According to HMRC, over £2 billion has been collected from users of tax avoidance schemes as a result of new government measures to collect disputed tax upfront.

New Accelerated Payments notices mean that users of tax avoidance schemes pay disputed tax up-front while their tax-affairs are investigated, instead of waiting until they are concluded. Given HMRC wins 80% of cases that go to court, this eliminates the financial advantage that tax avoiders previously enjoyed.

The Financial Secretary to the Treasury, David Gauke, said:

We will not tolerate tax avoidance and Accelerated Payments has been a real game changer.

HMRC already wins the vast majority of cases that go to court and now HMRC has taken more than £2 billion from tax-avoiders who would have otherwise benefitted from that cash while they were being investigated.

It should be absolutely clear to anyone who is tempted by these schemes that tax-avoidance does not pay.

HMRC is now issuing over 3,000 Accelerated Payment Notices a month, and has issued over 41,000 notices since Accelerated Payments were introduced. By the end of 2016, HMRC expects to have completed issuing notices, bringing forward over £5 billion in payments for the Exchequer by March 2020.

Accelerated payments were introduced in the Finance Act 2014 and National Insurance Contributions Act 2015 and they apply where avoidance schemes are subject to the Disclosure of Tax Avoidance Schemes rules or the General Anti-Abuse Rule, or where they are similar to a scheme that’s already been defeated in the courts.

An accelerated payment notice is issued to the taxpayer to collect the outstanding tax. Once they receive the notice, they have 90 days to pay or make representations to HMRC if they consider the notice is incorrect – either if the conditions are not met or the amount is wrong.

A reminder that it is not too late to avoid the hefty car fuel benefit charge if you drive a company car and your employer pays for your private fuel.

Many employers have an arrangement with their company car drivers to obtain reimbursement of any private fuel provided. Usually, the employee must reimburse the employer for private fuel included in petrol bills paid by the employer. Otherwise, the employee may face a tax charge.

 Consider the following example:

If your private mileage for March 2016 is 600 miles, and you drive a 1900cc diesel engine car, the rate per mile to cover fuel charges, as quoted in the latest rates published by HMRC, is 11p per mile. Accordingly, you should repay £66 to your employer. In order to exempt yourself from the car fuel benefit charge you must be able to demonstrate that the refund was actually made in the relevant tax year, in this example before 6 April 2016. In practice, HMRC may give you more time…

Based on the above example, if the vehicle’s list price when new was £30,000, and the car benefit charge rate was 26% (based on a 130g/km CO2 rating) the benefit in kind charge for 2015-16 would be £7,800. With no repayment of private fuel, there would also be a £5,746 car fuel charge. Both these amounts would be added to your taxable income for the year. If you were a higher rate tax payer the car fuel charge would cost you £2,298 a year in additional tax (£5,746 x 40%). This amounts to £192 per month.

If your actual private mileage proved, on average, to be 560 miles a month, you would therefore save £126 per month (£192 – £66).

It is worth crunching the numbers. Obviously, the lower your private mileage, the more likely a repayment system will save you money. 

From 1 April 2016, landlords who acquire new property to let as residential accommodation will be required to pay SDLT at significantly higher rates. The increase is also expected to apply to private householders who buy a second home.

The new rates will be:

*SDLT rates apply to the nominated bandings apart from properties purchased over £40,000 and up to £125,000 which will pay 3% on the total purchase price from 1 April 2016. Published information from the Treasury on these SDLT changes is thin on the ground, but informed opinion would seem to indicate that the additional 3% charge will not apply if you replace your main residence or if you are a significant corporate or fund investor in residential property.

A property purchased for £275,000 that is subject to the new rates will see an increase in SDLT from £3,750 (on property purchased prior to 1 April 2016), to £12,000 if purchased after 1 April 2016.

If you are presently negotiating to buy a new residential property for letting, or a second home, make sure that your advisors complete before the end of March 2016.

Despite generating substantial profits from sales of online services to individuals and businesses in the UK, Google is perceived to be avoiding tax on these profits in the UK.

Press commentary has highlighted the use of off-shore tax vehicles to divert Google’s profits in the UK into lower taxed countries: Ireland and Luxembourg have been mentioned.

Recently, Google agreed a multi-million pound settlement with HMRC to bring all its UK liabilities up-to-date for the last ten years. To many observers this seemed to be a fraction of the amount of tax that was due, and the so-called “sweetheart deal” has been robustly denounced.

HMRC have now published their side of the story, at least as far as they are prepared or able to disclose. They said:

“The Google enquiry

On 22 January 2016, Google announced that it had reached agreement with HMRC to pay an additional amount of £130 million in corporation tax and interest, as a result of HMRC’s investigation which started in 2010. This sum is over and above the tax that they have paid for past years (or would pay for the current period were it not for HMRC’s enquiry). The current tax charge that Google took in its accounts increased significantly from 2012, when the company first disclosed that it was under enquiry and made a provision for additional tax.

Some commentators have applied Google’s group profit margin to its sales to UK customers and estimated that Google’s UK corporation tax is equivalent to an effective tax rate of around 3% on the group’s profit’s arising in the UK.

This calculation does not reflect how tax law works.

Under international tax rules, Corporation Tax applies to profits created from economic activities carried on in the UK, not to profits from sales to customers in the UK. Many elements contribute to a multinational business’s economic activity and thus generate the profits, including the work that staff do, the technology driving and used by the business, intellectual property and other assets as well as where those assets are developed and actively managed.

Example

Imagine that a UK car manufacturer builds its vehicles in the UK, but half of its profits come from sales in the United States. Under Corporation Tax rules, the manufacturing profits would be taxed in the UK, the place of the economic activity, not the USA, where the consumers are.

In accordance with our published guidelines on resolving disputes, HMRC has taxed all of Google’s profits chargeable to tax in the UK for the period in question, at the full statutory rate of tax.

There has been media speculation about what other European tax authorities are doing regarding Google. We can’t comment on enquiries carried out in other countries, or on media speculation about them. So far, there has been no public confirmation that other countries have concluded enquiries with Google, either by agreement or by litigation. HMRC is satisfied that our enquiry has secured all the tax that is due in the UK.”

The dispute seems to be over as far as HMRC and Google are concerned, but it is unlikely that the owners of UK based companies, who do pay tax on profits generated by sales in the UK, will see this as justice…

The Chancellor announced in the Autumn Statement last November that he would be introducing new rates of Stamp Duty Land Tax (SDLT) on purchases of buy to let properties or second homes.  An additional 3% SDLT charge will apply to the purchase of residential properties caught by the new rules and this change is expected to come into effect for completions on or after 1 April 2016. There is an exemption from the charges for transactions under £40,000.

In December the Scottish government announced a Land and Buildings Transaction Tax (LBTT) supplement on additional homes. A bill has been introduced in the Scottish Parliament to introduce similar changes to LBTT.

The government is currently consulting on how the rules will be implemented and in which circumstances they will apply. It should be noted that the proposed changes will significantly increase the SDLT and LBTT on the purchase of second homes.

The rules will also impact on those individuals who purchase a new home where they have yet to sell their current home. The higher SDLT and LBTT rates would be payable on the purchase of the second property although this additional tax may be refunded if the first property is sold within 18 months.

To read the consultation which includes some examples of how the rules will operate use the link below.

Please also do get in touch if you would like specific advice on how these rules will affect you and whether or not you should buy or sell before or after April 2016.

For more information – click here

The government is reminding employers that a new National Living Wage (NLW) is being introduced from 1 April 2016 and advising employers to get ready for this change.

The NLW rate will be payable to workers in the UK who are 25 or over. For workers currently being paid the National Minimum Wage (NMW) this will mean a 50 pence increase in their hourly earnings.

The government expects over a million workers in the UK aged 25 and over to directly benefit from the increase, which sees the current minimum rate of £6.70 increase by 50p. Many will see their pay packets rise by up to £900 a year.

Business Secretary Sajid Javid said:

‘The government believes that Britain deserves a pay rise and our new National Living Wage will give a direct boost to over a million people. We are building a more productive Britain and giving families the security of well-paid work.

This is a step up for working people, so it is important workers know their rights and that employers pay the new £7.20 from April 1 this year.’

The government has launched an advertising campaign to highlight the new wage. More details are available at: livingwage.gov.uk.

The government is encouraging employers to ensure they are ready to pay the new wage on 1 April 2016. As part of this, it has published a four-step guide for businesses on the living wage website, asking employers to:

1. Check you know who is eligible in your organisation.
2. Take the appropriate payroll action.
3. Let your staff know about their new pay rate.
4. Check your staff under 25 are earning at least the right rate of NMW.

HMRC will have responsibility for enforcing the new NLW in addition to the NMW.

For those not affected by the NLW the following NMW rates apply:

• £6.70: for 21s and over
• £5.30: for 18 to 20-year-olds
• £3.87: for under 18s
• £3.30: for apprentices (the rate applies to all apprentices in year 1 of an apprenticeship, and 16-18 year old apprentices in any year of an apprenticeship)

For more information – click here

The following announcement was posted to the GOV.UK website 1 February 2016:

“The Valuation Office Agency (VOA) is in the process of updating the rateable values of all business properties. This is known as a revaluation. If you register your email details with us now we will email you when the draft rateable values are available to view on gov.uk in October 2016.

• Register your email at www.gov.uk/voa/revaluation

This will be your chance to let us know if the information we hold about your property is incorrect. If you don’t review your details you may find yourself paying an incorrect amount in business rates.

Rateable values are used by local councils to calculate business rates, and business rates bills will be calculated using the new rateable values from 1 April 2017.”

As this process may have significant cost implications it may be worthwhile to take an in-depth look at your present business rate criteria to ensure that come 1 April next year, the VOA’s reassessment does not result in incorrect, and possibly increased, business rate bills.

Earnings over £100,000?

If your taxable earnings for 2015-16 are likely to exceed £100,000, perhaps for the first time, now would be a good time to consider your tax planning options before 6 April 2016.

For every £1 your income exceeds £100,000 your income tax personal allowance will be reduced by £2. In effect, when your income reaches £121,200 you will no longer qualify for this allowance.

This would have a dramatic effect on the income tax charged on this top slice of income: from £100,001 to £121,200. The effective rate of tax charged would be 60%.

Accordingly, any steps you can take to reduce your income below £100,000 will save you £600 for every £1,000 reduction.

Earnings over £50,000

When the adjusted income of either parent exceeds £50,000 the family entitlement to child benefit reduces by 1% of the benefit for every £100 the income of the highest earner exceeds £50,000.

In plain English, this means that when the income of either parent is £60,000 or more the financial benefit of claiming child benefit is lost entirely.

It is worth reviewing income levels now to see if adjusted income can be reduced below the £50,000 threshold before 6 April 2016.

Possible strategies to keep you below this level include:

• Increase pension contributions
• Transfer income producing assets to a spouse or civil partner
• Make additional gift aid payments to increase your basic rate band
• There may also be opportunities for some tax payers to shelter income in a limited company
• If parents are in business together, change profit share arrangements to equalise incomes

Take advice to see if you can reduce adjusted income of parents for 2015-16 below £50,000. This will ensure there is no claw-back of your child benefits received. For a family with two school age children, benefits at risk would amount to £34.40 per week, £1,788.80 per annum…