Entries Tagged 'Tax news' ↓

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.

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!

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.

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.

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.

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.

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.

Should HMRC launch an investigation into your tax affairs, they will know your inside leg measurement even before they knock on your door. 

They obviously know about all your employment jobs but they also know about your rental income if you go through an agency as they have to tell the Taxman this information by law.  They will also know when you bought the rental property (thanks to the Land Registry) and who lives there (Electoral roll). 

The banks tell him how much interest you’ve earned on your savings, he knows where and when you’ve travelled around London (courtesy of the nice chaps at Oyster card) and where you shop and how much you spend (loyalty cards).

Expect them to be familiar with your Facebook and Myspace pages so your photos of expensive cars and holidays will need some explaining if you are only declaring £10k pa earnings!

And remember….walls have ears!

Below are the major changes for 2011/12 affecting UK based contractors and small businesses as announced in the Budget on 23 March 2011:

Income tax

• Personal Allowance increased to £7,475.
• Basic rate limit reduced to £35,000 (equivalent of £31,500 for net dividends).

Companies

• Corporation tax reduced to 20% for small companies.
• Mileage allowance increased to 45p for the first 10,000 business miles driven in employees’ private cars.  Secondary rate of 25p for miles in excess of 10,000 remains.
• IR35 rules are to be clarified by HMRC to remove grey areas.

VAT

• Registration threshold increased to £73,000 pa.

National Insurance

• Rate increased for employers and employees to 12% and 13.8% respectively if weekly earnings exceed £136 and £139 respectively.
• Higher rate of NIC increased to 2%.

Pensions

• Annual allowance for tax relief on pension contributions reduced to £50,000.

Capital gains tax

• Annual exemption increased to £10,600.

Furnished holiday lets (FHL)

• Losses may only be offset against FHL profits.
• From April 2012 property must be available to let for at least 210 days per year and actually let for at least 105 days per year.

Capital expenditure

• Allowances reduced to 18% per annum for periods ending on or after 1 April 2012.
• Annual investment allowance is reduced to £25,000 pa.