ICAEW’s Tax Faculty highlights key news and reminders for agents including: new option for identity verification; withdrawal of FBI2; crypto gains and losses; and voluntary class 2 national insurance contributions (NIC).
Agent Update 104 contains numerous updates for agents. Many have been shared in tax news, but the following should also be noted.
HMRC identity verification: a new option
When setting up a government gateway user ID to access HMRC services, taxpayers need to verify their identity. HMRC is now providing an alternative way to do this.
A new identity checking app lets taxpayers use the camera on their mobile phone to confirm a match with either their UK photocard driving licence or ePassport.
To use the app, taxpayers must:
- have a working camera on their device;
- use the Chrome browser if they’re using a phone running Android software;
- have an iPhone 7 or above if they’re using an iPhone.
HMRC plans to add more options for proving identity during 2023. If they prefer, taxpayers can provide two forms of evidence instead of using the new app. Taxpayers who already have HMRC sign-in details are unaffected.
Set up a Government Gateway ID:
Form FBI2 to be withdrawn
The authorise a tax agent to use PAYE and Construction Industry Scheme (CIS) online services (FBI2) form is being removed from GOV.UK on 31 January 2023. The revised authorising your agent 64-8 form introduced in March 2022 can be used to authorise agents for Employer PAYE and CIS services.
HMRC will continue to recognise existing authority provided on an FBI2. ICAEW understands that HMRC will continue to process new FBI2 forms that it receives, but agents are encouraged to use a 64-8.
Gains and losses from cryptoassets
Disposals or exchanges of cryptoassets may give rise to gains that are taxable for capital gains tax (CGT) purposes, or allowable losses. Taxable gains arising between 6 April 2021 and 5 April 2022 should be reported on a taxpayer’s self assessment tax return due by 31 January 2023, and any associated tax paid by that date.
Gains on cryptoassets can arise in a number of ways, not only on transactions that individuals may identify as disposals. HMRC has published guidance and a dedicated manual setting out its interpretation of how the CGT legislation applies to cryptoassets.
Voluntary class 2 NIC for self-employed traders with small profits or losses
Agent Update helpfully states the 2022/23 and 2023/24 class 2 and 4 thresholds for self-employed profits. However, it does not mention that self-employed individuals with profits of less than the small profits threshold of £6,725 (2021/22 £6,515) or losses can voluntarily pay class 2 NIC of £3.15 (2021/22 £3.05) per week.
To tell HMRC that voluntary payments will be made in these circumstances, put ‘x’ in box 36 of the short self-employment page or box 100 of the full self-employment page of the self assessment return. The class 2 NIC should be paid by 31 January, alongside any self assessment balancing payment. Paying voluntary NIC entitles the trader to state pension and certain contributory social security benefits.
From April 2022, those with profits above the small profits threshold (£6,725) and no more than the lower profits threshold (£11,908) are not liable to pay class 2 NIC, but will be given an NIC credit. This credit will provide the same benefits as if class 2 NIC had been paid (see above).
In 2022/23, class 2 NIC of £3.15 pw (2021/22 £3.05 pw) must be paid if self-employed profits exceed the lower profits threshold of £11,908 (2021/22 small profits threshold of £6,515). Traders with profits below the small profits threshold or losses can still pay voluntary class 2 NIC.
The class 4 lower profits limit is currently £11,909 a year (2021/22 £9,568). In 2022/23, traders with profits of this figure and above will pay class 4 NIC at 9.73% (2021/22 9%) up to the upper profits limit of £50,270 (2021/22 £50,270) and 2.73% (2021/22 2%) on profits above this limit.
The thresholds at which the self-employed start paying both classes 2 and 4 NIC, (ie, the class 2 lower profits threshold and the class 4 lower profits limit), have been aligned for 2022/23 onwards.
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