Wednesday 29 February 2012

Immigrants

Migrant workers will need to earn at least £35,000 to qualify for settlement in the UK, says the Home Office.

New bank funding

The European Central Bank (ECB) has provided a further 530bn euros ($713bn; £448bn) of low-interest loans to 800 banks across the European Union.

New rules for micro businesses

From ICAEW
Receipts and payments and flat rate expense deductions

The Office of Tax Simplification (OTS) has published its final report, Small business tax review: simpler income tax for the smallest businesses, in which it recommends a simpler way to calculate the taxable profits of nano businesses. The report makes some suggestions which would represent fundamental change and simplification for many of the smallest businesses in the UK.

The natural and instinctive reaction of many professionally trained accountants may be a desire to preserve GAAP accounting at all costs. However there are a few points worth keeping in mind. The OTS proposals are aimed at the very smallest unincorporated businesses, which it refers to as nano businesses. These are businesses:
  • With turnover below £30,000
  • With little or no capital investment
  • Not normally registered for VAT, and
  • Probably with no employees.
They are usually sole traders without professional advisers and it seems likely that many of them will already use some form of ‘cash accounting’.

The key recommendations of the OTS are as follows:
  • Receipts and payments, rather than accruals accounting, should be used to calculate taxable profits. Businesses would still have the option to calculate profits in accordance with GAAP.
  • A series of flat rate expense deductions should be allowed to cover items such as use of home, mileage, telephone and internet, subsistence, laundry, postage and stationery.
  • Immediate tax relief should be given for small value capital items by allowing them to be deducted as expenses rather than through the capital allowances system.
  • Small amounts of private use of assets and services would be disregarded.
There are many ‘what ifs?’ to this. For example, there would need to be flexibility around businesses with fluctuating profits. The report suggests a ceiling of £40,000 before a business would need to use traditional computations instead. There would also need to be a period of grace to allow those businesses which grow enough time to make the transition into GAAP accounting. The rules for the new Universal Credit should reflect whatever basis is adopted for income tax and NIC. But this can all be discussed.

The immediate next step is that the Chancellor will consider the proposals and may announce a way forward in the March 2012 Budget

Tuesday 28 February 2012

Barclays Bank to pay £500m in back taxes for avoidance schemes

From the BBC
Barclays Bank has been ordered by the Treasury to pay half-a-billion pounds in tax which it had tried to avoid.
Barclays was accused by HM Revenue and Customs of designing and using two schemes that were intended to avoid substantial amounts of tax.
The government has taken the unusual step of introducing retrospective legislation to end such "aggressive tax avoidance" by financial institutions.
Tax rules forced the bank to tell the authorities about its plans.
The government has closed the schemes to retrieve £500m of lost tax and safeguard payments of billions of more tax in the future.
BBC business editor Robert Peston has been told by Barclays that it is surprised by HMRC's reaction to the two schemes, which it believed to be in line with those used by other banks.
Our business editor says it is highly embarrassing for Barclays, because Britain's big banks have all signed a code committing them not to engage in tax avoidance.
'Decision justified'
Announcing the crackdown, Exchequer Secretary to the Treasury, David Gauke, said the bank involved, which he did not name, should never have devised the schemes in the first place.All Britain's big banks have signed a code committing them not to engage in tax avoidance”
 
Robert Peston Business editor
 
"The bank that disclosed these schemes to HM Revenue & Customs (HMRC) has adopted the Banking Code of Practice on Taxation which contains a commitment not to engage in tax avoidance," he said.
"The government is clear that these are not transactions that a bank that has adopted the code should be undertaking.
"We do not take today's action lightly, but the potential tax loss from this scheme and the history of previous abuse in this area mean that this is a circumstance where the decision to change the law with full retrospective effect is justified."
Disclosure window
One tax dodge involved Barclays claiming it should not have to pay corporation tax on profits made when buying back its own IOUs.
The second tax avoidance scheme, also designed by Barclays, involved investment funds claiming that non-taxable income entitled the funds to tax credits that could be reclaimed from HMRC.
The Treasury described this as "an attempt to secure 'repayment' from the Exchequer of tax that has not been paid".
Barclays Bank signs Retrospective legislation has been introduced by the government to close the tax avoidance loopholes
A Treasury source suggested that outlawing the tax dodges immediately would save the government a further £2bn in tax that would otherwise have been foregone.
Barclays disclosed the two schemes to the tax authorities under rules which have been in place since 2004.
Anyone, such as a bank, accountant, lawyer or tax adviser, who devises a seemingly legal tax avoidance plan, is obliged to tell the tax authorities about it within a few days of using it or marketing it to clients.
More than 2,000 schemes have been disclosed in the past eight years.

Monday 27 February 2012

HMRC announce 30 new task forces

HMRC has announced 30 taskforces to crackdown on tax avoidance and tax evasion over the next two years. Likely targets for tax inspectors include the clothing industry, the motor trade and markets.
HMRC said it expected to collect more than £50m as a result of 12 taskforces launched in 2011/12 – and with 13 criminal investigations under way, this figure is expected to rise.
Exchequer secretary to the Treasury, David Gauke, said in a statement: “The government is committed to tackling tax evasion and avoidance. HMRC’s taskforces are cracking down on people who choose to break the rules and creating a level playing field for the majority who play by them.”
Taskforces are aimed at specific business sectors in specific locations where HMRC has evidence of tax evasion. Other tactics to tackle evasion and avoidance include tax amnesties and criminal and civil prosecutions.   
The taskforces target sectors at the highest risk of tax evasion, typically focusing on groups of up to around 600 businesses, the ICAEW said. More details on the 2012/13 taskforces will be announced later this year.
Much of HMRC’s announcement is an update on existing taskforces as the ICAEW notes. A dozen of the taskforces were announced in 2011, targeting sectors including restaurants and fast food, scrap metal, and property.
HMRC said that taskforces only target people who are at high risk of breaking the rules and don’t pay the tax they owe. It said: “We know we’re going after the right people – some taskforces have hit rates of 100% so far.”
The taskforces were created following the government’s £917m spending review investment to tackle tax evasion, avoidance and fraud from 2011/12. It aims to raise an additional £7bn each year by 2014/15.

Change in rules in phones

BlackBerrys, iPhones and other smartphones will no longer be viewed as benefits in kind, following a change of heart from HMRC.
On Monday, HMRC announced that it had changed its interpretation of the legal definition of “telephone apparatus” to include mobile phones and smartphones. The announcement was made public in Revenue & Customs Brief 02/12, 'Employment income - definition of mobile phone (treatment of smartphones)'. As a result, employers will no longer need to record smartphones on P11Ds, nor pay Class 1A NICs on the supposed benefits of the smartphones. The brief notes that many employers have already ceased doing so under separate provisions, but those who have done so, and their employees could seek refunds on amounts paid going back to 2007-08.
When the Finance Act 2006 was upgraded to exempt mobile phone use from tax, HMRC did not consider multimedia-equipped smartphones to qualify. Under the department’s new interpretation of s316 of the Income Taxes (Earnings and Pensions) Act 2003  there will be no assessment of a benefit in kind if the employer provides a single device whose sole purpose is to allow an employee to perform their job, on the condition that private use is not significant. For more technical detail on this exemption see the Employment Income Manual at EIM21611 and for the changes introduced relating to mobile phones, see EIM21779.
“HMRC now accepts that smartphones satisfy the conditions to qualify as mobile phones,” the brief explains. “Developments in PDAs following the penetration of smartphones into consumer markets from late 2007 onwards mean that many modern consumer PDAs are now also likely to be smartphones. But this will not apply to devices that are solely PDAs.”
Nor will the “primary purpose” test apply to sat nav devices, tablet/laptop computers and devices that use voice over internet protocol (VoIP) to make calls. However, the brief added that its view applies to what is understood as a smart phone at the beginning of 2012 and it cannot be certain about how the definition of “mobile phone” in s316 ITEPA 2003 will apply to new devices in the future.

Friday 24 February 2012

50p tax rate not working

The ONS released its public finance figures for January showing that although overall receipts are up 6.2%, in part due to large corporate tax payments this month, Self Assessment (SA) receipts are actually down. The government ending up with its highest monthly surplus in four years which would seem to suggest that the economy is doing rather better than the doom-mongers of the press would have us believe.
These latest tax figures would seem to suggest that the 50p tax rate is not having the effect that was planned by the previous Labour government.

More bad news from the banking sector

http://www.bbc.co.uk/news/business-17151214


Lloyds loses £3.5b

Monday 20 February 2012

HMRC launches electricians campaign

HMRC is giving a time-limited opportunity aimed at anyone who installs, maintains and tests electrical systems, equipment and appliances, allowing them to pay tax owed with reduced penalties.
Interested parties must Notify HMRC of their intention to take part in the campaign by 15 May 2012. Once you have done this, affected parties must make their disclosure and pay what they owe by 14 August 2012.
Those who take part in this campaign and tell HMRC about any income that they haven't previously disclosed:
they may only have to pay for a maximum of six tax years
they can tell HMRC how much penalty they should pay
they may be able to pay what they owe by instalments
Further information is available from HMRC.

Pension challenge

A trio of powerful UK industry groups have called on European Commission head, Jose Manuel Barroso, to think again before ratifying radical European pension proposals that could see companies collapse and jobs lost.
The National Association of Pension Funds (NAPF), the Confederation of British Industry (CBI) and the Trades Union Congress (TUC) jointly penned a hard-hitting letter outlining the destructive impact they believe the new rules would have.
‘By demanding dramatic increases in funding from employers, the commission’s plans would – at best – force all remaining defined benefit schemes to close and – at worst – push many businesses into insolvency, leading to significant job losses,’ it read.
More details are available from the NAPF.

IR35 - not applicable to Government??

More than 25 senior staff employed by the Department of Health have salaries paid to limited companies enabling them to reduce their tax bills.
Leaked emails sent to the Guardian showed that in some cases the named individuals are being paid more than £250,000 a year, as well as additional expenses.
The emails reveal the majority of the fees were paid to companies with the same address as the home address of the staff.
Many of the companies are registered as business and management consultancies, yet the internal payroll information also details the health department offices in which they work, job title and email address. In most cases the companies’ names are very similar to that of the individuals’ surnames.
The emails also reveal senior civil servants at the Department discussing the possible reputational damage to the Department and seeking to avoid ways of revealing the nature of the payments sought in a written question last December by Gareth Thomas, the shadow Cabinet Office minister.
The arrangements would enable the individuals involved to save thousands of pounds a year in income tax and national insurance contributions by only being taxed at the corporation tax rate of 21 per cent.
This follows on from the recent revelation that the Department for Business, Innovation and Skills had sanctioned a similar salary deal for Ed Lester, the chief executive of the Student Loans Company.
At the time, the Health Minister Simon Burns said in a written parliamentary answer that no payments were being made to civil servants in this way. However, in light of the leaked documents the Department’s spokeswoman apologised for the misleading information but suggested that the individuals involved were not civil servants, or technically even staff, despite having been employed by the Department for a number of years in senior positions.
A Whitehall-wide review into tax arrangements of public sector appointments, initiated after the Ed Lester revelation, will be carried out this month.

Wednesday 15 February 2012

Post from Accounting Web

This is a post from an accountant on AccountingWeb

I had a really strange letter from a (now former) client this week that is a UK born and resident IT Contractor of Indian descent working for a finance house in Canary Wharf.
As is often our want, a few months ago he had come to me with one of those ludicrous 'man down the pub' schemes, whereby he was going to continue to operate his UK company as previously, but instead of paying the UK's 'extortionate' corporation taxes and such, he would sub-contract an offshore company based in a tax haven to undertake the actual work (actually performed by him at some bank in Canary Wharf) and then the offshore company would invoice the UK company extracting the majority of profits tax free and just paying him enough to live on.
He justified this as being 'all right' as he was going to retire at 50 and live in India and he needed it to setup his retirement fund.
After looking at him a gasp for about 30-seconds I pointed out to him why this was probably a bad idea in that it was a fairly obvious attempt at tax evasion which would (once discovered by HMRC) be subject to full repayment of unpaid tax, a penalty of up to 200% of the tax due, interest and the possibility of a jail sentence for willful tax evasion. I then explained about things like SOCA and Money Laundering, etc.
From that point onwards the meeting petered out and it wasn’t raised again.
Then out of the blue last week, I received a letter from him effectively saying that he was unhappy that he was paying me a lot of money, but that if he did anything wrong I was going to ‘report him to the taxman” and accusing me of working for HMRC rather than the guy who was paying the bill.
Since he could no longer ‘trust any UK accountant’ he was arranging to have his brother-in-law who is an accountant in Pune, India deal with his affairs and that he would make arrangements in the coming weeks.
He’s paid his latest bill, so there is no concern over fees, but I’m just wondering what (if anything) I should do from here. He’s within his rights to get anyone to do his accounts if he feels they are appropriate and qualified, but I suspect the real reason is that he would like to go ahead with his crackpot scheme and is using the Indian accountant as a way to bypass SOCA and Money Laundering Regulations.

SA Notices on the way - update from the ICAEW

But HMRC reacts sensibly to worries over unfair use of new filing penalty

As anticipated, HMRC has advised us that from 17 February, it will begin sending out penalty notices to all taxpayers who failed to file their 2010/11 returns by the 31 January deadline. What is a surprise is HMRC has also said it will cancel any outstanding returns and associated penalties where taxpayers call them and explain that they do not need to be in the self assessment (SA) system. HMRC will be sending a flyer with the penalty notice inviting taxpayers to phone on the general SA helpline number if they think they don’t need to be in SA.

This will also apply to taxpayers who are dealt with in Personal Tax International who are advised to call the dedicated helpline number.

The full message reads:
For information - from 17 February, all customers who failed to file their 2010/11 return online by the deadline will receive a flyer with their penalty notice inviting them to phone us on the general SA helpline number if they think they don’t need to be in SA. A copy of the flyer is attached.

Our contact centre staff will ask them some questions and if we decide we don’t need the return back we will advise the customer that we will cancel the return and remove the penalty.

This additional step has been introduced to mitigate the impact of the new penalty regime, such as by ensuring customers who have to pay penalties are people we need to be in SA whilst others are taken out.

Obviously we hope that customers dealt with in Personal Tax International will call our dedicated helpline number. We will also 'cancel' their return and penalty if it becomes clear that they should no longer be within the SA system.

If any of our PT International customers do contact the 0845 Helpline we will receive notification and make a decision as to whether they should complete the SA return or not. We will write to these customers.

We have been warning readers for some time about the new penalty rule introduced this year which means that if you missed the deadline you will have to pay a £100 late filing penalty even if you had no income to report or no tax to pay.

In other cases, it is of course still possible to claim reasonable excuse for filing late, see our news story Tax return filing - what is a reasonable excuse?

To read more about the new rules on penalties, refer to our news item 31 January, an even more important date.

BYOD - interesting concept

From the BBC

BYOD: Bring your own device could spell end for work PC


Computer screen being thrown through window Out with the old: You may find yourself using your own device - laptop, tablet and/or smartphone - for work whether you like it or not
Do you dream of a world where you have your choice of laptop, smartphone or tablet at work; all of which connect seamlessly one to another, and are constantly updated?
Sitting at your desk, feeling the red mist descend as your ancient XP desktop computer tries and fails to open your inbox, this might seem like an impossible dream. But for some people that day is already here.
 
But there could be a catch.

It's about a year since we last covered BYOC - bring your own computer. This refers to companies who offer staff the chance to choose the devices they use for work - a laptop, or perhaps desktop or Mac. Even a tablet.
Where this happens the company might cover either all or part of the expense, on the understanding that the employee also purchases a support package. Or it might simply provide software to allow employees to access a virtual desktop on their own devices.
Most schemes allowed for access via a virtual private network or similar software application to ensure that data was held securely on the company servers.
Since then, BYOC has become BYOD - bring your own device.
In the last year the level of smartphone and tablet ownership has sky-rocketed, and with it the trend towards the consumerisation of IT. In other words, business IT organisations have come under ever-increasing pressure to let their employees choose what they use to do their work on.
While many firms follow the traditional route of offering a stipend or some sort of financial incentive, others expect their employees to pick up the tab.
iPad Huge increases in the rates of tablet and smartphone ownership have helped push the bring your own device (BYOD) trend)
A survey covering 17 countries by business technology company Avanade found that 88% of executives said employees were using their own personal computing technologies for business purposes.
Absolute Software found that 64% of IT managers surveyed thought it was too risky to let personal devices be integrated into the business network. However 52% of companies allowed some form of access.
Another survey by Cisco found that although 48% said their company would never authorise employees to bring their own devices, 57% agreed that some employees use personal devices without consent.
And 51% said the number of employees bringing their own devices to work is on the rise.
A completely unscientific straw poll carried out on Facebook, Twitter and Google+, suggested that many people were aware of BYOD policies. For some, the ability to choose how they access the network was an important factor in choosing an employer.

We found globally that 40% of college students and 45% of employees would accept a lower paying job with a choice of device”
 
Ian Foddering Cisco

Many felt however, that they should expect some financial contribution towards the equipment.

Foot in both camps

Ian Foddering is the chief technology officer and technical director for Cisco UK and Ireland. He says companies need to have a policy on BYOD.
"We've been in the interesting position for the last 12-18 months. I look at what our clients are doing. Up until recently they've been deciding whether to block it or embrace it.
"Beforehand most people were ignoring it [but now] you'll certainly find the more progressive organisations have embraced it."
Cisco also runs a BYOD programme for its own employees.
They have the choice of either using company-issued laptops and phones, or buying their own.
If they choose to use an Apple Mac, the company won't provide IT support. This is done instead through internal wikis and mailers where other employees offer possible solutions to their IT woes.
Mr Foddering says users find they prefer this to having to use the IT department.
When it comes to recruiting young talent, he says company research found that offering a choice of device was an important consideration to potential employees.

IT managers on BYOD

  • 52% accept some form of network access
  • 64% believe it is too risky to allow personal devices to be integrated
  • 49% believe the future of their organisation requires integration
  • 50% believe it can increase productivity
  • 82% have a policy in place regarding the use of personal devices at work
Source: Absolute Software
"We found globally that 40% of college students and 45% of employees would accept a lower paying job with a choice of device, than a higher paying job with less flexibility."
Absolute Software's Stephen Midgley agrees.
"We're actually hearing from our own customers, during the interview process, where potential employees are asking what kind of device they will be able to use to access the network."
He also stresses that companies need to consider the security of their networks and data.
"It's the new reality for organisations, and IT needs to find an effective way to securely manage these devices. What we've seen is a cultural divide between IT and the rest of the organisation.
"IT thinks about security, that's their job, the rest of the organisation doesn't."
Making secure behaviour the easiest option is the best way to get employees to cooperate, says Mimecast's Justin Pirie.
"Companies need to make sure they have the facilities to support the 'right' behaviour with the proliferation of devices.
"This has to mean that the 'right' behaviour also becomes the 'easiest' behaviour."
Broad appeal
It's not just the young that are pushing to use their own devices at work, according to VMware's Joe Baguley. The company is a virtualisation and BYOD specialist.
Horizon Mobile application VMware's Horizon Mobile application lets you run a virtual work phone within your personal phone
"It's definitely a trend that's increasing," he says.
"As technology is getting to more and more people, like my parents and my wife who are now using IT more than ever before and seeing what's possible.
"It's not just the under-30s turning up from university with their iPads and iPhones. People talk about the consumerisation of IT, the problem is that the users have turned into consumers. It's consumerisation of the users with IT departments struggling to keep up."
The company is in the process of launching Horizon Mobile, software that allows you to run both business and personal phones from one handset.
This means that should the phone be lost, or the employee leaves, any company data on the phone can be remotely wiped. The work phone can also be switched off leaving the personal phone still connected.
Another company which has seen BYOD policies increase over the last year is Good Technology.
Screenshot Good Technology lets people use their smartphones for business use, keeping the data separate
"If I go back 12 months we would have discussions about companies providing smartphones as an alternative to Blackberries, but they would still be owned and managed by the company," says Good's Andy Jacques.
"Now it's almost exclusively about BYOD."
The trend is powered not only by the growth in mobile devices, but by cloud computing, with companies able to buy ready-to-go virtual desktops.
Mr Jacques sees big advantages especially for small businesses.
"If I was a small business owner the last thing I would be doing would be buying employees phones and laptops," he says.
"I wouldn't put any servers in my office, I would put everything into the cloud, I wouldn't implement any software on the premises."
Bigger picture
According to Brian Gentile, CEO of business intelligence (BI) company Jaspersoft, the BYOD trend has been key in pushing consumerisation, and in pushing the uptake of business applications on personal smartphones and tablets.
The company has just launched its software as a mobile application.
"Recently [technology analysts] Gartner reported that by the end of 2013, approximately 33% of BI will be consumed from a mobile device, which is just remarkable given a couple of years ago the number was zero."
One thing seems sure: companies have to make decisions about how they are going to handle employee demands to use their own devices, or risk devices being used on the network without their knowledge.
Phil Lieberman of Lieberman Software certainly thinks so. He believes companies need to talk to their IT departments to find a solution.
"I guess that many chief information officers who approve employee device usage see this as a nice way to make their bonuses by further reducing costs, while the potential liabilities are above their pay grades.
"Perhaps corporate management believes that this is simply a way to get more out of their employees - a type of electronic leash - without having to pay the cost of the devices or service; all without considering the legal consequences."

German economy going into reverse in Q4 of 2011

From the BBC

The German economy shrank 0.2% in the final three months of last year.
Germany saw exports slow down as the debt crisis hit its European neighbours and their demand for German goods.

In France there was surprise growth at the end of last year, with the economy expanding by 0.2% in the fourth quarter.

The economy was boosted by healthy growth in exports and business investment, which will come as a boost to President Nicolas Sarkozy.

If he chooses to run again, Mr Sarkozy faces a national election in April.

'Better than feared'

For 2011 as a whole, the French economy grew by 1.7% and Germany 1.5%.
Greece may be burning. Growth may be slowing. But the recognised German barometer of hope over fear shows far more Germans looking on the bright side than those down in the dumps”

Economists forecast that Germany is likely to avoid that scenario and say the latest growth figures could have been worse.

"This is better than feared after retail sales and industrial production turned out badly in December. The decline is due to the euro crisis. It caused a drastic loss in confidence among companies and consumers." said Christian Schulz, an economist at Berenberg Bank.

"Action from the ECB and the government has restored confidence. There is hope that we will emerge quickly from the economic dip. We expect growth again in the second quarter at the latest, provided that the euro crisis remains under control." he said.

The French growth figures were better than forecast, with many analysts having expected the economy to have contracted in the fourth quarter.

Confidence in France was undermined in January when it lost its top-notch AAA credit rating, after Standard and Poor's downgraded the nation's debt.

At the time the agency blamed Europe's debt crisis and the failure of Europe's leaders to tackle the region's problems.

European growth rates

Country 4th quarter 3rd quarter 2011
Germany- 0.2%0.6%1.5%
France0.2%0.3%1.7%
Austria- 0.1%0.2%1.2%

HMRC launch new tax cheats initiatives

From HMRC web site

A new campaign will be launched by HM Revenue and Customs (HMRC) during the next year aimed at people who fail to make tax returns and who are liable to pay tax at the highest tax rates.
In two further campaigns, to be launched later in the year, the department will target tradespeople working in the home improvement market, and people who receive income from buying and selling goods direct to others, or are paid commission.
HMRC will use new technology to search the internet for information about specified, targeted people and businesses.
The new campaigns will focus on:

  • Missing returns. This will contribute to wider HMRC activity tackling failure to complete tax returns. It will initially focus on those who fail to complete tax returns and who are liable to pay tax at the highest rates.
  • Home improvement trades. This will build on campaigns aimed at plumbers and electricians, and will include several 100,000 tradespeople in construction and building work such as roofing, window fitting, bricklaying, carpentry and joinery.
  • Direct selling. This will target customers who ought to be paying tax on income they earn from buying and selling goods direct to others, or from the commission on these sales.

As with previous campaigns, the focus of the new campaigns will be on providing those in the selected groups, who may not be paying the tax they owe, a chance to put their affairs in order on the best possible terms.
Marian Wilson, of HMRC’s Risk and Intelligence, said:
“Most people pay their taxes in full and on time, so it is right that HMRC works hard to secure payment from those who have not come forward.
“Using new technology, we have been able to analyse returns to HMRC covering a range of taxes and to cross-reference these with other information to build a picture of where we believe we have taxpayers with missing returns.
“We will use the same technology to analyse information gathered to support the following two campaigns and for each campaign, after the opportunity has closed, we will use the information we have to pursue those who choose not to use the chances we provide to put their affairs in order.
“We are offering all the people targeted the opportunity to come forward. Penalties will be higher if we come and find people after the opportunity. A criminal investigation may also result. I therefore urge them to disclose unpaid tax voluntarily.”
Two campaigns that will be launched before the end of 2011/12 will focus on:

  • E-marketplaces. This will cover those who are using e-marketplaces to buy and sell goods as a trade or business and who fail to pay the tax owed. People who only sell a few items and who are not traders are unlikely to be liable to tax and will not be targeted by this campaign.
  • Electricians. This will build on HMRC’s plumbers’ campaign and give an opportunity to another group of tradespeople to come forward and declare unpaid tax.

More than £500m has been raised by HMRC from voluntary disclosures and a further £105m from follow-up activity. Previous campaigns have targeted offshore investments, medical professionals, plumbers, VAT defaulters and private tutors.
Information on campaigns for 2012, including how people can work with HMRC to influence their development, can be found at http://www.hmrc.gov.uk/ris/hmrc-campaigns.htm
Notes for editors
1. Private tutors who have registered for the Tax Catch Up Plan have until 31 March to tell HMRC what they owe and make arrangements to pay. Further details: http://www.hmrc.gov.uk/ris/tcup/
2. People who believe they need to make a disclosure and want to come forward now and voluntarily disclose can call 0845 601 5041.
3. Under the plumbers campaign nearly 600 people came forward to “notify” HMRC of their intention to declare unpaid tax, offering over £4m in unpaid tax. So far, nearly £4m has been paid and 10 plumbers have been arrested, with more arrests planned. In addition, more than 1,000 civil cases have been prepared.
4. All HMRC Campaigns provide opportunities for people to voluntarily put their tax affairs in order. They do this by identifying a group to target and gathering information and intelligence that can be used to encourage and influence that group to come forward. Once a campaign closes, HMRC then uses that same information and intelligence to follow up with action that can include criminal investigations, aimed at those who choose not to pay up.
5. For more information about campaigns http://www.hmrc.gov.uk/ris/hmrc-campaigns.htm
6. Follow HMRC on Twitter @HMRCgovuk

Tuesday 14 February 2012

UK inflation falls

From the BBC:

UK inflation rate falls to 3.6% in January

Pound notes The cost of living continues to rise, with prices increasing faster than wages
Inflation fell sharply in January as the impact of last year's VAT rise was no longer shown in the figures.
Consumer Prices Index (CPI) inflation in the UK fell to 3.6% in January, down from 4.2% in December, according to the Office for National Statistics (ONS).
Retail Prices Index (RPI) inflation - including mortgage interest payments - fell to 3.9% from 4.8%.
VAT went up from 17.5% to 20% in January 2011, pushing up the annual inflation rates that year as a result.
The drop brings CPI inflation to a 14-month low. However, the rate remains well above the Bank of England's 2% target.
The government said it expected the inflation rate to continue to fall this year.
"Inflation fell significantly in January for the second month in a row, which is good news for family budgets. The Bank of England and other forecasters expect inflation to keep falling through this year, providing additional relief," said a statement from the UK Treasury.
However, Labour argued that prices remained high.
"For ordinary families right up and down throughout the country, the fact is prices went up last year, they've stayed up... and incomes of course haven't risen at all," said shadow treasury minister Owen Smith.
In addition to the impact of VAT, smaller increases in the cost of commodities and oil than seen a year earlier also helped to bring the inflation rate down, according to the ONS.
The average price of petrol in January rose by 0.6p a litre, compared with a 5.4p rise last year.
Diesel was up 0.7p a litre, compared with a 5.8p rise in January 2011.
The month-on-month comparison showed small falls in the cost of clothing and footwear, furniture and household goods and transport whilst alchohol, household services and health rose slightly.
Analysts say CPI inflation could fall below the 2% target by the end of the year, driven by lower agricultural and commodity prices.
"Inflation expectations tend to follow actual inflation and, given that the CPI appears to be heading sharply lower, we expect inflation expectations to do likewise," James Knightley from ING bank.

Moody's downgrades UK outlook

http://www.bbc.co.uk/news/business-17021986

Of course what Ed Miliband and the BBC don't say is what the Moody's potential downgrade would have been if the Coalition Government hadn't embarked on a programme to slash the years of gross overspending that they inherited from the previous Labour Government.

Monday 13 February 2012

PAYE

From April 2012, HMRC can require employers to pay a security, where there is serious risk that they won’t pay over their PAYE tax deductions or NICs.
The new power will be targeted at employers who deduct money from employees’ pay packets, under the pretext of paying their employees’ income tax and NICs, but have no intention of paying it to HMRC. These employers often build up substantial PAYE and NICs debts, and ignore HMRC’s attempts to contact them. In many cases, the business becomes insolvent, to avoid tax, and sets up a new company soon after, to continue trading (known as a “phoenix company”).
This is an extension of a power that has already been successfully used for VAT, insurance premium tax and environmental taxes, and will not affect employers who have genuine payment difficulties.
The required security will usually be either a cash deposit from the business or director, or a bond from an approved financial institution that is payable on demand.
HMRC will calculate the amount of the security on a case-by-case basis, depending on the amount of tax at risk, the employer’s previous behaviour and other risks.
Businesses that fail to provide a security face a fine of up to £5,000, which will be enforceable by the courts.
More information on the new measure is available from HMRC.

PAYE

From April 2012, HMRC can require employers to pay a security, where there is serious risk that they won’t pay over their PAYE tax deductions or NICs.
The new power will be targeted at employers who deduct money from employees’ pay packets, under the pretext of paying their employees’ income tax and NICs, but have no intention of paying it to HMRC. These employers often build up substantial PAYE and NICs debts, and ignore HMRC’s attempts to contact them. In many cases, the business becomes insolvent, to avoid tax, and sets up a new company soon after, to continue trading (known as a “phoenix company”).
This is an extension of a power that has already been successfully used for VAT, insurance premium tax and environmental taxes, and will not affect employers who have genuine payment difficulties.
The required security will usually be either a cash deposit from the business or director, or a bond from an approved financial institution that is payable on demand.
HMRC will calculate the amount of the security on a case-by-case basis, depending on the amount of tax at risk, the employer’s previous behaviour and other risks.
Businesses that fail to provide a security face a fine of up to £5,000, which will be enforceable by the courts.
More information on the new measure is available from HMRC.

Treasury lambasted

The Treasury has come in for heavy criticism from a powerful, all-party committee of MPs which blasted the department for not ‘‘having a grip’’ on trends in key areas or any plans for managing them.
The Commons public accounts committee reported its alarm when the Treasury confessed it was "surprised" to learn that £10.9 billion of unpaid tax had been written off by HMRC in just one year.
Neither was the department apparently fully aware of the estimate until after it appeared in the Whole of Government Accounts (WGA) for 2009-10. It also had "no knowledge" of whether plans were in place to cut the taxpayer's massive £15.7 billion liability for clinical negligence claims, the Public Accounts Committee (PAC) said. More details are available from the PAC website.

Roofers and Builders to be target by HMRC

Roofers, window fitters, brickies, carpenters and joiners are among those set to be investigated.
Other targets include people who receive income from buying and selling goods direct to others, or are paid commission. Typically this will include those earning commission from catalogue sales and like.
New technology will be used to trawl the internet for offenders.
Like previous campaigns, the focus will be on offering those targeted a chance to put their affairs in order.
HMRC’s Risk and Intelligence spokeswoman, Marian Wilson, said: “Using new technology, we have been able to analyse returns to HMRC covering a range of taxes and to cross-reference these with other information to build a picture of where we believe we have taxpayers with missing returns.
“We are offering all the people targeted the opportunity to come forward. Penalties will be higher if we come and find people after the opportunity. A criminal investigation may also result. I therefore urge them to disclose unpaid tax voluntarily.”

Thursday 9 February 2012

Wednesday 8 February 2012

Take care when dismissing

http://www.bbc.co.uk/news/business-16662636

Ex Woolworths workers get £67m in compensation

Top 5 areas where businesses need HR advice

Top Five Reasons Why Clients Call Us For HR Advice
By Alan Price, Employment Services Director
The Peninsula Advice Services receives over 10,000 calls per week and I thought you may be interested to know the top five reasons why clients call us. Can I stress that if you are dealing with any of the below, or indeed any particular HR issue then it is vitally important that you call the Peninsula Advice Service on 0844 892 2772. My team will be happy to advise you, 24 hours a day. So here are the top five most sought after HR advice issues this week:
1. Conduct
2. Terms and Conditions
3. Redundancy
4. Absenteeism
5. Grievances

Sunday 5 February 2012

Builders make most mistakes on tax returns

Mistakes on tax returns are most likely to be made by builders, according to a survey of accountants by Bloomsbury Professional.
Taxi drivers (11%) were ranked second, while personal service contractors, such as IT consultants came third on 9%. However, 33% of builders, carpenters and plasterers were seen as by far the most incompetent tax returning trades.
The handy-man professions were seen as especially prone to errors due to their tendency to be paid in cash and have traditionally been considered problematic. In the past HMRC has even sent letters to homeowners who have had recent building work completed, in an attempt to gain a clearer picture of the business dealings of the cash-in-hand workmen.
Of the accountants polled, 4.3% even considered their fellow practitioners as highly likely to commit errors on the forms, putting accountants in the same bracket as buy-to-let investors and restaurateurs.

Review of HMRC powers

HMRC has updated its summary of the legislation arising from its review of powers, deterrents and safeguards (penalties, compliance checks, time limits and interest) and the date it comes into effect.
The Review of HMRC powers, deterrents and safeguards started in 2005. It is a programme of consultation and legislative change to provide a modern framework of law and practice for tax administration. It aims to secure the benefits of the merger of HM Customs and Excise and the Inland Revenue by aligning powers, deterrents and safeguards across the taxes and duties administered by HMRC, where it makes sense to do so.
The Review consults on parts of its work as they are developed, feeding the results into successive Finance Bills. Changes to legislation have been made in Finance Acts 2007, 2008, 2009, 2010 and 2011. The Review is consulting on proposals for inclusion in Finance Bill 2012 and for possible inclusion in Finance Bill 2013.
The updated summary is available from HMRC.

Seminal decision on LLP status

An important ruling on LLP liabilities has been made by the Court of Appeal (CoA) in an unfair dismissal claim being pursued against law firm, Lester Aldridge.
The judicial panel, chaired by family division president, Sir Nicholas Wall, ruled that an LLP member is not an employee.
It added that any decision on whether an LLP member should be classed as a partner depends on the LLP members’ agreement and whether the parties intended that the person should be a partner.

HMRC announce changes to Business Record Checks

HMRC has announced a fresh approach to its business records checks programme in 2012, following a review.
The review, which included discussions of the pilot programme with trade and professional bodies’ representatives it recommended that the checks are more targeted in future, linking to available education and support.
The pilot programme of business records checks (BRCs) began in April last year and involved checks by HMRC on the standard of small and medium-sized enterprises’ statutory business records. Up until 4 January 2012, 2,437 business records checks had been carried out. These found that 28 per cent of those businesses visited had some issue with their record keeping, and an additional 11 per cent had issues serious enough to warrant a follow-up visit.
HMRC will now postpone making any new business records check appointments until the revamped approach outlined in a report is launched early in the 2012/13 financial year. This will allow further consultation with representative bodies on the implementation of the recommendations in the review and on some details of the new approach. In the interim, HMRC will only undertake visits already booked, as well as follow-up visits to businesses that have already been identified as having seriously inadequate statutory records.

Fraud boomin in UK according to KPMG

It may be austerity Britain for most of us, but fraud is clearly a booming UK industry, up 150% to a record £3.5bn, according to KPMG’s latest Fraud Barometer report.
Now in its 25th year, the report reveals that scams cooked up by companies’ own management teams rocketed by 74% to £729m.
There were some 57 cases of purported fraud by management in 2011, worth £729m, up from £420m the previous year, although the number of cases remained broadly the same as in 2010.

Friday 3 February 2012

All change ahead

The European Commission’s proposals to reform statutory audit are up for debate. Here Susanna Di Feliciantonio takes us through the main points.

The publication of the European Commission’s proposals to reform statutory audit at the end of November marked a new phase in the policymaking process. The proposals, presented by internal market and services commissioner, Michel Barnier, are aimed at addressing “current weaknesses in the EU audit market, by eliminating conflicts of interest, ensuring independence… and by facilitating more diversity in an overly-concentrated market”. The package is a complex one, containing two legislative texts, a draft regulation focusing on public interest entities (PIEs) and an update of the 2006 Statutory Audit Directive. It comes with an impact assessment and an externally-contracted study. The European Parliament and the EU Council of Ministers must now work through the draft provisions and eventually reach consensus on final texts (via the co-decision process).

Undoubtedly, much attention has been centred on aspects relating to independence, competition and choice yet the package is even more far-reaching. A wide range of issues are addressed, including the role of the auditor and the audit committee, the internal organisation and governance of audit firms, and the responsibilities of national competent authorities and the European Securities Market Authority (ESMA).

As stated in ICAEW’s initial response to the draft legislation, while we do not agree with all the Commission’s proposals, we believe a number have merit and should be supported. Helping policymakers understand the possible consequences of eventual legislation on both the audit profession and the wider business community – looking also at how provisions will have to be implemented in practice – promises to be a key aspect of our ongoing engagement in Brussels and beyond.

Greater expectations

A key objective of the package is to “make clearer what an audit is and what should be expected of it”. The draft regulation, in particular, contains a number of provisions relating to the performance of the statutory audit, audit reporting and transparency reporting by auditors and audit firms. Some of these provisions may be in line with existing practices in different member states. The content of the public audit report, for instance, is expanded to include information on methodology, testing, materiality levels, key areas of risk of misstatement, fraud detection and the reasons for any qualified or adverse opinion. A longer and more detailed report is to be prepared for the audit committee and closer cooperation with supervisors is also set out.

The role of audit committees, to include at least two members with relevant experience, looks likely to be beefed up. According to the draft provisions, audit committees should have greater responsibility with regard to evaluating audit quality, assessing non-audit services provided by auditors, the selection and appointment of auditors and negotiation of audit fees. With audit committees only recently required by EU law (under the Statutory Audit Directive), the dissemination of best practice will be important to help bridge the gap between what they currently do and what they may have to do in future.

With a view to also facilitating the single market, the Commission has called for the EU-wide adoption of International Standards on Auditing (ISAs) and the introduction of passports to allow for mutual recognition of audit firms approved in one member state (with some safeguards). The approach taken towards the cross-border provision of services on a temporary or occasional basis is more in line with the principles behind the EU Recognition of Professional Qualifications Directive (which applies to accountancy and tax services, with little evidence of significant application to date). A voluntary pan-European audit quality certification is also proposed for firms carrying out audits of public interest entities (PIEs). It is to be delivered by ESMA.

Independence, competition, choice

Provisions relating to independence and market structure could have a substantial impact as currently drafted. Key are the requirements relating to rotation and the provision of non-audit services. PIEs would be required to change their auditor every six years, extended in some instances to eight or nine years (12 in exceptional circumstances) for PIEs opting for joint audit. A four-year cooling-off period is also introduced. Mandatory tendering on the basis of fair selection is also required when changing the auditor.

The list of prohibited non-audit services to PIE clients is also expanded. For some non-audit services, the audit committee or competent authority will be required to judge whether they may or may not be provided. This is in combination with a 10% limit (of the statutory audit fee) for related financial audit services. Moreover, the draft regulation would oblige audit firms generating more than a third of their annual audit revenues from large PIEs and belonging to a network with combined annual audit revenues in excess of €1,500m to focus on the provision of statutory audit and not undertake non-audit services. The Commission makes a number of additional proposals, such as relaxing audit firm ownership rules and banning third-party covenants in contracts that restrict choice to a Big Four firm. National competent authorities and ESMA are given responsibility to monitor developments in the respective national and EU markets for statutory audit of PIEs. ESMA must also prepare reports reviewing the impact of national liability rules on market structure. The six largest firms in each member state will be required to draw up contingency plans addressing possible threats to the continuity of their operations and provide information on the levels of liability for partners and the potential spread across the national, EU and international network.

SMEs and supervisors

Although the focus is on the implications of the package for large, listed companies, SMEs may also see changes ahead. The draft directive contains measures that would allow member states to apply auditing standards to the statutory audit of medium-sized companies in a way that is “proportionate to the scale and complexity” of their businesses.

The legislative proposals also address the question of supervision. Cooperation between competent authorities to ensure a robust system of public oversight will take place under the aegis of ESMA, which replaces the existing European Group of Auditors’ Oversight Bodies (EGAOB) – although the home state principle for direct regulation is underlined. ESMA is given responsibility for issuing guidelines on issues such as the content and presentation of audit reports, audit committee activities or the conduct of quality assurance reviews. Changes to the role of professional bodies are also proposed, removing delegated responsibilities with regard to oversight.

The debate ahead

Against a difficult economic backdrop, member states and MEPs will spend much of 2012 trying to agree final legislative texts – a process that looks likely to run into 2013. In the European Parliament, the Legal Affairs Committee and the Economic and Monetary Affairs Committee will be leading the deliberations with UK Conservative MEPs playing an important role. In the EU Council of Ministers it will fall to the Danish and Cypriot EU Presidencies to set the pace for negotiations and lead the search for compromise. In London, Brussels and elsewhere in Europe, ICAEW looks forward to sharing its insight and experience in the discussions ahead.

Susanna Di Feliciantonio, Head of EU public affairs, ICAEW

Thursday 2 February 2012

Charities Act 2011

The Charities Act 2011 had received Royal Assent. A key question for many of us is when do we have to start to refer to the new Act in our accounts and reports? We understand that Charity Commission guidance on the effective date of change is due to be published shortly and that the 2011 Act will apply to documents issued on or after 14 March 2012, including relevant reports issued after that date.


Financial Services Bill

The Government has published the Financial Services Bill which sets out the new financial regulation regime. Proposals see the Financial Services Authority (FSA) abolished and replaced with a Financial Policy Committee within the Bank of England, and two new regulators: the Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA).
The PRA will supervise the most complex financial firms in the UK, including banks and insurers. The FCA will regulate financial conduct across the sector, and deal with the prudential regulation of all financial services firms not covered by the PRA. The FCA will also take over responsibility from the Office of Fair Trading for consumer credit business.
The Bill is expected to receive Royal Assent by the end of 2012, with the new regime in place shortly thereafter

New Tax Disclosure Facility

As part of the Government's commitment to tackle fraud, HMRC's new Contractual Disclosure Facility (CDF) will be launched on 31 January 2012.
HMRC will contact a taxpayer, in writing, to inform them that they are suspected of serious tax fraud and offer them the opportunity to enter into a contract to disclose that fraud within 60 days. In return, HMRC will agree not to criminally investigate, removing the risk of prosecution by HMRC.
Taxpayers who are not under investigation but who want to admit to tax fraud may fill out a form to voluntarily request that HMRC consider their suitability for a CDF contractual arrangement.