Taxing Times – September 2017

Hello and welcome to this edition of Taxing Times.  Summer has gone (did it ever arrive?!).

Autumn is here and the world of tax continues to be interesting/frustrating (delete as appropriate!) So please delve straight into this edition of Taxing Times to find out more:

  • Big Brother really is watching!
  • Dates for your diary
  • PAYE update
  • What’s new in the world of tax?

A quick reminder that Dodd Wealthcare Limited will be at the inaugural Over 50s show at Rheged on 23 September between 10am and 4pm.  FREE ENTRY so make sure you pop along and see us to say hello.

FREE SEMINARS:

In other news, BACK by popular demand, we are holding two further cloud accounting seminars on Wednesday 11 Oct at The Shepherd’s Inn, Rosehill, Carlisle and then again on Monday 30 Oct at North Lakes Hotel, Penrith. Everything is going online and accounts, tax and payroll are no different – cloud accounting is here to stay and is the digital way forward. Get a head start before digital reporting becomes a legal requirement. There are lots of different cloud packages available, but which one works best for YOU and YOUR business? Click here for further information and details of how to book. This seminar is free to attend and is open to both existing clients and non clients of Dodd & Co.

1984 all over again…Big Brother is here….

HMRC have never been more keen to pursue outstanding tax and crack down on those who don’t pay their fair share.  Here are some ways that HMRC can use to check if you have been less than scrupulous with your tax affairs.

1 – Connect 4 (or 40, or 4,000, or 4,000,000…)

HMRC use a powerful computer program called “Connect”. This sifts through huge quantities of information to hunt for underpaid tax. To give you a sense of the scope of its power, it connects more data than is stored in the British Library and automates analysis that would once have taken months, if it could have been done at all.

The information fed into Connect includes details of bank interest, credit card data and Land Registry reports, and HMRC now has the right to force apps and platforms such as Apple, Amazon and Airbnb to hand over data to help it identify tax-evading businesses. PayPal is another new source of data.

2 – International co-operation

Ten years ago, anyone with an offshore account could be pretty confident that HMRC would never find it.  From this month though, details of bank balances, interest, dividends and certain types of income earned by expats will start to be sent to their home governments as part of the “common reporting standard” initiative, wherever they may be.

3 – Ghosts and moonlighters

HMRC believes it loses billions of pounds every year as a result of undeclared economic activity by “ghosts” — people whose entire income is unknown to HMRC and by “moonlighters” — people known to the tax authority but who have secret sources of income. HMRC takes a number of approaches to tackling this area; it is seeking new sources of information and investigating other ways of encouraging third parties to help its crackdown, and encouraging people to come forward themselves, for example with its focussed campaigns on specific trades and professions, such as plumbers, solicitors and doctors, and specific areas such as buy-to-let rental income.

4 – Fear and guilt

The good old combination of carrot and stick has tended to be a winner for HMRC in encouraging people to come forward. The carrots have included a series of disclosure facilities which offered reduced penalties and — in some cases — a promise of no prosecutions to people who settled up. But now it is time for the stick as HMRC wields threats of tougher penalties and more prosecutions. In 2015, HMRC was given a target to triple to 100 the number of prosecutions of wealthy individuals and corporates made each year by 2020. Anyone who has failed to correct previously undeclared UK tax liabilities in respect of offshore interests by September 2018 will pay a penalty of up to 200 per cent of the tax and 10 per cent of the value of the asset. HMRC is also “naming and shaming” individuals who evade more than £25,000 in tax, by publishing lists on its website that include the person’s name, address, nature of business, period covered by the evasion, amount of evaded tax and the penalty for that evasion.

5 – Informants

HMRC have a hotline to allow the public to report evasion and tax fraud, including PAYE and national insurance, undisclosed offshore investments, tax credit fraud and VAT fraud. It said it received 113,000 reports from the public providing information to the department in its last financial year.

6 – Small businesses

HMRC says small and medium-sized businesses account for just over half of the tax “gap” — the difference between the amount that is collected and the amount that should be collected. HMRC can compare a company’s financial results with others in the same sector to spot anomalies that need further investigation. In some industries such as the restaurant trade, HMRC have been known to be a “mystery shopper” and pretend to be a customer so they can check the meal against the restaurant’s end-of-year books to see whether it had been properly included.

7 – Social media

Social media is a fantastic resource for HMRC, providing them with evidence of lifestyles which do not fit with the amount of income taxpayers declare. Several individuals were caught out after appearing in an early episode of the Channel 4 television programme ‘My Big Fat Gypsy Wedding’ and shown spending thousands of pounds of undeclared income on lavish family weddings.  Spending on property renovations and building extensions might also be spotted with the help of Google Earth.

8 – Suspicious Activity Reports (SARs)

Banks and professional advisers (accountants and lawyers for example) have to complete suspicious activity reports if they suspect that a customer might be involved in money laundering or terrorist financing.  Since November 2013, SARs data has been transferred to HMRC’s Connect database on a monthly basis.

If you are at all worried about your tax position or if HMRC have opened an enquiry into your tax affairs, please call your usual Dodds contact and let us help.

Dates and deadlines for your diary

30 September 2017

Corporation Tax: company tax returns for accounting periods ending 30 September 2016 should reach HMRC.

Accounts: Private companies with 31 December 2016 year ends must file their accounts with Companies House.

5 October 2017

Income Tax: last day for individuals not already registered for self assessment to notify HMRC of chargeability to income tax or CGT for 2016/17.

19/22 October 2017

PAYE: deadline to pay Class 1B NIC on PAYE settlement agreements for the year ended 5 April 2017 (19th for postal payments and 22nd for BACS).

31 October 2017

Income Tax: deadline to file tax returns for the 2016/17 tax year in paper form.  It has to reach HMRC by midnight.

Corporation Tax: company tax returns for accounting periods ending 31 October 2016 should reach HMRC.

Accounts: Private companies with 31 January 2017 year ends must file their accounts with Companies House.

PAYE update

Maximise your apprenticeship funding

During August, thousands of students will have been considering their next steps as they received their exam results.  This also makes an ideal time for employers to consider how they might maximise the apprenticeship funding available to them to benefit their business.

Apprenticeships are now better structured, independently assessed and aligned to the needs of your business.  With many employers looking for higher quality apprenticeship standards, you can have greater confidence than ever that apprentices are trained in the relevant skills employers need, bringing value to your organisation.

If you are ready to recruit, then ‘Find an apprenticeship’ on GOV.UK is a free recruitment solution used by thousands of employers.  The vacancies are also available through other popular recruitment sites such as Indeed Jobs, allowing you to reach even more candidates.

Using your funding

If you are a levy-paying employer, you should have registered on the Apprenticeship Service and started to report and pay your Apprenticeship Levy to HMRC each month.

Once you have registered on the Apprenticeship Service:

1 – Sign your agreement to allow you to spend funds on apprenticeships

2 – Add one or more organisations

3 – Add PAYE schemes

4 – Decide the other team members you’re going to add to your account

5 – Add apprentices to your account, otherwise your provider will not get paid

6 – Declare your Apprenticeship Levy by the 19th of each month to secure your levy funds for that month

If no apprentices are added to your account, your chosen provider will not be paid.  The data they submit must match the information you have approved for each apprentice in your Apprenticeship Service account.

As a non-levy paying employer, guidance is also available on the steps you need to take to recruit an apprentice.

For further information go to https://www.gov.uk/topic/further-education-skills/apprenticeships

Childcare Service Technical Failures

Since the Childcare Service went live in April there have been numerous reports that experiences of using the website have thrown up many challenges and frustrations. As with any new digital service the Childcare Service has been launched in Beta trial mode and is being updated with system fixes and improvements on a regular basis.  If you don’t instantly get a connection when you follow the link https://childcare-support.tax.service.gov.uk/ give it a moment or two and then refresh the page in your web browser – not a guaranteed solution but it may remove the need for you to call the helpline on 0300 123 4097.

HMRC has recognised the disruption and inconvenience that the issues have caused to some parents and are offering compensation through a government top-up as a one-off payment for Tax-Free Childcare.

You may be eligible for these payments if you’ve:

  • been unable to complete your application for Tax-Free Childcare
  • been unable to access your childcare account
  • not received a decision about if you’re eligible, without explanation, for more than 20 days

HMRC will also consider refunding any reasonable costs directly caused by the service not working as it should, mistakes or unreasonable delays.

For full details on how to apply for compensation visit https://www.gov.uk/government/publications/childcare-service-compensation

Automatic Enrolment Update

Saving for your own retirement could not be more vital given the recent announcement by the government that many people will now have to wait a year longer than they expected to get their state pension.  Originally, the rise was going to be phased in from 2044 but will now begin seven years earlier in 2037 and will affect more than 7 million people in their late 30’s and 40’s.  Regardless of whether you think such a move is right or wrong, it will require many people to now reassess their retirement aspirations, provisions and planning.

According to a new report, young people in the UK will need to save 18% of their salary if they are to have an ‘adequate’ retirement in the future which is a huge savings challenge. The current minimum contributions levels set by the Pension Regulator go nowhere near to meeting a decent retirement income and although the minimum contribution levels rise in April 2018 and again in April 2019, they still fall short of the recommended guidance.

The good news is that automatic enrolment has been a success with over 7 million people enrolled into a pension scheme by over 300,000 employers so far and this is expected to rise to around 10 million savers by 2018.  The government are currently undertaking a review of automatic enrolment which will include looking at the needs of those who are not currently benefiting and include employee’s with part time multiple jobs who do not meet the minimum criteria in any of those jobs, and those who are self-employed.  The review will also look at the current earning triggers and qualifying earnings bands.

Getting people to save enough for their retirement has long been regarded as problematic but the initial success of automatic enrolment shows that an agreed long term policy can have a huge impact on people’s savings habits.

Payroll Team

Motivational thought of the month:

 

 

What’s new in the world of tax?

Do as I say, not as I do: Ex-HMRC employee sentenced over tax credits fraud

An ex-HMRC employee from Dudley, who lied on her tax credits claims to steal more than £56,000, has been given a two-year suspended prison sentence.

Rebecca Gray worked as a customer adviser at HMRC’s Merry Hill office for nearly eight years, advising members of the public on their tax credits claims. She was arrested in March 2016 and immediately suspended.

Instead of being a single mum living at an address in Wolverhampton, she had been living in Dudley with her partner between July 2014 and April 2016, and she also overstated costs of childcare for seven years.

Oops…and another one: Tax specialist arrested over property income

An HMRC tax investigator has been arrested on suspicion of failing to declare earnings on a second home. Funmi “Caroline” Moses, who works in a property tax investigation unit, is alleged to have kept quiet about pocketing £120,000 over ten years from a flat she rents out in South London.

And another! Tax adviser jailed for £1.5m tax scam

A self-appointed tax adviser has been jailed for five years after instructing his clients on how to fraudulently claim £1.5m in tax repayments, while keeping £300,000 from the false claims for himself!!

Former bricklayer Jeffrey Bakewell, from Essex, set himself up as a tax adviser but failed to register as a tax agent, did not complete due diligence checks on his clients and failed to keep the records required by the Money Laundering Regulations.

Bakewell’s clients were mainly crane drivers but also included builders and other construction industry workers. They made claims for travel and subsistence payments but HMRC investigators found these had been covered by their employers.

Not a very good example of professional conduct!

And yet another!! BBC still paying stars off the books

A report in the Mail showed that 66 of the BBC’s wealthiest stars are paid through personal services companies, despite the corporation pledging five years ago that the practice would end. PSCs are subject to corporation tax whereas payrolled earnings would be subject to much higher income tax rates and National Insurance contributions.

£109m tax fraud fugitive ringleader deported to UK

One of Britain’s most wanted tax fugitives, who masterminded a £100m-plus VAT tax fraud and then fled the UK three years ago to avoid prison, has been deported from Dubai after being caught travelling with a fake British passport.

Geoffrey Johnson, originally from Forfar, Angus, played a leading role in an 18-strong crime gang involved in a complex VAT fraud. He was sentenced to 24 years in prison in his absence and both he and his son were ordered to repay £109m.

The gang, based in Cheshire, East Sussex, Greater Manchester, Lancashire, North Wales, Staffordshire, Scotland and Spain, set up a number of businesses claiming to be legitimately importing and selling mobile phones, which an HMRC investigation discovered to be an elaborate VAT repayment fraud.

The 18 gang members were jailed for a total of 135 years, but rather than stand trial, Johnson along with his son Gareth, became fugitives and fled the UK.

Dragons burned

Theo Paphitis and Peter Jones, the stars of Dragon’s Den, have lost nearly £33,000 after a dishonest accountant working at their Red Letter Days firm falsified checks and cashed them.

 

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