HMRC has capped penalties for late returns of payment information to contractors under the Construction Industry Scheme. The scheme has proved controversial with contractors. Since 1 October penalties have been capped at £3,000. Before then, however, penalties for failing to register with the scheme were £100 per month and some penalties could amount to tens of thousands of pounds. In some instances where firms had neglected to register in the first place, they were being hit with notices for £20,000 and more. One firm was landed with a penalty of £80,000, which had built up over a year because the firm had failed to register as a contractor.

The new penalty regime came in on 1 October and only applies to penalties levied since that date however if you are faced with penalties under the old regime, contact us today on o800 917 9176 and we will assist you in mitigating these liabilities

HMRC has said it will stick to a plan to introduce a ‘real-time’ pay-as-you-earn tax system by 2013, despite concerns from employers and payroll software companies that the timetable is “unachievable”.

As part of a plan to modernise PAYE, which was introduced in 1944, employers will send information about tax and national insurance they deduct from employees’ wages to HMRC when they are made – rather than at the end of the tax year as happens now.

The current system causes overpayments and underpayments of tax because some information is out of date.

RTI timetable

Q: When will it happen?
A: Employers and pension providers will begin to use the RTI service during April-October 2013. All employers will use the RTI service by October 2013.

Q: How can employers be sure it will work?
A: HMRC will pilot RTI with volunteer software developers and employers and pension providers for a year, starting in April 2012.

Q: How can employers be part of the pilot?
A: Plans for the April 2012 pilot are already well advanced and no additional employer volunteers are needed. However HMRC are looking at how to bring more employers onboard later in the 2012-13 tax year.

Q: As an agent who files PAYE submissions for a number of employers, do I need permission from my clients before I could take part?
A: Yes. An agent would need to have the agreement of the client employer.

Real-time earnings information could be sent to HMRC automatically using payroll software via the BACS payment network. The new system is expected to be working October 2013.

In a response to an HMRC consultation in December last year, three quarters of respondents who had a view on the proposed timetable for introducing real-time PAYE thought it was “UNACHIEVABLE”.

But in a summary of responses to its consultation document on real-time PAYE information HMRC said the timetable for the introduction of the “universal credit” in 2013 to replace many benefits and tax credits meant “there is no flexibility in terms of the ultimate go-live date of RTI.”
which is quite frankly ridiculous.

To help smooth employers’ transition to real-time earnings information HMRC said it would “align its employment records with those of the employers”, hmmmmm and that should be interesting to witness.

Software suppliers told HMRC in the PAYE consultation that the proposed timescale did not allow sufficient time to develop and test products in time for to be ready by April 2012, but did they listen ………….?

In a concession to software companies, HMRC has said that not all software products would need to be ready for real-time PAYE by April 2012. Instead, software products will be tested for one year – starting in April 2012. Software suppliers and employers can volunteer for the scheme.

Karen Thomson, associate director of policy, research and strategic visibility at the Chartered Institute of Payroll Professionals (CIPP), said the trial of the payroll software should flesh out any “anomalies”. Employers who make payroll errors under the new system, such as telling HMRC the wrong hours worked by an employee, or the wrong leaving date from a job, could be responsible for an individual losing their benefit entitlement because the Universal Credit will rely on PAYE information, Thomson said, so a sysytem that 3/4 of respondents thought was being rushed and has a major impact on benefit entitlements, has simply not been thought through and will crash and burn if the existing timescale is pursued

HM Treasury will continue in its fight against tax avoidance by the UK’s wealthiest people with the recruitment of an additional 2,250 tax inspectors.

Speaking at the Liberal Democrats annual conference in Birmingham, Danny Alexander, chief secretary to the Treasury, confirmed that the additional HMRC staff will move into new anti-evasion and avoidance jobs targeting around 350,000 taxpayers.

More than 1,000 of these new HMRC roles are being advertised this month.

Mr Alexander said: “These [350,000 wealthiest taxpayers] are the people who pay or should pay the 50p rate of tax. And my message to the small minority who don’t pay what they owe is simple, I agree with the Chancellor. ‘We will find you and your money’ and you will pay your fair share.”

Alexander also said that this package was already bearing fruit: “I promised you we’d collect an extra £7bn a year by the end of the Parliament; and I can tell you we’re already on track to raise £2bn this year.”

The Lib Dems have also vowed to put an income tax threshold of £12,500 “on the front page of its next manifesto” up from £10,000.

“Some people have argued that we should change our tax priorities and focus our limited resources on cutting taxes for the wealthiest instead,” said Alexander. “At a time of austerity, this argument simply beggars belief. If we are all in this together, those with the broadest shoulders must bear the greatest burden.

“Fair taxation of the wealthiest is key to our deficit reduction plan. Of course, if a better way can be found to raise the money from this group, I will be willing to consider it. But right now we must focus relentlessly on those who are struggling. And we need to make sure tax owed is tax paid.”

In light of current tax investigations by HMRC, it is worth reminding you guys of the ability of HMRC to Name and Shame Tax Evaders

HMRC can publish the following information, unless doing so would prejudice an ongoing criminal investigation or cause serious risk to the taxpayer’s safety:

- The taxpayer’s name (including a trading name or pseudonym);
- The taxpayer’s address or registered office address;
- The nature of the taxpayer’s business;
- The amount of the penalties charged and the tax involved;
- The periods when the errors arose; and
- Any other information that HMRC considers necessary in order to make the taxpayer’s identity clear.

Taxpayers cannot appeal against the decision to publish their details, although they can appeal against the imposition and level of the penalty.

However, HMRC will not publish a taxpayer’s details if the tax they deliberately evaded is less than £25K or if the taxpayer voluntarily tells HMRC about the errors before HMRC begin a compliance check.

HMRC Tax Investigation into plumbers has begun in ernest

Five plumbers have been arrested and around 600 are under civil investigation by HM Revenue & Customs (HMRC) for failing to pay the right amount of tax.

The arrests and investigations have taken place during a campaign targeting plumbers which invited them to put their tax affairs in order. Some of those involved owe up to £150,000.

This is the start of co-ordinated action and more raids are expected to take place over the coming weeks across the UK, including Yorkshire, Kent, Cambridgeshire, Tyne & Wear, Midlands and South Wales.

John Pointing, Assistant Director, HMRC Criminal Investigation, said:

“These raids and arrests of ‘ghosts’ – people who have not declared income from the work they do – are the culmination of months of work by HMRC.

“We provided a chance for those we have arrested, and the 600 we are investigating, to come forward voluntarily and put things right. These arrests send a clear message that HMRC will take action against those who choose not to come forward and pay the tax they owe.”

Mike Wells, Director HMRC Risk & Intelligence Service, said:

“These arrests are just the start. HMRC is considering hundreds of further cases for criminal investigation in the plumbing and medical professions. Some people may have thought we were bluffing when we said we have information that we will use to prosecute tax evasion.”

Under the Plumbers Tax Safe Plan (PTSP), plumbers, gas fitters, heating engineers and members of associated trades who owe tax that they had not declared faced a penalty rate of only 10 per cent, with a maximum of 20 per cent if they disclose in full. They have until 31 August to arrange for payment.

If you are worried about these developments call us today on 0800 917 9176

The nature and definition of a “reasonable excuse” with respect to tax issues has been highlighted by Geraint Jones QC (who oversaw 4 hearings into late payment penalties imposed by HMRC).

Accountancy Age reports that he found in favour of 3 cases:

- Anthony Leachman,
- Ballysillan Community Forum and
- NA Dudley Electrical Contractors.

He relied on a European Court of Human Rights ruling that stated the penalties imposed by HMRC were “in the nature of a criminal penalty”.

As such, he said HMRC must “satisfy me to the criminal standard” – beyond reasonable doubt – that it was an unreasonable mistake on the taxpayer’s behalf that filing did not take place.

Jones is quoted:

“HMRC argues that a ‘reasonable excuse’ must be some exceptional circumstance which prevented timeous filing.

That, as a matter of law, is wrong.

If Parliament had intended to say that the penalty would not be due only in exceptional circumstances, it would have said so in those terms.”

However, he didn’t stop there in admonishing HMRC. He also noted that HMRC, by imposing a second penalty while deliberately failing to send reminder about the first penalty, was trying to take advantage of its own default.

“In my judgment, it is not open to HMRC to take advantage of its own default in sending a timeous default notice to a taxpayer.

That would offend the common law principle of fairness and most right-thinking members of the public would find it repugnant, especially on the part of a public body.”

HM Revenue & Customs has confirmed it is taking on an extra 100 officers to target tax abuses in the construction industry.

HMRC said it is doubling the number of specialist officers cracking down on labour providers who fail to pay tax.They are expected to bring in an additional half a billion pounds of tax across all business sectors over the next four years. Labour providers found guilty of tax evasion could face jail.

David Gauke, exchequer secretary to the Treasury, said: “This government has invested £900m in HMRC to crack down on people who break the rules. Expanding these teams will help make sure that we bring in the additional money that the UK needs. Labour providers who think they can exploit their staff and the tax system need to think again.”

Mike Eland, HMRC’s director general of enforcement and compliance, said: “Building on HMRC’s successful approach to tackling fraud in the labour provider industry, these teams will make it even harder for fraudsters.

“Labour providers are traditionally found in agriculture and construction where they supply workers to other businesses. But HMRC will also continue to focus its efforts on all sectors where there is a demand for a flexible workforce to meet seasonal and market demand such as leisure, food, transport, security and cleaning.

“We will tackle fraud by those employers who don’t play by the rules and the organised crime gangs who exploit their workers. We will also work collaboratively with labour users and businesses in these sectors to help them use legitimate providers. This will help to create a level playing field for compliant businesses to compete in the market place.”

This employment tax expert warns companies that there are many labour providers in the Construction Industry who are not legitimate and will cause you more problems than if you engaged the subcontractors on truly self employed terms

How many seemingly straight forward changes in forms from HMRC carry the potential for information collation leading to a tax investigation?

Well, later this year you will find that your solicitor, or property conveyance person, will be required to file new forms with the Stamp Duty Land Tax Office when you buy a property. After 4 July 2011 new forms need to be filed and you need to be aware that the devil is in the detail!

The new forms require that each lead purchaser provide the following unique identifier when completing the forms:
• Individuals – their National Insurance number, or
• Companies and Partnerships – their Unique Tax Reference (UTR) or VAT registration number.

So be warned HMRC will be setting up tracking processes that could find you walking straight into an HMRC tax investigation

HMRC have announced that they will allow plumbers and people in associated trades to declare their unpaid taxes for the past five years but this will be different from previous amnesties such as the Tax Health Plan (THP) and Liechtenstein Disclosure Facility (LDF) – the Plumbers Tax Safe Plan (PTSP) is not based on information uncovered about plumbers’ accounts and covers five years rather than a 10-year period.

HMRC state that they do not have specific information about plumbers’ accounts but is using data obtained from the Gas Safe register (previously known as Corgi) to target plumbers. Well call me a cynic but these sort of campaigns are not one of those finger in the wind moments, it is backed up by intelligence and is basically trying to encourage people out of the wood work rather than HMRC focusing on individual investigations, this merely represents an easier way for HMRC to meet targets as opposed to doing the real work of tax investigations.

Anyone thinking of entering the PTSP scheme will have until 31 May to notify HMRC of their intentions with arrangements to pay them off by the end of August.

The penalties will be:

* 10% for careless errors
* 20% for deliberate defaulters

Important dates to note are:

* 1 March 2011 – the start of the Plumbers Tax Safe Plan
* 31 May 2011 – the last day you can notify
* 31 August 2011 – your disclosure must reach HMRC by this date

but before anyone launches forth re participating in this disclosure, take expert professional advice

HMRC have issued an apology noting that the turnaround times for newly self-employed people to register will increase to eight weeks, between now and October 31 2010.

It seems that processing times for paper form 64-8 and registrations for self-assessment will also increase over the next two months.

HMRC staff are being moved to “higher priority work”, hence the delays in processing these forms.

Be very careful during this time to ensure that you are genuinely self employed, whether it be in the construction industry or elsewhere – if in doubt contact us today