It uses a mathematical technique to search previously unrelated information and detect otherwise invisible ‘relationship’ networks. Using Connect, HMRC sifts through information on property transactions at the Land Registry, company ownerships, loans, bank accounts, employment history, voting and local authority rates registers and compares with self-assessment records to spot taxpayers who might be under-declaring or not declaring income.
Connect has made links between tax records and third party data from hospitals, pharmaceutical companies, insurers and even gas SAFE registrations. DVLA records and the shipping and Civil Aviation Authority registers help identify owners of cars and planes who declare income that the computer suggests cannot support such purchases.
If you have undeclared tax now would be a good time to tell HMRC.
the key life events and activities that SMEs experience
how these relate to tax
what opportunities there are for the improvement of HM Revenue and Customs (HMRC) services by more closely aligning them to business lifecycles
The Transparent Benchmarking Team Statement (November 2014)
HMRC is conducting a number of pilots, focussed on SME customers, designed to explore the effectiveness of publishing benchmarks on aiding greater voluntary compliance.
Following the first pilot (benchmark net profit ratios for Painters and Decorators, and Driving Instructors) in March 2014, HMRC will run two more in the autumn. One of these will focus on self-employed taxi drivers and pharmacists, where HMRC will be writing to around 2,500 agents that have a number of clients in the target sectors. The idea is to test whether publishing benchmarks through an agent is more effective than writing to a customer directly. Letters will also be sent to a sample of represented and unrepresented customers within the selected sectors to form control groups for evaluation purposes. All represented individuals and businesses written to directly will be informed that their agent has not received a copy of the letter.
The benchmark for both sectors is the net profit ratio. Because this is a controlled pilot exercise, not all agents or businesses within the relevant sectors will be receiving a letter. (source CIOT)
The Benchmarks we know so far are:
Painters & Decorators range from 59% to 79%
Driving Instructors 31% to 67%
So the range of profits are big!
We await the ranges for Taxi Drivers and Pharmacists.
If your profit doesn’t fit then you need to know why.
Do not ignore the letter because HMRC are likely to follow it up and assume you are deliberately trying to avoid tax!
You may have some valid reasons for not fitting the benchmark and you must explain those reasons to HMRC.
A deliberate error will results in a higher penalty (up 100% of the tax) but can also open the door to HMRC going back over up to 20 years of your accounts!
The Finance (No2) Bill 2014, which is due to receive Royal Assent in July, contains legislation which will enable HMRC to demand payment upfront of disputed tax in certain cases, principally involving tax avoidance or deferral. It is estimated that up to 43,000 taxpayers could receive such a demand. Those demands will be issued over an extended period but the first are likely to be issued as early as September 2014.
Taxpayers who have sought tax advantages through tax avoidance schemes that fall within the Disclosure of Tax Avoidance Schemes (DOTAS) are likely to be most affected.
Here is a link to the SRNs (Scheme Reference Numbers) affected – click here
Over the next 2 years HMRC estimates that it will rake in £7 billion through the use of these notices. Of this £7 billion, individuals will weigh in with £5.1 billion. This would equate to each person having a gross income of £262,000.
Last week the Financial Times reported that Ingenious Media, an investment company, warned 1,300 of its investors, including business leaders, entertainers and sporting celebrities, such as David Beckham, to expect substantial tax bills with interest, as reward for using its tax avoidance scheme. (Contractor Weekly)
This is a radical change and many might say its been a long time coming.
It has always struck me as slightly bizarre the DOTAS were registered and allowed to exist.
As part of the intensified battle against tax fraud, the Commission launched on 6th February 2014 the process to start negotiations with Russia and Norway on administrative cooperation agreements in the area of Value Added Tax (VAT). The broad goal of these agreements would be to establish a framework of mutual assistance in combatting cross-border VAT fraud and in helping each country recover the VAT it is due. VAT fraud involving third-country operators is particularly a risk in the telecoms and e-services sectors. Given the growth of these sectors, more effective tools to fight such fraud are essential to protect public budgets. Cooperation agreements with the EU’s neighbours and trading partners would improve Member States’ chances of identifying and clamping down on VAT fraud, and would stem the financial losses this causes. The Commission is therefore asking Member States for a mandate to start such negotiations with Russia and Norway, while continuing exploratory talks with a number of other important international partners.
If you’re a landlord who has undisclosed income you must tell HMRC about any unpaid tax now. You will then have 3 months to calculate and pay what you owe.
The Let Property Campaign is an opportunity open to all residential property landlords with undisclosed taxes. This includes:
those that have multiple properties
landlords with single rentals
specialist landlords with student or workforce rentals
anyone renting out a room in their main home for more than £4,250 per year, or £2,125 if the property was let jointly, but has not told HMRC about this income
those who live abroad or intend to live abroad for more than 6 months and rent out a property in the UK as you may still be liable to UK taxes
According to the Telegraph….
Fewer than 500,000 taxpayers are registered with HMRC as owning properties other than their home. And yet other sources put the number of Britain’s growing army of landlords at between 1.2million and 1.4million.
Why the discrepancy? No one can say for sure, but the taxman has his answer: not enough people are declaring – and paying tax on – their property incomes and gains.
HMRC will identify those who they believe should have made a disclosure by:
comparing the information already in their possession with customers’ UK tax histories
continuing to use their powers to obtain further detailed information about payments made to and from landlords
Where additional taxes are due HMRC will usually charge higher penalties than those available under the Let Property Campaign. The penalties could be up to 100% of the unpaid liabilities, or up to 200% for offshore related income.
If you owe tax, you must tell HMRC of your intention to make a disclosure. You need to do this as soon as you become aware that you owe tax on your letting income.
At this stage, you only need to tell HMRC that you will be making a disclosure.
You do not need to provide any details of the undisclosed income or the tax you believe you owe.
It sounds like HMRC could be in for bumper Christmas if landlords take advantage of this opportunity to pay up!
The Chancellor George Osborne presented the Autumn Statement to the House of Commons on 5th December 2013 and things are getting better, economic growth forecasts for this year have more than doubled from 0.6% to 1.4% but the austerity plan is set to continue.
Here is a summary of the key announcements:
Business rate increases in England will be capped at 2% in 2014/15 (they were set to increase by 3.2%) and businesses will be able to pay over 12 months rather than 10.
The Retail Sector will also get a £1,000 discount in 2014/15 and 2015/16, this applies to pubs, cafes, restaurants and charity shops with a rateable value below £50,000.
A reoccupation relief of 50% is being introduced for up to 18 months on premises that have been empty for a year or more and it will apply from 1st April 2014 to 31st March 2016.
Small Business Rate Relief has been extended to April 2015 under the scheme small businesses with a rateable value of £6,000 or less can get 100% relief, the relief is scaled down to zero on rateable values of £12,000 and there is a lower multiplier on rates between £12,001 and £17,999.
As previously announced the personal allowance will be £10,000 for the tax year 2014/15.
From April 2015, a spouse or civil partner who is not liable to income tax will be able to transfer £1,000 of their allowance to a basic rate tax paying spouse and as a result save £200 in tax.
State Pension Age
By 2020 it will be 66, by 2028 it will be 67 and by mid 2030’s 68, then in 2040’s 69.
Capital Gains Tax
The annual exempt amount will be £11,000 for individuals for 2014/15.
But there was an exemption for principle private residence letting for 36 months and from 6th April 2014 it will be reduced to 18 months.
Consultation will start in April on non-residents paying capital gains on property disposals.
Individual Savings Account (ISA)
The limit will rise to £11,880 for 2014/15 and of this £5,940 can be invested in cash ISA’s
Mortgage Guarantee Scheme
The scheme started in October will run for 3 years and end in January 2017.
Buyers will only need a 5% deposit and the government and the funder will guarantee 15% of the loan in return for a fee.
Legislation will be tightened from April 2014.
A range of measures were discussed in addition to IR35 and these included:
Controlled foreign companies
High risk tax avoidance schemes
Other headline measures
Employers NI for under 21’s to be scrapped in 2015
Rolling back green levies to allow an average saving of £50 on energy bills
Free school meals for infants
Scrapping of 1% above inflation rail fare increases
Electronic tax discs
Abolition of next years 2p per litre fuel duty rise
The purpose of VATDSAG01050 Single Entity and Disaggregation Manual is to help you to determine
whether two (or more) apparently separate businesses are, in reality, a single entity
whether, where two (or more) separate entities exist, they have been separated artificially.
Schedule 1,1A (2) of the VAT Act 1994 requires that, in determining whether any separation is artificial, due regard is had to the extent to which the different persons concerned are closely bound to one another by
Schedule 1, 2(2) of the VAT Act 1994 lays down three conditions which must be met before we can issue a Notice of Direction to any person. These are:
he is making or has made taxable supplies
those taxable supplies form part of wider activities carried on concurrently or previously (or both) with one or more other persons
the totality of the disaggregated activities gives rise to a liability to be VAT registered.
alternative medicine or therapy – eg homeopathy, acupuncture, nutritional therapy, reflexology, nutrition
other therapy – eg psychology, speech therapy, arts therapy
You have until 31st December 2013 to notify HMRC and any unpaid tax has to be paid by 6th April 2014.
Health and wellbeing tax plan helpline
Telephone: 0845 600 4507
From outside the UK: +44 1792 657 324
Monday to Friday, 8am to 6:30pm
Marian Wilson, Head of HMRC Campaigns, said:
“I urge health and wellbeing professionals to take advantage of our quick and straightforward way of bringing their tax affairs up to date. Help, advice and support is available.
“After the opportunity closes on 6 April, HMRC will use information it holds from third parties and regulatory bodies to identify people who have not paid what they owe. Penalties – or even criminal prosecution – could follow.”
Do you have anything to declare? HMRC can go back 6 years