Is there nowhere to hide from the Taxman?

Every month, Peter Watters, FCA, shares some useful financial tips. This month, the focus is on HMRC Tax Investigations. HMRC’s determination is to get its pound of flesh from the middle class. How can you stay on the right side of the law but still keep your tax bills to a minimum?
The taxman is now going after the middle classes, no longer targeting just the super-rich, but everyday professionals are now feeling the pressure of this greater scrutiny with an increased likelihood that their tax returns will be challenged.

HM Revenue & Customs (HMRC) has doubled the number of inquiries into taxpayers it feels are not paying enough tax over the past two years. When such inquiries become in depth investigations they can take years to conclude.

New powers have been proposed to allow HMRC to take money directly from taxpayers’ bank accounts, including joint accounts, without first obtaining a court order. If the proposals, which are subject to a consultation, are approved, there are concerns that HMRC will withdraw
incorrect sums from accounts before giving taxpayers a chance to argue their case.

HMRC says that they do not plan to empty bank accounts completely as rules are in place to ensure that, after the tax owed is taken, a sum of £5,000 must remain in the individual’s bank accounts. The money can only be taken after four requests for the tax owed have been ignored.

Other existing measures, such as the creation of special “task forces” to target certain job sectors such as freelancers and buy-to-let landlords, have also helped
boost the Revenue’s total tax take.
HMRC has beefed itself up by doubling its use of bailiffs and debt collection agencies over the last two years. Its focus on evasion and non-payment looks set to gather force.

One of the most controversial snooping powers the taxman uses to spy on individuals is obtaining information from third parties, including banks, credit card providers, employers and other government agencies such as the Land Registry.

The Revenue will also snoop on the websites that taxpayers use and check up on an individual’s mobile phone usage. They can use bugging or telephone
tapping, but in practice they are rarely used.

This policy is seen as hitting the ‘easy’ target, using all its powers to crack down on individuals, rather than companies or other better resourced institutions. The
sums involved may not be huge when compared to going after a major corporate, but individuals are a much easier target to squeeze and collectively they are now paying out a huge amount of extra tax. They are more likely to have made tax return mistakes but they are also more likely to capitulate without arguing, making HMRC confident of success.

Another aggressive tool used by HMRC is by threatening taxpayers with higher penalties as part of its tougher stance, which has helped increase tax returns for the Revenue because individuals are paying automatically to avoid receiving higher fines rather than looking at the
amount owed and challenging the taxman if they think it is incorrect.

Need more help?
This feature aims to give some informal hints and tips. Mcphersons are offering businesses free advice so get in touch now to arrange your meeting – we can help you protect your money! Simply email Peter Watters p.watters@mcphersons.co.uk or call our Head Office on 01424 730000 for a free consultation at mcphersons’ London, Bexhill or Hastings offices. www.mcphersons.co.uk

Post Budget Winners and Losers

This month, Ainsley Gill looks at the winners and losers from the 2014 Budget.
A wide range of measures were announced in the 2014 Budget, with savers very much ‘at the centre’. Here we cut though all the detail to highlight the measures that will affect individuals. To download our full budget book, please visit our website www.mcphersons.co.uk.

Winners

ISA savers. An ISA rise from £11,520 to £15,000 from July 1 this year. They can also save the full amount in cash, rather than only half, as previously. It means savers with hundreds of thousands in ISA investments can move the money into savings accounts.
Pension savers. More flexibility over taking an income from a pension and pledge that no one would be forced to buy an annuity. There was also an increase in the amount that can be taken as a cash lump sum from a small pension pot.
Pensioners. Anyone aged 65 or over will be offered a new type of savings account named ‘pensioner bonds’, available from NS & I from January 2015. This is expected to pay up to 4% on a three year fixed rate bond.
Everyone earning less than £100,000 will pay less income tax because of a further rise in the tax-free personal allowance for each taxpayer. This will rise from £9,220 to £10,000 from April 2014 and to £10,500 in 2015.
Premium Bond savers can buy £40,000 of bonds from August and there will be an additional monthly prize for £1 million.
Around 1.9 million parents will benefit from a new childcare system to replace the current childcare vouchers.
Socially-aware investors will be able to take advantage of a new social investment tax relief with a 30% tax break.
Drivers will be relived to hear that the ‘fuel escalator’ on petrol has once again been abandoned.
Beer and Whisky drinkers. Duty on Scotch whisky and ordinary cider was frozen and beer duty cut by 1%.
Long haul travellers. From April 2015 the tax on long-haul flights will be reduced.
Bingo Players should benefit from a reduction in bingo duty to 10%.

Losers

Families where one parent stays at home to take care of children will not qualify for the new child care subsidy.
Investors of VCTs and EISs. Tighter regulation of venture capital trusts and enterprise investment schemes could lead to investors losing the tax breaks they expected
Those earning around £40,000 with the 40% tax rate starting at £41,450
Those planning to retire at 55 with the age people can access their pensions rising to 57 in 2028 affecting anyone under 40
Tax avoidance. The government will adopt a ‘guilty until proved innocent’ approach for tax avoidance schemes. Tax will be payable in advance and refunded only if the scheme complies with the rules.

Need more Help?
This feature aims to give some informal hints and mcphersons are offering businesses free advice so get in touch now info@mcphersons.co.uk or call 01424 730000 to arrange your free meeting.