After much speculation HMRC have now confirmed details of the new facility for taxpayers to voluntarily disclose tax liabilities re undeclared income from offshore bank deposits. Of course they are also interested in the taxability of the underlying profits and gains that were deposited offshore.

Tax Advice Network member Bill Stephenson has written an article containing further details.

A couple of points are especially worthy of note. HMRC will be seeking payment of all tax, NICs and VAT that may be outstanding so this new facility cannot be considered to be an amnesty. In addition interest will be payable of 10% of the tax due. However, for taxpayers with accounts at Barclays, HBOS, HSBC, Lloyds or RBS (who were offered the chance to make a disclosure last year and who failed to do so) the penalty will be 20%.

You need to consider how best to respond to this new facility, or if you are an accountant in practice you may be approached by clients and non-clients alike who ask for your help. Where the numbers are especially large or if you would feel more comfortable talking to an expert before deciding how to proceed, do please call the Tax Advice Network.

The scheme will start on 1 September 2009 when accountants and taxpayers can download guidance from the HMRC website, or request the same information from HMRC help lines, from that date the taxpayer can notify HMRC that they plan to make a full disclosure and will be given a disclosure reference number (DRN). Accountants can do this on behalf of their client. This notification of a future disclosure can only be made up until 30 November 2009, which is quite a short window to decide whether this is right for you/your client.

Once the DRN is received you/your client, or the accountant on their clients behalf, can make a full disclosure on paper, or online from 1 October 2009. The period for paper disclosures ends on 31 January 2010. Online disclosures can be made until 12 March 2010. Payment of the tax, interest and penalties due must be made with the full disclosure, or the disclosure will not be regarded as being complete.

This disclosure scheme, which includes a maximum penalty of 10%, only applies to unreported tax liabilities that relate to offshore income or gains. The penalty will be 20% for those taxpayers who ‘should’ have confessed during the previous offshore disclosure opportunity in 2007.

If you/your client has undeclared amounts of UK generated income or gains, they cannot use this scheme to pay the tax due and benefit from the 10% capped penalty. It is not yet clear whether the taxpayer who uses this disclosure system will be immune from prosecution.

If you need assistance in dealing with a disclosure yourself, of if you are an accountant in practice and need assistance on behalf of a client please ask one of the Tax Advice Networks tax investigation experts.

Article by guest blogger: Mark Lee from The Tax Advice Network.

Some self-employed clients get confused about the on-account payment due on 31 July . Their accountant may not have drawn up their accounts for 2008/09 (6 April 2008 to 5 April 2009), particularly for years ending on 31 March 2009, but the individual needs to pay tax on those profits. This can be difficult to understand.

If you suspect that you may have made a loss, or a significantly reduced profit for 2008/09, try to quantify this without delay. In either case the payment due on 31 July 2009 will need to be amended by submitting a claim to reduce the payment on account. This can be done using the paper form SA303, or online though the SA online system. There have been on-going problems with the online method, but we understand these are now fixed.

If you do need to pay some income tax by 31 July 2009 and want to send a cheque before you go away on holiday, make sure you send it to the right place. All tax payments should now be sent to the Shipley office:

HM Revenue and Customs Accounts Office
BRADFORD
BD98 1YY

Ideally you should include the payslip that was attached to your personal statement of account. When this cannot be found enclose a payslip printed from the HMRC website amended for your details.

Many businesses will also have VAT to pay by 31 July 2009, for the quarter to 30 June 2009. Electronic payers have up to seven extra days to pay, especially if they also file their VAT return online. These online filers are encouraged by HMRC to set up a direct debit to collect the VAT due as shown on their VAT return, with an incentive of an extra three days (on top of the seven for electronic payment) to pay the VAT due.

Those who don’t trust HMRC to collect the right amount of VAT by direct debit need to amend the bank account details they have stored on their online banking, as HMRC changed the bank account it uses to receive VAT payments on 8 July, to: Sort code: 08-32-00, Account no: 11963155 Some banks may not set up these new reference details, in old HMRC account details should be used. Check with the bank first to see if the new bank account reference is recognised by their system.

Where the VAT due is paid by cheque the payment should be sent to:

HMRC VAT controller,
VAT central unit
BX5 5AT

Article by guest blogger: Mark Lee from The Tax Advice Network.

Expenses to report on the P11D.

The starting point is that all expenses reimbursed and benefits made available to an employee who earns £8,500 or more, or who is a director, must be reported on a form P11D, unless a dispensation is in place that covers those particular items. This applies even if all the expenses are valid business expenses, which can be reclaimed by the individual on their own tax return or on a form P87 where no tax return is issued.

In some cases the expense payment will not pass through the employee’s hands and the cost is incurred on a company debit or credit card, but this does not mean it can be ignored. HMRC view any payment for travel or accommodation as a benefit in kind, until the business purpose is ‘proved’ by the employee making an expense claim to HMRC. Thus where the company buys travel tickets or pays a hotel bill directly the amounts must be reported on the form P11D and the equivalent expense claimed on the individual’s tax return.

It is very difficult to persuade clients that this pointless paper chase is required by the law, but if a P11D is not completed correctly the company will leave itself open to penalties. And under the new penalty regime they may be inclined to blame their accountant in order to escape such a penalty – even though this will land the accountant in trouble with HMRC (see below re ‘Reasonable care’).

The solution is for the company to apply for a dispensation for valid businesses expenses, or for you to do this on the company’s behalf. HMRC are happy to grant dispensations to small companies where it can be shown that a person, other than the individual who receives the expenses, checks the receipts and amounts paid. This checker could be another employee of the same company, or an external person such the company’s accountant. The checking of receipts and expenses claims does not have to be done monthly. An annual check should be sufficient for most companies.

Click the following for:

Advice on completing P11D

Application form for PIID dispensation

Are you at least ‘reasonably competent’?

Reasonable care – escape a penalty for any errors on tax forms, or on other documents which are submitted to HMRC.

HMRC have now released more guidance in their Compliance Handbook (CH) which implies that if a taxpayer has acted on advice from a competent professional adviser, he will be treated as having taken reasonable care. This applies even if the advice resulted in an error.

HMRC do not define what they mean be ‘a competent professional adviser’, but the CH guidance makes it clear this is not a person the taxpayer has casually met in a pub. The taxpayer will only be considered to have taken reasonable care when using a professional adviser if he:

• gives the adviser a full and accurate set of facts;
• checks the adviser’s work or advice to the best of their ability and competence; and
• adopts the advice given by the adviser.

This probably means that all accountants and tax advisers clients can look on them as being ‘reasonably competent’ and that they will want to blame them if HMRC ever seek to apply a penalty when adjusting their tax liabilities or completing an enquiry.

And if a client’s tax issues, problems or difficulties go beyond what an accountant or tax adviser is comfortable dealing with then you’d best ensure that you turn to someone else who is at least ‘reasonably competent‘ – or indeed one of our vetted independent specialist tax advisers.

Reliance on use of an adviser – http://www.hmrc.gov.uk/manuals/chmanual/CH84540.htm

Article by guest blogger: Mark Lee from The Tax Advice Network.

Many accountants prefer not to deal with Tax Credit claims, as they don’t want to get involved in that highly complex system of state benefits. However, I must stress, all accountants should at least tell their clients about their rights to claim Working Tax Credit or the Child Tax Credit.

A claim for tax credits is based on a couple’s net income averaged over the whole of the current tax year. Where an individual is made redundant in say August 2009, the couple may be entitled to tax credit payments for the whole of 2009/10 from 6 April 2009 onwards. However, these tax credit payments can only be back-dated to 6 April 2009 if the couple had made a protective claim for tax credits by 5 July 2009.

HMRC are actively encouraging people to submit protective claims if there is any uncertainty about the family’s future income – which must apply to a huge number of people in the current economic climate. This isn’t just a question of redundancy, it would also be relevant in the case of wholesale business failure or of losses wiping out or reducing taxable income. And don’t forget that the Annual Investment Allowance may also reduce taxable income.

Its not only couples with children who can claim tax credits, single people can qualify for the working tax credit if they work at least 30 hours per week, and their annual income is less than £13,250. Unfortunately this doesn’t apply to young workers, as the individual must be aged at least 26. Although disabled workers can qualify for tax credits from the age of 16 if they work 16 hours or more.

The working hours can be made up from more than one job, so the hours devoted to part-time job and a self-employment can both be included. The income limit is the lower of the person’s income for the current year and that for the previous year.

Care must be taken with a single-person claim, as single people tend to pair-up and start living together without thinking about the tax credit consequences.

Accountants need to warn their clients/claimants need to be aware, that making a tax credits claim as a single person, when they are in fact part of a couple, makes the single claim invalid. Any amounts claimed under an invalid claim will have to be repaid, and HMRC may prosecute those that are clearly trying to cheat the system by denying they are part of a couple. That rule may be varied if the person concerned is an MP of course! Single people who are claiming tax credits must tell the tax credit office as soon as they start living with a partner.

Details on protective claims for tax credits can be found here.

Details on prosecutions for invalid single person tax credit claims can be found here.

Article by guest blogger: Mark Lee from The Tax Advice Network.

Share This ]]> http://holdenassociates.co.uk/blog/tax-credit-claims/feed/ 1 http://holdenassociates.co.uk/blog/clamp-down-on-pension-contributions/ http://holdenassociates.co.uk/blog/clamp-down-on-pension-contributions/#comments Fri, 12 Jun 2009 17:05:00 +0000 Mark Lee http://holdenassociates.co.uk/blog/2009/06/12/clamp-down-on-pension-contributions/

In my first posting on the Holden Associates blog I thought I would cover a topic that could easily be missed by many.

Who would have thought a responsible Government would introduce legislation to discourage the payment of pension contributions? but it’s there in Schedule 35 of the 2009 Finance Bill.

These provisions apply to contributions made from 22 April 2009 where all of the following also apply:

· the taxpayer’s total income exceeds £150,000 (see below for which tax year);

· their level of regular pension contributions is changed (see definition of ‘regular’); and

· employer and employee contributions total more than £20,000 in one tax year.

Where all of these conditions apply a special charge is levied on all non-regular pension contributions that exceed £20,000. This charge is 20% for 2009/10, and it is designed to reduce the tax relief on those pension contributions from 40% to the basic rate of 20%.

An individual can be caught by this new anti-pensions rule if he had, or will have, total income exceeding £150,000 in any of these tax years:

2007/08,
2008/09,
2009/10, or
2010/11.

Individuals with variable earnings now have to be very careful about making irregular or increased pension contributions.

Regular contributions are defined as those made quarterly or monthly. Self-employed individuals who make single large pension contributions once or twice a year will be treated as making non-regular contributions, which could be subject to the special charge. We anticipate that representations will be made that the new rules discriminate against the self employed. It is possible (no more) that the rules will be relaxed so as to avoid such unfairness – but no one should plan on this being the case.

Total income is broadly the person’s taxable income before pension contributions exceeding £20,000 per year are deducted, but it includes any salary sacrifices made on or after 22 April 2009 in return for pension contributions made by the employer. The calculation of total income is complex, so if you, or any of your clients, are in this position who want to make one-off pension contributions ask a tax expert for advice.

A guide to pension relief capping can be found here.

Article by guest blogger: Mark Lee from The Tax Advice Network.

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