HMRC have recently published an update to issues that affect pension scheme administrators and individuals who contribute to pension funds. Highlights of some of the issues raised are reproduced below:

Annual allowance charges for tax year 2014-15

Administrators are reminded that it is really important that scheme members who have exceeded the pension schemes annual allowance of £40,000 for 2014-15 declare this on their Self-Assessment tax return. The deadline for submitting the return is 31 January 2016 although those scheme members who want to submit a paper Self-Assessment tax return must do so by 31 October 2015.

Those members who have exceeded the 2014-15 annual allowance and do not have sufficient unused annual allowance to carry forward from previous tax years will have to pay a tax charge.

Tapered annual allowance

Scheme administrators and contributors are also reminded that from 6 April 2016, as part of the changes for the tapered annual allowance, all pension input periods must be aligned with the tax year, even if the member is not affected by the taper.

This measure will restrict pensions tax relief by introducing a tapered reduction in the amount of the annual allowance for individuals with income (including the value of any pension contributions) of over £150,000 and who have an income (excluding pension contributions) in excess of £110,000.

Taxation of lump sum death benefits PAYE

Death benefits paid to individuals will change to the recipient’s marginal rate of income tax from 6 April 2016.

Normal PAYE rules will apply to these payments.

Pension Flexibility – transitional period

The special temporary rules have allowed individuals to take their pension commencement lump sum tax-free before 6 April 2015 and the associated taxable pension before 6 October 2015, outside of the usual six-month time-limit.

This allowed individuals to delay accessing their pension until the provisions of the Taxation of Pensions Act 2014 took effect from 6 April 2015, providing them with more choice.

Many will have accessed their pension shortly after 6 April 2015 but please note that the extended period for individuals to access their pension after taking their pension commencement lump sum under these temporary rules expired on 6 October 2015.

The tax gap for 2013-14 was 6.4% of tax due, continuing a long-term downward trend.

The tax gap, which is the difference between the amount of tax due and the amount collected, has fallen from 8.4% in 2005-06. This reduction in the percentage tax gap since 2005-06 represents an additional £57 billion in cumulative tax collected over the eight-year period.

The largest reduction is in the Corporation Tax gap which has halved since 2005-06, from 14% to 7% of relevant tax liabilities. There has been a sustained downward trend for both large and small businesses, with the overall reduction driven mainly by large businesses.

David Gauke, Financial Secretary to the Treasury, said:

The UK has one of the lowest tax gaps in the world, and this Government is determined to continue fighting evasion and avoidance wherever it occurs.

If the tax gap percentage had stayed at its 2009 to 2010 value of 7.3%, £14.5 billion less tax would have been collected.

There is understandable anger when individuals or companies are perceived not to be contributing their fair share, but we can reassure the public that the proportion going unpaid is low and this government is dedicated to bringing it down further.

The government invested almost £1 billion over the last Spending Review period to transform HMRC’s approach to compliance and close the tax gap. This investment contributed to the delivery of more than £100 billion in additional compliance revenues over the Spending Review period to the end of 2015-16.

In 2013-14, HMRC brought in £505.8 billion in tax revenue for public services and secured £23.9 billion of compliance yield – money that would otherwise have been lost to the Exchequer. HMRC has built on this and last year (2014-15) brought in a record £517.7 billion in tax revenue and secured £26.6 billion in compliance yield.

HMRC recently announced that they have brought in an additional £109m in tax revenue in the last six months by pursuing claims against taxpayers who have not declared all their income for tax purposes. The specialist task forces employed to collect this tax are becoming increasingly effective at identifying and tracking down individuals and businesses who have not declared their true income and gains.

Between April and October 2015, HMRC launched 27 new taskforces targeting sectors that are at the highest risk of tax fraud, including Income Tax Self Assessment (ITSA) Repayments, Retail, Hidden Wealth and Grocery sectors, with one taskforce alone generating 22 arrests.

Taskforces were first launched in spring 2011 as part of HMRC’s compliance strategy to tackle tax evasion and fraud. Over 100 taskforces have been launched since then yielding more than £404 million, protecting this money for public services.

Speaking at the UK Tax Investigation Conference today, Jennie Granger, Director General for Enforcement and Compliance at HMRC, said:

“The message is clear if you try to cheat on your tax we are going to catch you – it’s only fair that we all pay what we should to fund public services. We have increasing amounts of intelligence, and are using state of the art digital tools to help us to identify and target high risk areas. This yield of £109 million – almost double the figure for the same period in 2014 – shows that our strategy is working.”

Taskforces bring together various HMRC compliance and enforcement teams for intensive bursts of activity targeted at specific sectors and locations where there is evidence of high risk of tax evasion and fraud. The teams visit traders to examine their records and carry out other investigations.

HMRC are also working with others to unmask the hidden economy including:

• Trading Standards, the Vehicle and Operator Services Agency and the Department for Work and Pensions to identify uninsured drivers and benefit cheats
• local authorities and Home Office immigration enforcement to investigate exploitation of migrant workers and multiple occupation of houses
• London boroughs and police to tackle rogue landlords charging cash-in-hand rents and exploiting vulnerable people living in sub-standard or unsafe homes

Legislation introduced in September 2013 means HMRC can use data from credit and debit card companies on sales made by retailers, to cross check against their VAT registrations and business income declared on tax returns.

We are often asked to explain the role a director is required to undertake for an incorporated business. It is wise to take this question seriously as these responsibilities are written into company law – break them at your peril.

The government website lists these duties as follows.

As a director of a limited company, you must:

• try to make the company a success, using your skills, experience and judgment
• follow the company’s rules, shown in its articles of association
• make decisions for the benefit of the company, not yourself
• tell other shareholders if you might personally benefit from a transaction the company makes
• keep company records and report changes to Companies House and HM Revenue and Customs (HMRC)
• make sure the company’s accounts are a ‘true and fair view’ of the business’ finances
• file a Company Tax Return and pay Corporation Tax
• register for Self Assessment and send a personal Self Assessment tax return every year – unless it’s a non-profit organisation (e.g. a charity) and you didn’t get any pay or benefits, like a company car

You can hire other people to manage some of these things day-to-day (e.g. an accountant) but you’re still legally responsible for your company’s records, accounts and performance.

You may be personally liable for your company’s business liabilities and be fined, prosecuted or disqualified as a company director if you don’t follow the rules.

Taking on an appointment as a director should not be undertaken lightly. Readers who have been asked to act and are still unsure if they should accept should take professional advice.

HMRC are inviting bids from interested charities and will allocate a guaranteed £1.5m per year over the next 3 years to the voluntary and community sector (VCS) to support taxpayers who need extra help understanding and complying with their tax obligations and claiming their entitlements, including those who are currently digitally excluded.

 They are looking for VCS organisations to help taxpayers form or rebuild a relationship with HMRC that enables them to engage directly with HMRC in the future.

 Bids should include one or more of the following activities:

• providing advice and support for HMRC’s customers who need extra help and cannot afford to pay for it
• assisting customers who are digitally excluded, to build their confidence and capability to use HMRC’s online services for themselves
• providing specialist advice and taking referrals by telephone or email from HMRC’s extra help service
• assisting customers who need independent advice and support with more complex tax issues, for example complicated PAYE issues, or claims for Special Relief and appeals

Interested organisation would require the infrastructure and capability to handle in the region of 700 referrals per year, and would be responsible for bringing individual cases to conclusion.

We invite bids for funding of between £10,000 and £450,000 per annum, with a maximum threshold set at 50% of your organisation’s turnover (last audited accounts).

We will only accept one bid per organisation. To qualify for a bid the organisation must comply with all of the following rules:

You will need to confirm that you satisfy all of the following criteria to be eligible to apply for grant funding from HMRC.

1. Your organisation must be one of the following:
   • registered charity
   • voluntary and community sector organisation
   • social enterprise
   • mutual
   • co-operative
2. Your organisation must have 3 years of financial history in place.
3. Your organisation must have a turnover of no less than £40,000 per annum.
4. No directors within your organisation to have been disqualified in the last 5 years.
5. No director, trustee, treasurer or anyone in a position of financial responsibility to have had a relevant conviction, such as for fraud, within the last 3 years.
6. You must have sound and comprehensive financial systems and processes that enable you to track the amount of funding spent throughout the year, and demonstrate that you have allocated the funding to the specific activity detailed in your bid.
7. You are able to identify customers who have HMRC-related issues and be competent to help them with one or more HMRC services, for example:
8. Tax (PAYE and Self Assessment)
9. Working Tax Credits
10. Child Tax Credits
11. Child Benefit
12. You must have in place an infrastructure for monitoring and evaluating that is capable of reporting agreed outcomes; i.e. the impact on your clients and that your outcomes represent value for money.
13. No aspect of the activity funded by this grant may be party-political in intention, use or presentation.
14. The grant cannot be used to support or promote religious activity.

Any bids that progress through the evaluation process will be subject to verification of the eligibility criteria along with additional financial /operating information as part of our due diligence process.

The timeline for the funding round is as follows:

• 8 November 2015 – Deadline for receipt of completed applications
• within 3 working days – we will acknowledge receipt of your application
• from 14 December 2015 – notification sent to successful applicants
• 1 April 2016 – grant agreements in place and new funding begins

Charities that are interested should apply to HMRC VCS Stakeholder Management Team – mailbox.stakeholder@hmrc.gsi.gov.uk