HMRC Cracks Down on Tax Avoidant Smokers

Some smokers are avoiding tax in their choice of cigarette according to HM Revenue & Customs.

It seems duty paid on normal cigarettes is equivalent to duty paid on longer ones which HMRC deems as avoidance of tax.

To combat this from January 2011 any cigarette longer than 8cm, excluding the tip, will be treated as a separate cigarette and receive added duty, according to the Daily Telegraph.

A HMRC spokesman told the newspaper the technical change “is designed to stop a tax avoidance method”.

In a further crackdown any cigarette which is a further 3cm above the 8cm, will be treated as a third cigarette. Meaning any cigarette 12cm or longer will be treated as three cigarettes, not one.

A normal cigarette excluding the tip is 6cm in length.

The taxman has yet to announce the level of duty the brands, affected by this change, will have to pay. It also has not confirmed whether certain slim cigarettes, which are longer than the usual size, will be affected.

The chancellor announced in the budget this week cigarettes would rise by 15p immediately or 1% above inflation which is set at 3%. He added from 2011 to 2015 duty on cigarettes would rise 2% above inflation.

Accountancy Age

HMRC Sponsors New TV Series

A new TV series – “The Business Inspector” – has been sponsored by HM Revenue & Customs (HMRC). The programme will raise awareness among small businesses that they need to keep good records.
The Business Inspector is a four-part series that will be broadcast weekly on Five at 8pm from 10 March 2010.

Stephen Banyard, Business Customer Unit Director at HMRC said:

“We know that most small businesses want to get their tax right. But we also know too that failure to take reasonable care costs the Exchequer over £6bn a year, with a major cause being poor record keeping. We hope this series will raise awareness of the need for good record keeping.

“We also want small businesses to realise the benefits to them – such as improved cash flow – of taking better care of their records and paperwork.”

Presenter Hilary Devey said:

“Britain’s brimming with creativity but a terrifying number of businesses go bust each year and this shouldn’t be happening. I am going to teach businesses how to improve their all round business knowledge and direction, cash flow, marketing strategy and in some cases even their enthusiasm. Invaluable lessons they will never forget.”

Warning on UK Tax Codes

Incorrect tax codes may have been sent by HM Revenue & Customs (HMRC) because of an error in a new computer system.

The codes tell taxpayers how much their employers and pension firms will deduct in income tax in the coming financial year 2010-11.

The Chartered Institute of Taxation (CIOT) says taxpayers could be asked to pay up to £108 a month too much.

The Revenue said it had no evidence of a widespread problem but advised taxpayers to check carefully.

“There will be some incorrect tax codes as there always are at this time of year,” said an HMRC spokesman.

“But the coding notice tells people what the code relates to and tells them to contact us if it is wrong,” he added.

‘Nasty shock’

The CIOT has called on the Revenue to launch a publicity campaign to alert taxpayers to the potential problem.

“Most people on PAYE are used to assuming that what the taxman sends them is correct,” said Andrew Hubbard of the Chartered Institute of Taxation (CIOT).

“But this year, many of them are being given wrong information, and unless they spot it and tell HMRC, their employer will receive the wrong information too.

“They could get a nasty shock when they open their April pay packet and see it is as much as a hundred pounds lighter than they are expecting,” he added.

It is not clear how many incorrect tax codes have been sent out, or may be distributed in the coming weeks.

The CIOT said the scale of the problem might be indicated by the fact that this year about 25 million coding notices are being distributed, which is about twice last year’s number.

The Revenue explained that the increase was a natural feature of the new system.

“It creates a single record for customers for the first time, and this, together with increased automation compared to previous years, is resulting in many more people having more accurate codes than before,” the spokesman said.

Computer problem

The codes have been sent out in batches in a process that started in the first week of January and which ends in the first week of March.
  If the whole of that personal allowance is wrongly applied that would cut a basic rate taxpayer’s pay packet by about £108 a month or £1,295 a year

CIOT
They go first to individual taxpayers in a P2 notice for them to check, before the code is sent to their employer.

However some people are receiving two or more more coding notices which are different.

The problem appears to lie with a new computer system designed to process the collection of income tax via the PAYE system, along with national insurance contributions.

The CIOT said the system’s database was failing to distinguish between current jobs and old ones, leading to tax codes being calculated on the assumption that someone has more than one job.

It said this was resulting in some people having their personal allowance split between two jobs, or allocated entirely to a job they no longer had, which would force their current employer to deduct too much tax.

“The personal allowance will be £6,475 for most people under 65 in 2010-11,” said the CIOT.

“If the whole of that personal allowance is wrongly applied that would cut a basic rate taxpayer’s pay packet by about £108 a month or £1,295 a year,” it said.

In a few cases the Revenue computer system has removed the personal allowance on the assumption that the person’s income will be higher than £100,000.

Earners above this level will lose their personal allowance this coming tax year, in a measure first announced by the Chancellor in the 2008 pre-budget report.

Accountancy Age

Government Delays Crackdown on Tax in Construction

Plans for a clampdown on tax in the construction industry have been postponed until the New Year.

According to the industry magazine Construction News the focus on what the taxman regards as “false self-employment” will continue after the holidays when responses to current consultation are also expected to be published.

HMRC believes many people working in construction are in effect “employees” but adopt self employed status to avoid tax and national insurance contributions.

Accountancy Age

Taxman Should Improve Bereavement Behaviour

The Low Incomes Tax Reform Group has called on the taxman to improve its treatment of the bereaved.

A paper from the charity recommends HM Revenue & Revenue takes part in a Tell US once pilot which allows the bereaved to report a death to s single government agency which would then notify all the other relevant bodies.

In addition the group wants HMRC to begin house calls and take steps to eradicate the overpayment of tax among the elderly.

John Andrews, Chairman of LITRG, said: “LITRG tries to join up the activity of HMRC with other departments, such as the DWP and we are continually frustrated at the silo mentality of ostensibly customer-facing organisations.

“People need the maximum support from all government departments at the time of bereavement.”

Accountancy Age

Pre-Budget Report 2009

Alistair Darling will make his Pre-Budget statement to the House of Commons on Wednesday 9 December 2009 at 12:30.

Tax Doesn’t Have to be Taxing

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Find out more about our taxation and accountancy services.

Students Getting Educated About Tax

Full time students pay income tax just like everybody else but research from HM Revenue & Customs (HMRC) reveals that more than half of the UK’s 2.3 million university students don’t realise this.

The good news is many of those who have paid tax will be entitled to get it back if they have earned less than £6,475 during this year.

Students who think they may have paid too much tax can use the student tax calculator on HMRC’s website (http://www.hmrc.gov.uk/calcs/stc.htm) to find out if they are due a cash refund and HMRC plans to launch a tax fact Facebook application complete with a refund calculator.

Three out of every four students take paid work, and if they have worked over the summer vacation or intend to get part-time work during term-time HMRC wants to help them to get the facts about tax right so that they don’t pay more tax than absolutely necessary on their hard-earned cash.

HMRC’s research also shows that there is no such thing as a typical student job – summer posts range from retail and hospitality to counting the number of passengers on trains or setting up bouncy castles for a city council.

Jane Frost, Director of HMRC Individuals Customer Directorate said:

“The start of the academic year is a good time to get educated about tax.

Making sure your tax code is right from the start of your paid employment can save you money and is good training for life after graduation. We want to help students understand how the tax system works ideally so they pay the right amount of tax from the outset and can claim what is due.”

Key questions for Students

As well as being aware of their Personal Allowance, students should also find out:

What do I do with forms such as the P45, P60 and P38(S)?

Students who plan to work only during the holiday periods, and expect to earn no more than the Personal Allowance (currently £6,475) in the tax year can ask their employer for a P38(S) which they should complete and return to their employer at the start of their job. A P45 is given out at the end of a job and shows the pay received and tax deducted between the start of the tax year (6 April) and the date the employment ceased (if before 5 April the following year). The P60 summarises the yearly earnings and tax paid for a particular job. Students with more than one job at the 5 April each year will receive a P60 from each employer. The P45 and P60 forms should be kept in a safe place for future reference.

What does my tax code mean?

Your tax code shows how much you are allowed to earn before paying any tax. This helps employers to work out how much tax to deduct from your pay.

What if I have more than one job?

Like everyone else, students only have one Personal Allowance for each tax year and if they start a new job without finishing their first job, their second employer will ask them to fill out and sign a form P46. The employer uses the information on the P46 to notify HMRC that a new employee has started and to ensure the correct code is operated on earnings from the second job.

What are National Insurance contributions (NICs)?

NICs pay for social security benefits that you may receive later in your life and to help pay for the National Health Service. National Insurance contributions are recorded against a person’s name using a National Insurance Number. NICs are deducted at source from pay by employers and cannot be claimed back. They are only paid once your income exceeds £110 a week. You’ll need to keep a record of your National Insurance Number for any dealings with your tax office and your employer(s).

Who do I need to tell when I change address?

HMRC needs to be kept informed of your address. This is the individual’s responsibility – don’t assume your college or university will do it – and ensures you won’t miss any important letters or forms – or rebates!

Students can find all the information they need at: www.direct.gov.uk/studenttaxadvice.

HM Revenue & Customs re-organisation of Corporation Tax work

HM Revenue & Customs (HMRC) is currently reorganising the way it handles Corporation Tax work in local offices.

During July the Corporation Tax records of companies and organisations currently dealt with by the office in Liverpool (That is those records prefixed by 423) will transfer to:

HMRC Local Compliance
CT Operations
Blackburn House
Hanley
Stoke-on-Trent
Staffordshire
ST1 3BS

Telephone: 01782 683318 – Please do not use this number for any other queries.

You will shortly receive a note on form CT 210 confirming these details.

You may receive notification of this change even if your company or organisation is currently dormant. This is because HMRC want you to know which office to contact should your circumstances change.

HM Revenue & Customs re-organisation of Corporation Tax work

HM Revenue & Customs (HMRC) is currently reorganising the way it handles Corporation Tax work in local offices.

During July the Corporation Tax records of companies and organisations currently dealt with by offices in Wrexham and Swansea (that is those reference numbers prefixed by 793 and 700) will transfer to:

HM Revenue and Customs
Local Compliance
CT Operations South Wales
Ty Glas
Llanishen
Cardiff
CF14 5FP

Telephone: 02920 325003 – please do not use this number for any other queries.

You will shortly receive a note on form CT 210 confirming these details.

You may receive notification of this change even if your company or organisation is currently dormant. This is because HMRC want you to know which office to contact should your circumstances change.

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