The View from No 50

 

 

 

 

September 2009

K P Bonney & Co

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby Road  Menston

Ilkley  LS29 6JA

Tel:  01943 870933

Fax:  01943 870925

Email:  keith@kpbonney.co.uk

www.kpbonney.co.uk

 

 


 

NEW OFFSHORE DISCLOSURE OPPORTUNITY

Following the 2007 disclosure opportunity, under which taxpayers with undisclosed income from offshore bank accounts were encouraged to disclose and pay tax, interest and a low fixed penalty, HMRC has announced it will be conducting a similar exercise between
1 September 2009 and 12 March 2010.


The format is similar to the previous opportunity.  However, those who were written to during the 2007 exercise and who chose not to disclose then and decide to do so now will suffer a penalty of 20% of the outstanding tax. The 2007 initiative targeted the five major retail banks - Barclays, HSBC, HBOS, Lloyds and RBS.

For those disclosing for the first time who had not previously been contacted by HMRC, the penalty will be 10%. The details are:

The initial disclosure must be made between
1 September 2009 and 30 November 2009 for those providing a paper notification.

• For those providing an electronic notification, the time period is
1 October 2009 to 30 November 2009.

 

• Disclosures may then be made:

 

- On paper from 1 September 2009 to 31 January 2010

- Electronically from 1 October 2009 to 12 March 2010

• Once the disclosure window closes on 12 March 2010, those taxpayers who have not come forward but are found to have unpaid tax liabilities will face penalties of at least 30% rising to 100% of the tax evaded.  They also run the risk of criminal prosecution.

 

• The disclosure should include all undisclosed sources and not just the offshore sources, otherwise it will not be considered to be complete and the taxpayer may be open to a higher level penalty or even prosecution.

• Full step by step procedures for disclosure will appear on the HMRC website (www.hmrc.gov.uk) on
1 September 2009.

It should be noted that, whilst HMRC had only limited information from five banking sources for the last disclosure facility, they have secured information from a significant number of other banks for the New Disclosure Opportunity (NDO).

After HMRC have received the initial notification, the disclosure report would include:

• A summary of all tax and/or duties, interest and penalty due

 

• Details of offshore bank accounts relevant to the disclosure and/or open at 5 April 2008.

• Details of offshore assets held at
5 April 2008

An offer to pay

 

• A declaration that the disclosure is correct and complete

• Payment

 

HMRC states that the disclosure is not complete and can not be accepted until and unless the amount disclosed has been paid. They also state that this will be the last disclosure opportunity of its kind.

 

It should be noted that, whilst HMRC had only limited information from five banking sources for the last disclosure facility, they have secured information from a significant number of other banks for the NDO.

 

Interestingly, the current HMRC announcement does not indicate how far back the disclosure should go, however, the maximum number of years HMRC can go back is 20 under current legislation.

Our Advice:  If you have undisclosed income you should think seriously about making a disclosure under the NDO.  The consequences will be much harsher if you leave it to HMRC to make their own investigations later.  We dealt with a handful of cases under the first disclosure opportunity.  Please get in touch if you need help with the New Disclosure Opportunity.

 

 

FOOD AND DRINK FOR THE SELF EMPLOYED

 

For so long as the self employed have been charged to income tax on their profits they have been denied tax relief for the cost of meals taken whilst travelling.  Actually, that is not quite true.  They have been able to claim for the cost of a meal where they have taken it with their accommodation.  But for the cost of free-standing meals and refreshments the tax deduction has been strictly verboten.

 

The reason the self employed couldn’t claim for the cost of a meal whilst away travelling was the same as the reason they couldn’t claim for the cost of a meal taken at home.  They eat to live, not to run a business.  Why should the general body of taxpayers subsidise the cost of their eating?

 

This long standing rule changed on 6 April this year.  From that date the self employed can claim for ‘any reasonable expenses’.  The relief applies where the trade is itinerant or where the trader only travels occasionally to the place in question for business purposes and the journey does not form part of the trader’s normal pattern of trading.

 

Whether you view this change as a good thing or a bad thing probably depends on whether you are self employed or not.

 

Our Advice:  In the past you may not have bothered to obtain receipts for or to record your expenditure on meals and refreshments whilst away on business.  From now on you should do so as you will be able to claim tax relief for reasonable expenses.

 

 

ALL THE GOOD PEOPLE HAVE LEFT

 

Explaining why it would take two and a half months to return to court with a reasoned case the barrister for HMRC stated they would need to ‘find the right people’.  Lord Justice Moses, one of the judges hearing the case commented that bringing the case back to court within this timescale would itself be a challenge for HMRC because since the 2005 merger ‘all the good people’ in the Revenue had left.  

 

When the Inland Revenue and Customs and Excise merged in 2005 there was set in place a program of early retirements and reorganisations the effect of which has been to make the combined H M Revenue & Customs so efficient it doesn’t have the staff it needs to carry out the tasks it is supposed to do.

 

HMRC is relying on its remaining staff to work overtime in order to keep the wheels turning.

 

According to the Public and Commercial Services Union there is presently £25.8 billion of taxes going uncollected.

 

The Institute of Chartered Accountants in England and Wales commented “The tax profession is fed up with the Revenue’s platitudes about how its reorganising is for the better.  That may come true but in the meantime the situation is dreadful.”   We agree.

 

The great majority of UK taxpayers do the right thing and pay their taxes on time.  If the perception grows that HMRC doesn’t have the resources to collect outstanding taxes the danger is that hitherto honest taxpayers might decide to stop paying.

 

It is vital the government commits the necessary resources to tax collection and to recruiting and retaining the staff it needs to get the job done.  Doing a job on the cheap may satisfy short term Treasury targets but what we need are fully functioning public services.  Otherwise we really are going to hell in a hand cart  

 

Oh no!  I have gone all Daily Mail!  Time to stop.

 

 

BEACAUSE I’M WORTH IT

 

A footballer, a financial genius, a religious leader and a student are on board a stricken aircraft.  They discover there are only three parachutes.  The footballer leaps up and says: “I make millions of pounds a year because I am so talented and adored by my fans.  They couldn’t bear to lose me.”  He grabs a parachute and jumps out.  Then the fund manager stands up and says “I am a financial genius.  I manage millions of pounds of investors’ money.  They can’t afford to lose me.”  He grabs a parachute and jumps out.

 

The religious leader turns to the student and says “I have enjoyed the true riches of spiritual enlightenment.  You take the parachute.”  The student replies “Hey, no worries man.  That football wizard jumped out wearing my rucksack.”

 

 

Copyright:  K P Bonney & Co LLP 2009.  All rights reserved.  No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers.  Disclaimer:  The publishers have taken all due care in the preparation of this publication.  No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.

 

 

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