“Members can use us as a second opinion or sounding board”

One of the benefits included in AOP membership relates to cover in respect of a tax or VAT enquiry from HM Revenue & Customs (HMRC) through Markel Tax. The AOP has taken out an insurance policy to provide this automatic cover as a right of membership.

The policy covers an enquiry by HMRC into Self Assessment Tax Returns, VAT Returns and PAYE compliance reviews. Under the terms of the policy, an investigation specialist will be appointed by Markel Tax to deal with the enquiry on the member’s behalf. All of the Markel Tax specialists are former inspectors of taxes and so are well-versed in dealing with HMRC enquiries.

During the course of the enquiry, the specialist will liaise with the client and accountant where necessary, deal with all correspondence, and attend any meetings required by HMRC until a satisfactory outcome has been achieved. More details on the policy can be found on the AOP website.

Protection in enquiries

Cover can provide considerable savings and added protection at a time when it is expected that HMRC enquiry activity may be increasing, especially into businesses that made claims under the Government support grants, such as the Coronavirus Job Retention Scheme (furlough), and the Self Employment Income Support Scheme.

Over the past 18 months, revenue activity reduced because a lot of compliance staff were moved to processing support grants. Now that the support schemes have ended, those staff will return to their normal work in compliance. The Government also has to pay for the COVID-19 support, and they receive their money through taxation. These two factors allied together suggest we are going to see an increase in enquiries.

AOP members have protection through their cover, so if they do receive an enquiry, they can get in touch and we will provide support.

Another area where HMRC activity is expected to increase relates to the change to the IR35 rules in April 2021. Since the change, it is now the responsibility of the engager, where they are a medium or large company, to determine the IR35 status of a contract. 

This could affect both engagers, and workers – in this case, the locums – that provide services through their own limited company.

Where previously locums would have made the decision of whether they felt they were caught by IR35, since April, this responsibility has been taken out of their hands. Equally, the liability now falls on the engager.

Say that a large company takes the broad decision that they will deem all of the workers they are engaging caught by IR35, getting them off the hook for any liability, the locum then has to decide whether they want to take that contract. Or, they could negotiate and say: ‘If you’re saying I’m caught by IR35, I want to be paid more as a headline because I’m losing out on the tax benefit.’

We would expect HMRC to begin to increase compliance activity on this from the second quarter of this year. This would let the first financial year go through and enable them to see what has happened, and whether there has been a significant change in the amount of assessments acknowledging that IR35 does apply.

Providing support

The answer to a lot of tax-related questions is often: “It depends.” Topics are not black and white, but grey.

Markel Tax provides advice to AOP members through our tax/VAT telephone line from nine to five, Monday to Friday. Calls can be on any areas of tax, or members can use us as a second opinion or sounding board.

Conversations can even just be: ‘I’m going to see my accountant to discuss something, but I don’t really understand what I’m talking about.’ Our advisers can provide support so that when the person sits in front of their accountant, they have a better sense of the subject matter and feel more informed.

Overall, VAT probably represents about a third of all the enquiries we get at Markel Tax. It rose to possibly 40% over the last year, though I expect that part of the reason for this was because the revenue staff performed fewer income tax enquiries. Like much of the UK, revenue staff were working from home and this made carrying out enquiries difficult – particularly around individuals’ confidential tax records.

VAT enquiries tend to be a quicker process, and don’t necessarily require getting records but are more a case of asking questions, so proportionally we think VAT enquiries were the big hitter in 2021.

VAT is a common issue that affects optometrists in particular, due to the mixed supply from the sale of spectacles and contact lenses which comprises both VAT-able goods (frames & lenses) and exempt services (dispensing), and needing to get that split right. That is something we can talk members through.