HMRC Increases Late Filing Penalties

People who submit their tax return after the 31 January deadline will face significantly higher penalties, HMRC has announced.

Previously, returns filed after the deadline would attract a £100 fine. However under the new framework, which first applies to 2010/11 tax returns, taxpayers who file their returns late will be charged £100 on day one and further daily penalties of £10 after three months.

It means that a tax return filed six months late could attract a penalty of at least £1,300.
According to HMRC, the old £100 penalty failed to act as a deterrent. It hopes the new harsher penalty system will therefore encourage people to ‘submit returns as soon as possible’.

‘HMRC spends a lot of time pursuing late returns and getting involved in unnecessary appeals work. We want to focus our resources on more productive work such as catching criminals and collecting tax,’ said a HMRC spokesperson.

Story from Accountancy Age

Phasing Out of National Insurance Number Cards Continues

Traditionally HM Revenue & Customs (HMRC) has notified individuals of their National Insurance number for the first time by sending them a plastic National Insurance number card.

Last year, as part of the Government’s Spending Challenge, the Chancellor announced that HMRC would stop issuing National Insurance number cards and send letters instead (saving £820k a year).

HMRC stopped issuing replacement National Insurance number cards in October 2010. Since then, if you ask for a reminder of your National Insurance number you get a letter confirming it instead.

From July 2011, HMRC will stop issuing cards to adults. If you’re an adult and need a National Insurance number for the first time, you will receive your number on a letter from the Department for Work and Pensions (Jobcentre Plus).

However, if you are approaching age 16 and are eligible to receive a number automatically, you will still be sent a National Insurance number card. This will continue until later in the year.

Millions of people will still have a National Insurance number card. As the cards are phased out, there will be growing numbers of people who will have a letter instead. If you are an employer you will need to bear this in mind when taking on a new employee.

You do not need to have a National Insurance number card – it is your number that is important.

Find out more about how to get a National Insurance number, when you’ll need one and what to do if you don’t receive yours or forget or lose it by following the link below.

Applying for a National Insurance number

HMRC to Use Web Robot

New campaigns targeting VAT defaulters, private tutors and e-marketplaces will be launched by HM Revenue & Customs (HMRC) over the next year.

HMRC will use cutting-edge tools such as “web robot” software to search the internet and find targeted information about specified people and companies. Using the software, the department can pinpoint more accurately people who have failed to pay the right tax. The “web robot”, used with the department’s Connect computer system, also helps find people who are trading without telling HMRC.

Connect alerts HMRC to previously invisible tax evasion by matching a vast amount of HMRC and third-party data, enabling a fast and focused response to tax evasion. It shines a light onto previously hidden relationships, uncovering anomalies between such elements as bank interest, property income and lifestyle indicators before homing in on unexplained inconsistencies.

Before designing and launching the campaigns, the department will seek input from interested parties.

HMRC announced last month that a campaign targeting VAT rule-breakers trading above the £73,000 turnover threshold but who have not registered for VAT will be launched in the summer.

Other campaigns that will be launched in 2011/12 will focus on:

• Those who provide private tuition and coaching. This addresses the risk posed by all professionals who, because of their field of expertise, are able to earn money from providing tuition and coaching – either as a main or a secondary income. It covers people providing private lessons, regardless of whether they have a teaching qualification, and could include, for example, fitness/dance/lifestyle coaches through to national curriculum subject tutors and others.
• E-marketplaces. This will cover those who are using e-marketplaces to buy and sell goods as a trade or business and who fail to pay the tax owed. People who only sell a few items and who are not traders are unlikely to be liable to tax and will not be targeted by this campaign.
• Trades. This will build on HMRC’s plumbers’ campaign and give an opportunity to another group of tradespeople to come forward and declare unpaid tax.

Mike Wells, HMRC’s Director of Risk and Intelligence, said:

“We want to make sure HMRC listens to as many informed views as possible for our future campaigns. We want the views and experience of people and organisations outside the department to play a fuller part in the campaigns that we design for customers.

“By being open about our areas of interest for the coming year we hope to maximise that exchange of information and ensure we reduce the tax gap and help customers pay what they owe.

“We will use the information we gather to pursue people who choose not to use the opportunities we provide for them to put their affairs in order on the best possible terms. It will be more expensive if we come and find people, so I urge them to come forward and disclose voluntarily.”

So far, more than £500m has been raised by HMRC from voluntary disclosures and a further £100m from follow-up activity. Previous campaigns have targeted offshore investments, medical professionals and people working in the plumbing industry.

Company cars – advisory fuel rates from 1 June 2011

HM Revenue & Customs has published new advisory fuel rates effective from 1 June 2011 and are available on the HM Revenue & Customs website:

http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm

The rates are now to be reviewed four times a year. Any changes will take effect at the beginning of each calendar quarter – on 1 March, 1 June, 1 September and 1 December and will be published on the HM Revenue & Customs (HMRC) website shortly before the date of change.

In view of the increased frequency of review, HMRC will no longer consider changing the rates if fuel prices fluctuate by 5 per cent from the published rates.

Employers should make themselves aware of any changes by referring to this page in late February, May, August and November each year. It is the primary source of information.

VAT
Customs will also accept the figures in the table for VAT purposes though employers will need to retain receipts in line with current legislation.

Judge Takes Dim View of HMRC’s Approach

A First-tier Tribunal judge in a recent appeal took a very dim view of HMRC’s approach.

In brief, the taxpayer tried to file her tax return online in January 2010 but found that she could not access HMRC’s website. She contacted HMRC’s support line, but did not receive a reply. HMRC issued two late filing penalties: one for not filing by 31 January and the second for still not having filed her return six months later.

In support of its failure to respond in time, the Revenue claimed that the taxpayer had emailed the VAT online services helpdesk in error. It argued that the taxpayer had to take responsibility for ensuring that her tax affairs were dealt with correctly and on time, and that this was not negated by her having twice emailed the helpdesk. The department, somewhat extraordinarily, argued that it could not reasonably be expected to reply to her emails before 31 January 2010.

The First-tier Tribunal judge found the latter ‘proposition startling’, saying he was sure HMRC would expect a business to which they had sent correspondence, not only to be able to reply within 14 days but actually to do so. He said ‘there is no reason why the standards applicable to businesses and commercial organisations should not also apply to an organ of the state’.

While agreeing that it was the taxpayer’s responsibility to file her self assessment return on time, the judge added that ‘it was equally the responsibility of HMRC to provide online filing facilities that worked and provided the promised filing facility’. He was ‘wholly unimpressed by the argument that there was no obligation on HMRC to reply to the appellant’s emails to its helpdesk; there is little point in there being a helpdesk if, in fact, it does not provide help’.

The upshot was that the judge found that the taxpayer had a reasonable excuse for failing to file online by the 31 January 2010. The excuse was that the online filing facility provided by HMRC did not work as it should have and, furthermore, HMRC failed to provide her with the help that she had requested within a reasonable time which, the judge suggested should have been within three days.

The judge’s comments are total indictment of HMRC’s not infrequent unprofessional and lackadaisical dealings with taxpayers and agents. Sadly, the taxpayer lost the moral high ground by failing to file her return until several months later, so the second £100 penalty stood.

Story from Tax Advice Network

Taxman’s “Tactical” Withdrawal From Court Battle Could Harm Recruiters

The Taxmans’s expected decision to not appeal against a VAT tribunal ruling it lost has been described as a clever “tactical move” could harm the recruitment agent industry.

Reed Employment won a first tier tribunal in March in which it argued that it should only pay VAT on the commission fee charged to clients, and not the entirety of the charge.

HM Revenue & Customs has not confirmed whether it will appeal the decision. But Hannah Dobson, VAT director of Smith & Williamson, said that HMRC sources have indicated it will not appeal.

“This is a fantastical tactical ploy,” Dobson said. “A case through the first tier tribunal is only persuasive on others, and not binding. HMRC will turn around and say no-one else can rely on the ruling, it only applies to Reed.

“We cannot have Reed being allowed to operate in one way in an industry and everyone else in another. But that said, I think HMRC will challenge anybody else that is thinking of operating like Reed. It is in a position where it can challenge others.”

This will mean that recruitment businesses will be out of pocket for “another 12 to 24 before another court case comes out”, she added. “It has potentially delayed any repayments of VAT to anybody but at least another two years.

“If this had been binding, any client that had gone back to the temporary agency and asked for VAT back, the agency could have gone to HMRC and HMRC would have paid it back,” she said

HMRC Trials Single Compliance Process

HM Revenue & Customs (HMRC) has announced trials of a single compliance process for enquiries across a range of different taxes.
By simplifying and standardising the process for compliance checks HMRC will improve customer experience and reduce costs as the check will only take as long as the risks and behaviours encountered dictate.

The trials of the new process will run for six months from 1 June in 10 different locations across the UK: Reading/Slough, Newcastle, Warrington, York, Exeter, London Euston and Southampton in England; Cardiff in Wales; Belfast and Edinburgh/Dundee.

The new process will be rolled out nationally from January 2012, subject to the results of the trials.

David Gauke, Exchequer Secretary to the Treasury, said:

“This Government is committed to relieving the burden on businesses. We know that agents, individuals and businesses find some of HMRC’s current compliance practices drawn out and costly. A single compliance process could help HMRC improve the customer experience and reduce costs.

“HMRC is working directly with agents via the Compliance Reform Forum to help develop it, and will continue to work with them during the pilots.”

The single compliance process will focus solely on the risks and behaviours identified in cases and throughout the life of the compliance check, irrespective of the head of duty (VAT, Income Tax, Corporation Tax and PAYE) involved. The process will be capable of addressing lower risk cases at an appropriate level, but will also increase in intensity should the approach be warranted.

If you require assistance with a Compliance check why not contact Davenports to see if we can help. Simply complete the quick form below and one of our team will contact you back.

Accountancy Request

1. Your Name(required)
2. Post Code
3. Contact Number(required)
4. Email(valid email required)
5. I Need...
6. Help!
   A Change of Accountant
   Assistance starting up
   Help with the Payroll
   Help with Tax, CIS or VAT
   Help with getting money from my clients
7. Any other comments
8. To receive your FREE key fob, tick this box
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Business Entertainment

With effect from 1 May 2011 input tax is no longer blocked in respect of business entertainment of overseas customers “of a kind and on a scale which is reasonable, having regard to all the circumstances”. It is expected that HMRC will interpret this latter condition strictly.

For further assistance please contact Davenports to see how we can help. Simply complete the quick form below and one of our team will contact you shortly.

Accountancy Request

1. Your Name(required)
2. Post Code
3. Contact Number(required)
4. Email(valid email required)
5. I Need...
6. Help!
   A Change of Accountant
   Assistance starting up
   Help with the Payroll
   Help with Tax, CIS or VAT
   Help with getting money from my clients
7. Any other comments
8. To receive your FREE key fob, tick this box
9. Verification

 

Plumbing Profession Told to Tighten up Tax Affairs

Plumbers, gas fitters and heating engineers are being targeted by the tax authorities in a clampdown on tradespeople failing to declare their earnings and pay tax.

Under the tax plan, plumbers, gas fitters, heating engineers and members of associated trades who have tax to pay which they have not yet told HM Revenue & Customs (HMRC) about can come forward by 31 May to tell the department of their intention to disclose what they owe. If they make a full disclosure, most face a low penalty rate of 10 per cent, with a maximum of 20 per cent. They have until August 31 to make their disclosure and arrange for payment to be made.

After that date, using information pulled together from various sources, HMRC will carry out targeted investigations aimed at those who have failed to come forward and make a full declaration. Substantial penalties or even criminal prosecution could follow.

The plumbers’ tax safe plan (PTSP) is the first initiative in a campaign focused on tradespeople. It is designed to make it easy for those in the plumbing industry to put their tax affairs right – and keep them that way.

Mike Wells, HMRC’s Director of Risk and Intelligence, said:

“Our aim is to make it as easy as possible for plumbers to come forward, make a full disclosure and benefit from a reduced penalty.

“We will be using various intelligence sources to target plumbers who have not declared their full income. I strongly urge any in this group who think they may owe tax on their income to get in touch with HMRC and get their tax affairs in order simply and on the best available terms.

“This is the first step in enabling those with undisclosed income or gains to avoid a full tax investigation with much higher penalties. The message is clear: contact us before we contact you.”

The tax plan operates in two stages:

* From 1 March to 31 May, plumbers can register with HMRC to “notify” that they plan to make a voluntary tax disclosure.
* By 31 August, those who have registered must have told HMRC about tax due and have made arrangements to pay any tax interest and penalties due. This is called “making a disclosure”.

How do plumbers let HMRC know that they intend to make a tax disclosure?

* Online by completing a notification form at www.hmrc.gov.uk/plumberstaxsafeplan
* Ring HMRC on 0845 600 4507

A dedicated team will be on hand to help.

The benefit of the Plumbers Tax Safe Plan is that those who make a full disclosure:
* Will be offered a simple and straightforward way to put their tax affairs right; and
* Will be charged a low penalty rate – (10 per cent for most who sign up, with a maximum rate of 20 per cent).

Farmers Can Use Red Diesel Now to Help Out During This Extreme Weather Snap

HM Revenue & Customs (HMRC) confirmed today that during extreme weather farmers can use red diesel in their tractors to help grit and clear snow from public roads.

Under normal rules any vehicle that is specifically constructed or adapted for dealing with frost, ice and snow – such as a snow plough – can work on public roads while using red diesel.

HMRC recognises the vital role played by farmers in helping to keep rural roads clear. So during this period of extreme weather HMRC will adopt a pragmatic approach to the rules. This means tractors on public roads clearing snow or gritting to provide access to schools, hospitals, a remote dwelling, or communities cut off by ice and snow are entitled to use red diesel.

More details can be obtained by calling the Excise and Customs Helpline on 0845 010 9000.

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