Employment Tax Expert

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

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.”

If you were reading my blog earlier in the week you will have seen that HMRC are generously doing their bit to cut the Budget deficit by having an Autumn feeding frenzy as far as employer compliance reviews, tax investigations, steal the last penny off your Gran are concerned, so how does this stack up with the following:

The FT has reported that HMRC are apparently going to adopt a less “combative approach” to resolving tax disputes with businesses.

It seems that there is a “logjam” of legal cases relating to the “contentious” issue of avoidance, which are very expensive in terms of both time and money.

Even Dave Hartnett, permanent secretary for tax at HMRC, has expressed concerns that maybe HMRC have been a tad “heavy handed”:

“HMRC is packed full of very intelligent people, but we are sometimes too black-and-white about the law.”

He went on to comment on HMRC’s litigation strategy, which was introduced in 2007:

“I think we got it a bit wrong in the way we explained it to our people. They thought it was a great sword of justice.”

Who do these people think they are, it’s ridiculous and if the likes of David Hartnett thinks that this approach is going to be changed when the very people he is talking about are having the threat of the sword being shoved where the sun don’t shine if they don’t get in the extra revenue, then he is as mad as a box of frogs!