Entries Tagged 'Tax news' ↓

Latest figures for IR35 investigations

 
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

Valid VAT registration numbers

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.

IR35 win for taxpayer – ECR Consulting

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.

Business Records Check (BRC)

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.

The Taxman’s big brother is watching you!

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!

Budget 2011

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.

Plumbers coming clean

Plumbers, gas fitters and heating engineers are the latest targets of HMRC, as part of a wider clampdown on tradespeople. The Plumbers Tax Safe Plan is HMRC’s latest tax amnesty and is open until 31 August 2011.  We would note however, that this amnesty is open to all taxpayers.

HMRC has obtained information from Gas Safe and Corgi in an attempt to discover taxpayers who have underdeclared their income.  Investigations will commence after 31 August 2011.

Under the plan, plumbers (and other taxpayers) are given the opportunity to fix any leaks in their tax affairs, by making a voluntary disclosure to HMRC. In return they will be offered lower penalties.

Why plumbers?

HMRC has decided to target plumbers because:

  • Registered plumbers can be traced by HMRC via Corgi and Gas Safe registration.
  • Plumbers have been singled out because they do a lot of cash work.
  • A plumber in receipt of cash may have not have declared all his income, or registered for VAT.
  • Many plumbers are self-employed and so have the potential to incorrectly claim expenses for working from home, for home to work travel and for subsistence.
  • Training to become a plumber is costly, and some plumbers may have been tempted to incorrectly claim the cost of the training and course fees required to obtain their registration.

Under the new tax penalty system that applies for errors from accounting periods in or after 2008/09, a voluntary disclosure of an error caused by careless, but not deliberate behaviour will not attract a penalty, however, the penalty for disclosure of an error caused by deliberate behaviour will attract a minimum penalty of 20% to 30%.  Interest is also due on any overdue tax or NICs.

Nottingham accountant ordered to repay £1.4m

An unqualified accountant who used his client’s cash to line his own pockets has been ordered by a judge to pay back £1.4m.

A judge has now ruled that Warman has 12 months to pay up. His current 8 year jail term could be extended if he does not repay the cash.

He also stole £80,000 from three other Nottingham businesses – a farmer, a firm of solicitors and a transport company.

The moral of the story is be careful who you appoint as your accountant – ideally they should be personally recommended to you, but if not, ensure they are regulated by a professional institution and carry adequate professional indemnity insurance.

Exclude bank interest from flat rate VAT

The recent case of Fanfield and Threxton v HMRC concluded (on appeal) that interest earned on a company’s bank account does not need to be taken into account when calculating the turnover (and hence the VAT liability) of the business. 

The VAT flat rate scheme is an optional scheme that small businesses can join to simplify their VAT affairs.  The VAT liability is calculated using a flat rate percentage of the turnover for the period.  This case confirms that bank interest received does not need to be included in these calculations as it is outside the scope of VAT.

Taxman recovers £8.5bn from tax evasion

HMRC managed to raise £8.5bn from investigating serious tax evasion cases in 2009-10, according to a new report by the National Audit Office.

In addition, The Managing Civil Investigations report reveals the following facts;

  • HMRC collected £435bn in tax during 2009-10
  • An estimated £42bn goes uncollected. Fraud and evasion account for an estimated £15bn with the remainder due to error, avoidance and non payment.
  • Civil Investigation teams generated a yield of £8.5bn in 2009/10. Average yield for 900 settlements during past three years was £329k. 15% of investigations took more than 3 years.

HMRC are taking steps to recover the full £15bn estimated to be lost each year