Share scheme reporting, Second income disclosure, Penalties for follower notices

The P11D forms are sorted, so what’s the next tax deadline to worry about? That will be the annual returns for employee share schemes which are due in by 6 July, as outlined below. We also have news of a disclosure opportunity for individuals who have a second income, and some new HMRC factsheets about penalties and follower notices. 

This is an
extract from our topical tax tips newsletter dated 9 June
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>> 

Second income disclosure 
This disclosure opportunity was opened in April 2014 (see our newsletter 17 April 2014), but the guidance has recently been updated. It amounts to an open-ended opportunity to disclose taxable income or gains and take advantage of a discount on penalties due. 

To use this disclosure opportunity, the individual (or you as their tax agent), must notify HMRC using a special online form or by telephoning: 0300 123 0945. HMRC will respond with a disclosure number, and a payment reference number to quote when paying the tax due. A full disclosure and payment of all liabilities must be made within four months of HMRC’s acknowledgement of the notification. 

The calculation of the payment due must include interest and penalties, but the level of penalty will be no more than 20%, and could be zero for some years. If the taxpayer can’t pay the full amount due in one go, you should contact HMRC and make a formal time to pay agreement. This will generally require instalments to be paid by monthly direct debit for a period of between 6 and 12 months. 

If the only undeclared income relates to let property, the individual should use the let property campaign to declare that income and any related gains. The let property campaign operates in a similar fashion to the second income disclosure, but the taxpayer has only three months to pay the amount due after notifying HMRC. 

The second income disclosure can’t be used to declare employer’s NIC, IHT, VAT, trust income or income arising from a deceased’s estate during administration. It also can’t be used if there is an open tax enquiry into the taxpayer’s affairs. 

If the taxpayer is uncertain about their residency status, and hence their liability to pay UK tax, that point needs to be resolved before completing the disclosure form. Also if the taxpayer has been part of a tax credit claim in any of the tax years covered by the disclosure, that fact should be declared on the disclosure form.

This is an
extract from our topical tax tips newsletter dated 9 June
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>
 
The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Doctors’ pensions, VAT compliance checks, Beware HMRC scammers

The civil service for central Government is now in “purdah”, which means there will be no significant Government announcements until after the EU referendum on 23 June 2016. This is holding up the publication of key tax consultations, particularly on Making Tax Digital. In the meantime there is a problem with GPs’ pensions you need to be aware of. We also have news of a pilot scheme for VAT compliance visits, and a warning about fraudsters claiming to be from HMRC.

This is an
extract from our topical tax tips newsletter dated 2 June
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Beware HMRC scammers 
Fraudsters are using threats and intimidation in phone calls to taxpayers and accountants, as they pretend to be collecting tax debts on behalf of HMRC. This is not surprising as the HMRC-approved debt collectors can be threatening and unreasonable at times. 
  
The latest calls and text messages claim there is an outstanding tax debt, and that payment must be made immediately or the police will arrest the individual. The fraudsters are able to use technology to pretend to be calling from a genuine HMRC call-centre telephone number, in this case: 0300 200 3300. You should not trust the number shown on your telephone’s display as it can easily be spoofed. 
  
The fraudulent caller normally attempts to obtain credit or debit card details, and may give her name as Heather Grey of HMRC. There is no such person within HMRC. In another twist the taxpayer may be asked to pay the tax debt in the form of gift card vouchers from iTunes or Argos. This sounds incredible, but some people are falling for this scam. Gift cards can be easily redeemed or sold on. 
  
Please warn your clients about these scams, especially those individuals who are new to self-employment and haven’t dealt directly with HMRC before. HMRC never use text messages to ask for payment. 
  
If you or your clients have suffered an attempted fraud, report it to Action Fraud (National Fraud and Cyber Crime unit) on 0300 123 2040 or by using the online fraud reporting tool.   
   

This is an
extract from our topical tax tips newsletter dated 2 June
2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>
 
The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Planned dividends, Death penalties, HMRC bank accounts

Last week we returned to the topic of the new dividend tax, as without forward planning many shareholders will see their tax bills increase in 2016/17 by at least 7.5%. We also explored the problems that can arise from errors in a deceased person’s tax return, and updated accountants about the new HMRC bank accounts.

This is an
extract from our topical tax tips newsletter dated 3 March 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

HMRC bank accounts 
HMRC is moving it’s bank accounts again, for the third time in 15 years. This is part of the open tendering policy under which key Government contracts are regularly reviewed. For banking facilities this appears to occur every seven years. 
  
This time the accounts are moving from the RBS and Citi Banks to Barclays Bank, but most taxpayers won’t have to do anything different. The account numbers and sort codes of the HMRC accounts are moving to the new bank, so all UK electronic payments will proceed as normal. Also all cheques sent to HMRC will be processed as normal. 
  
However, taxpayers who pay HMRC from a bank account situated outside the UK will have to use a new IBAN number, the details of which are shown in the links below. Overseas HMRC “customers” are being informed about this bank account change via a personalised letter, but you could tell your non-resident clients by email rather quicker. 
  
The next big tax payment date which will be important to overseas residents is 30 April 2016 when the ATED charge for 2016/17 is due. ATED is payable by companies or other non-natural persons who hold UK residential properties which are worth over £500,000 (threshold reduces from £1 million on 1 April 2016). This can include companies or partnerships with corporate members which are resident outside the UK. 
  
To pay the ATED charge the taxpayer must quote their ATED reference number. However, to get an ATED reference number the taxpayer must first submit an ATED return, which is due on the same day: 30 April 2016. So if this is the first year the taxpayer is due to pay the ATED charge, the ATED return must be submitted early in order to get a reference number to pay the ATED charge on time. 

This is an
extract from our topical tax tips newsletter dated
3 March 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Farmers and losses, SDLT supplement, HMRC communications

Business life doesn’t stop in January so everyone can concentrate on completing their tax returns – although you may like it to. Clients are busy trying to make a profit, or at least striving to avoid a farming loss for the sixth year running. We explain why this is so important in this week’s newsletter. Property owners need to act quickly to complete deals before the new SDLT supplement kicks in. We also have a timely warning about communications from HMRC.

This is an
extract from the first of our topical tax tips newsletters for 2016. It went out on 7 January
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

HMRC communications 
Where a taxpayer has appointed a tax agent HMRC is supposed to write to that agent, or at least copy-in the agent on any correspondence with the taxpayer. That rule is being broken again with “educational” letters being sent out by HMRC. 
  
The letter we have seen is addressed to farmers, reminding them that subsidies paid by the EU are taxable income and should be included on their SA tax return. It goes on to say the farmer should check their tax returns to see if the right amount of income has been declared. This will alarm some clients, and no-doubt prompt phone calls to you. 
  
Other communications, such as emails and texts supposedly from HMRC are obvious fakes. We know that HMRC doesn’t offer taxpayers refunds by email but it does send reminders to complete tax and VAT returns. It’s easy to be duped by the fraudsters. 
  
Finally, where you or clients have been affected by the floods, and as a result need more time to complete tax returns or make tax payments, there is help available. Access that help by calling the HMRC flood helpline: 0800 904 7900. To arrange time to pay a tax debt call before the debt becomes due.

This is an
extract from our topical tax tips newsletter dated 7 January 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Errors in loss calculations, Nudge letters, Non-resident or Non-domicile

How confident are you that your tax return software calculates the tax due correctly? In last week’s newsletter we explained why you may need to be sceptical. We also highlighted some underhand letters HMRC are sending to taxpayers. Finally there was a revised HMRC guidance note and a consultation document which you should read if you have any non-domiciled or non-resident clients.

This is an
extract from our topical tax tips newsletter from last week, dated – 8 October 2015. 
You can obtain future issues as they are published by registering here>>>

Nudge letters 
HMRC has a “nudge” unit. Its policy is to persuade taxpayer to pay the right amount of tax. It does this through carefully worded letters containing psychology techniques to subconsciously nudge the recipients to declare previously undeclared profits. We have reported earlier missives from the HMRC nudge unit in our newsletters on 17 April 2014 and 3 July 2014. 
  
The latest targets of the nudge unit are taxpayers who are in dispute with HMRC. Some of those taxpayers have been receiving letters that encourage them to settle the dispute with HMRC. The letters play on the natural desire of taxpayers to avoid confrontation, particularly when up against a powerful opponent such as HMRC. 
  
If your client has received such a letter, but you may not be aware of it as HMRC are not sending copies of the letters to the registered tax agent. This is a serious issue, as those nudge letters could be construed as an attempt to apply improper pressure to settle the tax dispute – coming from the party that has the greater power. 
  
If you feel a line has been crossed by the nudge letter your client has received in connection to their tax dispute, a reasonable course of action would be to complain to HMRC. Out tax investigation experts can provide impartial advice on the issues underlying the tax dispute and the likelihood of winning the argument. 

As always, the
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.


HMRC performance, Incorrect APNs, Direct recovery of debts

Mid-August, and it appears that most of HMRC is on holiday as processing times have slowed down to a crawl. This has implications for your clients who are waiting for tax repayments, but it doesn’t stop the HMRC machine from spewing out incorrect tax demands as we explain below. We also have an update on the direct recovery of debt rules which will be arriving at a bank near you this Autumn. 

HMRC performance

When you send a letter or tax return to HMRC you expect it to be dealt within a reasonable time. HMRC’s target for dealing with post is to clear 80% within 15 working days, and 95% within 40 working days, but its quarterly performance reports show those targets are not being achieved.
In fact accountants are reporting that HMRC taking over 15 weeks to deal withletters. Repayment claims for tax deducted under PAYE, or under self-assessment,are taking at least six months to be paid, and the HMRC call centre says thatclaims submitted in April 2015 will not be processed until January 2016 – that’s aneight month delay!
So what can be done? Not a lot if your claim or letter is already in the system. You can raise the issue as a complaint with HMRC and suggest your client writes to their MP (who is also on holiday). You may consider lodging the delay on a tax issues forum such as operated by CIOT or ICPA. However, HMRC is aware that its post handling is not up to scratch as it reports in the Working Together in the latest Agent Update (no. 49). It says it is recruiting more staff to deal with thebacklog.
In the future the only way to get a response within a reasonable time from HMRC is to submit tax repayment claims online. If the claim relates to CIS tax there is a list of tips to follow which may speed-up the repayment (see below). Your letters regarding PAYE or self-assessment may get a quicker response if you use standard headings as suggested by HMRC, this allows the staff to send the letter to the right place in the organisation.  

This is an
extract from our tax tips newsletter dated 13 August 2015
(5 days before we publish an extract on this blog). The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
and extremely good value for accountants in general practice. Try it
for free by registering here>>>


Getting through to HMRC, Employee share schemes, Employer Bulletin

The start of last week saw a melt-down at the Government Gateway that allows tax returns to flow through to HMRC. In last week’s newsletter we offered some reassurance about penalties that may arise and suggestions of other routes to contact HMRC. We also had a warning about the fast approaching deadline for registering employee share schemes, and a heads-up on useful information hidden in the Employer Bulletin.

Employer Bulletin 
The June 2015 edition of the Employer Bulletin (issue 54) is just out and it’s well worth a read. This publication is now issued six times a year and it covers a wide range of tax and regulatory matters, not just payroll issues. 

For example this edition includes articles you may want to pass on to clients who will shortly reach state retirement age, who sell alcohol, or who are worried about pensions auto-enrolment.    

State pension 
People who reach state pension age on and after 6 April 2016 will receive the new flat rate state pension, but there is a lot of confusion about who will be entitled to what. A new You-Tube channel has been set up to answer questions about the state pension and how to prepare for retirement. It also includes videos about auto-enrolment.    

Individuals aged 55 or over can request a personalised state pension statement from the Pensions Service, which will give them an idea of their expected level of state pension. This service use to be open to anyone but it now seems to be restricted to those within 10 years of retirement age. 

Alcohol 
Clients who sell alcohol as a retailer or wholesaler need to prepare for a new alcohol wholesaler registration scheme which comes into effect from 1 October 2015. It’s going to be administered by HMRC so no doubt there will be some cross-checking with VAT and Excise duty returns. 

The scheme is designed to stamp out sales of counterfeit alcohol and where duty has not been paid. There will be civil penalties and criminal sanctions for non-compliance with the scheme. 

This is an
extract from our tax tips newsletter dated 25 June 2015. The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
and extremely good value for accountants in general practice. Try it
for free by registering here>>>


Paying HMRC, VAT invoices, NICs for young people

It’s the eleventh hour and the SA tax returns are almost done, but have your clients’ managed to pay their tax on time? This year HMRC has thrown hurdles in their way as we explain below. We also have news of changes coming into effect from April 2015 for VAT invoices and NICs. In both cases clients need to be warned in advance to budget for different payments and receipts.

Paying HMRC

In a break from previous practice, this year HMRC has not sent out SA reminder letters to individuals that include a paying-in slip. This has left many clients waiting for the payslip as a prompt to pay their tax and to complete their tax returns.    

The pixies behind the GOV.UK website think that everyone has internet access and uses online or telephone banking, so those factors are prerequisites for almost all the methods of payment suggested on the ìhow to pay your self-assessment tax billî page.  But there are a large number of people who donít bank online either because they donít have a computer or they simply donít trust online banking.  

For those off-line taxpayers paying a tax bill generally means writing a cheque and sending it through the post with a payment slip, or taking the cheque to a bank, building society or post office with a payment slip. Note the taxpayer needs the payment slip as printed by HMRC and attached to a SA statement -which many people have not received this year.  

You can help your clients by printing a personalised payslip from the GOV.UKwebsite, but that payslip can only be used to accompany a cheques sent through the post to HMRC collector of taxes in Bradford. It is now technically too late for a cheque to arrive by 31 January, as HMRC says it takes three working days for a cheque to reach them and be processed. 

Where the taxpayer has a debit card, they can use that card at a Post Office to pay the tax due, but a payment slip is still needed. However, the payment must be made by close of business on Friday 30 January 2015 to count as being received by HMRC by 31 January 2015. Also the maximum payment that can be made through the Post Office in one transaction is £10,000. 

A debit or credit card can be used to pay HMRC directly, though the internet or by telephone, but there is a 1.4% charge for using a credit card. To pay by debit card the taxpayer needs to have the funds required in the bank account attached to that card. The bank may also set a daily limit on the amount that can be paid using a debit card, on via online or telephone banking. 

Taxpayers can pay HMRC over the phone by calling 0300 200 3402. This number is not advertised anywhere on the GOV.UK website. 

This is an
extract from our tax tips newsletter dated 29 January 2015. The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
and extremely good value for accountants in general practice. Try it
for free by registering here>>>


Benchmarking of profits, Clients’ expense records, Directors’ loans

Back in the day the Inland Revenue trained their officers to understand that different taxpayers required different approaches, and to use their discretion to smooth out the difficulties which real life throws up. Nowadays their approach is: one penalty fits all, and business profits are compared to standard benchmarks as we explain below. We also question how deeply you should delve into a client’s expenses, and have news on how to reclaim s 455 tax paid on directors’ loans. 
 
Benchmarking of profits
In our newsletter on 17 April 2014 we explained how the HMRC “transparent benchmarking team” was writing to sole-trader businesses in selected trade sectors to nudge them into reviewing their reported net profit ratios. The trades targeted were: painters and decorators, driving instructors, taxi drivers and pharmacists.
The HMRC benchmarking team has now turned its attention to car mechanics and furniture shops. However, this time it is looking at the VAT returns of up to 7500 businesses, rather than the gross profit figures reported on the SA tax returns. 
The HMRC letter asks the trader to work out its VAT mark-up ratio by comparing the difference between sales and purchases (ie gross profit), as a percentage of all purchases as reported on the VAT return. It provides a range of mark-up ratios which HMRC say are standard for the trade.
HMRC ask the business to compare its VAT mark-up ratio for the last 12 months of VAT returns to the standard mark-up ratios. If it’s mark-up ratio falls outside the standard range, it should review the figures to be included in boxes 6 and 7 on its next VAT return.  
This is where you come in. In spite of asking some fairly complicated questions about profits and mark-up, HMRC has decided not to copy the letter to the tax agents of the businesses they have selected for this experiment. Fortunately the HMRC letter does not require a reply, so it can be safely ignored if you are confident that your client’s VAT returns are correct. 
However, the HMRC letter will certainly generate some alarm the business owners who receive it, so be prepared for some panicky phone calls – just what you need at this busy time of year.

 

This is an
extract from our tax tips newsletter dated 15 January 2015. The newsletter
itself contained links to related source material for this story and the
other two topical, timely and commercial tax tips. It’s clearly written
and extremely good value for accountants in general practice. Try it
for free by registering here>>>