from A newsletter for proactive planning... In this edition... Making a voluntary disclosure if you have not told HMRC about tax that you owe Realistic scam letters – how to check if a letter purporting to be from HMRC is genuine Do I need to worry about IR35? What can HMRC do if you do not pay your tax bill? Restarting child benefit claims Tax Diary - October 2024 October 2024 Issue www.compassaccountants.co.uk
PAGE 2 Making a voluntary disclosure if you have not told HMRC about tax that you owe There are various reasons why a person may not have told HMRC about the tax that they owe, ranging from a simple oversight to the deliberate evasion of tax. Regardless of the reason, if you have failed to declare income and gains on which tax is due, it is always better to take action to correct the situation than to wait to be ‘found out’ by HMRC. There are various different ways in which a disclosure can be made, and the option that is right for you will depend on your particular circumstances. The digital disclosure service Individuals and companies can use the digital disclosure service to tell HMRC about errors that relate to income tax, capital gains tax, inheritance tax, corporation tax, National Insurance or the Annual Tax on Enveloped Dwellings. It cannot be used to tell HMRC about errors relating to VAT. The service can be used regardless of whether the error arose despite taking reasonable care, as a result of carelessness or because of deliberate actions. There are various steps to follow. The first step is to notify HMRC that you wish to make a disclosure via the digital disclosure service (see www.gov.uk/guidance/tell-hmrc-about-underpaid-tax-fromprevious-years). At this stage it is not necessary to provide details of the income or gain. After making your notification you will receive a unique disclosure reference number (DRN) and a payment reference number. The next stage is to make the disclosure. This can be done once you have the DRN, and must be done within 90 days of the date on which HMRC acknowledged your notification. You will also need to calculate what you owe, and it is advisable to take professional advice. You will also need to work out the interest and penalties that are due. HMRC have an online calculator which can be used for this purpose. Interest is charged from the date that the tax was due to the date that it was paid. The number of years covered by the disclosure would depend on the reason for the error – if you took reasonable care, the maximum period HMRC can go back is four years, if CONT ON PG 3
PAGE 3 you were careless, it is six years, but if you deliberately misled HMRC, they can go back 20 years. As part of your disclosure you will need to make an offer to HMRC. Payment should be made when you submit your disclosure using the payment reference issued by HMRC. If HMRC are satisfied that you have made a full disclosure, they will accept it. They may undertake further checks before accepting the disclosure. Where a disclosure is accepted, HMRC will send a letter of acceptance, which together with your offer letter forms a binding contract. If the disclosure is found to be incorrect or incomplete, it will not be accepted, Disclosures are unlikely to be accepted if they are made after HMRC have opened an enquiry or a compliance check. HMRC will contact you if they cannot accept the disclosure. Where this is the case, they may seek higher penalties or, in cases of fraud, consider a criminal investigation. The contractual disclosure facility The contractual disclosure facility (CDF) should be used where a disclosure is being made because you deliberately failed to tell HMRC about tax that you owe. This facility should only be used to admit tax fraud – it should not be used if you made an error despite taking reasonable care or you were careless. If HMRC suspect you of tax fraud, they may offer you a contract through the CDF. Specific campaigns From time to time, HMRC run specific campaigns related to the non-disclosure of a particular type of income. Details of specific campaigns can be found on the Gov.uk website. For example, HMRC have a specific form for telling them about undeclared sales arising from misuse of your till system (see www.gov.uk/guidance/make-a-disclosure-about-misusing-your-till-system).
PAGE 4 Realistic scam letters – how to check if a letter purporting to be from HMRC is genuine Scammers are becoming increasingly adept at fooling people and a favoured tactic is a letter, a text or an email purporting to be from HMRC, often promising a tax refund in exchange for personal and financial data. During the summer, many taxpayers received a very convincing scam letter which appeared to be from HMRC, seemingly from the Individuals and Small Business Compliance scheme. The letter asked the recipient to provide business bank statements, the most recent set of accounts, VAT returns in PDF format for the last four quarters and a clear photo of either a passport or a driving licence for all the directors for ‘identification purposes’, and for them to email the information to companies-review@hmrc-taxchecks.org. The letter warned that if the information was not provided, they would ‘conduct an investigation and possibly freeze any business activity’ until the investigation is complete. The letter had the look and feel of a genuine HMRC letter, adopting a similar format and font. It is easy to see why people would be duped, and the threat of having their business assets frozen is enough to panic many people into complying. So, if you receive a letter which appears to be from HMRC, what can you do to check its authenticity? The first point is to consider what is being asked and why. There are some red flags in the letter. Firstly, the unique taxpayer reference (UTR) quoted is only six digits, whereas a UTR is ten digits. It is always prudent to check that the UTR quoted on a letter is correct. Further, it is sensible to ask why HMRC would ask for copies of the last filed accounts and VAT returns, which are easily available to them. The request to send photos of a passport or driving licence should also be viewed with suspicion. Finally, the email address to which the documents are to be sent is not a genuine HMRC email address, which would end in ‘gov.uk’. Genuine HMRC contact HMRC produce regular updates to help taxpayers gauge whether a communication that appears to be from them is indeed genuine. The guidance can be found on the Gov.uk website. Typically it will list recent communications from HMRC, so the taxpayer can check whether the communication they have received is listed. HMRC will contact taxpayers by letter, text and email, and sometimes will use more than one communication channel. Stay alert It is important to be alert to the possibility that a communication which seems to be from HMRC may be a scam. Particular care should be taken as regards clicking on links included in a text or an email. While HMRC may include links to information on the Gov.uk website or to a webchat, other links should be viewed with suspicion – if in doubt, don’t click on the link. HMRC will never send links which offer a tax refund on the provision of personal or financial details, nor will they ask for personal or financial information by text. Reporting scams Scam texts can be forwarded to 60599. Suspicious emails, texts, letters and phone calls can also be reported to HMRC by emailing them at phishing@hmrc.gov.uk.
PAGE 5 Do I need to worry about IR35? If you provide your services personally to an end client through your own limited company or other intermediary, you may fall within the scope of either the off-payroll working rules or the anti-avoidance rules known as ‘IR35’. Both aim to redress the tax and National Insurance balance where the worker would be an employee if they provided their services directly to the end client; however, the responsibility for applying the rules differs. Under the off-payroll working rules, it is the engager who must decide if they apply, whereas the responsibility for assessing whether the engagement falls within the IR35 regime, and applying the rules if it does, falls on the worker’s personal service company or other intermediary. IR35 or off-payroll working? The nature of the end client determines which set of rules must be considered. Where the end client is a large or medium-sized private sector organisation or one in the public sector and they engage workers who provide their services through an intermediary (such as a personal service company), they will need to determine whether the worker would be an employee if they provided their services directly. Where this is the case, the end client (or fee payer where different) must deduct tax and National Insurance from payments made to the worker’s intermediary, rather than making the payments gross. Here, it is the end client who is responsible for applying the rules, not the worker’s personal service company. to whom you provide your services via your personal service company or other intermediary is a small private sector organisation. This will be the case if the organisation does not meet two or more of the following: ·Annual turnover of more than £10.2 million ·Balance sheet total of more than £5.1 million ·More than 50 employees. Often, particularly at the smaller end, it will be apparent. If not, you should check with the client. Complying with IR35 If your end client is a small private sector organisation, you will need to determine whether the engagement falls within the scope of the IR35 rules. The first stage is to assess whether you would be an employee if you provided your services to the client directly. You can use HMRC’s Check Employment Status for Tax (CEST) tool to do this (see www.gov.uk/guidance/check-employment-statusfor-tax). If the answer is yes, you will need to work out the deemed employment payment and calculate the tax and National Insurance due on this, and report it to HMRC by 5 April at the end of the tax year. By contrast, small private sector organisations do not need to worry about whether an engagement falls within the scope of the off-payroll working rules. Instead, the onus falls on the worker’s personal service company to determine whether the engagement is within IR35. Know your end client In order to ascertain whether you need to consider the IR35 rules, you need to know whether the client CONT ON PG 6
PAGE 6 What can HMRC do if you do not pay your tax bill? HMRC have a range of powers at their disposal to collect unpaid tax. If you are struggling to pay a tax bill, or know that you will not have the funds available to meet an upcoming bill, it is better to take action than to ignore the problem and hope it will go away – it won’t. Interest will be charged on tax paid late, and late payment penalties may also apply. Set up a Time to Pay arrangement Rather than paying your tax bill in one hit, you may be able to set up a Time to Pay arrangement and pay in instalments. Depending on your circumstances, you may be able to set this up online. If not, you can call HMRC to discuss your options. Although interest will be charged, setting up an instalment plan will save late payment penalties. Further details on setting up a Time to Pay arrangement can be found on the Gov.uk website at www.gov.uk/difficultiespaying-hmrc/pay-in-instalments. HMRC visits If you have unpaid tax and a Time to Pay arrangement is not in place, HMRC will try and contact you first to discuss options for settling the bill. However, if you do not respond and do not pay what you owe, an HMRC officer may visit you at your home or business premises. At the visit they will discuss the situation with you and try and agree a plan for settling the debt, either in full or in instalments. The HMRC officer will be able to take card payments during their visit. Debt collection agencies HMRC may also pass the debt to a debt collection agency to collect on their behalf. A debt collection agency may contact you by letter or text or by phone, but they will not visit you. You can pay the debt collector what you owe. You can also discuss using a Time to Pay arrangement to settle the debt. Adjusting your tax code If you pay tax under PAYE, HMRC may be able to adjust your tax code to collect the debt. Taking possessions to cover the debt If neither HMRC nor an appointed debt collection agency CONT ON PG 7
PAGE 7 have been able to collect the debt, HMRC may look to take possession of your goods to cover the debt. They will warn you before they do this and offer you the opportunity to settle the debt first. A formal notice of enforcement will be issued, for which there is a charge. An HMRC officer will visit you and ask you to pay the debt. If this is not done, they will either take possessions there and then to cover the debt or ask you to sign an agreement, which will include a deadline by which the debt must be paid. If the tax debt is not paid by the deadline, the goods will be removed and sold to clear the debt. You will be charged for this. If the amount realised from the sale of the goods is less than the tax debt, you will be liable for the difference; if it is more, you will be paid the excess. HMRC will not take possessions that are essential for your security and wellbeing. Court proceedings HMRC may use court proceedings to recover the debt through charging orders, attachment of earnings orders, third party debt orders or from pension payments. Insolvency Where all other options have been exhausted, HMRC may apply to the courts to make a person or company insolvent. Restarting child benefit claims Many parents who fell within the ambit of the High Income Child Benefit Charge (HICBC) opted not to receive child benefit, rather than to receive it and pay it back in full in the form of the charge. However, changes to the HICBC which came into effect from April this year mean that some parents who previously lost all their child benefit to the charge will now be able to retain some or all of it. Where this is the case, they will need to restart their child benefit payments so that they do not lose out. Changes to the HICBC Prior to 6 April 2024, the HICBC applied where a child benefit claimant and/or their partner had adjusted net income of more than £50,000 a year. The charge was equal to one per cent of the child benefit for the year for every £100 by which adjusted net income exceeds £50,000. Once adjusted net income reached £60,000, the charge was equal to the child benefit for the year. From 6 April 2024, the HICBC applies where the claimant and/or their partner have adjusted net income of more than £60,000 a year. The charge is equal to one per cent of the child benefit for the year for every £200 by which adjusted net CONT ON PG 8
PAGE 8 income exceeds £60,000. Once adjusted net income exceeds £80,000, the charge is equal to the child benefit for the year. Where both the claimant and their partner have adjusted net income in excess of the trigger threshold, the charge is levied on the person with the higher adjusted net income. Impact on child benefit It is always important to claim child benefit to preserve the associated National Insurance credits, particularly where the claimant will not pay sufficient National Insurance contributions for the year to be a qualifying year. However, where the charge is equal to the child benefit for the year, it may be preferable to opt not to receive the child benefit than to receive it only to repay it in the form of the HICBC. For 2023/24 and previously, where the person liable for the charge had adjusted net income of £60,000 or above, the charge equalled the child benefit for the year. Consequently, a decision may have been made not to receive the benefit. However, as a result of the changes to the HICBC thresholds from April 2024, the charge will only be equal to the child benefit for the year once adjusted net income reaches £80,000. As a result, where adjusted net income is £60,000, the HICBC would be 100% of the child benefit in 2023/24, but in 2024/25, there would be nothing to pay. Similarly, where adjusted net income is between £60,000 and £80,000, the charge would be equal to 100% of the child benefit in 2023/24 but less than 100% of the child benefit in 2024/25. Claimants who had opted not to receive child benefit and either they or their higher earning partner has adjusted net income of at least £60,000 but less than £80,000 will now be able to retain some or all of their child benefit. Consequently, they should restart their payments so that they do not lose out. It is important to do this without delay as it can take up to 28 days before you will receive your first payment. The Child Benefit Office will let a claimant know in writing whether they will receive backdated payments and, if so, how much. Payments can be restarted by using the online service or by completing the online form. Alternatively, HMRC can be contacted by phone on 0300 200 3100 or by post by writing to them at the following address: HM Revenue and Customs – Child Benefit Office PO Box 1 Newcastle upon Tyne NE88 1AA.
PAGE 9 TAX DIARY OCTOBER 1 October 2024 – Due date for Corporation Tax due for the year ended 31 December 2023. 19 October 2024 – PAYE and NIC deductions due for month ended 5 October 2024. (If you pay your tax electronically the due date is 22 October 2024.) 19 October 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2024. 19 October 2024 – CIS tax deducted for the month ended 5 October 2024 is payable by today. 31 October 2024 – Latest date you can file a paper version of your 2023-24 self-assessment tax return. For further information on any of the stories in this month’s newsletter, or for any other matter that Compass Accountants can assist you with, please contact us on 01329 844145 or contact@compassaccountants.co.uk To subscribe to the newsletter, so that each edition is delivered to your inbox, go to www.compassaccountants.co.uk and add your contact details. Compass Accountants, Venture House, The Tanneries, East Street, Titchfield Hampshire. PO14 4AR
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