Dean Statham |
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Dean Statham Tax Alert. |
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HMRC crackdown on tax evasion |
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HMRC are presently pursuing a number of campaigns designed to target taxpayers who have been less than forthcoming in declaring their taxable income and gains.
This update summarises these campaigns.
Liechtenstein Disclosure Facility (LDF)
A new penalty regime was introduced allowing for a higher penalty for taxpayers who fail to provide a full account of their income tax or capital gains tax liabilities, where the failure is linked to an offshore matter. The penalties came into force for tax periods commencing on or after 1 April 2011. The new penalty regime is linked to the tax transparency of the territory in which the income or gain arises and penalties can be as high as 200% of the tax due. The only remaining HMRC offer to encourage disclosure is the Liechtenstein Disclosure Facility (LDF) that allows penalties on unpaid tax to be capped at 10% of tax evaded over the last ten years. The LDF commenced on 1 September 2009 and will run until 31 March 2015.
Restaurant sector
The targeting of restaurants is not an amnesty and unlike some other initiatives, which seek to tempt taxpayers to come forward under favourable terms, there is no formal disclosure facility on offer. HMRC inspectors will therefore have the full range of civil and criminal sanctions at their disposal. This includes the likelihood of restaurants having to repay any unpaid tax, interest and penalties. The worst offenders could face criminal investigation and prison. Any restaurant business that has deliberately evaded tax should take urgent action to make a pre-emptive voluntary disclosure to HMRC.
VAT
The VAT Initiative campaign offers businesses the opportunity to inform HMRC that they should have been registered for VAT. The last day to notify HMRC of an intention to take part in the VAT Initiative is 30 September 2011. The deadline for returning the completed VAT registration form (VAT1) to HMRC is 31 December 2011.
Other forthcoming campaigns
New campaigns which are expected to begin later this year and next year will target the following areas:
- Individuals that provide private tuition and coaching without declaring their income.
- Individuals and businesses that buy and sell goods online as a trade and who fail to pay the tax due.
- Other business sectors where there is evidence of tax evasion. This campaign will be based on HMRC's campaign to target plumbers and give an opportunity to other groups of tradespeople to come forward and declare unpaid tax.
Any individual or business that has deliberately evaded tax should take immediate action to make a pre-emptive voluntary disclosure to HMRC. Please contact us if you feel you may be affected by the issues raised in this update.
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IHT charitable incentive |
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On 10 June 2011, the Government published a consultation document entitled 'a new incentive for charitable legacies'. The subject of the consultation is a proposed lower rate of inheritance tax on estates which leave at least 10% to charity. This builds on the announcement made during the Chancellor's Budget speech in March, which first outlined the proposal. The Government's proposal would reduce the rate of IHT from 40% to 36% for estates that include charitable legacies of at least 10% of the 'net estate', for deaths occurring on or after 6 April 2012.
Even under these new rules there is still a net cost to the estate where 10% or more of the net value of the estate is paid to charities prior to distribution to beneficiaries. However the cost is reduced due to the lowering of the 40% IHT rate to 36%.
The Government is aware that, where a charitable legacy is close to 10% of the net estate, a small difference to the amount gifted to charity could have a much larger impact on the estate's IHT liability. There are no plans to apply tapering or any other mechanism to mitigate this 'cliff edge' effect. It is therefore crucial to plan the value of any charitable legacies carefully, to avoid missing out on this relief.
A deed of variation can be implemented to vary the amount left to charity if the charitable legacy falls short of the 10% required, provided the beneficiaries agree to the variation. The deed of variation can be made to have effect for inheritance tax purposes, so could be used to ensure that the reduced rate of IHT applies. This would be particularly useful where the charitable legacy is close to but just under the 10% threshold.
The present consultation on these issues is due to close on 31 August 2011.
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Reduced rate update |
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Some EU member states, including the UK have a zero rate which was agreed as part of their EU Accession Treaty. For example, in the UK most 'basic' food stuffs are zero rated. However, the UK is no longer able to add to the zero rate categories, and the minimum VAT rate that can be applied to any new category that the Government seeks to reduce rate is 5%.
The 5% VAT reduced rate applies to the provision of the following goods and services:
- Electricity
- Children's car seats, booster seats and booster cushions
- Smoking cessation products
- Sanitary Protection products
- Mobility aids for the elderly (installation)
- Renovation / Alteration of certain, empty residential buildings
- Converting certain premises into different living accommodation
- Energy saving materials
If you are unsure if a supply you are about to make should or should not be made at the reduced rate of 5% please contact us for clarification.
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DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers' circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred. |
Dean Statham,
29 King Street, Newcastle, Staffs, ST5 1ER.
Tel: 01782 614618 Fax: 01782 717287.
Web: www.dsonline.co.uk.
Dean Statham is a limited liability partnership, registered for VAT under reference 812 0016 96. Partners in the firm are members of the Institute of Chartered Accountants in England and Wales (ICAEW). This body has its headquarters in the UK and its rules of professional conduct can be obtained from its web site.
Dean Statham are authorised to act as statutory auditors by the ICAEW. |
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