Friday, 24 August 2018 13:22

Tax Investigation Is On The Increase

Written by
Despite widespread media coverage of large companies blatant avoidance of paying tax, it is still the smallest of businesses coming under the microscope of HMRC.

Surprisingly in the past sectors such as Barristers, Dentists and Doctors have come under investigation as well as the more expected areas such as Building and Motor related firms.

However, with more and more people becoming self employed or running their own business, nobody is off limits for HMRC. Any additional tax found owing can be backdated and made worse by the addition of compound interest.

A typical tax investigation lasts for around 17 months and costs around £5000 in accountancy fees to defend. Even without any extra tax to pay this is a hefty sum to pay to prove your innocence.

Membership of Your Business Community (YBC) includes tax investigation insurance so that if your affairs come under examination your accountancy fees are paid for. It also provides Free Legal advice 24/7 and Free Tax advice during office hours

We are often asked why isn’t our tax advice available 24/7 too and the answer is simple. If you need tax advice outside of office hours it is almost certain that you need to be speaking to a lawyer!

Related items

  • The Implications Of Wrongful Deduction Of Wages And National Minimum Wage
    In the past couple of weeks, the media has highlighted HMRC crack down on employers wrongfully deducting monies from their employee’s wages thus bringing their hourly rate of pay below the National Minimum Wage (NMW). This is largely due to human error and the methods employers have used to make such deductions.

    In a recent case (6th Feb 2019) – Middlesborough FC have been cleared from breaching NMW 1998 rules. Historically Middlesborough Football Club had given their staff the option of purchasing football season tickets via their wages. A large number of staff agreed to this and the employer made the relevant deduction. What the employer failed to recognise when making this deduction was that it breached NMW rules as their hourly rate of pay dropped. HMRC investigated this and took the club to Employment Tribunal. After a gruelling two years, the club appealed the decision and successfully won their case. The club demonstrated that they were helping their employees to spread the cost of season tickets payments which was accepted by the EAT.

    HMRC response was that the NMW 1998 is a protective legislation where no worker can agree to receive less, therefore the club should not have done this.

    This situation is not unique as Iceland Frozen Foods now face similar employment tribunal claims by HMRC who have stated that Iceland had also breached NMW legislation (Jan 2019). Iceland offered an optional savings scheme (Christmas Club) to its staff whereby an agreed deduction was made. Again by making this deduction through payroll the hourly rate shown was below the NMW. Iceland intends to challenge this case and we eagerly await the outcome.

     

    YBC members can access advice on this and other HR & employment issues by calling the YBC Support Helpline which is included for free as part of thier memership.

  • Transitional import procedures—no deal Brexit guidance
    in Law
    The government has published new guidance for stakeholders on transitional import procedures if the UK leaves the EU without a deal in place.HM Revenue & Customs (HMRC) has published the following guidance to help stakeholders prepare for a no deal Brexit:

    In the event that the UK leaves the EU without a deal, from 11pm GMT on 29 March 2019, UK businesses will need to apply the same processes when trading with the EU trade that already apply when trading with the rest of the world.

    The actions set out in this guidance do not apply to importing or exporting goods between Northern Ireland-Ireland.

    Roll on roll off locations are ports like Dover or the Channel Tunnel where traders use vehicles to drive onto ferries or trains to transport goods into or out of the UK.

    From 29 March, importers using these locations will have to submit customs declarations and pay any customs duty, excise duty or VAT that’s due. But traders can apply for HMRC’s temporary arrangements to make sure that you can carry on transporting goods and to make customs processes easier for you to complete. HMRC will update this guidance when further details are available.

    Importing to the UK from the EU

    If the UK leaves the EU without a deal you’ll need to be ready to make customs declarations and follow other customs rules for the goods you import. If you’re importing through a roll on roll off listed location, you cannot complete customs formalities when your goods arrive in the UK, so you’ll need to make your customs declaration before checking your goods onto the ferry or train on the EU side.

    The main customs form used in international trade is the Single Administrative Document. You can submit this electronically. Check how to complete a customs declaration. To be as prepared as possible, you’ll need to: get an Economic Operator Registration Identification (EORI) decide whether you want to use a customs agent to process customs declarations for you, or buy software so you can make declarations yourself using CHIEF or Customs Declaration Service systems register in advance to use the transitional simplified procedures which will make customs processes easier make sure you’re ready to send your EORI or master reference number to the haulage company moving your goods

    Making customs declarations before your goods leave the EU

    There are different ways to make a customs declaration. You should decide which option works best for you, but you’ll need to make your declaration before you check-in.

    You can register to use transitional simplified procedures to:

    • transport your goods into the UK without having to make a full customs declaration at the port
    • make a more detailed declaration later (a supplementary declaration)
    • defer paying your duty

    Once you’re registered you’ll be able to make either:

    • a simplified frontier declaration (an electronic declaration submitted to HMRC)
    • an entry in your own records of when the goods are crossing the border

    Both of these declarations ask for less information upfront compared to a full customs declaration.

    If you’re importing controlled or restricted goods you’ll only be able to use a full declaration or a simplified frontier declaration. Check guidance on other details required for the customs declaration.

    You can change your customs declaration up until the point you check-in at the ferry or train at the departure port. You may be asked to confirm that you’ve completed a declaration as part of the terms and conditions when booking your transport or at check-in. You’ll get a unique master reference number when you complete either a full customs declaration or a simplified frontier declaration. You should confirm with your haulage company that you’ve made a customs declaration before departure by giving them either the: master reference number (to show you’ve made a full or simplified frontier customs declaration) your EORI number if you’ve made an entry in your own records

    We may ask your haulier to show the master reference number or your EORI number to prove a declaration is in place.

    When your goods arrive in the UK For a temporary period, HMRC will allow most goods moving from the listed roll on roll off locations to leave the UK port or train station before you’ve told us that the goods have arrived. If you’ve submitted either a full declaration or a simplified frontier declaration, you must tell us as soon as possible when the goods arrive in the UK. You tell us the goods have arrived by updating your declaration using your software application, or your agent can do this for you. You must do this no later than the end of the working day after the goods’ arrival in the UK. If you’ve used an entry in your records, you must update your records to show the actual time the goods arrived in the UK. But you do not need to tell us about the arrival of the goods at roll on roll off locations.

    For both the simplified frontier declaration and entry in your own records, you should submit a supplementary declaration (a more detailed declaration) by the fourth working day of the month after your goods’ arrival in the UK. If you have duties or taxes to pay, HMRC will take your direct debit on the 15th day of the month after the goods arrive in the UK.

    Haulage companies - imports

    When haulage companies (or someone acting for them) are accompanying goods through the border, for example, the driver accompanying the load on board the ferry, they have a responsibility to submit safety and security information through an Entry Summary Declaration before the goods arrive in the UK. For roll on roll off ports you must submit the declaration at least 2 hours before the goods are due to arrive in the UK. For Eurotunnel you must submit the declaration at least 1 hour before check-in at Coquelles - this is because the UK border is actually crossed in France. As well as submitting an Entry Summary Declaration you should carry either:

    • a master reference number to show that you’ve made a full or simplified frontier customs declaration
    • the EORI number of the importer if the importer made an entry in their own records

    The importer or their customs agent will give these to you.

    Ferry operators and the Channel Tunnel operator - imports

    If you’re a ferry operator or Channel Tunnel operator you must have reasonable belief that your customers have made the customs declarations. You can do this through your terms and conditions that your customers use when booking their transport. You’ll need to show the booking to HMRC if we ask for it.

    Accompanied goods

    For goods that are accompanied by a haulier, they’re responsible for submitting the Entry Summary Declaration (the safety and security declaration) before the goods leave the EU. There’s no obligation for the ferry or Channel Tunnel operator to confirm that this declaration has been submitted.

    Unaccompanied goods

    Where goods are unaccompanied, for example goods on trailers or in containers, the ferry operator is responsible for submitting the Entry Summary Declaration before the goods leave the EU. You must include the trailer or container number on the declaration.

    Exporting

    If you’re exporting goods from the UK from a roll on roll off listed location to the EU, you or your customs agent must complete a combined safety and security and customs declaration before the goods get to the departure port. You’ll be able to do this using the National Export System. If you do this yourself, you will need to enter the correct customs duty tariffs. You must include the vehicle registration number of the vehicle you’re using to transport your goods on the declaration. Ask the company that’s exporting your goods (usually a haulier) for the number. You need this so that you can complete the combined export and safety and security declaration in full.

    If your goods are being transported unaccompanied on a trailer or in a container you must include the trailer or container number on your declaration. To be prepared you’ll need to: get an Economic Operator Registration Identification (EORI) decide whether you want to use a customs agent to process customs declarations for you, or use the National Export System yourself Once you’ve submitted the combined customs and safety and security declaration HMRC will send you a notification that either: allows you to proceed asks for additional documentation asks you to make sure the haulier or driver transports your goods to a Designated Export Place or authorised premises, so that we can make customs checks before we give you clearance If you’re exporting high risk goods, you must give HMRC a full departure message so that we can complete the export and account for any duty refund or discharge any liability. You can do this by either: submitting online forms to HMRC along with evidence of export arranging for an appropriate third party intermediary to update HMRC IT systems.

  • Will HMRC Come After You?
    HMRC are under pressure from politicians who are demanding that they recover more unpaid tax even though they delivered a record haul of almost 30 billion pounds from their compliance activity during the last financial year.

    Despite popular opinion that some large companies ought to be targeted for their blatant tax avoidance, it appears that small business owners are more likely to be brought under the microscope. HMRC can opt to instigate criminal or civil investigations and the way in which business owners react initially often determines the way proceedings are handled. As a result, it is essential that expert advice is taken immediately.

    This expert advice would normally be sought from an accountant but the cost of defence can be extremely expensive. An investigation can be targeted or random and it is up to the business owner to prove their innocence. It is not uncommon for investigations to last for longer than a year and to cost several thousands of pounds in accountancy fees. This is without any additional tax that may be found owing.

    Insurance to pay accountancy fees in such circumstances is available but is costly because of both the volume of investigations and their length. Basically, on your own, you are a bad risk

    Members of Your Business Community (YBC) enjoy this protection as part of their membership and by joining you will become a good risk relatively speaking.

    We insure our cars and houses as routine so, for many, it is prudent to insure our businesses too.

  • It's that time of year again
    Its that time of year where you need to start thinking about your investments and particularly your stock ISA, if you haven't already. Remember if you don't use it you lose it!

    It’s that ISA time of year again

    Last week I had a client come in to my office with over half a million pounds worth of share certificates that had been accumulated for over 30 years. What a logistical mess. It took my team over 7 hours to work through all of the papers and this is only the first part of the job done.

    Now the fun bit starts where we have to contact the various Share Registrars and raise indemnities to sort out missing or invalid certificates. I don’t know if you have ever tried calling a Share Registrar but you are typically on hold for around 10-15 minutes and because it’s a premium rate telephone number it can get expensive. The hold music is pretty bad too but that’s another story.

    However, it should really come as no surprise to me. This time of season is especially worse because we are fast approaching the end of the tax year. It’s the time that everybody seems to have awoken from their long winter hibernation. To describe it as a frenzy is not an understatement. It really is with everybody scrambling to get their paperwork in order to avoid paying HMRC huge tax bills.

    That’s why I am writing this article to share how a bit of forward planning can save you lots of time and money. Here are a few tips to consider.

     

    1. £20,000 ISA Allowance – if you don’t use your allowance you lose it and so you should always make sure that you take advantage of it if you can. Even if you don’t have the cash to put into an ISA, you should be considering moving shares that you hold in certificated or non-ISA form into your ISA.

     

    1. The ‘dividend allowance’ falls from £5,000 to £2,000 from April 2018 which means that if you are holding income paying shares outside of a tax wrapper you could get stung. The trick is put money into a SIPP and stock ISA. Or if you want to be really clever you can change income into capital! – watch today’s short video I show you exactly how to do this (link below).

     

    1. Don’t hold share certificates. Part of the problem of poor tax planning is not knowing which shares are doing well or badly and how much profit you are making. That’s why to hold your investments in a nominee (electronic) form (which is how 99% of the UK population prefers to hold their shares) makes sense. And don’t worry about attending AGMs, you can still do so just by letting your broker know.

     

    1. Change of strategy – with income being taxed much more aggressively than capital growth then it pays to move out of income paying stocks and into capital growth stocks. However, many investors don’t like the idea of this because they believe that capital growth stocks are higher risk than income. Watch today’s video of how to get around this.

     

    1. Lifetime ISA (LISA) – this is a great product which I’m surprised so few people know about. If you are aged between 18 and 40 you can invest up to £4,000 into a LISA and the Government will give you £1,000 for free which is a whopping 25%. There are some terms attached but nothing insurmountable.

     

    1. Cash ISA – there is still some confusion about cash ISAs so allow me to dispel them. Since 2014 Cash ISAs and Stocks and Shares ISAs are one and the same thing. That means that you can shift from cash to share investments and vice-versa relatively easily. With cash ISAs paying less than inflation it does make me wonder why investors may want to hold cash ISAs at all, but that’s another article for another time.

     

    1. SIPP is a great way to shield from IHT. If you have a normal pension you should consider getting tax advice on whether it makes sense to convert it into a SIPP. All pensions are exempt from Inheritance Tax but SIPPs give you greater control. If you are working then making pension contributions and earning higher rate tax relief on the way in and only paying basic rate tax on your drawdowns is one way that many savvy investors are really utilising this tax vehicle. However, like all products that prove popular with the public, don’t be surprised if the Government takes it away or changes the tax breaks before too long. (The Government has already reduced the life time allowance on more than one occasion so they could do it again.

     

    1. SIPP Lifetime Allowance – one big problem that investors sometimes face is being TOO successful. If they invest wisely and their SIPP value exceeds the lifetime allowance which currently stands at £1m, then they will get charged a whopping 55% on any withdrawals. Well the good news there is something that you can do about that. If you want to know more call our offices.

     

    Just so that you know I am not a tax advisor and I’m not giving tax advice. However, I do work very closely with a number of tax specialists who help my clients to achieve their objectives. Over the years I have picked up the tricks of the trade and found it to be easier than you might normally imagine. Understanding basic tax is essential to being successful in the long term and whilst it’s not a topic of great excitement it’s necessary so don’t hold it off until next year.

  • HMRC Vows To Crack Down On Use Of Freelance Jobs
    In relation to staff used for freelance jobs, a specialist HMRC team will target employers suspected of avoiding national insurance.

    HMRC has announced it is to form a specialist team to examine working practices at organisations that use staff for freelance jobs to fill what amount to full-time roles.

    Employers that persistently use office-based freelance workers to cover what would otherwise be full-time positions avoid offering individuals any of the associated benefits of full-time employment, such as sick pay, pensions and maternity leave, as well as avoiding employer national insurance contributions (NICs).

    If an organisation is found by HMRC to be in breach of existing laws, it could be fined up to 100% of the tax owed. The Treasury said it is currently owed more than £300m in lost national insurance contributions.

    It is unclear how widespread the practice is.  The crackdown comes at a time when HMRC is taking a renewed interest in the use of ‘umbrella companies’ to pay staff, and other unusual working arrangements that circumvent NICs and other taxes.

    Taxi-hailing app Uber and food delivery service Deliveroo are also legal cases over the status of their workers, who are currently classed as self-employed, with a tribunal decision on Uber’s case that has just come in as can be seen here:

    Uber's Employment Tribunal, on October 28th, ruled that two drivers who provide services to  Uber are 'workers' within the meaning of the Employment Rights Act 1996.

    This means they will be entitled to a limited number of employment rights .  Amongst other rights, they will be entitled to:-

    • 5.6 weeks' paid annual leave each year
    • a maximum 48 hour average working week, and rest breaks
    • the national minimum wage (and the national living wage)
    • protection of the whistleblowing legislation.

    As they are not employees, they will not be entitled to:-

    • the ability to claim unfair dismissal
    • the right to a statutory redundancy payment
    • the benefit of the implied term of trust and confidence
    • the protection of TUPE, if Uber sells its business

    I’m sure the verdict will be appealed and no doubt it is fact specific but be aware if you are taking on people under similar circumstances.

    Prime minister Theresa May recently announced a review of workers’ rights, amid concerns that almost half a million workers in the UK could be wrongly classed as self-employed. The review will look at whether the national living wage is being undermined, and what changes in legislation may need to be implemented as a result.