Taxing Times – June 2018

Welcome to June’s edition of Taxing Times…

and to what looks like summer at last! Here’s hoping the good weather lasts a little bit longer, especially now that we’re into show season. We will be at The Cumberland Show this Saturday and at the Penrith Show on 28 July so please do pop along and say hello.

 

In this edition we have:

  • Some thoughts on penalties
  • Making Tax Digital (MTD)
  • PAYE update
  • Dates and Deadlines for June 2018
  • What’s new in the world of tax

 

Penalties – legitimate fine or HMRC cash cow?

HMRC categorises tax failures into three categories – mistakes, carelessness and deliberate errors.  Deliberate errors are what in the pre Finance Act 2007 world, before the terminology and penalty regime changed, would have been called “fraud”.  The new (post FA 2007) terminology is intended to be easier to understand, and it isn’t necessarily the case that HMRC are saying that those taxpayers who fall into deliberate category are actually being fraudulent, but still, it is not really a very happy place to be.  Mistakes do not carry penalties, carelessness does, and deliberate errors carry higher penalties than carelessness.

In the last few years there has been a significant increase in the number of penalties levied by HMRC in the deliberate category and a fall in those categorised in the careless category. So HMRC are taking more cash in penalties than ever before.  And it is actually very difficult to get HMRC to accept that an error is just a mistake and should not be penalised at all.

So does this mean that taxpayers are more badly behaved than in the past?  Or is HMRC better at catching those who do wrong? OR, and this may be a cynical suggestion, are HMRC just getting harsher even though behaviours haven’t really changed?  After all, if they can push behaviour into the last category they can get more penalty monies into the Government’s coffers…

The point of this article is to remind taxpayers that HMRC don’t always get it right, for whatever reason.  So they may assess a penalty in a certain category, be that in the careless or deliberate categories.  But that doesn’t mean that the taxpayer cannot push back and argue that HMRC have chosen the wrong category (if they have).  After all, there is a burden of proof on HMRC to show that a penalty is due and what that penalty should be.  If HMRC are saying that an error is deliberate (which is actually rather a big claim for them to make) they should show that the taxpayer knew that they were doing the wrong thing and did it anyway. If they are saying that it is a careless error rather than a mistake then again they should demonstrate that the taxpayer did not take “reasonable care”.  If they took reasonable care and still got it wrong then it should be classed as a mistake and no penalty should be due.  It is always worth considering if a penalty levied by HMRC should be challenged.

The Low Income Tax Reform Group have a very useful section on their website about checking whether or not penalties are due.

Making Tax Digital (MTD)

Recent headlines have implied that MTD has been delayed but these articles only relate to MTD for income tax and it must be remembered that the first phase of MTD, MTD for VAT, is coming and it’s coming soon.

From April 2019, businesses which are VAT registered and have a turnover greater than £85,000 are affected with limited exceptions.  This criteria encompasses a large percentage of businesses and you will be prioritised to ensure you are MTD for VAT ready.  Businesses are likely to face many challenges in their efforts to become compliant, particularly small businesses who currently manage perfectly well putting all their records in a carrier bag or box until their year end has passed.

Currently there are more questions than answers and clarity is expected from HMRC by the end of the Summer. We did a recent podcast with Cumbria Chamber of Commerce which you can listen to here, which may help to explain it a little more. We have a dedicated MTD Team working to keep up to date with the latest developments and we will work with you over the remainder of 2018 to help you become compliant in time for April 2019.

But as always if you’d like to look at your options early our CAT (cloud accounting team) are on hand and more than happy to talk you through the best cloud accounting packages for you. Please contact Kristina Gash on 01228 530913 or Stu Bell on 01768 864466 to arrange your free consultation.

The Gender Pay Gap – What have we learnt?

Gender pay reporting legislation requires employers with 250 or more employees to publish calculations every year showing how large the pay gap is between their male and female employees and the pay differences between men and women in the UK has been revealed by more than 10,000 large firms.

The headline fact is that nearly eight in ten firms have a pay gap in favour of men, with men making up the majority of higher paid jobs.

Along with salary figures, firms have been required to disclose the differences in bonuses paid to men and to women.

The finance sector has the biggest bonus gap, with women paid 35% less than men on average.

The statistics contain a wealth of other information but there have been some particularly shocking explanations as to why more women are not at the top of company boards from a range of FTSE 350 chair and chief executives.

The explanations include:

  • “I don’t think women fit comfortably into the board environment”
  • “There aren’t that many women with the right credentials and depth of experience to sit on the board – the issues covered are extremely complex”
  • “Most women don’t want the hassle or pressure of sitting on a board”
  • “Shareholders just aren’t interested in the make-up of the board, so why should we be?”
  • “My other board colleagues wouldn’t want to appoint a woman on our board”
  • “All the ‘good’ women have already been snapped up”
  • “We have one woman already on the board, so we are done – it is someone else’s turn”
  • “There aren’t any vacancies at the moment – if there were I would think about appointing a woman”
  • “We need to build the pipeline from the bottom – there just aren’t enough senior women in this sector”
  • “I can’t just appoint a woman because I want to”

Clearly there is still work to do to and transparency on gender pay is only the beginning.

 Thought of the month

 June Dates for your Diary

What’s new in the world of tax?

HMRC cancels fines

HMRC cancelled 270,000 late filing notices in 2016, prompting suggestions that the Revenue has been wrongly pursuing individuals for failing to submit their tax returns on time. This goes to show that it is always worth checking that HMRC have correctly raised a penalty, as they are not always correct (also see our article above).

Sherlock mystery

Who really owns 221b Baker Street – the fictional London home of Sherlock Holmes? It seems that Numbers 215 to 237 Baker Street are held via a web of offshore companies and the owner’s identity is a mystery.  One not even the great detective himself can solve!

Genuine HMRC contact and recognising phishing emails

HMRC have issued updated guidance on how to recognise phishing emails.  Crucially the guidance states that emails from HMRC will never:

  • notify you of a tax rebate
  • offer you a repayment
  • ask you to disclose personal information such as your full address, postcode, Unique Taxpayer Reference or details of your bank account
  • give a non HMRC personal email address to send a response to
  • ask for financial information such as specific figures or tax computations, unless you’ve given HMRC prior consent and you’ve formally accepted the risks
  • have attachments, unless you’ve given prior consent and you’ve formally accepted the risks
  • provide a link to a secure log in page or a form asking for information – HMRC will ask you to log on to your online account to check for information instead

So if you did get an email containing any of the above please do not open the attachments or respond to it.  You can forward it for investigation to HMRC’s phishing team on phishing@hmrc.gsi.gov.uk

Full HMRC guidance on phishing is here.

 Advisory Fuel Rates from 1 June 2018

The latest advisory fuel rates (AFRs) are shown in the table below. Hybrid cars are treated as either petrol or diesel cars for these purposes. AFRs can be used by employers who reimburse employees for business travel in company cars (i.e. where a fuel benefit is not provided) OR by employers who require employees to repay the cost of fuel used for private travel in their company cars.  As long as employers pay a rate no higher than these AFRs, HMRC will accept that there is no taxable benefit for the employee and no NIC either.  It is very important that employers update the AFRs they use and use the current rates, otherwise HMRC could assess taxable and NICable benefits.

 

 

 

 

 

 

 

 

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