Tax avoidance back under the spotlight
In its drive to collect revenue, HMRC has published a list of tax avoidance schemes for which it wants up-front tax payments.
Two days before the Finance Bill became the Finance Act on 17 July, the obviously eager HMRC issued a list of nearly 1,200 tax avoidance schemes. Frustratingly the list consisted only of the scheme reference numbers (SRNs), given under the Disclosure of Tax Avoidance Scheme (DOTAS) legislation, so there were none of the exotic names which have been making headlines in some of the national press.
Starting in August, HMRC intends to spend about 20 months using ‘accelerated payment’ powers by the Finance Act 2014 to systematically ask the schemes’ users to pay the tax they thought had been avoided within 90 days. HMRC say that there are approximately 33,000 individual taxpayers and 10,000 companies involved, with over £7bn of revenue at stake.
HMRC has given no indication how it will progress through its long list, although some of the schemes could date back to 2004, when DOTAS was introduced.
As HMRC says, if a scheme designed to allow you to pay less tax sounds too good to be true, it probably is…
Net worth unit brings in the money
HMRC’s High Net Worth Unit has generated £1 billion in compliance yield.
The High Net Worth Unit, which was established in 2009, is a specialist division which deals with the tax affairs of the 6,200 wealthiest individual customers of HMRC in the UK. These people have a net worth of £20 million or more. They are assigned a relationship manager who has detailed oversight and who develops a close understanding of the tax risks among these wealthy individuals.
HMRC said that this maximised voluntary compliance of the majority of customers enables it to effectively challenge those who ‘do not play by the rules’.
David Gauke, Financial Secretary to the Treasury, 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”.
It makes a pleasant change to hear that in amongst all the stories about people avoiding paying what they owe, it seems that plenty of people are playing fair and coughing up.
Debt recovery proposals are cause for concern
The Institute of Chartered Accountants of England and Wales (ICAEW) has urged HMRC to abandon ‘unconstitutional’ direct debt recovery.
ICAEW has called for HMRC to scrap the planned introduction of new direct debt recovery powers stating that the procedure is “unconstitutional” and “wrong in principle”.
The plans, set out in the Finance Act 2014 2014, would allow HMRC to deduct tax owed directly from the accounts of debtors, providing at least £5,000 is left across all their accounts including NISAs. It is estimated that around 17,000 taxpayers will be affected each year.
ICAEW is against the proposals which it says fail to meet the criteria of being “fair, proportionate and accompanied by robust safeguards”. It raised concerns over a lack of independent judicial oversight of the powers in its response to a Government consultation on the controversial proposals.
“It is necessary to go back a step, to re-think the policy and consult upon the strategies by which HMRC can tackle those who willfully refuse to pay,” the Institute said. It added that it was unconvinced the powers are necessary given the range of tools at HMRC’s disposal.
ICAEW are not the only campaigners who are voicing their concern. The Low Incomes Tax Reform Group (LITRG) said that the proposal would inflict disproportionate financial and human cost on vulnerable taxpayers. The Association of Chartered Accountants (ACCA) also voiced concerns, arguing that HMRC’s attempts to extend its powers risk being unconstitutional.
HMRC responded to the concerns by stating that only those with an average of £20,000 in the bank and an average debt of £5,800 would be affected.
You can avoid this issue by paying your tax. We are here to help.
Auto-enrolment – two-thirds of SMEs are unaware of staging date
Auto-enrolment is due to take effect for the smaller-sized marketplace and according to research by accountancy firm HW Fisher and Company, 67% of respondents have no idea when their auto-enrolment staging date actually is.
The firm’s research, which surveyed 750 small and medium-sized enterprises (SMEs), found that nearly a third (32%) of respondents felt they do not know enough about
auto-enrolment to be able to gauge its impact. Nearly half (49%) of respondents said they understood little or nothing about the changes they will need to make, whereas more than a third (35%) said they have done nothing because they do not know how to start.
The research also highlighted that 30% of respondents are worried about the set-up costs; 62% are concerned about the ongoing expense of making employer contributions to staff pensions; and 47% stated their fear of the extra administration involved in managing a pension scheme.
From 1 August, employers with more than 60 PAYE employees have had to comply, and by August 2015 and employers with fewer than 30 staff will have to have an auto-enrolment schemes in place.
Although smaller organisations have a later staging date, employers still need to be on the ball regarding their obligations and expert financial advice should be sought when choosing an auto-enrolment scheme and planning your budget.
You can find information about staging dates by following this link:
http://www.nowpensions.com/auto-enrolment-staging-dates/
Wronged taxpayers are handed back £4 million
The Adjudicator’s Office upheld 90% of complaints against HM Revenue & Customs (HMRC) last year
Nearly 90% of complaints against the taxman were at least ‘partially’ upheld last year, the Adjudicator’s Office revealed in its latest annual report. Furthermore, over 50% were ‘substantially’ upheld across 2013/14.
HMRC therefore paid out more than £4 million to taxpayers, from whom it had claimed payments incorrectly and who had taken their complaint to the Adjudicator’s Office. It also had to redress payments. The Adjudicator’s role is to provide impartial investigations into complaints brought by individuals and businesses who are not satisfied with the way HMRC, the Valuation Office Agency or The Insolvency Service have handled their grievances.
The Adjudicator is there to review such cases and decide whether or not to uphold a complaint. If so, it may be settled by mediation, where both parties reach an agreement. 55% of complaints were mediated in 2013/14.
Most of the £4 million paid out to taxpayers was in the form of liability given up, relating to cases where HMRC had received too much money from taxpayers which has now been refunded.
In 2013/14, the Adjudicator’s Office received 1,087 new complaints and resolved 2,311, including those caught in backlog. It is good to know that there is an impartial arena to help should you believe you have been wronged by the taxman.
