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…

If your company has a 31 March yearend, you only have a few weeks to consider available planning options that may save you tax for the current financial year 2015-16. There are also a number of practical matters that should be considered. They include:

Directors

• Are there any monies owed to the company by directors?
• If the amounts owed exceed £10,000 has interest been charged on any balances owing? If not, beneficial interest will need to be declared on form P11D for 2015-16.

Dividends

• Is the correct paperwork in place: dividend vouchers and board minutes?
• Have dividends been paid out of distributable reserves?
• Have all dividends voted been paid or credited to a loan account?

Salaries

• Were any outstanding salaries or bonuses claimed in the 2014-15 accounts paid within 9 months of the year end? If not, the deduction for corporation tax will be disallowed.
• Have bonuses been considered for 2015-16? Would it be prudent to defer voting bonuses to assist with personal tax planning issues? For example, reducing taxable income for 2015-16 may save tax allowances if the intended bonus increased total income above the critical £100,000 ceiling.

Company car users

• Have steps been taken to recover the full cost of any private fuel paid to company car users during 2015-16? This needs to be completed by 5 April 2016 to avoid possibly significant car fuel benefit charges for the employee and NIC Class 1a contributions for the company.

Pension contributions

• Make sure that any company contributions for 2015-16 clear the company bank account before the yearend.

Deferring significant costs or fixed asset investment

• Consider deferring or bringing forward, significant revenue costs (for example allowable repairs to plant or other equipment).
•  Consider deferring or bringing forward, significant capital costs (for example equipment or commercial vehicles).

Losses

• Consider tax strategies to take advantage of past or current year losses.

This list is by no means conclusive. Please contact us if you would like to set-up a planning meeting. The sooner the better – the clock is ticking…