clear guidance on how to comply with the new rules.”

Capital Gains Tax allowance being reduced again

The allowance for capital gains tax (CGT) is being reduced to its lowest level in 40 years from April 6th when it is halved from £6,000 to £3,000. 

The Office for Budget Responsibility (OBR) estimates that CGT will raise £17.8 billion in revenue for the period 2023/24 as the freezing of tax thresholds mean more people will pay CGT. 

In comparison, inheritance tax for the same period and receives far more media coverage only raised £7 billion. 

Basic rate taxpayers pay CGT at 10% or 18% while higher rate taxpayers have rates of 20% or 28%. Basic rate taxpayers that receive gains to taxable income that pushes them into the higher rate threshold will have to pay some CGT at both eligible rates according to the Low Incomes Tax Reform Group (LITRG).

More sole traders to be investigated for potential bounce back loan fraud

HMRC, along with the Cabinet Office and the Department for Business (DBT) have established a new pilot scheme looking at potential fraud committed by unincorporated sole traders specifically focusing on misuse of the Bounce Back Loan Scheme (BBLS).

The aim is to identify sole traders who either applied for a bounce back loan when they weren’t trading during the eligibility period or who misrepresented their turnover in order to obtain a loan they would otherwise not have received. 

This is similar to a 2021 scheme that focused on detecting fraud by limited companies who applied for BBLS loans in the same way. 

The Cabinet Office and DBT will share sole trader borrowing data with HMRC who will compare it to the information it already holds on individuals. High-risk populations where fraud is suspected will be identified and shared with DBT to select cases for further investigation.  

The next stage will see the Cabinet Office share identified risk flags with accredited BBLS lenders to support these investigations. Cases where the lenders suspect fraud will then be raised with DBT. 

Sole traders received £9.6 billion through the scheme before its closure to new application on 31st March 2021.

These increased efforts from DBT and HMRC follow two Public Accounts Committee reports that concluded DBT’s predecessor agency BEIS “did not make full use of all the tools at its disposal to prevent and detect fraud” in Covid-19 business support schemes.