Thursday, 6 June 2013


Dear Anthony

Welcome to the Exceed monthly newsletter.

PAYE tax refunds and arrears
Tribunal - VAT default surcharge
Tribunal - VAT on helicopters
Real Time Information update
Fraudulent tax credit emails
Offshore tax evasion
Second list of deliberate tax defaulters published
HMRC launches new taskforces
PAYE tax refunds and arrears Income Tax

Annual reconciliations of PAYE for the tax year 2012/13 are being issued to some taxpayers using the P800 form. The form shows HMRC’s tax calculations in respect of the tax year ending 5 April 2013. This form is sent to taxpayers after HMRC have received details of the salary, pension and tax paid for each individual from employers and pension providers. HMRC use this information to ensure the correct amount has been paid.

In the majority of cases taxpayers that pay tax through the PAYE system will have paid the correct amount of tax. However, if too much or too little tax has been paid, taxpayers will be sent a P800 form.

Taxpayers that have paid too much tax, will be sent a cheque, in most cases, within 14 working days from the receipt of a P800 Tax Calculation. Those that have paid too little tax will in most cases have the underpayment collected automatically through their 2014-15 annual tax code over 12 months. Where this is not possible HMRC will contact taxpayers to discuss the available options to pay the tax outstanding. The recovery of tax underpaid can usually be spread over longer periods in cases of financial hardship.

Any taxpayer that receives a P800 form should check that the figures quoted are correct.

Tribunal - VAT default surcharge Value Added Tax

A taxpayer appealed against default surcharges levied by HMRC. A default surcharge is a penalty levied on businesses that submit late VAT returns or late payments. VAT registered businesses are required by law to submit their return and make sure that payment of the VAT due has cleared to HMRC’s bank account by the due date.

The defaults related to late payments of VAT beginning 2008 and were contested by the taxpayer who explained that there had been issues with HMRC and its predecessor body HM Customs & Excise (HMCE) dating back to a VAT Tribunal decision of April 2001. In fact the taxpayer had originally defaulted on a VAT payment as a result of burglaries at their business premises in 1993.

The Tribunal accepted that there has been a long history of incompetence, mismanagement and unlawful acts on the part of HMRC and its predecessor body HMCE and that issues between the taxpayer and HMRC had never been fully resolved. It was also noted that due to an upturn in business between 2001 and 2007 most VAT returns had been filed and VAT paid on time.

The recession of 2008 resulted in further late payments of VAT which the taxpayer contended was 'due to the cumulative effect of the previous 15 years’ financial damage, ultimately attributable to HMRC’s  mistakes, incompetence and worse over the intervening period.'

There was no dispute as to the quantum of the calculation of the default surcharge, the appeal rested on whether the taxpayer had a reasonable excuse for late payments of VAT. However, the Tribunal, whilst accepting that the taxpayer had had a raw deal in their dealings with HMRC, the appeal was ultimately dismissed on the basis that the Tribunal could not accept that earlier problems were sufficiently linked to the defaults beginning in early 2008.

Tribunal - VAT on helicopters Value Added Tax

The VAT rules, which allowed for full VAT recovery on the purchase of certain business assets used for both business and private or non-business, changed on 1 January 2011. Prior to that date businesses using the Lennartz mechanism could opt to recover all the input tax (subject to any partial exemption restriction) on the purchase of immovable property, boats and aircrafts up-front and make subsequent output tax adjustments to reflect any private or non-business use.

The change removes a significant cash-flow benefit for many businesses that may have benefitted from using the Lennartz mechanism.

A recent Tribunal case examined the Lennartz mechanism after HMRC issued an assessment in September 2010 relating to the VAT accounting periods for the quarters ending 09/06, 03/07, 09/07 and 12/08. The assessment related to the recovery of input tax allegedly over-deducted in respect of the purchase and maintenance of a helicopter by the taxpayer.

Ultimately, the Tribunal decided that the taxpayer could not rely on the Lennartz argument to justify its full recovery of input tax but it did accept that the purchase of the helicopter was for business purposes and therefore the taxpayer's appeal was allowed. In this case any private use of the helicopter had been invoiced by the company at normal commercial rates.

Real Time Information update Payroll

How are you coping with the new online filing of payroll information?

The introduction of the new system where HMRC collect Real Time Information (RTI) for PAYE has begun. The changes take effect from an employer's first payday on or after 6 April 2013 unless a later starting date has been agreed. The RTI system involves employers sending HMRC information about tax and other deductions each time a payment is made as part of the payroll process, rather than at the end of the year as was previously the case.

HMRC have confirmed that over one million employer PAYE schemes have started to use the RTI system since it was launched last month. Commenting on the announcement, Ruth Owen, HMRC’s Director General Personal Tax, said:

'RTI is bringing PAYE into the 21st century, and it is amazing that we have reached the one million mark in less than a month. This is at the top end of our expectations. However, we’re not complacent and are carefully monitoring submissions, but so far things are going well. We have had lots of feedback from many employers saying that RTI is easy to use. We know it will take time before all employers adapt to RTI, but any who haven’t started reporting in real time should do so quickly. All the help they need is on HMRC’s website.'

Employers and pension providers that have not yet begun reporting in real time are reminded that they are required to go through a payroll alignment process to check that their payroll records are complete and accurate. According to research undertaken by HMRC, over 80% of data issues are a result of incorrect information about an individual's name, date of birth or National Insurance number.

Employers also need to ensure that they are properly prepared to provide PAYE information in real time. This includes considering the available payroll software options or updates required, developing proper procedures to capture all the necessary information and preparing contingency plans in case of computer / internet issues.

We would be very happy to talk with any employer that is struggling to meet the demands of this new system.  All Exceeds clients have now been moved on to the RTI systems

Fraudulent tax credit emails Tax credits

HMRC is warning of new fraudulent emails being sent to taxpayers. The emails take advantage of the upcoming July 31 deadline for submitting tax credits renewal information. The fraudulent emails inform recipients that they are due a tax rebate, and provides a click-through link to a replica of the HMRC website.

These are not genuine HMRC messages and should be disregarded. It is a 'phishing' exercise that uses bogus e-mails and websites to trick taxpayers into supplying confidential or personal information. The 'phishing’ emails are being sent from inside the UK and around the world. The emails often start with phrases which alert taxpayers to the fact that they are due a refund of tax.
During last year’s tax credits renewals period almost 22,000 phishing emails were reported to HMRC. Although many websites were closed down during that time others continue to spring up in their place.

In a recent statement, HMRC’s Director General of Benefits and Credits, said:
'HMRC will never ask you to disclose personal or payment information by email. We are committed to your online security but the methods fraudsters use to obtain information are constantly changing, so you need to be alert. Anyone who receives this type of email should send it to '.

Any of our readers who are unsure as to the authenticity of any email purporting to be from HMRC should avoid clicking on any links until satisfied that the email is legitimate.

Offshore tax evasion Overseas tax issues

UK tax authorities have recently announced that they have been working with the United States and Australian tax administrations (the IRS and ATO) to investigate over 400 gigabytes of data as part of global efforts to target offshore tax avoidance and evasion. The data is still being analysed but it is thought that it will reveal the use of complex offshore structures by wealthy individuals and trusts in territories including Singapore, the British Virgin Islands, the Cayman Islands, and the Cook Islands.

HMRC’s press release reveals that 100 taxpayers have been identified who are under investigation for offshore tax evasion as well as more than 200 UK accountants, lawyers and other professional advisors who advise on setting up these structures. HMRC is urging UK residents with complex offshore arrangements to review the structures and to come forward if there are tax irregularities to be disclosed. Voluntary compliance can result in significantly lower penalties than would otherwise be the case.

Commenting on the announcement, Jennie Granger, HMRC Commissioner and Director General for Enforcement and Compliance said:

'Working with the international tax community to pursue offshore evasion is another important step in closing the net on tax evasion. There is nothing illegal about an international structure, especially in a globally integrated economy and these arrangements may be perfectly legitimate and may already have been declared to HMRC. However they may involve tax evasion, avoidance or other serious offences by taxpayers. What has to stop is using offshore structures to illegally hide assets and income'.

Second list of deliberate tax defaulters published General

HMRC have published a second list of deliberate tax defaulters. The list includes 15 individuals, businesses and companies and the amounts of tax on which penalties are due and the amount of penalties charged.

A deliberate defaulter is a person who incurs a relevant penalty for one of the following:

  • An inaccuracy in a return or document for a tax period beginning on or after 1 April 2010.
  • A failure to comply with certain obligations, such as the obligation to notify HMRC of a liability to tax.
  • A VAT or excise wrongdoing that occurred on or after 1 April 2010.

The legislation that allows HMRC to publish details of deliberate defaulters is contained in Section 94, Finance Act 2009. Taxpayers who make unprompted disclosures or a satisfactory fully prompted disclosure will not be affected.

The measure affects the following groups of taxpayers:

  • Taxpayers (individuals, businesses and companies) who are penalised for deliberately understating tax due, or overstating claims or losses, of more than £25,000. 
  • Taxpayers who are penalised for deliberately failing to notify HMRC when required to do so, leading to a loss of tax of more than £25,000. 
  • Taxpayers who are penalised for deliberately committing certain VAT and excise wrongdoings, leading to a loss of tax of more than £25,000.
HMRC launches new taskforces General

HMRC taskforces are comprised of multiple teams from across HMRC including special investigations, local compliance and criminal investigation units for targeting specific sectors and locations where there is a high risk of tax evasion.

The taskforces use local knowledge and risk profiling to help create a list of businesses to target. The taskforces also use special software to uncover business areas where tax evasion is common place as well as to target specific businesses.

New specialist taskforces have recently been launched to target the following sectors:

  • Londoners fraudulently claiming VAT repayments.
  • The restaurant trade in Northern Ireland.
  • The holiday industry in East Anglia.

The launch of the new taskforces are part of the Government’s £900m investment to tackle tax evasion, avoidance and fraud. HMRC aim to raise an additional £7bn each year by 2014/15 from this investment. The taskforces are part of HMRC’s wider remit to tackle evasion and avoidance which includes targeted campaigns including the recently launched tax return initiative.



Best wishes,

The Exceed Team

'In preparing and maintaining this newsletter every effort has been made to ensure the content is up to date and accurate. However, laws and regulations change continually and unintentional errors can occur and the information may be neither up to date or accurate. Exceed CA Limited makes no representation or warranty (including liability towards third parties), express or implied, as to the accuracy, reliability or completeness of the information published in this newsletter. The articles shared with you in this email are intended to inform rather than advise. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.