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Debt
Banks have warned the government that HMRC “cannot be considered as sufficiently competent” to wield a new power that would allow the tax department to seize unpaid tax from people’s bank accounts. The measure risks falling foul of violating human rights law and would put vulnerable individuals at risk, according to the British Bankers’ Association. Budgeting of proposed direct recovery of debts has also been criticised, with the Chartered Institute of Taxation claiming the figures are too low and will mean inadequate safeguards against mistakes by the Revenue.
Financial Times; Times; Times
Anyone who has read Taxation over the past couple of months will know we believe the proposals for direct recovery of debts should be withdrawn and rethought. If you agree, please sign our very successful petition (more than 1500 signatures in two weeks), encourage your clients to do the same, use the social media hashtag #APowerToFar, and watch for further developments over the coming weeks.
Disclosure
Changes to HMRC’s Liechtenstein disclosure facility (LDF) – aimed at encouraging holders of offshore assets to come clean about unpaid tax – mean users of employers benefit trusts (EBTs) can no longer take advantage of the long-running initiative’s reduced terms and penalties.
Financial Times
It is hard to know exactly what HMRC and our political masters think the LDF is for. Sometimes, they give the impression it is for dealing only with undeclared money in Liechtenstein, when in reality it is the nearest thing we have had to a universal disclosure opportunity. Is it too cynical to suggest the pressure on EBTs to settle quickly has a lot to do with the patchy record HMRC have attacking them in the courts?
Property
Plans to levy capital gains tax on property owners who hold their homes through a company structure risk discouraging investment in the private rented sector, tax specialists and investors have warned.
Financial Times
The law of unintended consequences is never far away when anti-avoidance legislation is in point.
HMRC have stepped up its scrutiny of landlords, contacting buy-to-let investors the department suspects of avoiding or evading tax. A letter asks recipients to make contact with the Revenue to arrange their affairs – or run the risk of a large fine or a criminal investigation. An estimated 5,000 people have received the letters, which provide a 30-day window to respond.
Telegraph
As is invariably the case these days, HMRC start an initiative with an attempt to make taxpayers run their own investigation. It’s the equivalent of Bertie Wooster’s trick of getting power over someone by whispering, “I know your guilty secret”. The real test is what happens when those under suspicion ignore the invitation to come forwards. Does the Revenue have the resources to track down the guilty and separate them from those identified wrongly as suspect?
Inheritance tax
Inheritance tax (IHT) planning for all but the UK’s super-rich will become harder under HMRC proposals to stop people setting up multiple small trusts and introduce a single nil-rate band. The Revenue has also mooted a crackdown on IHT dodging that would see more information about avoidance arrangements fed to tax officials, who would also be able to levy fines for evasion of up to 200% of the tax due. Households paid more in IHT last year than at any other time since the recession struck in 2008, official figures show.
Financial Times; Times; Financial Times; Telegraph; Financial Times; Times
While the Rysaffe trick of setting up pilot trusts is well-known and has not been challenged by HMRC for a few decades, it is hardly surprising it is finally being tackled - and there is little justification for allowing it to continue.
Residence
British expatriates will be stripped of the right to use their personal tax allowance on income earned in the UK – such as through property rental – under government plans to restrict the allowance to taxpayers with a “strong economic connection” to the country.
Telegraph
It will be interesting to see whether the plans fall foul of EU rules by acting as an indirect restriction on free movement.
HMRC have unexpectedly withdrawn a concession to wealthy foreigners living in the UK, giving many less than two years to restructure their borrowing to avoid a large tax bill. The department has reversed the policy that allowed non-domiciled residents could use money held overseas as collateral to obtain a loan in this country without being subject to tax.
Financial Times
There is little doubt the concession is misused as a ‘back to back’ arrangement scarcely distinguishable from remittances, but there are also situations in which the security is not a disguised remittance. The Revenue’s change will have to include an exemption so that the amount ‘remitted’ by being used as collateral is not treated as remitted again if it actually comes into the country.
VAT
The government has scrapped rules that compelled small businesses to file VAT returns online, after they were found to have breached taxpayers’ human rights. Elderly and disabled people and taxpayers with no internet access will also be allowed to continue to submit their returns on paper.
Times
The Times overstates the case in the first few paragraphs, and explains only later that businesses will need to prove, on a case-by-case basis, that it is not practicable for them to file online.
