Data published by law firm Pinsent Masons has suggested that government tax investigations into large businesses are taking ‘three and a half years’ to complete.
According to the law firm, HMRC’s litigation and settlement strategy makes it difficult for government investigators to settle for less than the full amount.
Commenting on the issue, a spokesperson for HMRC said: ‘The tax we collect funds the UK’s vital public services. We’ve secured over £62 billion in additional tax revenue from large businesses since 2010 – tax that would otherwise have gone unpaid.
‘Over 85% of our investigations conclude within 18 months, but some cases are more complex and so will take longer to resolve and even require us to litigate.’
However, experts argue that tax investigations are often ‘very disruptive’ for businesses.
‘HMRC’s inflexible approach to tax avoidance is driving delays as it frequently aims to win every point against the business,’ said Jason Collins, Partner at Pinsent Masons.
‘HMRC’s latest disclosure facility shows that HMRC is clamping down on what it views as businesses diverting profits from the UK through aggressive, out-of-date or erroneous transfer pricing.’
HMRC has launched a new consultation on how the administration and collection of Insurance Premium Tax (IPT) can be ‘modernised’.
The consultation also aims to review the extent to which there are emerging practices leading to ‘unfair tax outcomes’. HMRC has stressed that the consultation focuses on the operation of IPT, and does not, therefore, consider the current rates of IPT nor the current exemptions to IPT.
HMRC’s consultation document states: ‘We have been made aware of business practices involving administration and arrangement fees which may be leading to unfair tax outcomes in the insurance industry.
‘This involves the artificial manipulation of insurance and broker structures to create different tax outcomes. IPT is chargeable on the gross premiums, whereas fees are not subject to IPT or VAT.’
HMRC proposes extending the scope of IPT to include administration fees, in order to ‘align their treatment with commission’.
The consultation document can be viewed here. The closing date for comments is 17 July 2019.
On 1 April, the government’s Making Tax Digital for VAT (MTD for VAT) initiative came into effect.
Businesses which have a taxable turnover above the VAT registration threshold (currently £85,000) are now required to comply with MTD for VAT. As part of the initiative, firms must keep some records digitally, using ‘functional compatible software’. This means a ‘software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)’.
Commenting on the scheme, Mel Stride, Financial Secretary to the Treasury, said: ‘Delivering MTD for VAT is the first step toward our ambition to create one of the most digitally advanced tax authorities in the world.
‘The rules . . . will give businesses more control over their finances, allowing them to spend their time focusing on innovation, growth and the creation of jobs.’
However, the Association of Taxation Technicians (ATT) and the Chartered Institute of Taxation (CIOT) have warned firms ‘not to sign up too early’ for MTD for VAT. They state that, although 1 April 2019 is the start date for maintaining digital accounting records, it is not the deadline to sign up for MTD for VAT.
Adrian Rudd, Chair of the joint ATT/CIOT Digitalisation and Agent Strategy Working Group, said: ‘More than 70,000 businesses are now signed up to MTD, the majority of which have done this themselves. We hope they have not jumped the gun, having misunderstood the requirements.’
The government has delayed its planned increase in probate fees.
The delay has been attributed to ‘pressure on Parliamentary time’ caused by Brexit debates and votes.
The increase in fees had been set to take effect from 1 April 2019, but HMRC recently made the decision to postpone the rise. Under government plans, estates which are valued between £50,000 and £300,000 will be subject to a probate fee of £250. Fees rise thereafter to reach £6,000 for estates with a value above £2 million.
While the changes are pending, a temporary process is in place for applying for probate, and estates will not incur the higher fees if applications are made before the fee changes take effect.
Commenting on the matter, a spokesperson for HMRC said: ‘Probate registries will accept applications before processing by us as long as they are assured the inheritance tax (IHT) forms from us will be coming shortly.
‘Our processes aren’t changing, it’s just that probate registries will be willing to accept applications before our processing is done, when normally it would need to be after.’
With less than a week to go, HMRC is urging those firms which haven’t signed up for the Making Tax Digital for VAT (MTD for VAT) scheme to do so ‘as soon as possible’.
It is also advising businesses which have yet to prepare to ‘get ready now’ for MTD for VAT.
MTD for VAT will come into effect from 1 April 2019 for businesses which have a taxable turnover above the VAT registration threshold (currently £85,000). As part of the initiative, firms must keep some records digitally, using ‘functional compatible software’. This means a ‘software program or set of compatible software programs which can connect to HMRC systems via an Application Programming Interface (API)’.
Figures published by HMRC show that almost 1.2 million businesses will be affected by MTD for VAT. Additionally, each day more than 3,000 businesses are signing up to the scheme, according to the Revenue.
Commenting on the initiative, Mel Stride, Financial Secretary to the Treasury, said: ‘In a world where businesses are already banking, paying bills and shopping online, it is important that the tax system moves into the 21st century.’
Meanwhile, Theresa Middleton, Director of the Making Tax Digital for Business programme, said: ‘There are over 220 software products for businesses to choose from at a range of prices, including free ones, offering different levels of functionality.
‘I’d urge any business affected by MTD to start preparing now, and to join the thousands of others who are already experiencing the benefits MTD has to offer.’
HMRC has urged UK households with a landline number to be vigilant following a significant rise in landline tax scams.
HMRC recently moved to crack down on email and SMS phishing scams. As a result, many criminals are now turning to the more traditional method of cold-calling publicly available phone numbers, including landline numbers.
The Revenue recently revealed that, in the six months to January 2019, it received more than 60,000 reports of phone scams – an increase of 360% when compared to the previous six months. According to HMRC, phone scams are typically targeted at the elderly and the vulnerable. Criminals often pose as HMRC to ‘add credibility’ and convince their victims.
HMRC has been working with phone networks and regulator Ofcom to close nearly 450 phone lines that have been used by criminals. Ofcom estimates that 26 million homes have a landline, many of which could be at risk from scams.
Commenting on the issue, Mel Stride, Financial Secretary to the Treasury, said: ‘If you receive a suspicious call to your landline from someone purporting to be from HMRC which threatens legal action, to put you in jail, or payment using vouchers: hang up and report it to HMRC, who can work to take them off the network.’
Any suspicious emails, phone calls or text messages received should be reported to HMRC or Action Fraud.
With less than a month until the introduction of Making Tax Digital for VAT (MTD for VAT), HMRC is urging the 1.17 million UK businesses which have not yet signed up to the initiative to do so ‘as soon as possible’.
MTD for VAT is set to come into effect from 1 April 2019 for businesses which have a taxable turnover above the VAT registration threshold (currently £85,000). Under the initiative, businesses must keep some records digitally, and must submit their VAT returns via an Application Programming Interface (API).
According to HMRC, almost 30,000 firms have already signed up to MTD for VAT, with 2,000 signing up each day.
Mel Stride, Financial Secretary to the Treasury, said: ‘It has never been more important for businesses to be able to seize the opportunities that digital technology offers. MTD helps them to do just that – making it easier for businesses to get their tax right first time by transforming how they keep their records and send information to HMRC.
‘It will give businesses more control over their finances, allowing them to spend time focusing on innovation, growth and the creation of jobs.’