Friday 14th January 2022 HMRC waives late filing tax return penalties.
For the second year running, HMRC is waiving late filing penalties on tax returns for one month as the Covid pandemic continues to wreak havoc on the capacity of agents.
13th Jan 2022
HMRC has announced that self assessment taxpayers will get an extra month to file their tax returns without incurring a fine, although interest will still accrue. The news comes as rising Covid cases have squeezed capacity levels of accountancy firms and taxpayers, with self isolation rules and sickness causing strain for many in meeting the 31 January deadline. While the waiving of penalties means taxpayers won’t receive a late filing penalty if they file online by 28 February (and payments by 1 April), HMRC is continuing to encourage agents and taxpayers to file before the 31 January deadline as interest will still be payable from 1 February, as usual. Today’s announcement comes much earlier than the same news last year, when agents were working up until 25 January under the assumption that the 31 January deadline was still intact.
Breathing space for taxpayers
Lucy Frazier, the first permanent secretary to the Treasury, said the late filing penalty waiver will give millions of people “more breathing space to manage their tax affairs” as “Omicron is putting people under pressure.” “Waiving late filing and payment penalties will help ease financial burdens and protect livelihoods as we navigate the months ahead,” she added. Angela MacDonald, HMRC’s deputy chief executive and second permanent secretary, struck a similar tone: “We know the pressures individuals and businesses are again facing this year, due to the impacts of Covid-19. “Our decision to waive penalties for one month for Self Assessment taxpayers will give them extra time to meet their obligations without worrying about receiving a penalty.”
Numbers were tracking similar to last year
The tax authority has revealed that almost 6.5m taxpayers have already filed their tax returns, which leaves around 5.7m still to submit. This figure is slightly below the same figure this time last year, when 6.6m had filed their tax return and 5.4m had then until the 31 January to complete theres. While on 31 December 2019, HMRC had received 6.3m tax returns. Early signs were that the numbers were tracking at the same levels as previous years. Take Christmas Day for example; this year 2,828 returns were filed, which is ahead of the 2,700 taxpayers that filed on the same day in 2020. Meanwhile, 19,802 returns were filed on Christmas Eve, 8,641 on Boxing Day, 33,467 on New Year’s Eve and 14,231on New Year’s Day.
Agents called for SA deadline relaxation
However, word started spreading on Any Answers before the New Year that agents were struggling to keep on top of their self assessment workload as the Omicron variant ripped through firms. AccountingWEB regular Marks first alerted others of the potential self assessment deadline bottleneck as since returning to the office in August many of his staff have been off with Covid or self isolating. As of 31 December, he said that his firm had only filed 13% of tax returns, with 18% out with clients, 17% to be reviewed, 6% in progress and 26% not even started. Quickly, other readers came forward confessing that they were also buckling up for a tough January. Jajo called for an extension of some description, calling the problem this year different to last year’s with the number of days lost to staff with covid or working from home due. “With somewhere around 50% of staff with covid or isolating, 31 January deadline is looking difficult. Already had my first staff member saying they came down with Covid on New Year's Day. I doubt they will be the last and working from home won't be helpful in dealing with papers coming in over the next two weeks.” Still quarantining hand delivered records three days before opening them, AS44NG predicted today’s announcement. “Covid has certainly had an impact on the delivery of information to us, couple that with HMRC's appalling service at the moment and I can only imagine that the government will concede that there are additional obstacles in the way of the usual filing deadline.” That is not to say everybody was feeling the strain. A chorus of readers echoed similar thoughts to Williams Lester: “A deadline extension gives some clients a new excuse to not bring their paperwork in on time.”
Not quite like 2020
The early announcement of penalty waiver for the 2020/21 is a stark contrast to last year, when HMRC had stood firm on the deadline despite calls from the professional bodies to either extend the deadline or waive late-filing penalties. HMRC responded to each call that it was keeping the situation under review, but it wasn’t until seven days before the deadline that HMRC chief executive Jim Harra said that it “has become increasingly clear that some people will not be able to file their return by 31 January” and opted to give taxpayers “the breathing space they need to complete and file their returns”.
Advisers welcome the announcement
Already the news has been welcomed in by many in the profession. Dawn Register, head of tax dispute at BDO, is still encouraging those with tax returns prepared to meet the 31 January deadline but has called the news "a huge relief to those facing tax bills, alongside other household debts in January”. "HMRC clearly understands that those severely impacted by Covid-19 should not face receiving a ‘brown envelope’ in February as it would result in unnecessary angst. "This additional time will provide taxpayers and advisers with crucial latitude, which is needed in these unprecedented times. Previously, taxpayers would have needed to rely on adhering to HMRC’s ‘reasonable excuse’, which is open to interpretation – so this new certainty is very timely”.
Friday 12th March 2021 ACCA experts offer their initial reaction to key announcements in today's budget.
Claire Bennison, head of ACCA UK, commented: ‘We are pleased the Chancellor has continued support for businesses, but this seems like a fragmented Budget that fails to provide a longer-term roadmap to recovery for them. Many owners will still lack any clarity about their route back to stability and the government’s agenda beyond the next few months.’
Tax measures: corporation tax
Glenn Collins, head of technical advisory and policy at ACCA UK, said: ‘Corporation tax increases in 2023 may help to raise extra money in the future, but in the long term only greater economic growth is going to pay off Covid debts. ‘Some of the Chancellor’s measures will help with growth, but all of them come with administrative costs for the business owners trying to juggle tax alongside every other aspect of their operations. ‘The rollercoaster of rates and changes in corporation tax in recent years have not helped businesses plan. Each of the measures announced is potentially helpful in isolation, but in the real world, they are going to interact with each other and with everything else that business owners have going on. ‘Business rates relief for hospitality is welcome, but without increased demand from customers it looks set to taper off all too quickly. Likewise, the proliferation of VAT rates across time and products in the sector will be a mixed blessing for smaller concerns who feel the deadweight cost of administrative changes more than their larger competitors.’
On company directors
Glenn Collins, head of technical advisory and policy at ACCA UK, commented: ‘The Chancellor is looking to rebuild public finances by asking businesses the government has supported to pay extra, rebuild communities and take on risk, but that will also affect those freelancers and directors that have been ignored and not received assistance. Why are they ignored and once again left out of the support packages?’
The economy and public finances
Michael Taylor, ACCA’s chief economist said: ‘We welcome the improved economic outlook reflected in the updated OBR forecasts. Based on a strong second half of the year as consumer spending rebounds, the OBR now expects the level of economic activity to return to its pre-pandemic level by the middle of next year. GDP growth is forecast to be 4% this year and 7.3% in 2022 which is in line with consensus forecasts. But government borrowing will remain very high at £234bn (10.3% of GDP) for 2021/22. The public sector debt to GDP ratio rises to a peak of 109.7% by 2023/24, a remarkable 25% of GDP higher than in 2019/20 - a measure of the huge fiscal cost of COVID-19.’
Public Sector: Gender Responsive Budget and International Women’s Day
Rachel Bleetman, subject matter expert for public sector says: ‘While it is right to see more funding for domestic violence as part of this budget, more attention should be paid to account for women's economic insecurity and the disproportionate shouldering of unpaid work. With International Women’s Day next Monday, ACCA is calling for a more inclusive approach to the economic recovery by accounting for the gender equality gap exacerbated by the pandemic.’
Public Sector: Government Guarantees
Alex Metcalfe, head of ACCA public sector explains: ‘The government has announced significant new guarantees for recovery loans and first-time homebuyer mortgages. It is critical that the government fully considers the growing fiscal risks from providing these financial promises and work with the OBR to understand their impact on the public sector balance sheet and the sustainability of the UK’s public finances, more generally.
Skills: apprenticeships
Claire Bennison, head of ACCA UK, said: ‘We welcome the boost to the money offered to employers to take on an apprentice and the flexibility to allow apprentices the opportunity to work for different employers. However, we are not convinced that a one-off payment of £3,000 is enough to incentivise employers to create and sustain new jobs at this time when the number of new apprentices is falling. Small businesses require longer term support, such as subsidised wages for new starters.
Friday 21th March 2021 Guide from B. D. Accountants
Thursday 24th October 2019 HMRC has no figures on cost of post-Brexit customs procedures
In a session before the Treasury Committee, HMRC chief told MPs that it had not calculated the administrative cost of the government’s Brexit deal on exporting businesses and that several thousand high value exporters were not even ready for a no-deal Brexit
When pressed by members of the Treasury Committee, HMRC said that it did not have detailed figures on the administrative costs of implementing the government’s Brexit deal for businesses as part of the Withdrawal Agreement Bill Impact Assessment.
Despite the fluidity of the various Brexit deals, Jim Harra, interim chief executive of HMRC, was put under pressure to provide details of actual costs to exporters and businesses.
Catherine McKinnell MP, interim chair of the Treasury Committee, said: ‘We have a rough idea of what a no deal arrangement would add in terms of cost to the economy. What we don’t know is how much these arrangements, that we’re being asked to vote on today [in parliament], are going to cost. We do not have that figure.’
HMRC has not produced any detailed impact assessments on the effect of the latest deal proposals, Harra confirmed.
‘We have not provided any impact assessment and certainly in relation to procedures that still have to be worked out in detail between the UK and the EU, I am not in a position to do that,’ Harra said.
‘We have published what information we think we can that will assist, and that is basically the cost of operating customs declarations, which apply UK to EU. And if you assumed that at the end of the implementation period the arrangements that apply between GB and EU, were broadly similar to those in terms of the kinds of declarations that would be made, then subject to behavioural changes, the same kinds of things would apply.’
Asked if there was a ballpark figure on what the additional costs were going to be under the new arrangements for both the UK and the EU, Harra said: ‘I’m not in a position today to do that.’
McKinnell asked if there was at least a range of assumptions for potential scenarios or if there was a cost analysis.
‘I have no cost analysis that I am able to share with you that would cast any more light on that. Obviously from my department’s point of view it wouldn’t be an economic assessment, it would be an assessment of administrative costs,’ said Harra. We have published extensive information about cost of complying with customs procedures, but I cannot give you an indicative cost assessment.’
Harra refuted suggestions that the government was withholding information about the financial impact of Brexit on customs procedures. ‘I’ve certainly not held anything back from publication,’ Harra said. ‘I have shared what we have available to publish, and that was the impact assessment for no deal…I don’t have a revised impact assessment that I’m sitting on not publishing, I assure you.’
Lack of readiness for Brexit - EORI issues
The Treasury Committee also pressed Harra on whether UK businesses were ready to export in a post-Brexit trading environment.
Harra confirmed that while the majority of exporters were as 'prepared as they could be', in the view of HMRC, there was a tranche of several thousand businesses who were not ready and each accounted for exports of more than £250,000 a year to the EU. These businesses only exported to the EU so had no knowledge of non-EU customs and export procedures, which would effectively reflect any no-deal situation for companies exporting goods through Calais, for example.
All exporters to the EU will need to have an Economic Operator Registration and Identification (EORI) number for both the UK and the EU country to which they are exporting before they will be able to trade under a no-deal Brexit.
‘We have segmented businesses based on the data we hold. We have identified a group of businesses that export to EU but do not export to the rest of the world - we’ve targeted just over 3,000 high value businesses that export to the EU and we have contacted each of them to check their state of readiness.
‘About 80% of them are ready or know what they need to do and have taken the necessary steps. But about 20% of them are not as ready as we thought they needed to be. We are now going through some intensive engagement with them to ensure that they are ready and that they are managing their supply chain so that they know how to move their goods through Calais.’
However, these problems would only arise in the event of a no-deal Brexit.
‘If we are talking about a no-deal Brexit on 31 October, we estimate that a quarter of a million businesses would need to use customs for the first time, and we know that around 150,000 of those are VAT registered so we hold their information.
‘There is provision in the Withdrawal Agreement for the implementation period to take longer if that proved necessary. Our current plans are that we have to be ready by 1 January 2021 and in outline terms we think we can do that,’ Harra added.
Bundled goods and services – VAT issues
MPs also questioned Harra on VAT issues on bundled goods and services contracts.
Harra said: ‘There are two different arrangements for services and goods. VAT only applies to goods, but when goods and services are bundled then VAT is relevant on part of the bundle.
‘In relation to goods into NI [Northern Ireland] with certain exceptions NI VAT rules would stay aligned with EU VAT rules so it is important to understand what happens if there is a bundled supply of goods and services. The bundling of goods and services is already a fully aired area of VAT law and there has already been extensive precedence on how you do that, so I am confident that we can come up with guidance on how that works in the future.
‘If there was divergence in the future between the services and goods rules for VAT then it would become more important than it currently is to ensure that those rules are being applied correctly,’ Harra added.
Lack of economic analysis
Commenting on the evidence session, McKinnell said: ‘HMRC has told us that it hasn’t calculated the administrative cost of the government’s new Brexit deal for business.
‘Yet again, there is a void of economic information on the impact of the Withdrawal Agreement Bill. It’s astonishing that the government hasn’t analysed the impact of such a monumental piece of legislation.
Tuesday 21th August 2019 Getting ready for Brexit
HMRC Business Help and Education Emails sent this bulletin at 21-08-2019 04:20 PM BST
Dear colleague,
The Government has said that the UK will be leaving the EU on 31 October whatever the circumstances.
Leaving the EU without a deal means there will be immediate changes to the way UK businesses trade with the EU that may impact your business.
- UK businesses will have to apply customs, excise and VAT processes to goods sold into the EU (these are the same rules that already apply for goods and services traded outside of the EU).
- Trading partners in the EU will have to apply customs, excise and VAT processes to trade they carry out with you, in the same way that they do for goods and services traded from outside of the EU.
HMRC is helping businesses get ready for Brexit by automatically issuing them with a UK EORI (Economic Operator Registration and Identification) number. We have written to more than 88,000 VAT registered companies to let them know the UK EORI number they’ve been assigned. Businesses will not be able to move goods in and out of the UK without one.
If your business is not VAT-registered, you will still need to apply now for a UK EORI. HMRC cannot give you this automatically.
You can check the next steps you need to take to ensure that your business is ready for Brexit using our trader checklist.
We will continue to provide you with the latest guidance and support to help you prepare your business for the UK leaving the EU.
Yours sincerely
Jim Harra
Deputy CEO and Second Permanent Secretary – HMRC
Tuesday 21th August 2019 Getting ready for Brexit
Tuesday 29th May 2018 HMRC warns on tax refund scams
Fraudsters are sending scam emails and SMS-messages that promise tax rebates to trick people into disclosing their account and personal details.
HMRC is calling on people to stay vigilant in the fight against fraudsters, who are using email and text messages to scam them out of their savings.
The tax authority is currently processing tax refunds after the end of the 2017 to 2018 tax year. However, criminals are taking advantage of this by sending out scam emails and SMS-messages to trick the public into thinking they have received a tax rebate so they hand over their account and personal details.
Treasury Minister Mel Stride MP, the Financial Secretary to the Treasury, said:
HMRC only informs you about tax refunds through the post or through your pay via your employer. All emails, text messages, or voicemail messages saying you have a tax refund are a scam. Do not click on any links in these messages, and forward them to HMRC’s phishing email address and phone number.
We know that criminals will try and use events like the end of the financial year, the self-assessment deadline, and the issuing of tax refunds to target the public and attempt to get them to reveal their personal data. It is important to be alert to the danger.
Many of these fraudulent emails and texts include links which take the user to dubious websites where their information can be stolen. These sites are a focus of HMRC’s efforts to tackle fraud. In March 2018, it requested 2,672 phishing websites be taken down and received 84,549 phishing reports. This kind of phishing is expected to continue in the coming months as genuine tax refunds are issued.
Income Tax for 6 April 2017 to 5 April 2018 will be calculated over the coming months and anyone owed a genuine tax rebate will receive a tax calculation letter by post between June and October.
If you haven’t paid the right amount at the end of the tax year, HMRC will post you a tax calculation. This can be a P800 or a Simple Assessment letter. If you have paid too much tax, the letter will explain how you can get your refund paid to you. If you have not paid enough tax, the letter will tell you how much you owe and how you can pay.
HMRC advice
HMRC advises customers to:
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recognise the signs - genuine organisations like banks and HMRC will never contact you out of the blue to ask for your PIN, password or bank details
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stay safe - do not give out private information, reply to text messages, download attachments or click on links in emails you weren’t expecting
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take action - forward suspicious emails claiming to be from HMRC to phishing@hmrc.gsi.gov.uk and texts to 60599, or contact Action Fraud on 0300 123 2040 to report any suspicious calls or use its online fraud reporting tool
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check GOV.UK for information on how to avoid and report scams and recognise genuine HMRC contact
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if you think you have received an HMRC-related phishing/bogus email or text message, you can check it against the examples shown in this guide
HMRC action
HMRC has taken a range of action to protect the public from scams, including:
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from April 2017 to March 2018, reported 14,631 malicious websites for takedown
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from April 2017 to March 2018, received 771,227 customer phishing email/SMS referrals
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from April 2017 to March 2018, received 1.1 million direct visits to HMRCsecurity pages on GOV.UK
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implemented SMS firewalling - working with industry to deliver a pilot to reduce SMS abuse, resulting in a 90% decrease in reported abuse of protected HMRC SMS tags
Wednesday 26th April 2017 Mortgage Interest Relief
From April 6th, this year, tax relief on mortgage interest payments for landlords was restricted to the basic rate of (20%) income tax.
Prior to April 6th, landlords could claim tax relief on their mortgage interest payments. This meant that landlords could offset their mortgage interest against their rental income for the purposes of self-assessment. So, for example, a landlord that collects an annual rental income of £5,000 and pays mortgage interest annually of £4,000, would previously only pay tax on the difference between the two which is £1,000.
However, this has all now changed. The mortgage interest relief has been restricted and will be completely phased out over the next 4 years as follows:
Tax year 2017/18 – 75% of mortgage interest will be fully allowable at the landlords prevailing tax rate and the remaining 25% available at the basic rate;
Tax year 2018/19 – 50% of mortgage interest will be fully allowable and the remaining 50% available at the basic rate;
Tax year 2019/20 – 25% of mortgage interest will be fully allowable and the remaining 75% available at the basic rate; and
Tax year 2020/21 – mortgage interest deduction will only be given at the basic rate.
Using our simple example above, under the new system by 2020/21 landlords will no longer be able to offset all the mortgage interest of £4,000. Instead landlords will only be permitted to offset 20% of the £4,000, that is £800, which could push a basic rate taxpayer into a higher tax band.
These changes will not apply to limited companies and furnished holiday lets. However, anyone wishing to change their property ownership structure may need to take advice on any CGT and stamp duty implications as the ownership change would involve a transfer of the property.
Comment
There are fears that these changes could force landlords to increase the amount of rent they charge for their properties. However, at this stage it is too early to comment on the impact these changes will have. Landlords who are not aware of this change should be urgently assessing their tax position and ensuring that they have made the most efficient arrangements possible.
Tuesday 04th October 2016 HMRC has got a lot to do
The All Party Parliamentary Group on Responsible Taxation has a new call for papers out. Their plan is to hold an inquiry into public confidence in HMRC’s capability to collect tax fairly and effectively.
I submitted a response yesterday, which is here.
I said in response to the question ‘What legislative, resourcing or other measures would help to narrow the tax gap?’
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1. Properly appraise the tax gap: no management is effective until it properly appraises the issues it faces;
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2. Set up an Office for Tax Responsibility to monitor the tax gap independent of HMRC management;
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3. Appraise the cost of all tax reliefs and allowances and eliminate as many as possible to reduce cost, remove loopholes and ease taxpayer life;
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4. Provide as many tax reliefs (pensions, charitable giving, etc.,) at just one rate to ease administration;
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5. Integrate Companies House and HMRC with one annual return required from all companies, without exception;
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6. Make the directors of companies who do not file required returns personally liable for all tax owing;
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7. Introduce annual automatic information exchange from UK banks to HMRC on bank accounts a company maintains, beneficial ownership of the company, trading addresses, known directors, and annual deposits;
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8. Consider requiring the same data for UK resident individuals;
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9. Require public country-by-country reporting for the behavioural change it will give rise to;
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10. Properly use naming and shaming powers;
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11. Require an HMRC office in every town of more than 100,000 people with an enquiry centre attached;
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12. Improve HMRC pay: make HMRC a viable career option once more;
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13. Set HMRC a task of maximising revenue, not minimising cost;
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14. Require a broad basis of representation on the board of HMRC;
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15. Equalise the rates of income tax and capital gains tax to minimise the incentive to tax abuse;
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16. Reduce the gap between income tax and corporation tax rate to minimise tax abuse.
There is a lot to do.
Monday 22nd July 2016 Tax fraud taskforce lists ‘top ten most wanted’
A Bollywood movie maker who is wanted in connection with the evasion of over £4.5m in VAT and film tax relief has been named on an inaugural list of the UK’s top ten most wanted fraudsters, which has been compiled by the newly established joint fraud taskforce
The taskforce was launched by then-home secretary Theresa May in February this year to bring together law enforcement agencies, the financial sector and government to tackle large scale fraud. Those on the list are linked to over £20m in losses in the UK and abroad and the public is being urged to provide information about their whereabouts.
They include Sandeep Arora who setup a production company with offices in central London while he lived in Beckton. Between 2007 and 2011 he made multi-million pound VAT and film relief claims for films entitled Billy the Beagle, London Dreams, Kuan Bola, Aagosh, Trapped and Kia the Dream Girl, but they either did not exist at all or he had no involvement with them.
The National Crime Agency (NCA) said he is known in the Bollywood film industry as Karan Arora and purports to be a film producer who makes films in India and Fiji. Arora is currently believed to be in India, and police say it is highly likely that he will continue to commit further offences until he is caught.
Others on the list are Bayo Anoworin from Nigeria who is wanted by Lincolnshire police in connection with fraud offences and money laundering. Anoworin, who uses several aliases, was part of an organised crime group which defrauded a number of NHS Trusts in the UK and Guernsey, stealing a total of £12m and laundering the money between 1 January and 2011 and 31 July 2012.
In September 2011 Lincolnshire police started to investigate the group and 15 others were arrested. Anoworin was arrested in Abbey Wood, London, on November 2012 and released on bail; he failed to answer his bail and has been untraceable since.
Alex Mckenzie is on the list with a warning that the Metropolitan police regard him as a ‘prolific fraudster’ who poses a danger to the gay community, as he used a gay social networking app to meet his partners before defrauding them.
Mckenzie is wanted for a range of fraud offences. These include obtaining credit cards, bank accounts, and loans in his partner’s parent’s names, and two former partner’s names with losses totalling over £300,000.
In order to perpetuate his frauds, and deceive former partners, McKenzie claimed to work for MI6 and even provided forged documents, uniform, and identification of his various pseudonyms. He is also wanted for diverting approximately £30,000 into his own bank account whilst working for the accounts department for a large multinational company.
Other fraudsters on the list include a man from Colchester who is wanted by the City of London Police for orchestrating a £700,000 boiler room fraud for which he was found guilty of despite failing to appear at court, and a woman from London involved in the fraudulent supply of immigration documents.
Cheshire Constabulary are seeking Romanian national with links to the Midlands, who is wanted for committing multiple automated teller machine (ATM) fraud offences across the country since 2012, while Manchester Police are looking for a man who defrauded vulnerable and elderly houseowners of over £100,000 by claiming to do roof repairs.
A British man who is believed to be living in the Philippines is wanted by police in connection with a £20,000 fraud where victims have been duped into paying hundreds of pounds for designer and luxury watches they never received, while a man from Hampshire is under investigation over stolen brand new mobile handsets worth £40,000 obtained by using fraudulent payment details.
Finally, the Dedicated Card and Payment Crime Unit (DCPCU) is looking for Faisal Butt of Pakistan is wanted by for conspiracy to defraud after compromising over one hundred customer bank accounts, which resulted in the customers having hundreds of thousands of pounds being taken from their bank accounts. Multiple banks were targeted by Butt and his criminal colleagues, who used the services of a ‘bank insider’ to pass themselves off as genuine account holders and open joint bank accounts linked to existing customer’s main accounts.
By opening these accounts they were able to obtain credit and debit cards and transfer the customer’s funds into their own accounts or reset the customer’s security details. An ongoing financial investigation is taking place to try and find where the money has been sent to.
Donald Toon, director of the NCA’s economic crime command, said: ‘The annual losses to the UK from fraud are estimated to be more than £190bn. Behind this headline figure lie the actions of criminals like the wanted fraudsters highlighted in this appeal, who have caused distress and loss to people and businesses up and down the country.’
‘It is important that anyone able to provide information on the ten fraudsters we are highlighting today takes the opportunity to pass that information to law enforcement to help bring them to justice.’
Monday 04th July 2016 How tax can help heal our country
Rebecca Cave outlines how the tax system could be used to heal the wounds laid bare by the EU referendum.
Who is in charge?
Our country currently has no effective government or opposition. We are in political limbo waiting for the Conservative Party to decide who will be our next Prime Minster, while the Labour Party commit collective hara-kiri. Long term government policies and projects, including making tax digital, are uncertain or have been put on hold, according to research by the Institute for Government.
Then this morning up pops George Osborne (still the Chancellor for now), saying that what the country needs is a reduction in corporation tax down to less than 15%! He argues that is this cut is needed to stimulate investment into the UK.
Crazy rates
My view, and that of a number of other tax experts, is that a corporation tax cut the last thing the country needs right now. What we need is a stable tax system, not constant rate changes. In 2010 mainstream corporation tax was 28% and 21% for small companies. Now all companies pay CT at 20%, and that is due to drop to 19% on 1 April 2017 and to 17% on 1 April 2020. This is a crazy race to the bottom, only Ireland has a lower corporation tax rate at 12.5%, although some tax havens have zero rates.
Population needs
Corporations did not vote in the EU referendum, if they had we probably wouldn’t be in the mess we are. People voted, and the Government should listen to what those people are asking for, such as:
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long term jobs
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decent housing
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inspiring education
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reliable transport systems
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fast broadband
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well-funded health service and social care
If the rate of corporation tax is reduced, the government funding required to satisfy the above needs must come from individuals either as tax rises or benefit cuts.
How to fund
I believe the money needed for investing in communities should come from corporation tax on large companies, taking the rate back up to a reasonable 25%. The lower rate of 20% could be maintained for small companies, but it should be linked to the number of employees on the payroll rather than to the level of the company’s profits.
All companies (or groups) with less than 50 employees would pay CT at the lower rate of 20%. HMRC can easily determine which companies have 50 or more employees as that information is instantly available through RTI reports. The cut-off point of 50 employees is also the boundary used for RTI penalties, and for tests to establish whether a business is a small company for R&D and other tax reliefs.
Stimulate investment
The results of the EU referendum shone a spotlight on the inequalities across the UK in terms of industry and opportunities for the local population. Investment by business and government needs to be targeted in areas where it is needed most, eg outside the greater London area.
Here are some ideas for stimulating investment:
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Business grants conditional on the creation of long-term jobs in a specific area.
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Scrap the apprenticeship levy (due to come into effect from 6 April 2017), which will only add to the burden of employing people and complicate the tax reporting for all employers.
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Allow employers to claim tax allowances on providing decent housing and schools for their workers, to emulate the Victorian industrialists such the Cadbury family who built Bourneville village near Birmingham and Sir Titus Salt who founded Saltaire Village near Bradford.
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Bring back capital allowances for investment in factories and warehouses.
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Fund improvements in transport systems between towns in the North of England.
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Scrap the HS2 rail project – it will only pull more people into over-heated London.
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Improve the ports in the north east and transport links to them.
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Build support areas for lorry drivers up and down the country – safe and secure overnight parking for drivers.
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Pay teachers premiums to teach in lower performing state schools, to inspire the young to create the educated workers the knowledge-based economy needs .
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Make sure every town, village and hamlet has high speed broadband.
Business rates
This is a significant tax for many businesses, which has been devolved to the regions. So Scotland, Wales and Northern Ireland make their own decisions on the rates and reliefs.
In the March 2016 Budget the government proposed a major reform to English business rates to allow local authorities to retain 100% of the money raised. Those funds could be used to spend on urgent local needs such as social housing. Unfortunately, the reform of business rates in England has also been stalled due to political turmoil.
What do you think? Should modest tax rises be used to fund vital investment? Or do you agree with George Osborne that our top priority as a country should be to attract outside investors?
Friday 24th June 2016 Brexit: Five questions accountants should be asking
AS the nation digests the reality of an EU exit, accountants and practices across the UK will be looking to come up with answers to their clients’ concerns. But what exactly should the accountancy profession be asking now that the future involves no longer being part of a collective that’s had a large stake in both British tax and accountancy for the past 40 years?
ICAS has composed a list of questions breaking down exactly what the profession should be asking following the historic vote:
Break tax ties completely?
The UK has always had primary control over direct taxation, but will it be more inclined to “go its own way” and ignore European and international convention and initiatives outside the EU?
VAT
Will the UK government change its approach to VAT and VAT rates, freed from the restrictions imposed by the EU and, if so, what changes will occur?
What will happen if there is an emergency Budget?
If there is an emergency Budget, which taxes will increase and if significant sums are required does this mean the end of the triple lock on income tax, VAT and national insurance?
Policy changes
What will be the impact of Brexit on UK government policy in other areas which impact British business and the accountancy profession such as: anti-money laundering; data protection; competition; financial services; harmonisation of product standards; consumer rights; pensions?
What next for accountancy?
In areas of accountancy, what new policies will follow? Will the UK be inclined or persuaded to depart from International Financial Reporting Standards (IFRS) and re-establish UK Generally Accepted Accounting Practice (UK GAAP)? Will the EU Audit Directive and regulations continue to be implemented as planned, or will some aspects be reversed?
ICAS’ full list of questions can be found here
Monday 06th June 2016 Customer service better than ever, claims HMRC
Responding to criticism from the National Audit Office (NAO), HMRC says it is currently offering its best customer service in years.
In a recent report, the NAO said the quality of service at HMRC “collapsed” over an 18-month period covering 2014 and 2015. During this time, some customers were kept on hold for up to an hour as average call waiting times tripled. According to the report, the poor standard of service cost taxpayers the equivalent of £97m last year.
However, HMRC says its services have now “fully recovered”.
Ruth Owen (pictured), HMRC’s director general for customer services, said: “Over the past six months we’ve consistently answered calls in an average of six minutes, and have launched new online tax accounts and webchat for everyone, enabling customers to manage their tax affairs wherever and whenever they want.
“There’s never been a better or more convenient service for our customers.”
HMRC says it has achieved improvements to customer service by:
• recruiting more than 3,000 additional advisers who can work outside normal office hours;
• introducing more flexible working to deal with large fluctuations in customer demand throughout the year, underpinned by a new telephone system that enables HMRC to move calls around the country in response to demand;
• launching online services that enable customers to manage their tax affairs when and where they want, including by smartphone, with online support such as webchats.
HMRC also points to planned improvements announced in chancellor George Osborne’s 2016 budget, including:
• the introduction of a seven-day service by April 2017, with extended hours and Sunday opening on main phone lines, as well as online support services such as webchats;
• the recruitment of more than 800 new staff into the customer services teams, to reduce call answering times and further increase the flexibility to respond to demand;
• a new secure email service – operated through customers’ online tax accounts.
Helen Hargreaves, associate director of policy and research for the Chartered Institute of Payroll Professionals (CIPP), commented: “While our own research does not show the dramatic increase in performance suggested by HMRC, it is clear that HMRC’s response times have improved in recent months.
“However, there is definitely room for further improvement and we will be conducting further research in 12 months to establish the impact on performance of the investment announced by the chancellor in the 2016 budget.”
Wednesday 25th May 2016 Hanging on line to HMRC cost taxpayers £97m, NAO finds
Taxpayers forced to hang on the phone while calling HM Revenue and Customs (HMRC) lost the equivalent of £97m last year, a spending watchdog has said.
The National Audit Office (NAO) said the quality of service at HMRC "collapsed" over an 18-month period between 2014 and 2015.
Call waiting times tripled during that time, as some customers were kept on hold for up to an hour.
In response, HMRC said most calls were now being answered in just six minutes.
As part of its most recent study, the NAO worked out how much money callers would have notionally lost, while waiting for a reply.
Using HMRC's own criteria, it valued people's time at an average of £17 an hour.
As a result it claimed callers would have wasted the following sums:
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£66m while waiting on the phone
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£21m while actually talking to HMRC
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£10m on the cost of the call
Headcount
The NAO blamed HMRC's poor performance on its decision to cut 11,000 staff between 2010 and 2014.
As part of its strategy to persuade people to do their tax returns online, it had anticipated needing fewer employees to answer the phone.
But after call waiting times for self-assessment tax returns peaked at 47 minutes last autumn, HMRC was forced to bring in 2,400 staff to its tax helpline.
Amyas Morse, head of the National Audit Office, said he accepted that HMRC's overall plan did make sense.
"This does not change the fact that they got their timing badly wrong in 2014, letting significant numbers of call handling staff go before their new approach was working reliably," he said.
Citizens Advice said some people might fall into debt as a result of the problems - if they missed a tax deadline as a result.
"Long waiting times not only cause frustration and increase the cost of the call, but can also mean people miss important deadlines," said Gillian Guy, the chief executive of Citizens Advice.
"For example if you don't return your tax form on time you face a fine - which for some households can be an additional cost they can't afford to pay.
Wrong tax
HMRC said its service levels had improved since the period in question. Over the last six months it said call waiting times had averaged six minutes.
"We recognise that early in 2015 we didn't provide the standard of service that people are entitled to expect and we apologised at the time," said Ruth Owen, HMRC's director general for customer services.
We have since fully recovered and are now offering our best service levels in years," she said.
However the NAO said it was also concerned that, because many taxpayers never got through to HMRC on the phone, they may have paid the wrong amount of tax.
In March this year there were 3.2m outstanding high priority cases that still required investigation.
MPs on the Public Accounts Committee will take further evidence on the issue on 13 June.
Wednesday 04th May 2016 Brexit worries top SME agenda
The impact of a potential Brexit tops the list of business owner concerns, according to the latest research from accountancy and tax group Smith & Williamson.
Some 81% of respondents to the Smith & Williamson Enterprise Index survey felt that Britain leaving the EU would negatively impact their business, up 13% from June 2015.
Expectations for growth fell by 9%, with Brexit worries and fears around the state of the UK and global economy cited as major concerns.
The Smith & Williamson Enterprise Index, designed to measures the confidence of UK SMEs, fell by four points to 111.4, its lowest point for 12 months.
Commenting on the latest figures Guy Rigby, head of entrepreneurial services at Smith & Williamson, said: “When we first sought business owners’ thoughts on Brexit, the Conservative Party had just been elected and a potential Brexit felt quite remote. However, as we approach the referendum date, business leaders are seemingly more apprehensive about the prospect of leaving the EU.”
There were reasons to be cheerful however, with 80% of respondents stating that their own prospects for the next 12 months had increased over the past quarter, up 5% from the last survey.
“This improvement potentially highlights an entrepreneurial self-belief in spite of broader market headwinds,” said Rigby
“Overall, business owners appear quite confident in their own ability to grow, with 74% anticipating growth (or an acquisition) in the next 12 months. In addition, a record 50% thought that access to funding had improved over the past quarter, despite only 38% having an appetite to borrow.”
Trade expectations down
One area highlighted by the survey centred on export businesses. Those who expected their turnover to increase over the coming year declined 12% from the end of the last quarter. There was also concern around the financial health of trading partners, with only 55% believing their health was improving, a seven point decline from the previous quarter.
On this issue Rigby commented: “This is not supportive of the government’s aspirations to increase UK exports. If this sentiment becomes reality, it could have huge ramifications for future growth.”
Monday 25th April 2016Government opens consultation into Gift Aid Small Donations Scheme
HMRC has published its formal consultation on the Gift Aid Small Donations Scheme, with a deadline for responses of 1st July.
At Budget 2015, the Government announced an increase in the annual donations limit on which a charity can claim – from £5,000 to £8,000 from April 2016, and then brought forward a planned review into the scheme with a call for evidence launched last December.
It has now examined the responses and published its proposals. The key ones are as follows:
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A proposal to relax the Gift Aid history requirement so a charity would only need one year of successful Gift Aid claims (including in the previous tax year)
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A willingness to explore extension of GASDS to contactless payments (but not cheque/direct debit etc)
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Proposal to amend the community buildings rules to allow charities or a ‘group’ of charities to claim either under the main GASDS allowance or under the community buildings allowance, but not both. Charities receiving donations in multiple community buildings could make multiple claims under community buildings rules but not in addition to the main allowance
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Consideration of a relaxation in the definition of a community building to allow collections received outside of the building (in the community) to be included
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The Government is not minded to relax the 10 person element in the community buildings rules, because of concerns about fraud
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The £8,000 cap seems likely to remain for the time being and eligible donations will continue to be capped at £20
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Statistics that show that GASDS take-up has mainly related to Community Buildings so far (reflecting the high usage by churches) and that £23,475,000 was paid out in the tax year 2013-14.
The Government is inviting responses on a number of consultation questions:
Consultation questions
1. What would the impact on your charity be of the removal of the current legislative requirement that a charity must have been registered for at least two tax years (the two-year rule) before it can access GASDS? Would this change represent a meaningful simplification of the scheme?
2. What would the impact on charities be if the requirement that a charity must have made a successful Gift Aid claim in at least two out of the previous four tax years (the two-in-four rule) was changed to a requirement that a charity must have made a successful Gift Aid claim in the previous tax year only?
3. Does your charity currently collect donations using contactless payment technology, or are you currently considering doing so in future?
4. Would the expansion of GASDS to include donations received via contactless credit and debit cards present any challenges to charities, particularly in terms of record keeping or other administrative requirements?
5. Would the Government’s proposal to allow charities to claim either under the main GASDS allowance or under the community buildings allowance, but not both, present any specific equality issues or generate any obviously unfair outcomes?
6. What impact would this proposal have on your charity?
7. Would relaxing the community buildings rules to allow donations to be received outside of the building itself allow more charities to claim under GASDS?
8. What reasonable requirements could be included to ensure that the relaxed community buildings rules still only benefit donations received in a specific local community?
9. Are there any other reforms that you would like the Government to consider?
The Charity Tax Group has welcomed the proposals. CTG chairman, John Hemming, said:
“We welcome the proposals in this consultation on GASDS reform, which take forward a number of the key recommendations in CTG’s response to the Call for Evidence, including: a partial relaxation of the Gift Aid history requirement; clarification of the community buildings rules; and steps to future-proof the Scheme to accommodate new types of small donations.
“While the Scheme provides very useful relief – particularly for smaller charities – positive changes are required to improve uptake, which is still too low, and improve accessibility. We will continue to work with officials to improve guidance and ensure that there is less complexity for charities in the administration of the Scheme.”
The consultation document can read in full here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/517377/Gift_Aid_Small_Donations_Scheme-consultation.pdf
Responses should be sent by 1 July to charitypolicy.taxteam@hmrc.gsi.gov.uk or by post to: GASDS Consultation, Room G/45, 100 Parliament Street, London, SW1A 2BQ.
Thursday 14th April 2016Entrepreneurs’ relief changes lead to retrospective taxation
The last few Budgets have not been kind to owner managed businesses, with a series of measures being enacted to curtail perceived abuses of the rules for entrepreneurs’ relief.
So it was a welcome change this year to see the Government announcing a relaxation of some of the restrictions that they introduced in 2015.
Unfortunately, in their haste to put matters right, they’ve actually made matters very wrong.
It all comes about as a result of proposals to backdate the amendments to 18 March 2015 when the rules were first changed. If the legislation is passed in its current format, some people who lawfully claimed the 10% rate under the associated disposals rules will find that they didn’t qualify after all. As a consequence, the higher 18%/28% rates should have applied, which means that there is some tax still owing. Will these people be asked to make good the shortfall?
New rules for entrepreneurs’ relief and associated disposals?
The purpose of entrepreneurs' relief is to encourage individuals to set up and grow their own business. If the relevant conditions are satisfied, capital gains arising on the sale of the business are taxed at a rate of 10%.
The relief applies to a disposal of business assets consisting of either:
· Shares or securities in a trading company, including the holding company of a trading group. The company must be the individual’s personal company in which he holds at least 5% of the ordinary share capital, together with the associated voting rights
· Assets of a trade, where the individual operates either as a sole trader or member of a partnership. The assets disposed of must constitute all or part of a business.
There is a one year holding period for which the assets must have been owned up till the date of disposal. There are further provisions that permit relief if the assets are disposed of within three years of the business ceasing to trade.
Relief is also possible for an associated disposal where a business owner personally provides an asset for use in the trade (TCGA 1992 s169K). The 10% rate will apply to a disposal of the asset provided that:
· The asset has been used in the trade for at least one year, ending on the date of the disposal, or (if relevant) when the business ceases
· The asset disposal is linked to the individual withdrawing from the business by disposing of all or part of his shares or partnership interest as the case may be. This disposal must also satisfy the conditions for entrepreneurs’ relief.
In short, there must be two disposals: The asset used in the trade, together with the individual’s personal share of the business.
For example, consider the case of a partnership that trades from premises owned by one of the partners in his personal capacity...
Register for free and log in to AccountingWEB to see the full article, which also covers:
· What are the new rules?
· Issues relating to the backdating of the changes
· Clawback of relief
Thursday 16th March 2016Rebecca Cave believes the 2016/17 income tax rates are far too complex to explain easily.
It should be possible to explain to an ordinary taxpayer what tax rate they will pay without resorting to detailed questionnaires and calculators. That won’t be possible following the changes introduced by the Finance Bill 2016.
The changes to personal tax rates are so convoluted that people drafting the Finance Bill felt it necessary to include this table to summarise them:
|
Rates payable on: |
||
Type of taxpayer: |
Savings income |
Most dividend income |
Other income |
UK resident who is neither Scottish nor Welsh taxpayer |
Savings rates |
Dividend rates |
Main rates |
Scottish taxpayer |
Savings rates |
Dividend rates |
Scottish rates |
Welsh taxpayer |
Savings rates |
Dividend rates |
Main rates while s11B is not in force; Welsh rates if so |
Non-UK resident individual |
Savings rates |
Dividend rates |
Default rates |
Non-individual, except trustees in some circumstances, who are subject to trust rate or dividend trust rate |
Default basic rate |
Dividend ordinary rate |
Default basic rates |
Type of taxpayer
Before you can tell the taxpayer what tax rate they will pay, you need to know what type of taxpayer they are. This leads to questions about where the taxpayer’s main home is, and (for instance) if they are a member of the Scottish Parliament. If the taxpayer lives outside the UK they may be non-resident, in which case you need to use the statutory residence test to determine whether the taxpayer is resident in the UK for the particular tax year.
By “Scottish rates” the drafter means the Scottish rate of income tax (SRIT) plus the balance of UK default rates. To determine the Scottish rates you take the default rates, deduct 10% points then add on the SRIT, which also happens to be 10% for 2016/17. However, in 2017/18 the SRIT may not be 10%, and it may vary for each tax rate band.
The Welsh rates of income tax are not in force, but ITA 2007, s11B makes provision for them when they do come into being. From that point you will need to question the taxpayer as to whether they consider their main home to be in Wales, or whether they hold a position in the Welsh Assembly; other conditions may apply.
Type of income
The next batch of questions concerns taxpayer’s type of income. Many taxpayers will require an explanation of the difference between savings income and dividend income, and what falls into the catch-all “other income”. Of-course the journey to reach taxable profits from cash received is not straightforward, but perhaps some magic app will soon solve that for us.
Amount of income
The next step is to add up all the taxpayer’s income to see which type of income falls in which tax band (see 2016/17 table). To do that you need to know what order the income is taxed in. This is not immediately obvious (see HMRC guidance in SAIM1090). In brief savings income and dividend income are treated as the top slice of income, but dividends sit on top of any savings.
2016/17 Savings band: 0-£5,000 0–£32,000 £32,001–150,000 Over £150,000 |
Default rates 0% 20% 40% 45% |
Savings rates 0% 20% 40% 45% |
Dividend rates N/A 7.5% 32.5% 38.1% |
Allowances
Don’t forget to deduct the relevant allowances from the relevant income. The personal allowance and blind person’s allowance can be set against any type of income, but the dividend allowance (£5,000) can only be set against dividends and the savings allowance (£1,000 or £500) only goes against savings income. Remember the savings rate band in the table above applies in addition to the savings allowance, if “other income” hasn’t already covered it.
Non-individual taxpayers (ie trusts) are not eligible for personal allowances, savings allowance or dividend allowance. This means a trust will pay at least 7.5% (possibly higher rates) on all of their dividend income, with no tax credit or allowance to reduce the tax due. In general trusts don’t benefit from the lower tax bands which are available to other taxpayers.
All clear now?
Personal tax is now too complicated to be easily grasped by an ordinary taxpayer. We need help from tax software just to work out what tax rate will apply. But who is checking that the software delivers the right answer?
Thursday 16th March 2016 Budget 2016 – Highlights
George Osborne delivered his 2016 Budget this afternoon – ‘a Budget for the next generation’. The announcements today will impact on advisers and their clients. There is a lot of detail behind the announcements, but here are some highlights:
Capital gains tax
From 6 April 2016 the higher rate of capital gains tax will be reduced from 28% to 20% and the basic rate will be reduced from 18% to 10%. The reduced rates will not be available on disposals of carried interest and gains on residential properties. These will be subject to an 8% surcharge on the new rates.
Entrepreneurs’ relief (ER) will be extended to include an investors’ relief. This will be available to investors (not employees) who subscribe for new shares in an unlisted trading company on or after 17 March 2016. The shares need to have been held continually for a period of three years before disposal
ER and Goodwill U-turn – where an individual transferred a business to a limited company on or after 3 December 2014 FA 2015 denied ER. It seems that this is now reversed from 3 December 2014 where certain conditions are met.
ER and trading company – there are plans to review the definition of a trading company for ER purposes. This could result in a list of ‘excluded activities’.
Business
From 2018 Class 2 NIC for self-employed individuals will be abolished.
From 6 April 2016 the rate of tax payable by close companies on loans to participators will increase from 25% to 32.5%. This applies to loans made on or after 6 April 2016.
The corporation tax rate will be cut to 17% in 2020 (originally planned to drop to 18%).
Employment
From April 2018 national insurance contributions will be payable on termination payments over £30,000. A technical consultation will be undertaken before the measures come into effect.
Changes to the disguised remuneration regime have been introduced with immediate effect, to restrict the effect of rules that allow employees to escape tax charges by paying for assets held in trusts by introducing a targeted anti-avoidance rule – if there is a tax avoidance motive underlying the transaction, it will be treated as giving rise to income tax and NIC charges immediately.
In addition, to give companies and EBT participants an additional impetus to settle their cases, the rules exempting capital growth in EBTs from employment taxes have been given a “sunset” provision – cases must be finalised and tax paid before 1 December 2016 to benefit from the relief.
The generous relief, that completely exempted shares acquired under an Employee Shareholder Status (ESS) agreement from CGT, which was introduced in Finance Act 2013, has been very significantly curtailed.
Shares issued pursuant to such agreements after midnight tonight will be subject to a lifetime limit of £100,000 – only the first £100,000 of gains will be exempt from tax, anything in excess of that number will be subject to CGT in the normal manner.
Gains arising on shares that were issued before midnight 16 March 2016 do not count towards the limit and the employees will continue to enjoy the exemption.
Savings
From April 2017 a new Lifetime ISA will be introduced for adults under 40. Savers will be able to pay in £4,000 per year and receive a 25% bonus up to their fiftieth birthday. The funds can be withdrawn from age 60 or at any time after the first 12 months if the funds are used to purchase a first home up to £450,000.
Stamp Duty Land Tax
From midnight tonight, SDLT payable on non-residential properties will be replaced with a progressive rate system, rather than the current slab rate, so that SDLT is charged paid on the portion of the purchase price in each band. The bands will be £0-£150,000 – 0%, £150,001-£250,000 – 2% and above £250,000 5%. There will be transactional rules for those acquisitions where exchange has taken place before 17 March 2016. For larger commercial property acquisitions this change will represent a significant increase in the SDLT cost.
Following recent consultation, the additional 3% SDLT payable on the purchase of further residential properties will come into force from 1 April 2016. No portfolio exemption will be in place from this additional charge. In response to the consultation process, the Government have proposed that, to qualify for relief from the additional 3% charge, the time limit for an individual to replace their main residence will be extended to 36 months (rather than 18 months as outlined in the consultation). Married couples will no longer be treated as a single unit where the separation is likely to be permanent. Where a small interest in a property is inherited within the last 3 years, this will not be considered to be an additional property for the purposes of the test.
As you may be aware, in a broad attempt to reduce perceived imbalances in the UK tax system, HMRC released a consultation document in December governing distributions made by a company. Part of the proposed change is the introduction of a new Targeted Anti-Avoidance Rule (TAAR) that would apply to certain distributions to shareholders following the Members’ Voluntary Liquidation (MVL) of a company, which subject to the consultation, could become effective from 6 April 2016. This TAAR would treat such distributions as income not capital where: In view of the consultation, if you have a client who is considering implementing a MVL to make a capital distribution and possibly take advantage of entrepreneurs’ relief, it may be sensible to implement the MVL as soon as possible. We at Bailey Ahmad Business Recovery specialise in supporting directors, shareholders and their advisors in implementing low cost MVL solutions. If you have a client that needs advice or would like further information, please contact us at mvl@baileyahmad.co.uk or give us a call on 0208 662 6070. HMRC will no longer be able to provide copies of SA302 (otherwise known as the Tax Calculation) or the Tax Year Overview by fax, due to the type and level of customer information they include. This follows changes to the Government Security Classifications stating that fax is no longer considered a secure means of communication for certain documents. HMRC have notified the Council of Mortgage Lenders members who will be cascading this message to other lenders and brokers so they should no longer be requesting faxed information. HMRC will continue to provide copies of the SA302 by post if requested, but it would be appreciated if you use the self-serve option: SA302-tax-calculation for mortgage applications Financial experts say move will add more red tape for small businesses Plans to change were slipped out in George Osborne’s autumn statement Government expects most self-employed people to file quarterly by 2020 Mllions of earners are to be forced to file tax returns four times a year. Self-employed workers, landlords and small business owners currently have to submit their figures just once every 12 months. Switching them to quarterly returns will bring them into line with big corporations. But financial experts say the move will simply add to the reams of red tape already strangling small firms. ‘These changes are going to be very onerous,’ said Chas Roy-Chowdhury, of the Association of Chartered Certified Accountants. ‘It is not just about filling in a form, it is going to be a real burden. ‘Workers will have to make sure their books and records are up to date at least four times a year in case the taxman decides something is amiss and investigates them.’ Initially workers will not have to pay tax four times a year. But accountants suspect quarterly returns are a step toward this. The plans were slipped out in the small print of George Osborne’s autumn statement. Around four million people will be affected: the self employed, small business owners and landlords who make more than £10,000 a year profit. The Government expects most self-employed workers to be filing quarterly and online by 2020. It will thrash out the details over the next year when the plans go out to consultation. The first stage of the £1.3billion digital revolution at HMRC is expected soon with the launch of personal tax accounts for a million workers. These will act like an internet bank account, and keep an up-to-the-minute record of tax paid. At present every self-employed worker or small business owner needs to file a paper return by October 31, or an online one by January 31. Tax must be paid by January 31. Under the new system however, they will have to file online every three months – like big firms that report their financial results quarterly. They face having to use a complicated and lengthy online form each time. As well as adding to the burdern of red tape, there are concerns that many small business owners could be fined for missing deadlines. Two in every five self-employed workers are either unable to use the internet or need help using Government online services, according to HMRC figures. Fines of up to £100 are imposed for being a day late in filing. Given its track record for poor customer service, there are also doubts as to whether HMRC will be able to roll out a system efficiently and with proper support for taxpayers. In June it emerged that the taxman had failed to answer 18million phone calls from the public in 12 months. Small firms are already under pressure from the burden of setting up and paying into employee pension schemes. And owners of small shops have complained of being forced to close by soaring business rates. John Allan, of the Federation of Small Businesses, said he was deeply concerned about quarterly filing. ‘The annual tax return can be a major challenge and many smaller businesses still complete theirs manually,’ he said. ‘We believe the policy needs to be rethought. The push towards digital must be introduced alongside tax simplification and businesses should have a choice around the tax reporting process appropriate to them.’ Michelle Partington, 42, owner of small food business Lakeland Picnic, which is based near Kendal, Cumbria, said: ‘I could easily see how this could be a nightmare for some small business owners – especially one-man bands like plumbers. ‘When the Government first came to power it seemed to be very supportive of small business but it seems to have changed its approach. It is putting more and more things on us and putting barriers in the way of people who want to set one up.’ In their election manifesto, the Conservatives promised to cut £10billion of red tape and make Britain the best place in Europe to do business. In a recent speech to entrepreneurs, David Cameron hailed small business owners as ‘heroes and heroines’ and as Britain’s ‘life blood’. A HMRC spokesman said: ‘Many taxpayers have told us they would like more certainty over their tax bill and we acknowledge that they shouldn’t have to wait until after the end of the year before being landed with an unexpected tax bill. That’s why we’re making it easier for them to update their tax information more regularly from 2018. We will ensure people have access to guidance and support where needed, including access to telephone filing. ‘Ninety-nine per cent of businesses already file their corporation tax online and 98 per cent of VAT returns are filed online. The new digital accounts simply integrate the different information businesses provide to HMRC into a simple, streamlined system. ‘We are focussed on creating a tax system that is more effective, more efficient and easier for taxpayers.’ START-UPS are failing to see the importance in managing their financial affairs, with the majority of bosses failing to consult with a finance professional, according to a study by KPMG. KPMG interviewed 1,000 small business owners, ranging from owner managers to managerial level directors, all of whom are running a business with two to thirty two employees, writes sister title SME Insider. Relying on outdated information For businesses that are less than a year old, KPMG found that they are relying on management accounts that are, on average, four months out of date. There also seems to be minimum thinking behind important financial decisions, with the interviews revealing that many decisions such as hiring and firing, are based on gut instinct and mental arithmetic. Over a third of startup bosses are making vital decisions based on quick calculations of available funds, with some execs simply looking at how much money is in their bank account before signing off on big decisions. Out of all the startups KPMG spoke with, none of them said that they consulted a financial professional. ‘Frightening position to be in' "Getting a business off the ground is a bumpy ride at the best of times, but having to make decisions based on what happened four months ago when your business is barely a year old is a frightening position to be in,' said Bivek Sharma, head of KPMG Small Business Accounting. "Great businesses are built on great decisions, but owners really need to know where they stand today to make the right ones." KPMG's research also found that more than two thirds (69%) of entrepreneurs are entirely self-taught when it comes to finances and 63% prepare their own accounts; Two thirds (63%) are neglecting to plan ahead and prepare fee or income forecasts; A quarter of startup owners admit they have no idea how much money they can safely invest in their business; A third of start-ups (31 per cent) are still concerned about financial uncertainty, despite the country's relatively stable economic condition. Sharma concluded: "Many start-up owner managers have fought hard for the financial skills they need to be successful. But too many are lacking the data and insights to help them make truly informed decisions. "Combining current data and real insights with small business smarts is the key to helping these firms supercharge their growth." Fewer, more modern regional centres and highly skilled staff will provide customers with better services HMRC has today announced the next step in its ten-year modernisation programme to create a tax authority fit for the future, committing to high-quality jobs and the creation of 13 new regional centres over the next five years, serving every nation and region in the UK. The modernisation programme, now at the halfway point, includes investment in new online services, data analytics, new compliance techniques, new skills and new ways of working, to make it easier for the honest majority of customers to pay their tax, including by improving customer service, and harder for the dishonest minority to cheat the system. The changes have already resulted in over 80% of people filing their Self Assessment returns online and given customers new, simple ways to check their payments, make changes or find answers to questions. The tax authority, which raised a record £517 billion for public services last year, will open its first new regional centre in 2016-17, with others following between 2017 and 2021. HMRC’s 58,000 full-time equivalent employees are currently spread across 170 offices around the country, many of which are a legacy of the 1960s and 1970s, which range in size from around 6,000 people to fewer than ten. HMRC will bring its employees together in 13 large, modern regional centres, equipped with the digital infrastructure and training facilities needed to build a more highly-skilled workforce to meet the challenges of bringing in more revenue from those evading tax and improving its customer service to the honest majority. The transformation supports the Government’s commitment to locate jobs throughout the country. Bringing staff together in large centres will enable people to develop careers up to senior levels, with less need to move around the country, and will support the growth of specialist teams and links with universities and other sources of skilled recruits. Lin Homer, HMRC’s Chief Executive, said: "HMRC is committed to modern, regional centres serving every region and nation in the UK, with skilled and varied jobs and development opportunities, while also ensuring jobs are spread throughout the UK and not concentrated in the capital. "HMRC has too many expensive, isolated and outdated offices. This makes it difficult for us to collaborate, modernise our ways of working, and make the changes we need to transform our service to customers and clamp down further on the minority who try to cheat the system. "The new regional centres will bring our staff together in more modern and cost-effective buildings in areas with lower rents. They will also make a big contribution to the cities where they are based, providing high-quality, skilled jobs and supporting the Government’s commitment for a national recovery that benefits all parts of the UK." The changes will enable HMRC to give customers the modern services they now expect at a lower cost to the taxpayer, meeting the Government’s challenge for all departments to do more with less. HMRC expects the majority of staff to be able to move from their current offices to a regional centre, and is phasing the moves over ten years in order to minimise redundancies. But HMRC will aim to have fewer staff in the future as it streamlines how it works and uses the best of modern technology to reduce costs. Note to editors 1.The high-level plans for transforming HMRC were first shared with its staff 18 months ago. Since then, HMRC has held around 2,000 events across the UK, talking to its employees about how it is changing and involving them in the discussions. 2.The plans announced today will mean HMRC will be able to create better workplaces and generate estate savings of £100 million a year by 2025. 3.Moving more of HMRC’s work out of central London, which has some of the world’s most expensive office space, will enable HMRC to make substantial savings. 4.Regional centres will vary in size and in the mix of operational, tax professional and corporate services work that they contain. The smallest will hold 1,200 to 1,300 full-time equivalent members of staff and the largest, operationally-focused centres will hold more than 6,000. 5.HMRC will have four specialist sites for work that cannot be done elsewhere, notably where HMRC needs to work with its IT suppliers or other government agencies or departments. These will be in Telford, Worthing, Dover and at the Scottish Crime Campus in Gartcosh. 6.The 13 new regional centres will be in: North East (Newcastle); North West (Manchester and Liverpool); Yorkshire and the Humber (Leeds); East Midlands (Nottingham); West Midlands (Birmingham); Wales (Cardiff); Northern Ireland (Belfast); Scotland (Glasgow and Edinburgh); South West (Bristol); and London, South East and East of England (Stratford and Croydon). We cannot currently say more about the exact locations, because we need to negotiate with landlords and contractors, but they will be locations in the cities we have named with good transport links 7.Ultimately, these changes will involve the closure of 137 offices by 2027. Offices will be released, for instance, as lease breaks arise or at the end of the PFI contract with Mapeley in 2021. HMRC shared the broad outline of the transition with its staff on 12 November – including potential office closure dates and the likely outcomes for individuals working in each office. 8.HMRC will consult staff and other interested groups on the best way to carry out this transition. Where staff are not based in or near a proposed or existing regional centre, they will be given a range of options and will have time to consider and discuss their future with HMRC. 9.Much modern compliance work can be done from any location but HMRC’s investigators and field force remain a mobile workforce able to cover the entire country as and when we need to make contact face-to-face or at people’s premises. There will also continue to be mobile customer services for vulnerable individuals or those with additional needs. Half of all calls to the taxman in the first six months of 2015 were not picked up, report from Public Accounts Committee finds Millions of people may have filled in their tax returns incorrectly because HMRC is failing to answer their calls, MPs have warned as they condemned its its "abysmal" customer service. Half of all calls to the taxman in the first six months of this year were not picked up, equivalent to 12 million unanswered calls. MPs on the Public Accounts Committee said that despite the fact its performance has got worse, HMRC has failed to produce a plan detailing how it plans to improve matters. There are fears pensioners are particularly impacted because fewer of them are on the internet and they often have complicated tax arrangements. Meg Hillier, the Labour MP who chairs the PAC, said: “HMRC must rapidly improve its customer service, previously described by the PAC as abysmal and now even worse – to the extent it could be considered a genuine threat to tax collection.” “It beggars belief that, having made disappointing progress on tax evasion and avoidance, the taxman also seems incapable of running a satisfactory service for people trying to pay their fair share.” The committee’s report reveals the scale of HMRC’s struggle to answer the 50 million calls it receives every year. In the first six months of 2015 just half of calls were answered – worse than in 2011/12 when around three is four calls were picked up. It also failed to answer six in 10 calls within five minutes. • 'My £10,459 shock tax bill': the HMRC blunders blighting taxpayers The report warns that HMRC's customer service failings are creating a "genuine threat to tax collection" amid fears that people are paying the wrong amount. It says: “HMRC did not provide us with any indication of when or by how much its customer service would improve, beyond a vague aim to improve year on year “It acknowledged that people are more likely to pay the right tax when they find HMRC easy to deal with, but, in the words of its own Chief Executive and Permanent Secretary, 'we are still struggling'. “We are concerned that customer service levels are so bad that they are having an adverse impact on the collection of tax revenues.” There are concerns that people calling with questions about their tax returns, PAYE slips and other financial documents are being left in the dark. John Pugh, a Lib Dem MP and long-standing member of the PAC, said he feared millions of people could be making errors in their tax returns because of the failures. “Apart from the sheer inefficiency involved, there is an underlying anxiety that millions of people are paying the wrong tax because they can’t get through to HMRC on the phone,” he told The Telegraph. “Online tax returns have their place, but at the end of the day people do have problems and queries that they need answered. The tax system is very complicated and they need help.” The report also criticised HMRC for its failure to clamp down on offshore tax evasion, calling the number of prosecutions “woefully inadequate”. An HMRC spokesperson admitted there had been inconsistencies in handling calls earlier this year but said the problems did not impact its ability to collect tax. "We explained to the committee that we hadn’t provided a consistent level of customer service in the first half of the year and we had recruited around 3,000 new staff to improve service levels. But these customer service issues did not affect our ability to collect tax," the spokesman said. Sage has launched a new service called Sage Payments that enables small and medium sized businesses to make domestic and international payments directly from their accounts or payroll software. According to Sage the end-to-end payments solution will allow customers to make payments straight from their Sage 50 Accounts and Sage 50 Payroll software. The software giant said the “strategically significant” service aims to transform the future of business payments by eliminating the need to extract information and put it into a separate payment channel or bank. Lee Perkins, EVP and managing director of Sage UK, said: “Money management has throttled growth for too many businesses who struggle to handle flow of cash in and out of their organisation. “With Sage Payments, we are empowering businesses by breaking down age-old financial processes revolutionising the way they make payments and enabling them to take greater control of their cash flow,” he said. Sage Payments also:
Thursday 25th February 2016
Thursday 07th January 2016 Proposed changes to entrepreneurs’ relief
Thursday 17th December 2015 Tax Calculation (SA302) to support loan and mortgage applications
Friday 11th December 2015 Fill in your tax returns FOUR TIMES every year: Self-employed workers, landlords and small business owners faced with 'strangling' quarterly returns
Thursday 03rd December 2015 Financial carelessness is harming startup growth, finds KPMG
Thursday 26th November 2015 HMRC announces next step in its ten-year modernisation programme to become a tax authority fit for the future
"THAT IS WHY IT IS WISE TO SEEK THE SERVICES OF A PROFESSIONAL ACCOUNTANT OR TAX ADVISOR"
Thursday 05th November 2015 Millions could have filled out tax returns wrong due to HMRC phone failures, MPs warn
Wednesday 28th October 2015 Sage unveils new payments service
Sage told AccountingWEB that cash flow was the life blood for small businesses, yet money management has throttled growth for too many businesses:
“Businesses, like consumers, are seeking more secure, transparent, automated payments processes to gain greater accuracy, efficiency and control of their money. This has been reaffirmed through extensive research across our customer base and the small & medium business market more widely; Sage Payments is a direct response to these needs.
“By reliably automating key stages of the payments processes, Sage Payments saves businesses considerable time. Information a customer already has in their accounts or payroll software can be extracted to facilitate making a payment and the customer is put in control of when that payment can be made. Automated capabilities such as reconciliation, funding and calculation of exchange rate gains or losses reduces the need for re-keying to save time and improve accuracy,” Sage sai
Tuesday 06th October 2015 HMRC wins £200m from tax avoidance scheme
A complex tax avoidance scheme used mainly by property developers and IT contractors has been defeated at Tribunal by HM Revenue and Customs, meaning the investors now collectively owe the taxman up to £200m in unpaid tax.
Yesterday (5 October) HMRC confirmed it defeated an avoidance scheme at a tribunal.
The scheme aimed to exploit the UK’s double-taxation agreement with the Isle of Man. Over 2,000 people used the complex and artificial arrangement, believing it would reduce their rate of income tax to typically less than 5 per cent.
The complex and artificial scheme used a trust and a partnership in the Isle of Man to try to claim exemption from UK taxation via the Isle of Man Double-Taxation Arrangement (DTA).
Over 2,000 people signed up to such an arrangement from 2001-02 to 2007-08, before it was blocked by targeted anti-avoidance legislation in Finance Act 2008, which put the meaning of the existing legislation beyond doubt.
The scheme was blocked by parliament in 2008 but a scheme user, Robert Huitson, challenged the amending legislation, taking the case to tribunal, despite the legislation being applied retrospectively.
In April 2001 Mr Huitson entered into a scheme marketed by a firm of tax consultants called Montpelier Tax Consultants (Isle of Man) Limited.
The scheme involved setting up an Isle of Man trust of which Mr Huitson was the settlor and in which he had an interest in possession, or a right to income. The trust became a partner in an Isle of Man partnership which in turn entered into a contract with Mr Huitson to provide his services.
Under his contract with the partnership Mr Huitson was entitled to an annual fee of £15,000, as well as a share of the partnership profits as a beneficiary under the trust.
If the scheme operated as Montpelier intended, Mr Huitson would pay income tax and national insurance on his annual fee of £15,000.
However he would pay no income tax or national insurance on sums paid to him as beneficiary of the trust.
The retrospective 2008 legislation was also challenged via two Judicial Reviews, both of which failed. In February 2012, the Supreme Court refused an application to hear appeals against the Court of Appeal’s judgments in these two cases.
Jim Harra, director general of business tax at HMRC, said: “This is yet another example where some people try to abuse the tax system to deprive the UK of money for vital public services.
“This is unfair on the majority who pay their fair share.”
emma.hughes@ft.com
Monday 05th October 2015 The future is written in carrier bags
Rebecca Cave explains how the new carrier bag charge is just the beginning of the tax strife. It’s all due to the devolution of tax powers.
From 5 October 2015, shoppers in England have to pay at least 5p for each new plastic carrier bag they acquire. This apparently puts them in the same position as shoppers in Wales, Scotland and Northern Ireland, who have being paying for their carrier bags for some years (just under 12 months in Scotland).
However, as the rules concerning carrier bag charges were drawn-up by the devolved administrations, those rules differ in every country within the UK, even the VAT treatment of the charge is not the same!
In England the carrier bag charge applies to “single-use” plastic carrier bags which are 70 microns thick or less. In Wales, Northern Ireland and Scotland the charge applies to all single-use carrier bags, including those made of paper. In Scotland the charge includes bags made of other materials such as hessian, but in Wales bags made of hessian, cloth, jute and cotton are exempt from the charge.
In England only retailers who have 250 or more full-time employees (or equivalent) are required to charge customers for each bag, but in the other countries all retailers must levy the charge for new carrier bags.
There are circumstances in which the carrier bag charge does not have to be levied, such as when buying loose fruit, potted plants or medications, but only when the contents of the bag consists entirely of the exempt items. Of-course the list of exempt items is slightly different for each country. For example in Northern Ireland the charge doesn’t apply when buying take-away hot food and drinks.
Note that it is a “charge” not a “tax”. The levy is there to encourage customers to reuse bags they already have and hence reduce the number of discarded bags in the environment. So where does the money go?
In Scotland, Wales and England retailers can keep the carrier bag charge if they wish, having paid over the VAT portion of the charge (0.83p) to HMRC. They are encouraged to donate the net amount to charities or good causes, but they are not obliged to. In Northern Ireland the retailer must pay 5p of each bag charge to the Department of Environment, but there is no VAT to account for.
So there you have it; the same charge per bag in every country, but not on the same type of bags, in the same circumstances, or even with the same VAT implications.
Just imagine what will happen when further tax powers are devolved to the regional administrations. Scotland already has its own land taxes: LBTT and landfill tax. From April 2016 it will impose the Scottish rate of income tax (SRIT) on Scottish residents.
The Corporation Tax (Northern Ireland) Act 2015 gave the Northern Irish Assembly the power to set a different rate of corporation tax on trading income. Wales is drawing up plans for its own SDLT and landfill tax – as proposed in the Tax Collection and Management (Wales) Bill.
Monday 28th September 2015 McDonnell: HMRC review and ‘Robin Hood’ tax on Labour agenda
JOHN MCDONNELL is set to use his first speech as Labour's shadow chancellor to push for a review of HM Revenue & Customs and a ‘Robin Hood' tax on stock market transactions.
The coalition government fought hard against moves to introduce such a tax during the last parliament, including mounting a legal challenge to the so-called Tobin Tax.
The 0.01% levy proposed last term aimed at shares, bonds and derivatives across the whole EU, is intended to prevent speculative trading and prompt the financial sector to pay back some of what it received from governments during the financial crisis.
McDonnell is to consult with shadow business secretary Angela Eagle on the tax, but believes it could rein in the excesses of the City and help pay for improvements to the NHS and other public services.
He told BBC Radio 4's Today programme: "Robin Hood tax at the moment is Labour Party policy on the basis of if we can introduce it globally, and that's been Labour Party policy for some time now.
"However, what we are saying is today we are going to launch a review of our taxation system, we are going to bring the greatest economic minds in the world to bear on that issue, we are going to consult with the British people and then we will arrive at a decision on the way forward."
McDonnell will also announce a review of HMRC to establish how the tax authority can be bolstered in its efforts to collect taxes, particularly the billions lost through avoidance, evasion, fraud and error every year.
He intends to examine its "operations, effectiveness and also look at its range of policies and the instruments that it has available to it to ensure that we maximise our tax take and at the same time it's done on a fair and just basis".
During his Labour leadership campaign, Jeremy Corbyn claimed the tax gap - the shortfall between tax due and tax collected - stands at £120bn, enough to wipe out the country's deficit without cutting welfare or spending.
Thusday 03rd September 2015 ACCA ‘needs to be more open’ as members suggest governance changes
ACCA must overhaul its governance in order to be more equitable with its members. That's the message from institute member Tony Thorne, who is seeking to push through numerous changes to the way the body is run at its upcoming AGM.
The eight motions put forward by Thorne and 50 other members include calls for ACCA's senior management team to be subject to the same disciplinary rules as its members; for the institute's CEO and executive team to hold ACCA membership having qualified through examinations; and for the practice of delegated proxy voting to cease.
The group also proposes that all senior named council officers be appointed by the members at the AGM and that members of council are given the right of free speech, but ACCA has called on members to knock back the proposals.
The institute has issued explanations for its staunch opposition to all the plans, and why members should vote against them.
But Thorne told Accountancy Age: "We believe it's the members who are the body and the members should be made aware of what's going on."
He cited the example of seeking to call an EGM, which he says would require 1% of the membership – an ever-moving piece because "they're always signing up new members; members are dying," he said.
"It's one of the reasons we put a resolution forward on that because council only need ten members to call an EGM. Council members are no more equal than any other member, so it should be exactly the same. It's about what's fair and reasonable and it doesn't show good corporate governance – that's what we're suggesting."
One of Thorne's biggest bugbears has been the body's disciplinary policy, which he would like to see applied more evenly, citing a £100,000 provision made by ACCA in last year's accounts after some audit qualifications were erroneously awarded.
"It cost the ACCA's members £100,000 – for an error they made – and as far as we know, there has been no disciplinary action taken against anybody," he said. "If a member had done something similar, their feet wouldn't have touched the ground and there would have been publicity regarding their disciplinary. We need to show that we practice what we preach."
Another area of concern has been the institute's insistence on charging members' subscriptions in sterling even when they live overseas.
"Why are we not accepting subscriptions in the currencies in which we operate? We've got members in other jurisdictions paying their subscriptions in sterling and having to covert it back into whatever currency it is – for example Malaysian ringgits to run the Malaysian office," Thorne said.
"Some of our subscriptions are equivalent to a month's take-home pay in some areas of the world. And they're having to pay a little bit more for all the conversions.
"We're told that if they want the quality, that's the cost of it, but it should be what the cost is to them in that country and we should be more supportive to our members."
He added, too, that decisions from the top of the institute can affect the wider membership profoundly, and claimed that the institute had commited millions of pounds towards rent for its new Adelphi office.
"It's the members who pick up the tab and we're jointly and severally liable. It's the membership that is the body and they should listen to us all."
An ACCA spokeswoman told Accountancy Age: "ACCA's Council has responded in full to the AGM resolutions put forward, as can be seen from the AGM handbook.
"ACCA always works in the best interests of its members and its students.
"ACCA's move to the Adelphi has been properly costed to ensure that it represents value for the long term for a growing organisation. The relocation has also been necessary because a lease on one building is coming to an end. This is good estates planning, so that all of ACCA's London employees will be in one location, reflecting our influence as a world class professional membership organisation.
"Council has also rejected the resolution about staff being subject to the same disciplinary rules as members because ACCA has strong disciplinary policies in place for its entire global staff that reflect local laws regarding disciplinary and staff conduct."
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