The most recent articles from Accountancy Age

PKF warns secret Swiss account holders not to hide

David Jetuah — 2010-11-02T09:52:00.000Z

David Jetuah, Accountancy Age, Tuesday 2 November 2010 at 09:52:00

PKF's John Cassidy says that UK residents with secret Swiss accounts should not hang back and wait for an amnesty because the taxman could catch them in the meantime

Talks between Switzerland and the UK lined up for next year to address secret Swiss bank accounts will take time to complete - but this will give the taxman more breathing space to catch errant taxpayers before any new amnesty becomes available.

John Cassidy, tax investigation and dispute resolution partner at PKF, said: "Since the talks were announced, we have heard of several major advisers who are effectively telling their clients to sit tight and wait for a future UK-Swiss deal before coming clean on UK tax arrears.

"This is poor advice and could leave their clients facing unnecessarily large tax bills."

Cassidy added that those with undeclared income who do not come forward voluntarily should realise that there was a significant risk of HMRC discovering that they have underpaid or evaded tax.

"If an investigation is started it will be too late to use any amnesty. HMRC now has the funding to scale up its investigations against offshore account holders and has amassed a lot of data on offshore bank account holders generally," Cassidy added.

"It has already shown it is willing to use stolen bank data to open investigations into Swiss account holders in an attempt to catch tax evaders."

Further reading:

Tax evasion: Good cop, bad COP9

Taxman reveals sacking figures

Gavin Hinks — 2010-11-01T10:42:00.000Z

Gavin Hinks, Accountancy Age, Monday 1 November 2010 at 10:42:00

Dismissals and disciplinaries revealed by the taxman

More than hundred people have so far been dismissed from HM Revenue & Customs this year for reasons other than poor performance, according to figures published in parliament.

Gauke was replying to a question from Tory MP Priti Patel about the number of HMRC staff who were sacked for errors. A statement said that the department does not record ‘error’ as a reason for dismissal.

The numbers appeared in written answers from exchequer secretary David Gauke. They revealed that 116 people have been sacked for reasons other than poor performance among 369 who have been disciplined. Performance related issues have lead to the sacking of 294 staff.

Last year saw dismissal for 402 people for poor performance. Another 633 people were disciplined for other reasons, among them 158 who were sacked.

The Treasury also revealed the pay rates of senior management staff. The average pay for someone at the highest Senior Civil Service grade is £86,199. Average pay for the lowest ‘officer’ grade is £25, 235.

There is a two-year pay freeze in place for everyone below SCS level which runs from 2011 to 2013. SCS staffers have seen their pay frozen for 2010-11.

Taxman estimates £6.3bn written off

Taxman estimates £6.3bn revenue write-off

David Jetuah — 2010-11-01T09:54:00.000Z

David Jetuah, Accountancy Age, Monday 1 November 2010 at 09:54:00

The amount of debt HMRC believes it will not collect rises from £4.5bn to £6.3bn

The level of debts owed to the taxman which the department is prepared to write off has risen by almost 40% according to UHY Hacker Young.

The firm said the amount of expected revenue HM Revenue & Customs now classed as irrecoverable had jumped from £4.5bn to more than £6.3bn in the year to 31 March 2010.

UHY Hacker Young believed the increase in bad debts had been caused by the recession forcing more businesses to keep hold of money they should pay in taxes in order to pay other bills and keep afloat.

Roy Maugham, partner at UHY Hacker Young said: "The Treasury is very hungry for cash at the moment – they have a huge hole in the government’s finances to fill.

"Our concern is this is all going to lead to much more aggressive debt collection tactics in the future against both individuals and businesses."

Further reading:

SMEs face double whammy in tax avoidance clampdown

Tax deferral agreements fall

Rachael Singh — 2010-10-29T16:24:00.000Z

Rachael Singh, Accountancy Age, Friday 29 October 2010 at 16:24:00

Number of agreements between HMRC and businesses to delay tax payments has fallen dramatically

Deferred tax requests agreed by the taxman has significantly declined, according to figures released by HM Revenue & Customs.

The data shows from January to September 2009 there were 196,200 Time to Pay (TTP) arrangements compared with 114,600 for the same period in 2010.

From January to September 2010 there was £1.9bn worth of arrangements approved, compared with £3.4bn for the same period last year.

The amount of TTP requests that have been declined has doubled in the last year. For the period January to September 2010 the taxman declined 5.2% of TTP arrangements, compared with 2.6% for the same period in 2009.

According to Philip White, chief executive of finance provider Syscap, the increase in declined TTPs is a "clear confirmation" HMRC is taking a tougher stance on tax deferrals.

HMRC could be gradually winding down the scheme, added White.

The was no available information on how many businesses requested repeat deferrals, however, Frances Coulson, vice president of insolvency trade body R3, said the amount had "increased considerably", from September 2009 to early 2010.

"Without new figures, it is impossible to tell how many companies under the Time to Pay banner are severely distressed and at risk of insolvency," she said.

Coulson added towards the end of last year two thirds of insolvency practitioners had seen companies move from a TTP to a formal insolvency.

"While the majority of companies in Time to Pay surely use this period as a useful breathing space, a worrying minority may be unable to get their house in order," said Coulson.

Although the arrangement requests are declining Coulson said IPs are predicting an increase in corporate insolvencies next year.

"We should not assume 2011 will automatically be smooth sailing."

There were 256,500 TTP arrangements from December 2008, when the scheme began, to December 2009 - which equated to £4.5bn deferred tax payments.

Footballers' avoidance scheme hit again

David Jetuah — 2010-10-29T10:36:00.000Z

David Jetuah, Accountancy Age, Friday 29 October 2010 at 10:36:00

HMRC clamp down on Employer-Financed Retirement Benefit Schemes

HMRC has confirmed that it will clamp down on a tax loophole used by footballers to protect their pay packets.

The Employer-Financed Retirement Benefit Schemes (EFRBS) allow high earners such as footballers or bankers to pay 50% of their income at source into trusts, which prevents the Revenue from taxing them fully.

Accountancy Age revealed the EFRBS issues earlier this year after Cathy Corns, tax partner from Mercer & Hole, highlighted the problem.

The trusts can be used to buy assets such as property and are attractive to non- domiciled foreign players who can retain their money offshore.

Further reading:

Budget clamps down on retirement scheme tax avoidance

Government could kill pensions tax scheme

Common EU tax base proposals out next year

Paul Grant — 2010-10-29T09:37:00.000Z

Paul Grant, Accountancy Age, Friday 29 October 2010 at 09:37:00

Formal proposals for a common consolidated corporate tax base to be released in 2011

The EC plans to produce proposals for a common European tax base next year for businesses operating across member states.

The formal proposal for a common consolidated corporate tax base will be issued by the EC next year, according to European tax commissioner Algirdas Šemeta, as part of a raft of measures to strengthen the single market. Concerns have been raised that the move could increase costs for businesses operating in certain countries, according to tax-news.com.

The EC denied that the move was the first step towards harmonization of tax rates across the EU.

£10bn haul likely from Swiss accounts

David Jetuah — 2010-10-28T17:27:00.000Z

David Jetuah, Accountancy Age, Thursday 28 October 2010 at 17:27:00

Swiss agreement to help UK authorities probe account holders who may have undeclared income stashed away could recoup £10bn for the Treasury

HMRC's groundbreaking deal with the Swiss tax authorities could generate up to £10bn from high-net worth individuals with secret accounts.

Swiss banks have 56 times more assets under management than financial institutions in Liechtenstein, where the taxman is currently running an amnesty.

HMRC expects to yield £1bn from existing Liechtenstein account-holders between now and 2015.

In this context, tax advisers from law firm McGrigors said a conservative estimate of the amount that could be generated from undeclared assets held in Switzerland could be £5bn-£10bn.

Jason Collins, head of tax disputes and investigations at the firm, said: " There is a lot for HMRC to play for."

The downside for HMRC, Collins added, was the potential for the more committed tax evaders in Switzerland to shift their accounts to other offshore jurisdictions.

Further reading:

Swiss deal drives taxpayers to Liechtenstein amnesty

PwC wins green light for £300m stamp duty battle

David Jetuah — 2010-10-28T15:38:00.000Z

David Jetuah, Accountancy Age, Thursday 28 October 2010 at 15:38:00

PwC advising on group litigation order against the taxman for stamp duty charged on cross- border share issues, a move which the firm says is unlawful

PwC has won the High Court's backing for a group litigation order to challenge stamp duty levied by the taxman on cross-border share issues, a move which the firm says is unlawful.

Public UK companies were hit with the tax when they issued shares on foreign stock exchanges.

Claims issued to date exceed £150m but if compound interest is tacked on, the Treasury’s exposure could double to around £300m. PwC said.

However further claims could see the Treasury fork out more than £500m, PwC added.

"PwC Legal and PwC will work together to support clients to recover tax unlawfully levied and to seek to restore them to a just position. The GLO is a critical step in that process," the firm said today.

The GLO has been granted a year after a European Court of Justice ruling which said a 1.5% charge on issues of shares into a clearance service, which is used to hold shares traded on a foreign stock exchange, was contrary to EU law.

Paul Emery, stamp taxes director, PwC, added:

"This is a tax on UK public companies accessing US and other capital markets that is not imposed on their European counterparts, meaning UK companies are unfairly disadvantaged in accessing foreign capital. The ability of UK companies to raise finance freely as appropriate is critical to their competitiveness.

"The ramifications of a pending GLO go far beyond monetary value – it is also a matter of putting right the wrong to ensure the UK remains a competitive place to do business."

Further reading:

Video: Sunday closing for HMRC call centres

2010-10-28T14:26:00.000Z

Accountancy Age, Thursday 28 October 2010 at 14:26:00

Contacting the taxman just became even tougher for advisers

Gavin Hinks and David Jetuah discuss HMRC’s move to shut call centres on a Sunday as part of its cost-cutting strategy, and how that might impact on tax advisers who use the service.

Commons to probe HMRC ‘effectiveness’ after PAYE scandal

our parliamentary correspondent — 2010-10-28T09:56:00.000Z

our parliamentary correspondent, Accountancy Age, Thursday 28 October 2010 at 09:56:00

Treasury sub-committee to look into how HMRC can do its job better after problems with end of year reconciliations

MPs have launched a major inquiry into the "administration and effectiveness " of HMRC following the controversy over millions of demands for the payment of underpaid tax.

Commons Treasury sub-committee chairman George Mudie said the department had been "criticised heavily over the end of year reconciliations".

He said: "We will examine how HMRC is doing its job, whether it can do it better and what the future holds following the spending review settlement."

A statement from the committee said the department was subject to a significant efficiency programme and now faces having to make further savings as a result of the comprehensive spending review while giving priority to tax compliance.

It said: "The sub-committee's inquiry will build on its predecessor's work, which identified areas of concern in relation to the impact of the efficiency programme on HMRC's performance, staff morale within the organisation and its performance on issues such as the payment of tax credits."

Key issues will include:

HMRC's performance as an organisation and whether it is delivering its key aims;
What the implications are of the spending review settlement;
Whether the department is able to deliver the government's aims on tax compliance;
Whether PAYE reform is necessary; and
What HMRC's priorities should be for the future.

The MPs are inviting all interested parties to submit written evidence by noon on Wednesday, 17 November.

Business wins more time for VAT refunds

David Jetuah — 2010-10-28T09:35:00.000Z

David Jetuah, Accountancy Age, Thursday 28 October 2010 at 09:35:00

EU extends time for cross-border VAT refunds despite minister claiming the taxman would struggle to cope

Business will get more time to claim VAT refunds despite senior Treasury figures warning it will cause the taxman severe problems.

After a shift from paper to electronic filing of claims, there will now be a one-off six month extension for cross-border refunds from 30 September 2010 to 31 March 2011.

However, the exchequer secretary, David Gauke, told the House of Common's European scrutiny committee earlier this year that the extension would involve costly IT changes for the taxman and advisers.

Gauke's statement also said that it would "create operational problems for HMRC, as it has deployed additional resources to deal with the anticipated surge in refund claims ahead of the September 2010 deadline."

And it would confuse EU businesses "as it is very unlikely that any member state would be able to change their IT systems to accept late claims before the current 30 September deadline expires."

Gauke told the panel that the proposed extension to the deadline would impose additional IT costs on HMRC of between £100,000 and £150,000 (and could not be implemented in time). It would also impose unquantified costs on advisers.

HMRC said: "We have supported this proposal, as although the UK (HMRC) VAT refund portal has been operating properly, some UK businesses have either not yet been able to submit their claims to the appropriate member state of refund, or their claims has not yet been accepted into the other member states’ portals.

See the report here

Swiss deal drives taxpayers to Liechtenstein amnesty

David Jetuah — 2010-10-28T09:17:00.000Z

David Jetuah, Accountancy Age, Thursday 28 October 2010 at 09:17:00

Information exchange agreement with Switzerland could drive taxpayers to Liechtenstein amnesty

The UK's groundbreaking deal to exchange tax information with Switzerland could drive secret offshore account holders to use the Liechtenstein Disclosure Facility (LDF), advisers have said.

The LDF has had a relatively slow uptake since it began last year, but UK taxpayers with undeclared income in Switzerland may rush to move their assets in the wake of the agreement.

The deal could also pave the way for the UK and Switzerland, famed for its impenetrable banking secrecy, to adopt a similar disclosure facility to the LDF.

The predictions have been made after George Osborne announced the pact alongside Swiss finance minister Hans-Rudolf Merz.

Asked whether the Swiss deal could inadvertently increase uptake of the LDF, Gary Ashford, head of tax risk, disputes and investigations at RSM Tenon said: "I think the answer is yes."

For Swiss account holders with UK tax liabilities who have so far snubbed the LDF, they may face stiffer penalties if they rush to use a similar amnesty in Switzerland.

"There may very well be a Swiss Disclosure Facility on the cards and for those [UK-resident account holders ] who sit back and do not use the LDF they may find it harder to use the Swiss version if it is established," Ashford added.

Despite a £900m boost to combat tax evasion, HMRC will still have to process the wall of information that will come out of Switzerland amid dwindling staff numbers.

Recently, confidential account information has been stolen by employees of a number of offshore banks before finding its way to several European tax authorities.

In this backdrop, John Cassidy, tax investigation and dispute resolution partner at PKF, said: “Holders of Swiss accounts cannot assume their accounts will remain confidential for ever.

“An amnesty for accounts based in Switzerland is possible – but there is no guarantee that any future amnesty will be as generous as the current Lichtenstein Disclosure Facility.

Read more:

Swiss offshore tax deal

Tax powers could transfer to the EU

Kevin Reed — 2010-10-27T10:43:00.000Z

Kevin Reed, Accountancy Age, Wednesday 27 October 2010 at 10:43:00

Concerns rise over transfer of tax-raising powers to the European Union

Tax-raising direct from Europe would effectively create a "transfer of sovereignty", according to EU budget commissioner Janusz Lewandowski.

Edicts from the EU to tax member state citizens through VAT or financial transaction taxes could impinge on principles of national governance, reported the Daily Express.

"It needs ratification because it is the prerogative of a national state to set its own taxes," Lewandowski was quoted in the paper.

However the coalition government has promised to put any power-transfer plans to a vote.

"EU taxation proposals are invasive of British democracy's constitutional position," said Bill Cash, the Conservative chairman of the House of Commons scrutiny committee.

Further reading:

Video: EC tells UK to scrap six-year limit on tax repayments

CBI slams EC's bank tax support

'Jury out' on HMRC cuts

Accountancy Age — 2010-10-27T06:44:00.000Z

Accountancy Age, Accountancy Age, Wednesday 27 October 2010 at 06:44:00

Slashing the HMRC budget could hurt the most vulnerable, warns tax experts

Experts concerned with the taxing of those low incomes have said the jury remains out on George Osborne's proposals to cut HMRC's budget.

The Low Incomes Tax Reform Group (LITRG) was speaking after the chancellor said cuts to the taxman would come while protecting the most vulnerable.

The reform group immediately warned that cuts to services could hit the least well off. A statement issued yesterday said: "The cuts to HMRC’s budget could mean the end of services which the more vulnerable of HMRC’s customers can scarcely afford to do without."

There are conerns that the cuts will mean more centralisation through IT and the increasing use of a one-size-fits-all approach.

John Andrews, chairman of the LITRG, said:"We believe that the linking of error and fraud is unhelpful and will inevitably portray vulnerable people who make errors as blameworthy. Setting over-optimistic targets may put the unrepresented at a disadvantage if they are not aware of either the law or their rights.’

Spending review: HMRC faces 15% budget cut

Spending review: £100m to clear PAYE backlog

CSR: Cash-Strapped Revenue may use more amnesties

David Jetuah — 2010-10-26T14:08:00.000Z

David Jetuah, Accountancy Age, Tuesday 26 October 2010 at 14:08:00

Hopes that the taxman was going to be spared from the spending cuts were dashed, so will it roll out more amnesties to increase its cost efficiency?

Advisers bracing themselves for more strained working relations with the taxman after it was hit with a 15% savings bombshell are now saying that it may force the department's hand on offering more tax amnesties.

Instead of starting costly exercises to try and root out errant taxpayers some advisers predict HMRC will roll out more programmes like the Tax Health Plan to other well-paid professionals- even accountants.

"I'm hearing from government sources that the amnesties could stretch to lawyers and accountants," said one adviser.

The taxman had close to 69,000 staff as of April 2010, but revenue sources say that this will decrease to 56,000 by 2014/2015 after the latest round of cuts.

Advisers are warning that the taxman will have more trouble processing the large amounts of information it receives and dealing with the demands of the profession.

But, perhaps surpisingly, advisers are also being pragmatic about the situation.

"We've all got to get used to a degree of inconvenience in our lives," said Mike Warburton of Grant Thornton.

The first sign of how the taxman is going to achieve its savings target came through recently when it announced that the Sunday service hotline was going to be scrapped.

David Ingall partner at JWP Creers said:"The costs have to be cut and there will be consequences.

"We have to deal with those consequences as part of our professional life. Is the service going to be 15% worse? Depending where the savings fall it is anyone’s guess."