Detailing the various successes and highlights of the Low Incomes Tax Reform Group
In 2022, there were more than 5million visitors across our websites who viewed 7.66 million pages. The site continues to be highlighted in House of Commons Library briefings as an important source of information.
We continue to receive positive feedback from users, such as that below:
“I was really struggling to find any guidance from the gov.uk website on filling in the starter checklist when moving from self-employed -> employed. Your article gave me a direct, straightforward answer to my query… and put my mind at ease. Thanks so much for the information you provide and the way in which you provide it.”
Tax refund companies
A key achievement in 2022 was our work raising awareness around the potential problems associated with using private companies to claim tax refunds. Following a significant amount of contact from the public, raised directly with HMRC concerns about the actions of one particular refund company. This resulted in HMRC agreeing to issue refund payments directly to over 60,000 taxpayers. HMRC also set out wider improvements in relation to all repayment agents such as the removal of deeds of assignments and strengthening of standards for agents.
Working with government, HMRC and devolved administrations
LITRG continues to engage closely with HMRC on behalf of unrepresented taxpayers. Our feedback ensured HMRC’s ‘new starter’ checklist was updated, making it easier for unrepresented taxpayers to complete the form and HMRC have agreed to publish a paper CGT return for taxpayers unable to file electronically. We have provided significant input into aspects of HMRC’s penalty reform project, with many of our suggestions to amend mainstream and technical guidance accepted. On basis period reform, HMRC agreed to change their communications with taxpayers following our feedback.
We continued to raise concerns that the starting threshold for Making Tax Digital for Income Tax would bring non-taxpayers into scope and were pleased when the government delayed its introduction to April 2026 and agreed to review the scheme for those with gross incomes under £30,000. Changes were also made to the GOV.UK website clarifying the position on online childcare as a direct result of LITRG feedback.
Tax credits and benefits
LITRG continues to highlight the challenges facing taxpayers who receive tax credits and universal credit and to examine the interactions between the tax and benefit systems. In 2022, we ensured amendments were made to tax credit compliance letters to ensure claimants knew how to comply with checks. We were asked to review draft legislation in connection with tax credits and basis period reform, having identified issues and potential unintended consequences. HMRC also agreed to a formal position regarding the repayment of Self Employment Income Support Scheme (SEISS) payments for tax credits to ensure claimants did not lose out on tax credits when repaying SEISS grants.
Media and external engagement
LITRG continues to enjoy a strong media presence. Our technical expertise continues to be sought after by external organisations and 2022 saw us invited to present to bodies including the teaching union, NASUWT and HMRC. Our presentations helped increase understanding about the impact of the tax system on low-income unrepresented taxpayers. One of the LITRG staff was invited to join the tax working group of Scotland’s Poverty and Inequality Commission, established to provide independent advice to Scottish ministers.
In 2021 we continued to produce COVID-19 specific tax and tax credit guidance and our dedicated COVID-19 material received over 1 million page views.
We also continued to work closely with HMRC on covid support schemes and tax credit easements, focusing on unrepresented taxpayers. This work was acknowledged in HMRC’s annual report for 2020 to 2021. Our work in this area meant:
- We had an impact on the final turnover test rules for the fifth SEISS grant for those trading in partnership
- HMRC’s guidance was improved
- We published detailed guidance that is not otherwise available in one place
In 2021, the popularity of our websites continued to increase and there were over 6.1million visitors and nearly 9.9million page views across our websites.
Labour Market Intermediaries report
In March, we published a 150-page report taking a deep dive into labour market intermediaries, with a large focus on umbrella companies. The report explored the benefits and complexities of umbrella companies, as well as exploring other types of labour market intermediary and use of disguised remuneration schemes.
The report received widespread praise. We have discussed a number of the findings with HMRC and in December 2021, HMRC, Department for Business, Energy and Industrial Strategy (BEIS) and HM Treasury published a call for evidence on the umbrella company market which referred to the report. Our findings have also formed the basis of other consultation responses throughout the year and we have been quoted in the media numerous times in relation to labour market issues and specifically umbrella companies.
Pension tax relief equality campaign pays off
Since 2018, LITRG has been co-ordinating an action group involving politicians, members of the pensions industry and employer representatives to address an inequity that sees some low earners prevented from receiving tax relief on their pension contributions.
At the Autumn Budget, the government announced that it would introduce a ‘top-up’ scheme so that all low-income workers can get equivalent relief on their pension contributions. It means that from the 2024/25 tax year onwards, over a million low-income workers (mostly women) paying into a net-pay arrangement scheme will be able to claim a rebate from HMRC of up to £63 each year.
While the announcement was warmly welcomed, we are disappointed at its delay in implementation. Even if for practical reasons HMRC cannot make the payments immediately, we have questioned why in due course rebates might not be backdated to at least 2021/22.
The following are examples of success in our efforts to improve the tax and related welfare systems for the benefit of low-income, unrepresented taxpayers:
- We met with the new Financial Secretary to the Treasury, raising issues around tax refund companies and the standard of GOV.UK guidance. As a result of our work highlighting concerns around certain tax refund companies, HMRC have committed to consulting in 2022.
- Our written evidence was quoted in the APPG for Entrepreneurship’s report on the sharing economy
- Our oral and written evidence on basis period reform was quoted a number of times in the House of Lords Economic Affairs Committee’s report and influenced its final recommendations.
- HMRC updated their ‘where’s my reply’ tool following LITRG feedback that it was displaying incorrect metrics.
- HMRC published dedicated guidance on GOV.UK for umbrella company workers, after LITRG highlighted a paucity of information.
- We were the only organisation to publish information about loan recall issues relating to the loan charge. It was welcomed by experts in the area as ‘a fantastic briefing’.
- Our longstanding calls for a delay to the roll-out of Making Tax Digital for ITSA were answered, with a one year delay.
- HMRC set up an advisory group to provide advance feedback on one to many campaigns, which is working well
- We raised issues with HMRC’s ‘suspected repayment fraud’ letters which led to improvements and HMRC agreeing to look further at the process
- Our high income child benefit charge briefings and guidance were referenced multiple times in a House of Commons Library report and the LITRG website was suggested as a useful source of detailed guidance in their ‘Key Document: Taxation’ publication.
- We received praise from the Scottish Government on our factsheet explaining employment status for those taking on a personal assistant. They were able to use it in their work on related policy issues.
- HMRC updated and extended their guidance on reasonable excuse as a result of LITRG feedback
- HMRC confirmed they will provide guidance on tax checks as part of licence renewal applications for taxi drivers and scrap metal dealers in five languages, after LITRG’s suggestion.
- In capital gains tax, changes we and others have recommended have been made (or will be made), including: the doubling from 30 to 60 days to report CGT on UK residential property; extension of the time allowed for no-gain no-loss transfers after couples separate; and the extension of the payment window for paper filers of CGT returns from 14 to 30 days
- HMRC updated their staff guidance to ensure that tax credits claimants are made aware of notional offsetting rules when they phone HMRC. HMRC amended their letters to tax credit claimants about changes to their payments to reflect LITRG feedback.
LITRG’s objectives for 2020 altered due to the coronavirus pandemic and the consequent diversion of our resources into producing guidance on support available to the public. This was hard work, but was well received and was viewed almost 700,000 times by the end of the year.
Overall, our guidance continued to be well-visited, with 5.5million visitors and nearly 9million page views across our four websites.
We were delighted that LITRG received various Tolley’s Taxation 2020 Awards:
- the LITRG team won Best Specialist Team in a Public or Not for Profit Organisation.
- one of our Technical officers, Meredith McCammond won the Tax Rising Star award. A thoroughly well-deserved win.
- our former Technical Director and volunteer, Robin Williamson MBE, was awarded the Lifetime Achievement award. A hat trick for LITRG!
The following are examples of success in our efforts to improve the tax and related welfare systems for the benefit of low-income, unrepresented taxpayers:
- HMRC guidance on the Making Tax Digital VAT exemption was substantially improved and incorporated changes suggested by LITRG
- LITRG comments were incorporated into guidance aimed at contractors and agency workers on GOV.UK
- HMRC updated their guidance on the Self-Employment Income Support Scheme in relation to those trading through a limited company following issues raised by LITRG based on website queries received from members of the public
- Out of date wording was changed on the Self Assessment tax return as a result of LITRG raising issues on behalf of shared lives carers
- Specific information was published on the LITRG website about the Coronavirus Job Retention Scheme for those working through umbrella companies after getting clarification from HMRC – this information was not available on GOV.UK
- HMRC’s interactive tax tools were changed to remove incorrect wording and improve clarity following LITRG feedback
- Changes were made to the tax credit regulations relating to coronavirus-impacted workers and treatment of coronavirus payments was clarified as a result of LITRG identifying deficiencies in earlier regulations
- LITRG published a dedicated Q&A, working closely with HMRC, to help the 1 million people affected by a tax credit renewal error
- Relaxations were introduced in the tax credit system for self-employed claimants around various deadlines reflecting the impact of the pandemic
- LITRG comments were incorporated into HMRC materials produced to support people through compliance checks
- HMRC changed the deadline for those claiming the Self-Employment Income Support Scheme grant under the parental exception – following LITRG feedback.
In addition, LITRG’s technical expertise continued to be sought after. Technical workshops and training were run for other organisations including Advice NI, Shared Lives Plus Scotland, NASUWT (The Teachers’ Union) amongst others. We were also asked to sit on expert panels, for example by the London School of Economics talking about tax and benefit interactions and we were commissioned to write a factual report looking at how labour market intermediaries work.
In 2019, there were 5.5million visitors across the four websites – impressive growth despite the closing down of one of our sub-sites early in 2019.
A selection of our other successes in the year is outlined below.
Correcting inaccurate guidance
Following representations by LITRG, several pieces of guidance on GOV.UK were amended to correct misleading statements or errors and to add additional information.
Giving tax training and helping other organisations
LITRG was invited to run workshops at several events such as the UNISON Care Workers event, NASUWT (The Teachers’ Union) and the Talk Money week. These were an opportunity to promote LITRG’s work and our websites.
Disguised remuneration loan charge: guidance
LITRG continued to lead the field in publishing accessible guidance about the disguised remuneration loan charge and what it means in practical terms. This material was heavily quoted and linked to from other websites. Our technical officer leading on labour market issues met with the Financial Secretary to the Treasury (FST), along with the CIOT President, to discuss the loan charge – the FST subsequently publicly acknowledged LITRG’s work on the loan charge.
Working with government bodies
The LITRG team worked closely with the Office of Tax Simplification on their autumn 2019 report on life events and many of the points we made were included in the final report.
LITRG was the only organisation to provide a submission to the Law Commission with detailed comments on the tax and benefit consequences of surrogacy arrangements. As a result, we facilitated a meeting between the Law Commission and HMRC to discuss the proposals further.
Helping HMRC to improve customer experience
LITRG met several times with HMRC to help them understand the customer journey in compliance cases and how customers requiring extra support are dealt with during compliance investigations. This also included commenting on communications that are used in such investigations.
Supporting tax devolution
LITRG was mentioned in the Welsh Revenue Authority’s equality report in connection with our help regarding the Authority’s objectives.
LITRG’s views were sought by several organisations in Scotland, including the Scottish Government, in respect of their work on raising awareness of Scottish taxes.
Campaigning for change on low-income workers’ pensions
LITRG, together with Baroness Ros Altmann, continued to lead a group of professional body and pensions industry representatives to campaign for equal tax relief for low-income workers making pension contributions to net pay arrangement schemes as compared to those in relief at source schemes. The group gained interest in the issue with a number of politicians from different parties, culminating in a government commitment to review the issue and seek a resolution.
Almost 5 million web users were reached across our four websites – a significant increase on the 3 million in 2016 and just over 4 million in 2017.
In 2018, the CIOT marked 20 years since LITRG was set up by past CIOT President John Andrews.
Help for people affected by the loan charge
LITRG’s articles explaining the loan charge for unrepresented taxpayers were widely welcomed by CIOT members, the wider profession and campaign groups
Help to Save scheme improvements
HMRC took on board a number of LITRG recommended changes to the draft Help to Save regulations. HMRC also accepted all of LITRG’s recommendations for changes to draft Help to Save guidance.
Tax guidance for people making investment decisions
The Financial Conduct Authority amended its handbook to include a new rule requiring advisers to consider the impact of tax and access to state benefits following representations from LITRG.
Remittance basis of taxation
Following LITRG representations, HMRC introduced temporary guidance (until legislation could be put in place) to clarify the treatment of savings income in relation to the remittance basis of taxation.
Widowed Parent’s Allowance
LITRG supported the Childhood Bereavement Network in their Supreme Court Case on Widowed Parent’s Allowance by providing calculations and examples on various tax and benefit interactions.
Carer’s Allowance Supplement, Scotland
Following LITRG’s work in Scotland, amendments were made to the text of letters sent out in relation to Carer’s Allowance Supplement payments to ensure the tax treatment and interactions with tax credits were explained correctly.
In May 2018, LITRG published a comprehensive report highlighting how care workers lose out because of the confusing and unhelpful way in which their working arrangements and low pay interact with tax, welfare and minimum wage rules. The report was widely welcomed and was highlighted by Catherine McKinnell MP via a Parliamentary Question to the Chancellor of the Exchequer.
Over 4 million web users were reached across our four websites.
The law was changed to allow claims to the transferable marriage allowance to be made on behalf of deceased spouses or civil partners. Previously such claims were rejected. Such claims could then be made going back four years which enabled those to reclaim where they had tried to claim in the past but had been refused.
Deferment of Class 2 abolition
We made representations about the impact on the self-employed with very small profits of a proposed abolition of class 2 National Insurance. Had this happened, it would have meant these people would have had to pay significantly more expensive Class 3 National Insurance contributions instead to save towards the state retirement pension. Our representations paid off and the proposed abolition of Class 2 was deferred for a year so that further consultations can take place. In 2018, the government then decided to withdraw its intention to abolish Class 2.
Qualifying carer relief
Following LITRG campaigning, the Chancellor announced the extension of qualifying care relief to carers for people who have funded their own care.
The self-employed and universal credit
LITRG report Self-employed claimants of universal credit – lifting the burdens, published in October 2017, was cited in the House of Lords by Baroness Donaghy, following a meeting with LITRG. The report was also referenced in a letter written by the Chair of the Work and Pensions Committee to David Gauke, then Secretary of State for Work and Pensions. It was also picked up extensively by the media and led to invitations to give evidence to the Work and Pensions Committee. Stephen Timms MP tabled a number of questions at PMQs on self-employment off the back of the report.
Life assurance gains
Following work from the LITRG and CIOT, HMRC introduced a four-year time limit to claim for recalculation under the new rules instead of a much shorter window that was originally proposed in draft legislation.
Making Tax Digital
LITRG succeeded in getting exemptions included for the digitally excluded, following on from our earlier work on the Bishop VAT case.
Changes to the Tax Credit regulations
Changes were made to the Tax Credit regulations to protect tax credit claimants from residential landlord changes.
Over 2.9 million web users were reached across our four websites.
LITRG was mentioned in the Work and Pensions Committee Concentrix report 45 times.
Improving housing availability
Rent-a-room relief, which provides tax relief for those who take in a lodger, had not been increased since 1997. We argued that the limit of the relief should be doubled, enabling more homeowners to offer accommodation to third parties in their own homes, improving the availability of housing while providing useful tax-free income to the homeowner. In April 2016 the government increased the relief from £4,250 to £7,500 per year.
Encouraging the roll out of Tell Us Once
Notifying the death of a loved one is never easy. Tell Us Once, available throughout much of Great Britain and being considered for roll-out in Northern Ireland too, enables the registrar to advise other government departments and agencies about the death.
Ensuring that carers who stay overnight are not unfairly taxed
Often disabled people require overnight assistance, so we successfully campaigned for the introduction of a specific exemption from tax when a care and support employer provides their carer with board and lodging.
Scrapping of the proposed changes to tax credits in 2016 that would have dramatically reduced the financial support received by low income families
Many campaigners contributed to the defeat of these proposals, including LITRG. Our major concern was the proposed speed of introduction, resulting as it would have done in significantly less cash being available to families in a very short space of time which, combined with other changes, would have resulted in low-paid families suffering severe financial detriment. Our briefings on the subject were much quoted in Parliament.
Robin Williamson, Technical Director of the LITRG from 2003 to 2018, was awarded an MBE in recognition of his work for low-income taxpayers.
Over 2.5 million web users reached across our four websites.
Introduction of composite Notice of Coding
Most workers and pensioners have tax deducted from their pay using the PAYE system. This document provides them with a way of checking they are paying the correct amount of tax on their various income sources, and understanding the complex coding system used by HMRC.
Introduction of Simple Assessment
For taxpayers who have not paid the correct amount of tax during the year, this should enable them to more easily comply with their taxation obligations and settle their debts without having to complete tax returns.
Increased protection for vulnerable taxpayers when direct recovery of debts introduced
Through discussions with government we achieved amendments to draft legislation and guidance to provide greater protection to vulnerable taxpayers who have debts outstanding to the tax authorities to make sure they are not subject to the direct recovery of debts process inappropriately. The safeguards were written into the second Finance Act for 2015.
Obtaining changes to bereavement support payment
Working with other interested parties we obtained tax-free status for the bereavement support allowance, which replaced the widowed parents allowance in 2017.
Ensuring that disabled people who employ carers are entitled to claim employment allowance
This saves them employer’s NIC on £3,000 of their wages bill. Original proposals excluded such employers from claiming the allowance despite many being encouraged to employ their carers as a result of direct payments by local authorities.
Ensuring that the strengthened test for self-employment did not discriminate against low-paid disabled workers
The new test for self-employment was reshaped to recognise that disabled workers have a lower minimum hours requirement in the tax credit system.
Ensuring disabled trusts were available to a wide class of vulnerable people
Our campaign increased the potential classes of vulnerable people for whom such arrangements might be made.
A selection of highlights from earlier years
Ensuring that alternative procedures are put in place for many who are digitally less able
We assisted many appellants in a VAT case which has ensured other channels, such as paper and/or telephone, must be available for the digitally less able.
Ensuring that care & support employers can file RTI payroll returns manually if they wish to do so
Disabled individuals can become employers (due to the availability of personal budgets for care). We argued successfully that they should be entitled to special treatment and so be allowed to file their payroll returns due under RTI manually if they choose to do so.
RevenueBenefits was set up as a partnership between the Low Incomes Tax Reform Group and Lasa, providing advisers with access to the latest information on the range of HMRC ‘products’, including tax credits, child benefit and guardian’s allowance, national minimum wage and information and guidance on the transition to universal credit. Shortly after launch, RevenueBenefits won the LexisNexis Taxation Awards 2012 'technological innovation' category.
Ensuring tax credits working hours requirements were applied more fairly
When the weekly working hours requirement for couples with children was raised from 16 to 24, we secured an exemption for couples where one parent is entitled to carer’s allowance, and a similar easement for claiming childcare support through tax credits.
Ensuring that references to "lunatics, idiots and insane persons" be removed from the tax code
Legislation that might have been considered objectionable in defining some groups of taxpayer was repealed and replaced by applying principles set out in general law.
We obtained a change in the law for disabled people with progressive conditions to allow them to take advantage of trusts
This was a gradual process which began in 2006 and culminated in the Finance Acts of 2013 and 2014.
Notional entitlement introduced
LITRG led a coalition of voluntary sector bodies that argued in favour of 'notional entitlement'. This meant that if a tax credit claimant was slow in reporting the start or break-up of a relationship, the tax credits they would have received had they claimed in their new capacity at the right time (their ‘notional entitlement’) would be set against any overpayment arising on their original claim which ended automatically on their change of status. Previously they would have to repay the overpayment on their original claim without any set-off, which could be financially punitive.
Foster and shared lives carers get relief from capital gains tax on sale of home
Before 2009, foster carers who looked after children in their own homes would, when they came to sell their home, be chargeable to capital gains tax (CGT) on so much of the resulting capital gain as related to the bedroom space occupied by the children they had fostered. This was because their fostering activity was deemed to be a ‘business’, so the part of their dwellings that was allocated to ‘business’ purposes was ineligible for private residence relief. For many years LITRG and other organisations campaigned to grant foster carers full private residence relief, which finally happened when the shared lives care relief was introduced in 2009.
Improved the tax treatment of foster carers and adult placement carers
Started around 2003 or 2004, with our final recommendations becoming law in 2009.
Members of LITRG set up Tax Help for Older People, which became a nationwide charity harnessing the skills of tax professionals to give help and advice on tax to older people who could not afford the services of a tax adviser.
When the then Chancellor introduced an Autumn Statement in which the personal tax allowances for the coming year were announced, LITRG lobbied for the age-related allowances to be announced at the same time. This meant that older taxpayers received just the one coding notice during the winter with the correct age allowances for the following year, rather than two – one in the winter and an updated one the following spring – which only served to confuse. This practice was followed until the age-related allowances were phased out in 2015/16.
Persuaded HMRC not to force "employers" of carers to file PAYE returns online
Provision for care and support employers to file RTI returns on paper was contained in Finance Act 2013.
Successfully led the campaign for effective operation of Extra Statutory Concession A19 which resulted in many thousands of low-income taxpayers having liabilities removed.
Persuaded HMRC to legislate for low-income migrants so that small amounts of income held overseas were ignored
These provisions were in Finance Act 2009 for 2008/09 et seq.
At our instigation HMRC set up a consultation group for people with disabilities. We also helped HMRC with their disability equality strategy
The Disabled Customers Consultation Group (DCCG) had their first meeting in January 2008
Due to LITRG pressure in 2008, retirement annuities were transferred to the PAYE system so as to collect the correct amount of tax and to identify individuals due for repayments for up to six years.
Between 2008 and 2009, LITRG led a coalition of charities to ensure that HMRC agreed not to collect tax arrears from some 420,000 low-income pensioners.
In 2008, LITRG led the debate on the withdrawal of the 10% starting rate of tax which led to a change in government policy
The change in government policy was to increase the personal allowance so that those affected by the withdrawal of the 10% rate would not lose out.
Introduction of a simplified Self Assessment form
We were the primary movers in getting HMRC to introduce the simplified tax return at the time when the full Self Assessment form was too complex for those on low incomes.
In 1999, we campaigned for and obtained the pre-announcement of the Blind Person's Allowance saving its recipients uncertainty and unnecessary paperwork.