The CIOT reports that HMRC are focusing their small business compliance activity on private use adjustments as part of their efforts to address the small business tax gap.
HMRC intend to run a digital campaign in the coming months, says the CIOT, to highlight issues around the reporting of private use adjustments for business expenses purposes in self-assessment tax returns, and ‘to encourage correct business expense claims, taking into account accurate PU adjustments where applicable’.
HMRC ran a trial in 2024 with around 600,000 income tax self-assessment taxpayers encouraged to report accurate private use adjustments. The trial reportedly generated over £27 million in extra tax, highlighting ‘widespread reporting of disallowable private use in business expenditure’ (although, at an average of £45 of tax per individual, those statistics suggest an average maximum error of £100, even on the flawed assumption that all of the tax was at additional rate). Given the potentially small amounts of tax per individual taxpayer, compared to the potential scale of the operation, this could well be an area where HMRC intend to harness the potential of their AI systems.
The CIOT encourages members to remind clients of the rules for disallowable private use expenditure and reminds them of the professional conduct rules that apply in this situation (Professional Conduct in Relation to Taxation (PCRT)).
The CIOT reports that HMRC are focusing their small business compliance activity on private use adjustments as part of their efforts to address the small business tax gap.
HMRC intend to run a digital campaign in the coming months, says the CIOT, to highlight issues around the reporting of private use adjustments for business expenses purposes in self-assessment tax returns, and ‘to encourage correct business expense claims, taking into account accurate PU adjustments where applicable’.
HMRC ran a trial in 2024 with around 600,000 income tax self-assessment taxpayers encouraged to report accurate private use adjustments. The trial reportedly generated over £27 million in extra tax, highlighting ‘widespread reporting of disallowable private use in business expenditure’ (although, at an average of £45 of tax per individual, those statistics suggest an average maximum error of £100, even on the flawed assumption that all of the tax was at additional rate). Given the potentially small amounts of tax per individual taxpayer, compared to the potential scale of the operation, this could well be an area where HMRC intend to harness the potential of their AI systems.
The CIOT encourages members to remind clients of the rules for disallowable private use expenditure and reminds them of the professional conduct rules that apply in this situation (Professional Conduct in Relation to Taxation (PCRT)).
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