November 15th, 2011 — Tax news, Tax tips
Are VAT officers taking their new penalty powers too seriously? Well, the fact that more than half of them are overturned on appeal would suggest so.
A Freedom of Information Act request shows that 16,270 penalties were reversed out of a total of 28,912. HMRC said that alot of these reversals were because it was found that the taxpayer has a reasonable excuse for their actions and that this does not mean that the penalties were incorrectly levied in the first place.
We say, don’t pay a penalty just because it has been charged. Seek advice as to whether or not you have grounds to overturn it.
November 15th, 2011 — Tax news
The Taxman launched five taskforces on 7 November 2011 with the aim of clamping down on tax evasion in
various parts of the country.
North West and North Wales – landlords and construction workers
South East – taxpayers who have not submitted all of their tax returns (income tax, corporation tax, VAT, PAYE)
Scotland – scrap metal dealers and fast food outlets
We understand that the Taxman is planning a total of 12 taskforces in 2011/12 with more to follow in subsequent years.
HMRC have said that “these taskforces will come down hard and fast on those who have chosen to break the rules and deliberately evade the taxes they should be paying…..we can and will track you down and you’ll face not only a heavy fine, but possibly a criminal prosecution as well“.
Mmmm, fighting talk – be careful out there!
November 15th, 2011 — Business news, Tax news
HMRC has confirmed that they now expect to check the business records of a reduced number of businesses as 
part of their recent Business Records Check (BRC) initiative.
The new annual target is 20,000 visits, down from the original 50,000. An additional 90 staff have been recruited to the initial headcount of 30 in order to facilitate these visits.
HMRC have confirmed that they will not, initially, be charging fines to businesses who don’t maintain adequate records. However, this will change in the near future so all businesses should be ensuring that their paperwork is now up to date.
September 27th, 2011 — Business news
This recent case has moved the goalposts slightly in respect of employment status/IR35 scenarios.
The contracts in question contained the usual substitution and mutuality of obligations clauses which often point away from employment/IR35. However, the Supreme Court decided that the reality of the situation over-rode these contracts. The reality was that the workers had to do the work personally and could not send substitutes.
The court also said that the expectations of the parties need to be taken into account; no-one expected a substitute to be used. Also that the bargaining power of the parties should be considered; i.e. was the contract a “take it or leave it” contract?
No doubt, the Taxman will be trying to turn this case to his advantage in the near future so beware out there!
September 27th, 2011 — Tax news
There have been two recent defeats for the Taxman in respect of IR35 court cases – Marlen and Primary Path.
In Marlen, the contractor’s flexible working arrangements (hours, holiday, absences) were found to be a key differentiator from employees of the end client along with the very low level of control that was exercised over the contractor by the end client.
HMRC argued that there was a mutuality of obligations but the court found otherwise, citing early termination of some of the contracts in question and one instant were the contractor was sent home without pay when the computers all went down.
With Primary Path, the contractor won when the court concluded that the services were carried out with very little involvement of the client (thus again confirming that degree of control is an important factor). The court also noted that the ability to propose a substitute was inconsistent with IR35.
Finally, the court said that it was important that the contract between the contractor and the agency was also reflected in the contract between the agency and the end client. This last point can be an unknown as often the agency-end client contract is not seen by the contractor until everything goes to court.
September 27th, 2011 — Tax news
| In response to a Freedom of Information request, HMRC admitted that the number of IR35 status enquiries fell from 158 in 2006/2007 to 23 in 2010/2011.The tax take also fell from nearly £2 million five years ago to almost £220,000 this year.
The tax enquiries dwindled to a mere dozen in 2009/2010 – possibly as a result of speculation that IR35 was to be removed. However a report into the options for IR35 by the Officie of Tax Simplification resulted in a decision by the Government to retain the tax but improve its administration, which could result in renewed activity in the area.
Reports from HMRC to the IR35 Forum show that they will be continuing investigations but possibly taking a more targeted appraoch and focuses on ‘high risk’ areas – although it is not yet known what they will consider high risk.
The number of reviews opened by HMRC for the last five years, where the intermediaries legislation (more commonly referred to as IR35) was identified as a risk, is as follows:
- 6 April 2006 to 5 April 2007 is 158
- 6 April 2007 to 5 April 2008 is 104
- 6 April 2008 to 5 April 2009 is 25
- 6 April 2009 to 5 April 2010 is 12
- 6 April 2010 to 5 April 2011 is 23
The tax yield recovered in relation to these reviews cannot be indentified. This is because a review is not always concluded in the same year that it was opened. However, HMRC can provide the tax yield received for the requested years, which is:
- 6 April 2006 to 5 April 2007 = £1,906,619
- 6 April 2007 to 5 April 2008 = £1,730,640
- 6 April 2008 to 5 April 2009 = £1,430,358
- 6 April 2009 to 5 April 2010 = £155,502
- 6 April 2010 to 5 April 2011 = £219,180
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September 27th, 2011 — Humour
Heidi is the proprietor of a bar and realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar.
customers to drink now, but pay later.
Heidi keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around about Heidi’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Heidi’s bar.
Soon she has the largest sales volume for any bar in the area.
By providing her customers freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.
Consequently, Heidi’s gross sales volume increases massively.
A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi’s borrowing limit.
He sees no reason for any undue concern because he has the debts of the unemployed alcoholics as collateral!
At the bank’s corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS.
These “securities” then are bundled and traded on international securities markets.
Naive investors don’t really understand that the securities being sold to them as “AAA Secured Bonds” really are debts of unemployed alcoholics.
Nevertheless, the bond prices continuously climb – and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.
One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi’s bar. He so informs Heidi.
Heidi then demands payment from her alcoholic patrons.
But, being unemployed alcoholics — they cannot pay back their drinking debts.
Since Heidi cannot fulfill her loan obligations, she is forced into bankruptcy.
The bar closes and Heidi’s 11 employees lose their jobs.
Overnight, DRINKBOND prices drop by 90%.
The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community
The suppliers of Heidi’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the BOND securities.
They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.
Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations; her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from the government.
The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Heidi’s bar.
May 23rd, 2011 — Tax news
If you have doubts about the validity of a customer’s or supplier’s VAT number you can use the Europa 
website to check all VAT numbers in the EC. Alternatively you can contact HMRC’s VAT helpline on 0845 010 9000. See the Taxman’s website for more details.
May 19th, 2011 — Tax news
Another IR35 defeat for the Taxman here. Elaine Richardson, an IT contractor working for Vertex Data Science through her own personal service company, was facing a tax bill of £50,000.
The tax tribunal found that Elaine was clearly in business on her own account and not a disguised employee of her end client.
May 19th, 2011 — Tax news
Despite the Taxman saying he would take until Autumn 2011 to finalise details of the BRC, it now seems that he has secretly launched this new volley which involves checking that businesses are keeping adequate books and records.
Our sources say that the areas currently affected are Sheffield, Scotland, Stockport, Swindon and Oxford. We reckon some 1500 letters may have been issued to date.
As developments occur on this, we will post updates on this site.
