It’s official: thousands are on the wrong tax code!

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With the tax return deadline being only hours away (midnight 31 January 2014) there is still time to get professional help if you need it – particularly because HMRC  often get it wrong according to new research by UHY Hacker Young.

In just one example, HMRC sent a tax bill to a pensioner which demanded over £576k in tax! With an income of only £11k per annum this was clearly incorrect but what if it had been only hundreds of pounds wrong – would the pensioner have noticed and, if so, would he have been confident enough to question it with the might of HMRC?

According to the research, HMRC employees have been making ‘basic’ errors which have led to problems such as people being on the wrong tax code and consequently underpaying or overpaying tax. While underpaying it may sound attractive on the face of it, chances are the system will catch up and then a correction will need to be made later on, leaving the taxpayer with an unforeseen bill to pay – a real blow for cashflow.

While the UHY Hacker Young research cites an error rate in 2013 of 37% in the sample tested, HMRC are arguing that the research is wrong and that their PAYE coding notices are 99% accurate. Either way, when you consider that Read more

HMRC’s fight against tax avoidance is bearing fruit

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HMRC has reported that it raised an extra £20.7 billion in additional revenue during the financial year 2012-13, a result of its continued push on tax compliance and anti-avoidance measures. That’s an increase of £2.1 billion on the preceding year and is actually £2 billion above its original target.

This information comes hot on the heals of the Chancellor’s Autumn Statement, about which we reported in early December. Following that Statement, the Treasury issued documents including a ‘Scorecard’ which measures the impact of the Chancellor’s actions in regard to revenue collections. Of the 59 items listed in the scorecard, 20 fell directly into the categories of “Avoidance, tax planning and fairness” or “Fraud, error and debt”. The measures are estimated to yield a further £1,515 million in 2014-15 and £8,900 million in total by close of play 2018-19. Read more

Tax return help 7 days a week!

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By midnight on 31st January 2014, you will need to have submitted your self-assessment tax return to HMRC and have paid them any tax due for the 2012-13 financial year. It doesn’t matter if you have zero tax to pay – you still need to submit your tax return on time or you will be hit with an automatic penalty of £100 (delaying even further can, in the worst case scenario, increase this fine to as much as £1,600).

In view of this, for the month of January you can get help 7 days a week from Taxfile in Tulse Hill, South London.

Our team of tax advisers and accountants can help you with your return whatever your employment status. We can help you register with HMRC if you are not already registered, check your form and help fill it in where necessary, make sure you’ve claimed for any allowable expenses to offset tax, make sure you haven’t missed anything or claimed for something you shouldn’t have claimed, compute any tax due (or due to be refunded), and submit your tax return on-line (the only option available this late into January – paper returns are already too late!). Read more

Assets hidden offshore? Not for long!

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Financial information sharing now reaches the Cayman Islands, Isle of Man, Jersey and Guernsey.

On November 5th, Her Majesty’s Revenue & Customs (‘HMRC’) announced that the Cayman Islands had joined the ever-growing list of offshore territories which will now automatically share financial information with them in respect to UK taxpayers who may have accounts there. This follows similar agreements which took place in October for Jersey, Guernsey and the Isle of Man. Clearly the idea is to further aid in HMRC’s clampdown on tax evasion and avoidance.

The Cayman Islands also agreed to become an integral part of the G5 multi-lateral information sharing initiative involving a total of 31 territories including the UK, France, Germany and Spain, based on an earlier agreement with the U.S. and now also including cooperation with South Africa. The transparency of who really owns and controls UK companies is also a key HMRC aim.

This is all an important step towards the creation of a global standard in tax transparency and information sharing, an initiative originally agreed Read more

HMRC now has landlords in their sights

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Residential property lettingsHMRC (Her Majesty’s Revenue & Customs) has announced some new initiatives over the course of the last month and one of these is The Let Property campaign which is a campaign designed to recover undeclared tax from those receiving income from residential property lets. The idea is to encourage those landlords with under-declared income or gains (potentially including income tax, Capital Gains Tax and VAT) to contact them in order to make a full disclosure. By doing so they may well avoid the higher penalties which may be applied to them should HMRC discover the undeclared income/gains via other means. Don’t forget that they now have access to information shared across systems, including in relation to properties both at home and abroad, as well as being gained through their digital intelligence system ‘Connect’ which identifies links between individuals, entities and properties. So the message to landlords is loud and clear!

The campaign applies to landlords whether they have just a single property or a large portfolio of properties and encompasses lets to students, business workforces and the holiday market. Read more

HMRC now see payments you receive via credit card!

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On September 1st 2013 new legislation kicked in which allows HMRC automatic access to data showing payments made to businesses via credit card, going back as long as 4 years. HMRC will receive this information direct from the companies who process credit card payments on behalf of businesses (‘merchant acquirers’).

No personal data identifying the card owners, nor the credit card numbers, will be supplied as part of the data — it will primarily show the quantity of transactions and values credited to any particular business via credit card. On its own this may reap £50 million per annum in otherwise ‘lost’ tax revenue and the exercise will be helped by HMRC’s ‘Connect’ system which compares data coming in from various sources and cross-refers for consistency. The scheme’s implementation has been aided by a £1 billion budget given to HMRC aimed at tackling tax evasion and fraud.

The new legislation is part of the Finance Act 2013 and is part of a major crackdown on tax evasion which overall costs the taxpayer £9 billion a year Read more

Received an SA302 form from HMRC?

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If you’re ever wondering why you were sent form SA302 through the post, it will usually be for one of 3 reasons:

  1. if you sent in a paper tax return asking HMRC to calculate the tax for you;
  2. if you made an amendment to your paper tax return; or
  3. if you sent HMRC a paper tax return and they don’t agree with your calculations for tax.

You will also have received a covering letter explaining the period under scrutiny, the income tax due (or owed) for that tax year with a note of when it’s payable, an explanation of any changes made by HMRC to your figures and lastly information relating to any payments on account which may be required for the next tax year. Read more

Newsflash: Tax return deadline extended

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It’s not often we receive good news from Her Majesty’s Revenue & Customs, but today is a wonderful exception! In case you haven’t yet heard, the penalty deadline for 2011 tax returns has now been extended to 2nd February 2012. This is due to industrial action at HMRC on the 31st January.

(Information courtesy of Lynsey).

Tax Health Plan (THP)

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The HM Revenue & Customs is offering a disclosure opportunity for medical professionals known as Tax Health Plan (THP).
Under the plan, medical professionals have until 31 March 2010 to notify the HMRC that they will be making a disclosure of any undeclared tax bills.
After which the full disclosure and payment of all outstanding taxes and duties, interest and penalties must be made by 30 June 2010.
Under the Tax Health Plan, the HMRC are offering a reduced penalty rate of 10% but no penalty where the total of unpaid tax is less £1000.
After 31 March 2010, the HMRC have stated that they will be undertaking a data matching exercise using information from payments from NHS trusts, private hospitals and medical insurers.
If the choice is made not to disclose and HMRC discover any undeclared tax bills, they will seek to apply penalties of 30% to 100% of the unpaid tax bill.
If you wish to take advantage of the THP, Taxfile‘s tax agents may be able to assist you in entering the THP and preparing your disclosure. Pop in to see us or call us on 020 8761 8000 to book an appointment.

Venture Capital Trust (VCTs) and tax

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Venture Capital Trusts were schemes introduced in 1995 to encourage individuals to invest in high-risk trading companies.

With a VCT the risk of the investment is spread over a number of companies.

VCTs must be approved by HMRC and must meet a certain qualifying conditions.

If you have subscribed for shares in Venture Capital Trusts and you are 18 or over when the shares were issued you are entitled to a few tax reliefs.

According to HMRC, these are the tax reliefs for investing in VCTs:

Income tax relief:

One of the income tax reliefs of VCTs is that you are exempted from income tax on dividends from ordinary shares. This is called dividend relief;

Another very important tax relief when investing in a VCT is called income tax relief .

The amount of the tax relief will be the smaller of the amount subscribed up to a maximum of £200,000 at 30% or the amount that reduces the tax bill to zero for the year.

The rate of 30% applies in the tax year 2006/07 and onwards and for subscriptions for shares issued in previous tax years the rate is 40%.

Capital gains tax (CGT) relief :

One of the CGT reliefs when investing in VCT schemes is called disposal relief as you may not have to pay CGT on any gain you make when you dispose of your shares. In order to qualify for the reliefs certain conditions need to be met. You can find more about them on HMRC website.

As there are no guarantees that VCT investments will be successful, Taxfile‘s tax agents recommend that you seek professional advice from financial advisers beforehand.