Employment Tax Expert

The Government’s Comprehensive Spending Review (CSR) highlighted the need to adopt a consistent approach across HM Revenue & Customs (HMRC) in tackling tax avoidance risk. So what have HMRC done, you would hope tackle the massive corporate tax avoidance schemes that are well known, past and present, but no …… what is the highest risk, you guessed it, SME’s, this employment tax expert despairs.

To address the expectation in the CSR and focus on effectively tackling tax avoidance, HMRC has created four specialist teams to handle compliance checks into direct tax avoidance schemes used by small and medium enterprises (SMEs). SMEs are companies, partnerships or self-employed businesses with a turnover of under £30 million and with less than 250 employees.

The teams are located in:
Central – Stoke
East – various locations
South East – Bournemouth
London and Anglia – Luton

HMRC is currently transferring approximately 1,850 ongoing SME compliance checks to these four teams and aims to complete this by the end of January 2012. HMRC customers and their authorised tax agents and advisers (if appropriate) will be advised (in writing) of a change to both case officer and office dealing with the check.

From 1 December 2011, the teams will deal with all SME compliance checks which involve direct tax avoidance risks, so if you find your self in this position, please call us on 0800 917 9176

HMRC has opened a new specialist unit to target taxpayers holding assets offshore to evade tax, the Offshore Co Ordination Unit. This follows a sequence of initiatives to counter offshore practices – notably the recent deal with Swiss banks, the acquisition of data on accounts held at HSBC and other banks and successes achieved by the Liechtenstein Disclosure Facility (LDF), HMRC is staffing up an Offshore Co-Ordination Unit (OCU) with analysts, technical tax experts and experienced investigators.

Starting out with a team of 25, the unit will eventually have a staff of 100 to deal with income and capital held offshore to avoid UK tax.This employment tax expert thinks that they are hardly throwing resources at this with a team of 25!

However, this could be because back in October, HMRC wrote to 6,000 people whose names appeared on a CD-ROM that was reportedly stolen from the premises of HSBC’s Geneva branch inviting them to come forward. Already, around 500 serious fraud and criminal investigations are said to be in progress as a result of the data gathered.

Under the Swiss tax deal, banks will withhold a percentage of clients’ interest and pay it to HMRC, which should negate the need for buying illegally gained CDs. HMRC also have the luxury of more and more information coming in through a range of information-sharing agreements. The OCU will use this intelligence to develop “innovative” new ways of tackling offshore tax evasion, HMRC have said.

Exchequer secretary to the Treasury, David Gauke, commented: “The launch of this specialist unit, together with the other valuable work the department is driving forward in an effort to tackle offshore evasion, underlines the fact that offshore tax cheats are fast running out of places to hide.”

The OCU will work as a stick in parallel with the LDF carrot to encourage offshore account holders to make voluntary disclosures. It is yet another plank in the £900m campaign to crack down on evasion (and avoidance), shakes head, when will HMRC ever learn that tax avoidance is legal tax planning and concentrate on the tax evaders, to bring in as much as £7bn a year by 2014. Also underway are numerous trade-focused task forces to investigate sectors where there is a high risk of underpayment. If you are impacted by any of these initiatives, please call us today on 0800 917 9176

The Tax Health Plan (THP) was one of the first targeted tax disclosure opportunities, it was aimed at doctors and dentists with miscellaneous sources of income such as from writing medical insurance reports, working as a locum, or for signing certain certificates. Taxpayers who opted to use the THP were required to make a full disclosure and pay all tax, penalties and interest due by 30 June 2010.

HMRC are now confident they have processed all the disclosures from the THP. So they are now writing to over 2,500 doctors and dentists who did not take advantage of the THP, but who HMRC believe received some untaxed income. If your client receives one of these letters, they will have only 21 days to reply to HMRC.

If the taxpayer does not respond to HMRC within this time scale, the likely result will be a determination of tax due. A ‘determination’ is raised by HMRC where a tax return has not been submitted. Note, there is no right of appeal against a determination. It can only be superseded when the taxpayer makes a valid self-assessment, which means submitting a tax return. Where the taxpayer has submitted a tax return, HMRC can amend the taxpayer’s self-assessment if the enquiry window is still open, or otherwise issue a discovery assessment.

HMRC have used their powers to obtain lists of payments made to medical practitioners from pharmaceutical companies, insurance companies and locum agencies. These lists may not be entirely accurate as names and addresses can be confused. Sometimes the funds may be received and taxed in a personal company or partnership, when the payer believes they have made the payment to an individual.

Some serious cases will be referred directly to the Revenue and Customs Prosecutions Office for criminal investigation. If this happens to your client be sure to contact us without delay, on 0800 917 9176.

HMRC has been forced to respond to a Freedom of Information Act request and confirmed the following:

• The new Business Record Check annual target is 20,000 visits, which represents a 30,000 reduction from the original objective of 50,000, as outlined in the Business Record Check Consultation Paper.

• The 20,000 annual target has been reduced on a pro rata basis for this tax year. 12,000 Business Record Check (“BRC”) visits are due to be conducted before March 2012.

• The 30 staff who carried out the original ‘Test and Learn’ BRC visits between April and July from Edinburgh, Irvine, Liverpool, Manchester, Portsmouth, Sheffield, Stockport and Sunderland tax offices are going to be assisted by a further 90 staff. More tax offices are going to be involved. The additional 90 staff are being drafted on to the BRC Team between September and November 2011.

In addition to this second round of BRC visits which have already begun, HMRC is also revisiting businesses deemed to have been keeping inadequate records during the first ‘Test and Learn’ exercise. The follow up letters state the intention is ‘to check that the appropriate improvements have been made.’

There is no official clarification from HMRC yet as to whether fines will be levied for poor record keeping during the second round of BRC visits, although HMRC has previously said that businesses visited during the ‘Test and Learn’ phase would not receive fines unless in the most significant circumstances

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.”