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Dean Statham Tax Alert.

Current HMRC tax investigation campaigns

HMRC campaigns are broadly based on similar principles which involve three main stages:

• HMRC identify taxpayers from a specific group who may have outstanding tax liabilities.
• Stage 2 - HMRC offer a limited time disclosure facility with reduced penalties offering taxpayers the opportunity to bring their tax affairs up to date.
• Stage 3 - HMRC may formally investigate taxpayers that did not come forward under the disclosure facility or who HMRC believe have made an incomplete disclosure.

Current and upcoming disclosure opportunities:

Electrician's Tax Safe Plan (ETSP)
Electricians are to be targeted for tax evasion from February 2012. The launch of the ETSP will build on the success of the 'Plumbers Tax Safe Plan' (PTSP) and provide an opportunity to another group of trades people to come forward and declare unpaid tax and regularise their tax affairs.

E-marketplaces
This disclosure opportunity will cover individuals and businesses that are using e-marketplaces to buy and sell goods as a trade or business and who fail to pay the tax owed. Individuals who only sell a few items and who are not traders are unlikely to be liable to tax and will not be targeted by this campaign. The campaign is expected to begin Spring 2012.

Liechtenstein Disclosure Facility (LDF)
This agreement is designed to target UK taxpayers with investments in Liechtenstein which have not been taxed to make a full disclosure to HMRC. This agreement known as the Liechtenstein Disclosure Facility (LDF) will allow 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. Both HMRC and the Liechtenstein authorities expect that by the end of the LDF all UK taxpayers with Liechtenstein investments will be fully tax compliant. 

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Tax changes 2012-13

A number of tax changes were announced in the Autumn Statement 2012 that will affect our tax situation for 2012-13. Here's a reminder:

Changes to the taxation of non-domiciled persons
From April 2012, non-doms who have been UK resident for at least 12 of the previous 14 tax years and who elect to be taxed on the remittance basis will be charged an increased rate of £50,000 per annum. The current £30,000 per annum remittance basis charge will continue to apply to non-doms who have enjoyed UK residence for at least seven of the previous nine tax years, but fewer than 12 of the previous 14.

Reduced rate of IHT for charitable legacies
The new, lower rate of IHT at 36% will apply for deaths on or after 6 April 2012, where the individual leaves a minimum of 10% of the taxable estate (i.e. the value of the estate after deducting reliefs and exemptions) to charity on their death.

Seed Enterprise Investment Scheme
At the Autumn Statement, the Chancellor announced a new tax advantaged venture capital scheme called the Seed Enterprise Investment Scheme (SEIS), aimed at encouraging investment in small, seed-stage companies. Qualifying investments made on or after 6 April 2012 (and before 6 April 2017) will attract income tax relief at 50% on the lower of £100,000 and the amount of qualifying investments made during the tax year, regardless of the individual's marginal rate of income tax.

And don't forget:

New penalties late filing of Tax Returns
The deadline for electronic filing of the 2011 self assessment returns is 31 January 2012. Late filing will trigger the new penalty regime. In particular tax payers should note that even if they pay any outstanding liabilities for 2010-11 before the 31 January 2012 the late filing penalties will now apply.

Annual investment allowance
Expenditure on most qualifying equipment up to 5 April 2012 attracts a 100% write off up to annual expenditure limit of £100,000. From 6 April 2012 this annual limit will reduce to £25,000, but there are complicated transitional rules that may significantly reduce the £100,000 maximum allowance for periods that straddle 5 April 2012.

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VAT business splitting

A reminder that HMRC will not look favourably on any scheme that aims to minimise VAT liabilities by splitting businesses up in order that the annual turnover of each remains below the registration threshold.

HMRC are required to consider the extent to which businesses are 'closely bound to one another by financial, economic and organisational links' when determining if there has been an artificial separation of businesses for the purpose of VAT avoidance. HMRC will consider the following factors in making their decision.

Financial links

• financial support given by one part to another part
• one part would not be financially viable without support from another part
• common financial interest in the proceeds of the business.

Economic links

• seeking to realise the same economic objective
• the activities of one part benefit the other part
• supplying the same circle of customers.

Organisational links

• common management
• common employees
• common premises
• common equipment.

Care should be taken in organising the VAT registration status of connected businesses. Please call if you are concerned that you may be caught by these regulations.

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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.