UK'S LARGEST INDEPENDENT TAX WEBSITE
Are you a member ?
|
  • Editorial

    altHMRC: Earn What We Expect... or Else?

    I received an interesting email this week from Abbey Tax Protection. It pointed out that HM Revenue & Customs (HMRC) has a 'transparent benchmarking team', which has selected a number of trade sectors to test the use of 'benchmarks'. 
     
    These benchmarks are used to compare the 'net profit rate' of a business with competitors in its particular trade sector, to see whether their profit rate falls within a certain expected range.
     
    For example, one of the trades selected by HMRC for benchmarking is painters and decorators. HMRC has used information from the tax returns of painters and decorators for the past three years, to determine a 'net profit benchmark range'. Apparently, the net profit benchmark range for painters and
     decorators is 59%-79%.
     
    HMRC is understood to be writing to the selected trade sectors, including painters and decorators, inviting them to work out their net profit rate. HMRC's letters apparently suggest that if the net profit for the business "doesn't look right", it could be a sign that some of the figures on the business owner's tax return are not correct. 
     
    The purpose of HMRC's letters appears to be to encourage businesses whose net profit ratio falls outside the benchmarking range to check that their accounts and tax return are correct. And the use of statistics by HMRC is nothing new - its 'business economic notes' for specific business sectors were published and in the public domain for a number of years.
     
    However, as Abbey Tax Protection pointed out: "The key question really is, what will HMRC do if a business files a tax return which is outside the benchmark range? Is a full blown investigation the inevitable outcome?"
     
    It is not difficult to envisage the arbitrary use of benchmarks causing problems if used inappropriately, particularly in respect of cash-based businesses falling outside HMRC's benchmark ranges. If the net profit for such businesses "doesn't look right" because it is too low, will HMRC seek to increase business profits to within the benchmark range on that basis alone?
     
    I certainly hope not - we have already seen too many cases where HMRC presumes too much, as in the Newells' case which is in more detail here.

    Best wishes   

    Mark McLaughlin

    Managing Editor

WELCOME TO TAXATIONWEB

TaxationWeb is a free database of UK tax information for accountants and the general public.

Feel free to find out more about us

Tax Tips Forum is a free service. Taxpayers can add questions or comments to the site on tax problems or tax matters in general. Accountants, tax advisers and others are invited to offer practical help and advice in a free and open forum.

Browse through our selection of tax articles written by tax specialist on a wide range of tax issues.

Do you have any interesting tax news, points of practice or press releases relating to taxation issues? Please contact us with this information, for inclusion in the news section of this site.

Advertise on TaxationWeb! - do you offer tax related products or services? Would your company benefit from being exposed to thousands of highly-targeted visitors a month? Contact us for details of advertising on TaxationWeb.

I was looking for some guidance on share buy-backs under Companies Act 2006 and you had the perfect article. It was just what I needed to point me in the right direction. Thank you, and I will tell all my contacts to visit your site. - Pascale Wood-Atkins, Wood-Atkins Commercial Law

I would like to say how impressed i am with your site which i have found very useful on several occassions. - Paul, via e-mail

Great site. Answered a car allowance question in under an hour ! - Rudy, via e-mail

I had the HMRC claiming an overpaymet of over £5000 and took them all the way through county court.. four hearings blah blah... anyway I won my case the HMRC never showed for the last hearing and the claim was struck out....  the information on your web site was important in this case..  and gave me the reassurance that i was right to continue my defense against such a ridiculous claim. - Sharron, via e-mail

Tax professionals and public alike all benefit from the varied help & advice. Haven't seen any other site like this. Brilliant! - Caron Smeaton, Thompson Kimti Ltd

Excellent innovative site. Well done! - Steven, via e-mail

Very well set-out & informative site. Good luck with it! - Colin Baines, Seymour Taylor

I found this website most interesting and impressive. - Denis Cremin, Ryan Glennon & Company

So far, an excellent site which does what it says. A great rarity on the net. Well done! - Mark, via e-mail

Get our free Newsletter

You are:
You are interested in (tick all that apply):

3 FREE issues of Tax Insider Magazine

Sweet and Maxwell

Tax Books

BOOK OF THE WEEK

Core Tax Annuals 2013/14 Full Set

Includes six Core Tax Annuals plus CD-ROM and are all fully updated to the latest Finance Act

BOOK OF THE MONTH

Core Tax Annuals 2013/14 Extended Set

The Core Tax Annuals Extended Set includes 8 books
Booth and Schwarz: Residence, Domicile and UK Taxation, 17th edition

Booth & Schwarz: Residence, Domicile and UK Taxation, 17th edition provides a crisp analysis of this rapidly developing subject and expertly examines residence and other fiscal connections for individuals, companies and trusts.
Taxation of Small Businesses (4th ed)

A practical guide to all aspects of direct taxation of small businesses in one volume. Ideal for sole practitioners and small partnerships, but a handy guide for all tax advisers.
Tax software - Incorporation Calculator

2013/2014 Incorporation Calculator now available from Finansol Tax Calculators - suppliers of tax software to accountants, tax advisers and businesses since 1999.
Hitwise Award Winner Apr-Jun 2008 Hitwise Award Winner Jul-Sep 2008 Hitwise Award Winner Oct-Dec 2008 Hitwise Award Winner Jan-Jun 2009 Hitwise Award Winner Jul-Dec 2009 Hitwise Award Winner 2011 Alexa - Most popular news and media website

TaxationWeb Limited (Registered in England No. 4571386), 6 Coleby Avenue, Peel Hall, Manchester, M22 5HH, United Kingdom

By using this website, you agree to using cookies. Cookies are small text files stored on your browser when you use websites and applications (learn more about cookies).
You can control how websites use cookies by configuring the privacy settings within your browser (please refer to your browser help function to learn more about cookie controls).
Note that if you disable cookies entirely, there are parts of this website which may not function properly (e.g. logging in, commenting, etc).

Website by Dorifor Internet Marketing