Tax News
April 2010
HMRC plans to target ‘tax cheats’
The HM Revenue & Customs’ Business Plan for 2010/11 includes new targets for reducing tax loss and tax credit losses by a total of £5 billion. The plan states that HMRC is committed to helping those who want to pay the right amount of tax, but warns it will come down hard on those who try to sidestep their tax bills. “With the continuing difficult economic climate it remains important that HMRC helps and supports customers to fulfil these obligations while relentlessly pursuing those who bend or break the rules,” a spokesman said.
The naming and shaming begins
Any taxpayer caught evading tax after 1st April will be named and shamed by HMRC if the amount involved is greater than £25,000 of tax. The idea is based on a long-standing policy in Ireland, where publication of the identities of tax cheats attracts widespread publicity. However, it is unlikely to be before 2011 that the Revenue starts publishing the names and addresses of the tax cheats. “This new approach should make people think again about trying to get away with tax fraud,” said Stephen Timms, Financial Secretary to the Treasury. “As well as having to pay the tax, interest on the tax, plus penalties of up to 100% of the tax lost, they also now risk being identified publicly,” he added. A Revenue spokesman explained that miscreants would be given a chance to plead any mitigating circumstances to avoid the bad publicity.
HMRC crippled by low morale
A report by MPs claims that low morale and poor leadership are affecting performance at HMRC. A staff survey carried out in February 2009 brought “dire results” for the tax authority, the Treasury Committee said. It found that only 11% of staff felt that change was well-managed in the department. The poll also found that only 57% of calls made by the public to the Revenue’s contact centres were answered in 2008/09. During the peak period for calls (July), the response rate was lowest, at just 33%. “We are particularly alarmed by the low staff morale and engagement at HMRC, and its effect on performance,” said Michael Fallon, the Treasury committee chairman. The report’s findings came as part of a review of the Treasury and some of the authorities associated with it. HMRC suffers regular criticism from the Public Accounts Committee, which attacked it in February for its dealings with older people and their tax affairs.
Will Finance Bill ever become law?
The Treasury has published the 2010 Finance Bill, but there is speculation as we go to press that the prime minister will dissolve parliament shortly, leaving the government without enough time to enact it. The government could use a ‘wash-up’ process to force the bill through. However, this process requires a second reading and will need the consent of the opposition to be successful. No debate of the bill’s measures would take place in such a process.
Job cuts at HMRC may affect ability to tackle evasion
HMRC is preparing to cut back its workforce as the government attempts to plug the UK’s £167 billion public-spending deficit. According to the PCS union, 20,000 jobs have gone since 2006 and HMRC has a target of cutting 25,000 jobs in total and closing more than 200 offices by 2011. HMRC will aim to push through these cuts while maintaining its crackdown on those trying to avoid paying taxes. It has said it will look to tackle deliberate non-compliance by further improving the way it assesses levels of risk. HMRC now has powers which cut across all taxes, allowing the department to carry out checks on current records of all businesses, and, perhaps controversially, visit business premises without giving advance notice in some cases.
Liechtenstein signs information-sharing deals
Liechtenstein, the focus of much attention from tax authorities around the world, has signed 11 tax information exchange agreements thus complying with the requirement of the Organization for Economic Cooperation and Development (OECD). The UK, France, Germany, the Netherlands and Ireland are among the countries to sign deals. Only specific requests on an individual basis are subject to the deals which have faced criticism precisely because inquiries have to be so detailed in their content.
Non-dom gets the better of HMRC
HMRC has lost a case against a non-domiciled UK resident who used remittance rules to show profits kept offshore are not liable for tax in the UK. HMRC argued that a US company, where the profits were deposited, was opaque and therefore liable to UK taxation, but the non-dom countered that even if the company were opaque, remittance rules superseded this argument – a point tax judges agreed with. Remittance rules say that as long as non-doms do not bring profits made overseas onshore they’re not liable for tax in the UK.
Smokers hit by HMRC crack down
Duty paid on normal cigarettes is equivalent to duty paid on longer ones, which HMRC deems as avoidance of tax. To combat this, from January 2011 any cigarette longer than 8 cm, excluding the tip, will be treated as two separate cigarettes and receive added duty. In a further crackdown, any cigarette that is a further 3 cm above the 8 cm will be treated as a third cigarette. This means that any cigarette 12 cm or longer will be treated as three cigarettes, not one. A normal cigarette excluding the tip is 6 cm in length.
