Employment Tax Expert

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.”

HMRC’s campaign against disguised remuneration is designed to prevent employers, in particular City firms or football clubs, from disguising large payments to employees through loans and trusts – employment benefit trusts (EBTs) – in order to avoid or defer income tax or national insurance contributions.

A new schedule in the Finance (No. 3) Bill 2011 will treat loans, money or other assets held in trust but linked to an individual as PAYE income. HMRC also plans to bring forward a similar treatment for NICs. The regime came into effect on 6 April 2011, but will apply in some cases dating back to 9 December 2010.

Draft legislation on disguised remuneration published by the government in December 2010 was criticised for being complex and too broad. Tax experts warned that the anti-avoidance law would catch many remuneration structures that were not designed to avoid tax.

The new disguised remuneration provisions only apply to schemes that use a third party such as a trust, individual or company.

The disguised remuneration guidance, which is due to be finalised in the autumn, attempts to clarify how the law will work in a number of situations including:

Clarification that employee car ownership schemes wholly run by the employer or other companies in the same group will not be covered by the disguised remuneration arrangements
Normal dividend payments following a share transaction will not be caught by the new rules

In the past EBTs were extremely popular but now using an EBT for any kind of tax efficiency is unlikely to work in all but some very limited cases.

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