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Read This if You Have Missed the Tax Credits Renewal Deadline Print E-mail
Tax News - Personal Taxes
Written by Lee Sharpe   
Wednesday, 20 August 2014 00:00

The Tax Credits 31 July is an important deadline, partly because it renews the claim for the current year, partly because it also confirms the claim for the previous year and partly because, if you miss the deadline, usually the payments will stop and HMRC will write to you to ask for its money back from the beginning of the tax year.

We think HMRC ‘done good’ this year by extending the filing deadline by a few days because of the industrial action around 31 July.

HMRC has advised us that:

“This year has seen a record lowest number of outstanding renewals. 455,000 failed to renew this year, down from 650,000 in 2013. Not everyone will renew their tax credits as those whose circumstances have changed may no longer be eligible but since tax credits will stop if they are not renewed, we’re urging people to ring us on 0345 300 3900.”

Since HMRC ‘done good’, we shall overlook that HMRC should be asking everyone to go through the renewals process if only to validate the previous year’s claim.

It is important to note that all is not lost if you have missed the deadline: there is a procedure for getting the current year claim back on track, without necessarily losing any payments. HMRC will soon be issuing statements to claimants, warning that payments have been suspended. Provided claimants contact HMRC to renew within 60 days of the date of the statement, the claim will be re-instated in full.

In line with HMRC’s recommendation that people take action now, there is no need to wait for the statement to arrive before contacting HMRC but the statement does ‘start the clock’ for the 60-day limit. Our esteemed colleagues at the Low Incomes Tax Reform Group have helpfully put together some detailed guidance on what to do if you have missed the deadline  and we are, as ever, delighted that they can assist.

 
HMRC Clocks Up Another Tribunal Win Print E-mail
Tax News - Personal Taxes
Written by HM Revenue & Customs   
Thursday, 31 July 2014 00:00

HM Revenue and Customs (HMRC) has secured its eighth tribunal win in a row against tax avoidance schemes run by NT Advisors.

Between them, HMRC’s court successes against NT Advisors have now protected over £750 million in tax, defeating five of the promoter’s schemes. Among them is the Working Wheels scheme, where participants claimed to be second-hand car dealers.

In this latest case, the Upper Tribunal dismissed NT Advisors’ latest appeal that a scheme which used complex financial arrangements involving alleged overseas securities worked. The ruling upholds an earlier First-tier Tribunal judgment in HMRC’s favour.

In total there were 305 users of the scheme and this ruling alone is expected to protect £156 million in tax that would otherwise have been lost. HMRC will now pursue the other users of the scheme to make sure all the taxes that are due are paid.

The Financial Secretary to the Treasury, David Gauke, said:

“While the vast majority of people pay the taxes they owe, this victory shows HMRC’s determination and effectiveness in clamping down on those who seek to avoid their responsibilities.

Users of NT Advisors schemes, or those considering using their schemes, should know by now that HMRC is very successful at defeating them, and give serious thought to ending their involvement.”

HMRC has a dedicated helpline – 03000 530435 – for those who have engaged in tax avoidance schemes but now want to settle their affairs. Further information can also be found at Tempted by Tax Avoidance?

HMRC is writing to users of many of NT Advisors’ schemes to make sure they know how successful the department is at beating their schemes in court. In the last two months the department has written to more than 1,000 users, and users of the Bluebox scheme will be contacted shortly.

Further Information

  1. The Upper Tribunal ruling in Andrew Chappell versus The Commissioners for HM Revenue and Customs can be found at Andrew Chappell v HMRC [2014] 
  2. This complex scheme devised by NT Advisors used a series of circular and self-cancelling transactions involving alleged overseas securities. These purported to create substantial tax losses where, in reality, no economic loss had been suffered.
  3. HMRC will be writing soon to investors in the scheme this decision applies to so they know what action will be taken and what this means for them. HMRC wants to make it easy for those users to settle and will take strong decisive action for those who do not.
  4. Details of HMRC’s three most recent tribunal wins over NT Advisors’ schemes:

Bluebox (May 2014) – protected £21 million in tax 

Working Wheels (February 2014) – protected £290 million

Barnes - Court of Appeal (January 2014) – protected £100 million 

 
Pay Up Time for Offshore Loan Schemes – Says HMRC Print E-mail
Tax News - Personal Taxes
Written by HM Revenue & Customs   
Thursday, 24 July 2014 00:00

HM Revenue and Customs (HMRC) is today giving around 16,000 tax avoidance scheme users the opportunity to pay the tax they owe or risk facing bigger tax bills and heavy legal costs. The total amount of tax owed by these users is estimated at £430 million.

On average, each of the users of the contractor loan schemes covered by this settlement opportunity owes £11,000 a year in tax.

The schemes, used by a small minority of contractors to avoid paying their fair share, involve complex arrangements with individuals signing a contract of employment with an offshore employer. These are complex arrangements which involve individuals signing a contract of employment with an offshore employer. They then receive their remuneration from contracts in the UK through an offshore company or trust in what are claimed to be non-taxable loans, rather than as income. These are particularly aggressive schemes, used by the 1% of contractors who really do not want to pay their fair share.

The contractor then receives their pay through the offshore company or trust as what is claimed to be a non-taxable loan, rather than income.

Users will have until January 2015 to take up the settlement opportunity. If they do, they will pay the tax and interest due on the sums they received as loans under the scheme.

If they continue to challenge HMRC in the courts, they risk having to pay additional tax charges and penalties – as well as the costs of litigation if they lose.

Jennie Granger, HMRC Director General for Enforcement and Compliance, said:

"Many people regret ever getting involved with complex aggressive tax avoidance schemes and HMRC is providing an opportunity for contractors to come forward and straighten out their tax affairs. 

This is an important opportunity and we are working hard to encourage users to withdraw from such schemes. We also want to ensure they've understood our position. They can choose to continue to litigate for a better outcome but they risk a worse result. HMRC has a strong track record of winning tax avoidance cases in court, with around 80% of decisions in our favour. The costs for users are high, potentially resulting in penalties, charges and significant legal costs for scheme users."

HMRC is writing to all users who are being offered the settlement opportunity, explaining how they can resolve their case.  More information is available at Settlement Opportunity: Tax on Contractor Loans. If any users want to speak to HMRC about their case they should call the dedicated helpline on 03000 534226.This settlement opportunity applies to schemes used before the Disguised Remuneration rules were introduced in April 2011. Around 16,000 users can use the opportunity. However, HMRC will discuss settlement of all scheme use with anyone who comes forward during the settlement opportunity period.

HMRC offers settlement opportunities like this for some types of marketed tax avoidance schemes that have large numbers of users and where there is a range of possible outcomes in law. They are one of a number of tools HMRC uses for tackling tax avoidance. These also include the new Accelerated Payments powers introduced this month as part of the Finance Act. Under these powers, HMRC is able to seek upfront payments of disputed tax from members of avoidance schemes.

 
HMRC’s High Net Worth Unit Brings in £1 Billion Print E-mail
Tax News - Personal Taxes
Written by HM Revenue & Customs   
Thursday, 17 July 2014 00:00

HM Revenue and Customs’ High Net Worth Unit – a specialist division which deals with the tax affairs of the UK’s wealthiest individuals – has brought in £1 billion in compliance yield.

The unit, which was set up in 2009, deals with the tax affairs of the 6,200 wealthiest individual customers of HMRC – those with a net worth of £20 million or more.

Customers are assigned a relationship manager who has detailed oversight and develops a close understanding of the tax risks among these wealthy individuals. 

This maximises voluntary compliance of the majority of customers and enables HMRC to effectively challenge those who do not play by the rules. The High Net Worth Unit ensures good customer engagement with a focus on influencing behaviour to improve voluntary compliance.  

The compliance figure was revealed by David Gauke, Financial Secretary to the Treasury, as he spoke at HMRC’s annual stakeholder conference.

David Gauke said: 

“HMRC vigorously polices the rules ensuring it collects the tax that is due, and takes tough action against the minority who seek to avoid their responsibilities. This approach is clearly working as HMRC’s High Net Worth Unit has delivered £1 billion in compliance yield. This is against targets totaling £894 million and is further evidence that the government’s investment of nearly £1 billion in HMRC to tackle avoidance, evasion and fraud is paying off.”

Since 2009 the compliance brought in by the High Net Worth Unit has increased year on year to £268 million in 2013-14, a 20 per cent increase on the year before.

High Net Worth Unit compliance yield:

Year

Yield

Target

2013-14

£268 million

£210 million

2012-13

£222 million

£200 million

2011-12

£200 million

£195 million

2010-11

£162 million

£153 million

2009-10

£85 million

£80 million

 
PAYE Tax Codes: HMRC Proposes to Give Itself a Breather – at Taxpayer’s Expense… Print E-mail
Tax News - Personal Taxes
Written by Lee Sharpe   
Friday, 11 July 2014 00:00

“Put yourself in the taxpayer’s shoes”, Adjudicator tells HMRC. Now, how do you feel if HMRC cuts your tax code and takes 30 days to tell you..?

Well, it never rains but it pours. Yesterday we were busy with the Adjudicator’s report but we did not overlook something that HMRC published a couple of days ago, innocuously entitled: “Maintaining Customer Service Levels in Peak Periods – Draft Legislation”

At this stage, you might suppose that this was about HMRC raising its game to ensure that the taxpayer was provided with an adequate level of service – which would be most welcome. Unfortunately, you’d be wrong. This draft legislation is not about maintaining (acceptable) service levels at all, but rather reducing the standard to a level which HMRC thinks it might be able to cope with.

Coding Notices are one of the key ingredients of PAYE: it is HMRC telling the employer how much / what rate of tax to apply to an employee’s salary, or pensioner’s pension. It is the only warning a taxpayer gets that his or her take home pay is about to change.

HMRC proposes no longer to send an updated Coding Notice to the employee or pensioner, where HMRC thinks it will not affect the taxpayer’s net salary or pension. While this seems fairly tame, and to an extent understandable, the chances seem quite high that this will result in someone getting far less income than they expected, without any explanation. PAYE and RTI are hardly error-free.

Perhaps more worryingly, in terms of the number of taxpayers likely to be adversely affected, is the proposal that HMRC will send a revised tax code to the employer or pension provider, and give itself up to 30 days to tell the taxpayer. Bearing in mind that the employer will probably be advised electronically, but the taxpayer will be notified by 2nd class post via HMRC’s facilities – which are already notoriously slow – it seems quite likely that this will stretch the time to 40 days.

Which means that there could easily be two monthly salary payments, or 5 weekly wage payments, before the employee has some explanation as to why his or her take home pay has fallen through the floor.

Why HMRC thinks that this will reduce telephone enquiries is a mystery. Practically speaking, an employee concerned with a reduction in take home pay is likely to ask his or her employer first. Employers only receive the tax code itself, rather than the full explanation sent to an employee, so they will normally be unable to help, even if they want to, or have the time.

If the change in code results in only a small change in take-home pay, then perhaps it will be acceptable to an employee to wait 30-40 days. But if the change means the employee cannot pay his or her mortgage, then they might not be able to wait that long.

While HMRC may say that it will all come out in the wash at the end of the year, this is no consolation to someone who suddenly finds they cannot pay their rent.

While the explanatory memorandum emphasises this will not change an employee’s “right of appeal” against a tax code, HMRC seems incapable of grasping that the damage will already have been done. Given that PAYE regime allows HMRC to delve into a taxpayer’s pocket using estimated figures and on a provisional basis, it is clearly essential that a taxpayer be allowed the earliest available opportunity to dispute HMRC’s calculations.

But this draft legislation aims to do away with this perceived inconvenience for HMRC, so that it can say that it is meeting new, lower standards. Would it have been beyond their wit to ensure that they gave themselves that extra time only when it meant that they code was increased, so that it only applied when the taxpayer would end up better off..?

 
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