Tax News
June 2010
Coalition plans tax simplification
The Queen’s Speech placed plans for an Office of Tax Simplification high on the list of priorities for the new coalition government. Other tax policies mentioned in the speech include a significant increase in the personal allowance for income tax, with the longer-term aim of raising the allowance to £10,000, a National Insurance bill that will increase rates and thresholds to raise £9 billion from April 2011 and plans to review the raising of the pension age to 66, possibly doing so sooner than between 2024 and 2026 as previously planned. The first Budget will be on 22nd June.
HMRC tax credit cock-up
HM Revenue & Customs has sent banking details of up to 50,000 people claiming tax credits to the wrong addresses. Claimants were sent their annual tax credit award notice, but the documents contained the personal banking details of other taxpayers, HMRC admitted.
CGT reform comes under attack
Tory MP John Redwood is leading a rebellion against government plans to raise capital gains tax from 18% to levels closer to those applied to income tax. The former minister launched an attack on the proposal in a Commons speech shortly after the Queen’s Speech spelled out the proposals for the emergency Budget. Reports in the national press have suggested that assets are currently being sold at an accelerated pace in order to beat the impending rise.
Tax investigations into big companies are the most lucrative
The accountancy practice UHY Hacker Young has analysed the yield on tax investigations. Those into multinational companies are 18 times more productive than those into small to medium enterprises (SMEs). For every £1 HMRC spent on investigations into multinationals during 2008/09, it recovered £181 of tax. Tax investigations into SMEs and private individuals only generated £10 of extra tax for every £1 invested.
In the past 12 months, HMRC has generated £4.9 billion through tax inquiries into multinationals, but just £359 million from self-assessment business and personal tax inquiries.
Treasury minister didn’t pay CGT
Danny Alexander, the new Chief Secretary to the Treasury, has been accused of failing to pay CGT on his second home. He sold his London flat, on which he had claimed more than £37,000 in expenses, without paying CGT. However, he claimed that under the rules he was exempt from paying the tax for three years after buying a second property on the condition that it used to be his main residence.
Up to 100,000 have paid too much tax
Up to 100,000 workers have paid too much tax after problems with PAYE coding, according to HMRC. The problem arose after bringing together two PAYE databases. Anyone on PAYE has been advised to closely check their code.
IHT warning
Since April, HMRC has enjoyed new powers in relation to collecting inheritance tax (IHT). It can now force third parties, such as banks, to give the Revenue authorities information when investigating an IHT case. Also, an HMRC officer can carry out a site inspection at just seven days’ notice of any premises in which a deceased person had an interest and require any third party to give up documents that may be relevant to the tax position of the deceased person.
Vodafone will fight tax ruling
In the latest round of a three-year battle between the Indian Income Tax Department and Vodafone, a notice has been served on the communications giant that it should have paid the tax on its $11 billion acquisition of Hutchison Essar. Vodafone insists that the acquisition took place outside India’s jurisdiction. It said that the purchase was made by Vodafone International based in Holland, while the seller of the company was based in the Cayman Islands.
Warning over HMRC powers
As part of the coalition government’s tax policy, a statement has been issued stating that “we will make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals”.
After the first year of HMRC’s Powers, Deterrents and Safeguards programme, many professionals are already alarmed and feel that granting more powers would be a grave error. Critics have said that a leaner HMRC, under more pressure to scotch tax avoidance and bolster the UK’s coffers, may be excessive in the use of its powers to get the job done. A wide-ranging survey conducted by the Chartered Institute of Taxation (CIoT) tested the water in the advisory community. In a poll, advisers said HMRC was being unreasonable in the volume of information that was being sought – 55% of the advisers criticised the volume of information being requested and described the time provided for responses as unfair. Sixty-two per cent of tax advisers who have used the new internal review mechanism found it fair and reasonable. But more than a third (37%) of tax advisers did not think new information powers had been used fairly. Around half of tax advisers had seen an increase in informal checks, the CIoT reported. Sixty-two per cent said they were clear about the implications of informal checks, but only 13% thought their clients were clear on this issue. Advisers also want more training for HMRC staff dealing with complicated cases in the hope that they will use better judgement when choosing which powers are suitable.
Christian Aid pushes FTSE 100 for transparency endorsement
Christian Aid has asked supporters to put pressure on FTSE 100 companies to be more transparent about tax on profits generated in poor countries. It would like to see country-by-country reporting. “We have also written to all the FTSE 100 companies, seeking their views on questions such as whether businesses have a social responsibility to pay tax in poor countries and whether they would support the introduction of a new, more transparent accounting standard,” said Judith Cavanagh, Christian Aid’s campaign manager for economic justice.
PKF says HMRC is underfunded
By recruiting additional staff instead of cutting numbers and by introducing a national tax amnesty, the chancellor could rake in an extra £20 billion in the next three years, according to consultancy group Pannell Kerr Forster (PKF). Philip Fisher, head of employment taxation and rewards at PKF, said further reductions in HMRC staff numbers and capability would be a “false economy”.
