HMRC has had considerable success in using third party data to better target compliance activity and to tackle the hidden economy. A current consultation by HMRC proposes that these data gathering powers be extended in order to combat tax evasion. We have extracted the following comments from the formal consultation document.

Many businesses use intermediaries to handle transactions and route custom through to their businesses. With the development of the digital economy, there has been a proliferation of such business models.  Intermediaries operate across many industries, for example for restaurants supplying take away food; for hotel bookings; or to enable ticket resale for events. These intermediaries provide a framework for smaller businesses to trade.

Where a business is using an intermediary to offer goods and services, HMRC believes that the intermediary will be able to provide valuable information that can identify sellers that have not registered with HMRC or who have not declared the full value of their sales. Using such data will allow HMRC to match data received with registration data and compliant business’ tax returns, helping to identify unregistered businesses and target resources more effectively on the

non-compliant. This will support the growth of compliant businesses, protecting them against unfair competition from a minority who do not register for and pay the tax they owe.

 The types of intermediary which are likely to hold such data include:

• Advertising boards or platforms provide a service where advertisements for goods or services are displayed with the intention of linking a supplier with a potential customer.
• App stores provide a platform to advertise applications for devices such as smart phones or tablets. Customers set up a store account with a connecting payment method attached.  Some apps also provide in-app purchases which are paid for via the app store.
• Booking and Reservation Intermediaries facilitate a booking or a reservation of goods or services, and may facilitate taking of deposits or other payment in respect of the goods or services booked and or reserved.

 These increased powers will provide HMRC with much needed information to better target taxpayers who may not be declaring all their income.

 The powers will also be an additional compliance burden for the organisations that provide the information to HMRC.

Treasury Minister Damian Hinds visited Belfast and Newry recently as HM Revenue and Customs (HMRC) unveiled new roadside fuel testing equipment to tackle the trade in illicit diesel.

The hi-tech equipment has been introduced to allow officers to test vehicles at the roadside for the presence of the new fuel marker, which was introduced into supplies intended for use in agriculture and construction industries in April. The new marker is resistant to laundering techniques known to be used by criminal gangs and significantly improves HMRC’s capability to detect fraud.

Previously, the test for the new marker was completed at a laboratory, leading to a delay in identifying illicit fuel and further action being taken. The new equipment will now be installed in 49 HMRC Road Fuel Testing Unit vehicles throughout the UK and used to analyse fuel samples taken at the roadside and at retail premises, starting in Northern Ireland.

Exchequer Secretary to the Treasury, Damian Hinds, said:

“I am delighted to see first-hand the new roadside testing equipment in action. Together with the new marker it will play an important part in the fight against fuel fraud.

“At a time when the government’s priority is cutting the deficit, it is unacceptable that criminals are cheating the system. The new marker and testing equipment are part of the significant investment we have made in HMRC to tackle avoidance, evasion and fraud to make sure all businesses and individuals contribute to the tax revenue that is used to fund vital public services.”

Illicit diesel is estimated to make up 13% of the market share of diesel in Northern Ireland and costs the taxpayer around £80 million each year in lost taxes.

The government will monitor the success of the marker during the first six months, to make sure it is delivering results in the fight against fuel fraud. HMRC will publish an evaluation in the autumn.

 1 August 2015 – Due date for Corporation Tax due for the year ended 31 October 2014.

 19 August 2015 – PAYE and NIC deductions due for month ended 5 August 2015. (If you pay your tax electronically the due date is 22 August 2015)

 19 August 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2015.

 19 August 2015 – CIS tax deducted for the month ended 5 August 2015 is payable by today.

 1 September 2015 – Due date for Corporation Tax due for the year ended 30 November 2014.

 19 September 2015 – PAYE and NIC deductions due for month ended 5 September 2015. (If you pay your tax electronically the due date is 22 September 2015)

 19 September 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2015.

 19 September 2015 – CIS tax deducted for the month ended 5 September 2015 is payable by today.

 Legislation in Summer Finance Bill 2015 introduces a tapered reduction in the annual allowance from 6 April 2016, for those with an ‘adjusted income’ of over £150,000.

The ‘adjusted income’ definition adds-back any pension contributions, to prevent individuals from avoiding the restriction by exchanging salary for employer contributions.

To provide certainty for individuals with lower salaries who may have one off spikes in their employer pension contributions, a net income threshold of £110,000 will apply. If the individual’s net income is no more than £110,000 they will not normally be subject to the tapered annual allowance. However, anti-avoidance rules will apply so that any salary sacrifice set up on or after 9 July 2015 will be included in the threshold definition. The rate of reduction in the annual allowance is by £1 for every £2 that the adjusted income exceeds £150,000, up to a maximum reduction of £30,000.

All pension input periods open on 8 July 2015 are closed on that date, with the next pension input period running from 9 July 2015 to 5 April 2016. All subsequent pension input periods will be concurrent with the tax year.

To prevent retrospective taxation, individuals will have an £80,000 annual allowance for 2015-16, but subject to a £40,000 allowance for savings from 9 July 2015 to 5 April 2016. To achieve this, the 2015-16 tax year will be split into two notional periods: 6 April 2015 to 8 July 2015, the ‘pre-alignment tax year’ and 9 July 2015 to 5 April 2016, the ‘post-alignment tax year’. All individuals will have an annual allowance of £80,000 for the ‘pre-alignment tax year’. Where this amount has not been used in the ‘pre-alignment tax year’, it will be carried forward to the post-alignment tax year, subject to a maximum of £40,000. In addition, any unused annual allowance from the previous 3 years can be added to these amounts in the normal way.

The transition arrangements for 2015-16 mean that taxpayers who paid sizeable pension premiums in the period to 8 July 2015 (perhaps in anticipation of Budget changes) may be able to have a second bite at the cherry.

As readers will appreciate these are complex changes. Taxpayers who feel they may be affected should take professional advice.

 Some of the key changes that will impact small businesses in particular are set out below:

• Taxation of dividend income from April 2016. The present 10% dividend tax credit is being abolished from April 2016. In its place an annual dividend tax allowance of £5,000 is being introduced. Dividends received will be free of further charge to Income Tax up to this limit. Above the £5,000 limit dividend income will be taxed as follows:

• Basic rate tax payers at 7.5%
• Higher rate (40%) tax payers at 32.5%, and
• Additional rate (45%) tax payers at 38.1%

 Shareholder directors of small companies that pay limited salaries and high dividends may be affected by this change and should review their dividend strategy.

• National Insurance Employment Allowance. From April 2016 the present £2,000 allowance is being increased by 50% to £3,000. The Chancellor has also announced that the allowance will be withdrawn for one person shareholder/employee companies.

• Annual Investment Allowance (AIA). The annual limit for this generous tax allowance, presently up to £500,000 of qualifying expenditure can be written off against taxable profits, was due to revert to £25,000 from 1 January 2016. It has been confirmed that the £25,000 limit will instead increase to £200,000 with no further changes currently tabled.

 It was also announced that Corporation Tax rates would fall to 19% in 2017 and 18% in 2020.

 A number of counter measures will also be introduced to curb tax avoidance. This continues HMRC’s strategy to root out and penalise businesses that continue to misuse tax legislation in a way not intended by parliament.