The Blog

VAT: Flat Rate Scheme Changes

HMRC has announced that, as from the 1 April 2017, all businesses using the Flat Rate Scheme or intending to use the Scheme will have to consider (in addition to the existing conditions) whether or not their VAT inclusive expenditure on goods is either:

  • less than 2% of their VAT inclusive turnover in a prescribed accounting period; or
  • greater than 2% of their VAT inclusive turnover but less than £1000 per annum, or proportion thereof (ie, £250.00 per quarter or (£83.33 per month).

If this criteria is met then the business will be regarded as a “limited cost trader” and MUST apply a fixed Flat Rate percentage of 16.5% to its’ VAT inclusive turnover.

All businesses using or considering using the Flat Rate Scheme should now review their status.

If you would like to discuss anything in this article please contact either David Pegg or Leanne Macgregor on 01905 777600

Latest in HMRC campaigns targets employers not paying minimum wage

All employees have a legal right to the national minimum wage.

Although most employers pay at least the national minimum wage, there are several common mistakes which mean that employees don’t get what they’re entitled to.

HMRC campaigns offer the best possible terms to those who voluntarily come forward to bring their tax affairs up to date. They are now providing employers with the opportunity to check that they are adhering to national minimum wage laws.

The newly launched National Minimum Wage Campaign is the latest in a series of HMRC campaigns and encourages employers who have not been paying their employees national minimum wage, or have made any errors with this, to come forward voluntarily, disclose any mistakes they may have made and pay their employees any arrears owed.

Voluntarily disclosing national minimum wage arrears through the campaign will result in more favourable terms. Those who do not do this and are caught by HMRC face penalties of up to 100% of what they owe (up to a maximum of £20,000 per employee) and will be publicly named on a list of employers who do not pay national minimum wage.

 

What are the National Minimum Wage rates?

Current rateRate from 1 October 2015
Apprentices (aged 16 to 18 and those aged 19 or over in their first year of Apprenticeship)£2.73PH£3.30PH
Under 18£3.79PH£3.87PH
18 to 20£5.13PH£5.30PH
21 and over£6.50PH£6.70PH
Accommodation offset£5.08PH£5.35PH

As announced in the Summer Budget, the new National Living Wage of £7.20 per hour for over 25s will also come into effect in April 2016.

 

If you’re considering making a disclosure under the National Minimum Wage campaign or any HMRC campaigns, you will need to notify HMRC and complete a disclosure form. It is highly recommended that you seek professional advice to guide you through this process.

HMRC have released a webinar to help employers ensure you are paying at least the national minimum wage. Watch their pre-recorded webinar here: https://twitter.com/HMRCbusiness/status/580678155150757888

Let Property Campaign brings in £7.9 million in additional landlord tax

HM Revenue and Customs have been targeting UK landlords with the Let Property Campaign since autumn 2013, in part of a series of campaigns in their continued tax avoidance crackdown.

UK Landlords who make an income from residential properties at home or abroad (including holiday homes, specialist landlords and those above the ‘Rent a Room Scheme’ threshold) have been encouraged to disclose any previously undeclared tax under the Let Property Campaign.

The campaign offers more favourable terms to those who make a voluntary disclosure.

In 2014, HMRC reports that around 40,000 landlords who had failed to come forward were sent a letter which gave them 30 days to bring their tax affairs up to date. However, those who made a ‘prompted disclosure’ as a result of these letters were not offered the same favourable terms.

Ignoring the letter risks penalties of up to 100% of the unpaid tax liabilities and up to 200% of offshore related income. HMRC can also conduct an investigation and in certain cases the result may be criminal prosecution.

It is suspected that many buy-to-let landlords with undisclosed rental profit have misunderstood the rules. The most common misconception is that all mortgage repayments can be offset, however only the interest proportion is permitted.

Even if landlord tax is undeclared or under-paid because of an error or misunderstanding, it’s important that they come forward to bring their tax affairs up to date as soon as possible.

It is reported that HMRC have raised £7.9 million in additional tax as a result of the campaign so far.

Many letting agents have also received statutory notices and are legally obligated to give HMRC access to their landlord records. HMRC can also access records held by the Land Registry to detect undeclared income. Their software is getting more sophisticated and the records they can access is increasing.

 

The Let Property Campaign is one of a series of campaigns targeting different sectors and industries, and with an increase in data gathering the message is clear – it’s better to come forward and get your records in order now, rather than trying to hide.

For more information about the penalties that apply, Download our free guide to Landlord Tax Penalties.

 

Landlords with undeclared or under disclosed rental income, who have not yet been contacted by HMRC, are strongly urged to bring their records up to date as soon as possible. Favourable terms and affordable repayment plans can often be negotiated.

If you would like to discuss this further, or you have received a letter from HMRC about the Let Property Campaign, please contact us to speak to Anthony Middleton.

Tax Investigation: What does the taxman know about you?

HMRC are stepping up their tax avoidance crackdown, and they’ve got a hi-tech weapon to help them do it.

Only a few years ago tax investigators faced many months of preliminary information gathering before deciding whether a taxpayer was liable to a tax investigation. Now they can do this in seconds.

HMRC has invested over £80 million in developing their Connect software, a powerful computer programme which accesses databases of personal and commercial financial information and matches findings to tax returns to flag discrepancies.

The system is able to link a tax payer to property addresses, companies, partnerships and trusts, accessing more than 30 sources of data which currently fall within its scope – and now its reach is increasing.

 

It is reported that from next year Connect will become even more powerful, as HMRC gain access to files held by banks and financial firms based in British overseas territories. From 2017, Connect is set to go global, with access to data in 60 countries.

HMRC use Connect to find undeclared tax and have reportedly secured an additional £3bn in tax since its launch in 2008.

Access to additional data will increase their ability to identify activities or assets which are not being properly taxed. For example, by accessing Land Registry databases and mortgage information, Connect can identify the price you paid for a property and flag areas where capital gains tax is potentially owed.

We have already seen HMRC target online marketplaces for their records recently and as Connect gets more powerful they will be able to access this data quicker, cross-referencing it with your bank account and other records to identify discrepancies. If you become the subject of an investigation, Connect could even examine your social media activity for evidence of spending, travel or ownership of property and assets.

 

The strong message from HMRC is that it’s much better to get your records in order now, rather than try to hide. Penalties are based on taxpayer behaviour, so if you voluntarily disclose an issue your penalties are likely to be much lower than if HMRC discover it and approach you.

HMRC campaigns are also in place to give taxpayers the opportunity to bring their records up to date under the best possible terms. Businesses who accept card payments and landlords who collect income from residential property are two of the current targets being encouraged to voluntarily disclose.

 

If you have any concerns or you need help staying on top of your taxation matters, contact us today. We can offer advice on planning for the future of your business and assistance in dealing with income tax (self assessment), corporate tax, capital gains tax, inheritance tax, stamp duty, VAT and PAYE. Insurance against tax investigations can also be arranged.

Call us on 01905 777600 to arrange a free initial consultation.

Landlord tax the latest target in tax avoidance crackdown

Landlord tax is the latest target of a HMRC campaign to collect undeclared income, as part of a series of campaigns running since 2007 in their continued tax avoidance crackdown.

HMRC campaigns are aimed at groups of taxpayers where they suspect a higher risk of tax error. Since introducing them in 2007, HMRC have reportedly collected over £596 million in tax from people making voluntary disclosures, and over £338 million from follow up activities.

The legal sector have recently been targeted with the Solicitor’s Tax Campaign, and previous campaigns have been aimed across the full spectrum of businesses and professions, including healthcare and doctors, electricians, plumbers and offshore accounts and assets.

The current Let Property Campaign is an opportunity for landlords to bring their tax affairs up to date and declare previously undisclosed income to the tax authorities under the best possible terms.

If you rent out property in the UK or abroad you may be able to take advantage of the Let Property Campaign to bring your tax affairs up to date.

Find out more by downloading our Let Property Campaign Fact Sheet.

If you are considering making a disclosure, or have received a letter from HMRC regarding the Let Property Campaign, we strongly recommend that you obtain professional advice.

If you are a letting agent who is concerned about how this may affect you or your clients, or you have been approached by HMRC, we can help.

For more information, or for a free initial consultation, please contact us to speak to Anthony Middleton.

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