THE government's decision to abolish end-of-year tax returns in favor of online tax accounts online tax accounts for individuals and small businesses, signals the end of the annual tax form.

The move will make life easier for the 11 million taxpayers and 1.8 million companies who currently fill in an annual tax form, the Treasury believes. However the move has raised concerns among practitioners skeptical about the ambitious timetable and the long history of botched government IT projects.

The move was initially raised in November 2011, when it was included in Modernising the administration of the personal tax system discussion document. The plan is that people will be able to log on to their account to see how their tax is calculated. This will automatically be updated with information from employers, the Department for Work and Pensions, pension providers and banks. Taxpayers will be able to pay the tax they owe - for example, by direct debit.

The change will mean companies will not face a big end of financial year tax demand because HMRC has calculated their payments on the previous year's information and they will able to pay in real-time. The switch is scheduled to take place by 2020, with five million small and the first ten million people using their own digital account from early 2016, according to the Treasury.

While many advisers see the move as a natural progression for a system in need of an overhaul, the timetable and other practical issues have caused serious concern.

Designing, testing and producing a functional system within five years is unrealistic, particularly in light of the problems that took place when real-time PAYE was introduced, while the government's track record of failed large IT projects augurs badly for the effective roll out of online tax accounts. There are questions too over fines, penalties, what happens when errors take place, the basis of the accounting used and the ability for the technology to accommodate everything, given the poor quality of broadband in remote areas. Whilst the manner in which the plan was announced, which has a sense of immediacy and permanence to it, could lead taxpayers to believe they no longer need to file a tax return this year or that they no longer need an accountant, practitioners have warned.

HMRC has moved to allay some of those concerns. Accountants, it says, will still remain necessary because the system will be voluntary at first and many will still need help with compliance in any event. The department's spokesman also stresses the ‘soft landing' approach it will take over the coming five years.

Not only that, the digital account will essentially serve as a dashboard for information, and will not process transactions as RTI does, HMRC confirmed. It's clear however, the move is part of a shift away from HMRC toward the taxpayer as the tax authority sees its resources cut by 5% year-on-year, ACCA's head of taxation Chas Roy-Chowdhury suggests.

Despite that, few dispute the concept in general and are eager for further information to emerge. For individual taxpayers with straightforward affairs, it could make an annual task far less of a chore.

Article courtesy of Accountancy Age read more detail online

One aspect of the new digital self-assessment tax system announced by Chancellor of the Exchequer George Osborne in the Budget last week is a new system of fines and penalties for late payment that could be as much as £2000.

Plans for the new fines have only emerged in the last day or so as the massive Budget document is digested by experts and journalists.
But the basics seem to be this. A new points system will be introduced as part of the HMRC self-assessment tax portal that resembles those related to drivers’ licences, with penalties increasing as you lag behind on filing the relevant information with HMRC.

One bit of good news is that if you miss the deadline once, you won’t get the existing £100 fine. But the later you are, the greater the hit which could be as much as £2000.

This new system is currently under discussion by officials so it will be interesting to see if it pans out. Tax experts have already expressed their belief that putting the new digital tax returns system in place by next year is overly ambitious.

We will keep you posted on developments as they become known.

Giveaways - well he had scope to be generous to the tax payer given that he'd got the £2.2bn bank levy in his back pocket, but instead of using this windfall to reward the Labour labelled "hardworking tax-paying families" he used it, and wisely some say, to reduce the deficit, which George considers the better crowd pleaser. So, apart from 1p off a pint of beer (to help towards Nigel Farage's election campaign funds?) the main giveaways, whether factually accurate or not, were the relaxation in pensions and the increase in personal allowances, both of which had been clearly signposted in any event.

Gimmicks - to bring tax assessment and collection into a truly digital, cloud based, virtual reality, millions (10m to be exact) of small businesses and individuals who currently file tax returns will now have their tax bills assessed for them by HMRC via a "digital tax account". I'm going to show my age now, but back in 1996 tax advisers and accountants were forced to take on the burden of assessing our clients tax via the then innovative "self-assessment" regime. Roll forward 20 years and self-assessment is old hat, HMRC take back control of how much you pay and there's no detail, yet, on how the tax-payer can challenge what they think you owe. The cynics are sitting back, waiting to see this enormous IT project run into difficulties.

Whatever the detail, this is this Government's last Budget before Parliament is dissolved and the real giveaways and gimmicks will come fast and furious in the run up to 7 May, after which a new Government will announce a second 2015 Budget.

See the whole budget in all its glory here: Gov.uk

Kind Regards,

Sophie White CTA
Total Tax Group

 Total Tax Group is currently experimenting with change. We're aiming to move from providing "traditional accountancy and taxation services" to something more relevant, engaging and cost effective (for you and for us), something altogether more elegant. It's a work-in-progress (sorry for the accountancy pun) and we'll post regular updates here so you can see how we're doing.

First things first. We have to move to as an automated, digital, cloud based, accounts system as possible. So we're embracing the Xero revolution. Whether our clients use Xero or not, we will prepare their accounts on one of the Xero platforms. The reason? It's simple. It's more efficient and therefore it's cheaper - in the long run, once we've swallowed the training downtime, the conversion downtime and the paperless processes downtime.

Second things second - well, at exactly the same time actually - we're moving our own practice accounting from Sage 50 to Xero, including payroll. We're doing it this week via move-my-books. Some of us have bad experiences of data conversion and we're interested to see if this solution is really as simple as the Xero converted community say it is!

We couldn't contemplate any of this if we didn't have support from Xero themselves. Our account manager, Leigh Stallard, is working alongside us and so far the experience has been refreshingly easy. Expect more posts over the next six months as we embrace the cloud, and bring you more - relevant, cost effective, engaging ideas and services - elegant accounting.

The government has announced the launch of 'Pension wise' which will offer free and impartial guidance to people on the new pension freedoms which comes into effect in April.

Economic Secretary to the Treasury Andrea Leadsom has unveiled the name and logo of the new pensions guidance service.

Pension wise will offer free and impartial information and guidance to people with a defined contribution pension approaching retirement and will be available from April 2015 for individuals approaching retirement.

Economic Secretary to the Treasury Andrea Leadsom said:

'People who have worked hard and saved all their lives will be free to choose what they do with their money from next April.

We want people to be empowered to make informed and confident choices and I'm delighted to announce Pension wise: Your money. Your choice as the brand name for the impartial guidance service we are building.

Pension wise will be a first port of call for people with a defined contribution pension who are approaching retirement. It is a distinctive brand, making it easy for consumers to know where to go for help and guidance.'

Internet Link: News

The Government has published guidance on its new Fit for Work service, which aims to help tackle the problem of long-term sickness absence.

The service is being introduced to facilitate the return to work of employees who have been off sick for a period of four weeks or more. The new service will enable employers to refer their employees, with the employee's consent, for an occupational health assessment. Following the assessment, a return to work plan will be created, including recommendations for employers on how to assist the employee with getting back to work.

A benefit in kind tax exemption of up to £500 per year per employee will be available for employer spending on medical treatments recommended by the assessment which help employees to return to work.

The Department for Work and Pensions is advising employers to update their sickness policies to reflect the existence of the new service.

If you would like any help in this area please do get in touch.

Internet Link: Downloadable PDF

HM Revenue & Customs (HMRC) is to step up its battle against pension liberators in an effort to protect savers once the Budget retirement reforms come into force in April.

In last year’s Budget chancellor George Osborne announced measures to dramatically increase flexibility of pensions at retirement, cutting the 55% tax charge for people accessing their entire pension at retirement from 2015.

Pension providers and advisers have cautioned that the reforms may lead to spike in the number of retirees moving their savings from legitimate pension schemes into so-called liberation schemes which offer high returns, but which may turn out to be scams.

In an effort to clamp down on such scams HMRC is to demand further information from registered pension schemes to stop them changing their nature and activities after receiving a rubber stamp from the taxman.

HMRC said in a statement: ‘To help prevent a scheme being set up legitimately and then changing its structure to become a scheme that is more likely to be the target of pension liberation, we have amended the information that must be provided to HMRC when a scheme changes its structure or range of number of members, to enhance HMRC’s compliance activities to combat pension liberation. This will take effect from April 2015.'

The new measures, which will come into force in April, build on HMRC’s fit and proper person declarations required of registered schemes.

Under this regime HMRC can refuse to register a new pension scheme and de-register an existing pension scheme if the administrator is seen as not fit to carry out their duties.

Article courtesy of Citywire.co.uk read further articles here.

This is obviously welcome news as bad advice could become big business in this field.  If you need some sound guidance do get in touch as we know a number of local professionals.

Have you been asked by HMRC to file a personal tax return? Or are you worried that you should be filing but haven't contacted HMRC yet?

Here's some basic facts about the HMRC Self Assessment rules.

• You must decide if you need to file a tax return and pay tax, not HMRC.
• You will have to file a return if you have any untaxed income - such as rental profits, pensions, interest paid gross or taxable benefits from your employment - and your total income is more than the tax free personal allowance ( £10,000 for 2015) or ( £9440 for tax year 2014) .
• You will have to file a return if you have sold an asset for more than £43,600 that has produced a gain of more than £10,900. (Private residences are normally excluded).
• You will have to file a tax return if you are self-employed or in a partnership.
• You will have to notify HMRC within three months of commencing self-employment.
• HMRC will normally ask you to file a return if you're a director of a company.
• You will have to file a return if you claim child benefit but you or your spouse earns more than £50,000 annually.

The tax year runs from 6 April to 5 April.  The 2014 tax year, for example, is the tax year from 6 April 2013 to 5 April 2014.  Your tax return for the 2014 tax year must be filed no later than 31 January 2015 and the final tax for that year is also due on the same date. If you want HMRC to calculate your tax for you then the 2014 tax return should be submitted by 31 October 2014 otherwise you are responsible for calculating your own tax.

If you are due to file a tax return and have any concerns about how to do so please call us for advice.  We can prepare the return for you, calculate the correct tax due, file the return electronically and ensure HMRC allocate your tax payments correctly. We will agree a fixed price with you for this service before we start work.

Please check out our services under Personal which are relevant to individuals who should be filing tax returns.

Solicitors are being given the chance by HMRC to bring their tax affairs up to date or face tougher penalties, as part of a new tax campaign.

The Solicitors Tax Campaign gives solicitors the opportunity to declare any undisclosed income by making a voluntary disclosure. The disclosure opportunity is available to those working within the legal profession either as a solicitor in a partnership or company, or as an individual.

Those affected have until 9 March 2015 to notify HMRC of the undisclosed income and need to complete a disclosure form and pay the outstanding liability by 9 June 2015.

Caroline Addison, Head of Campaigns, HMRC, said:

'Information gathered by HMRC has allowed us to identify solicitors who thought they could operate without declaring income and paying the taxes that others have to pay. If you have not declared all of your income, you need to put your tax affairs in order. Take this chance to come forward and put things right in a straightforward way and on the best possible terms. It will be easier and cheaper for you to come to us than for us to come to you. Those who make a deliberate decision not to pay the taxes due could face a penalty of 100% or more of the tax due, or even a criminal prosecution.'

Internet links: Gov news2

The government has published draft tax legislation to implement the new tax on diverted profits which has been referred to as the 'Google tax'.

The introduction of a new Diverted Profits Tax which was announced in the 2014 Autumn Statement will target multinational enterprises with business activities in the UK who 'enter into contrived arrangements to divert profits from the UK by avoiding a UK taxable presence and/or by other contrived arrangements between connected entities'.

The Diverted Profits Tax will be applied using a rate of 25% from 1 April 2015 and is expected to raise £1.4bn over the course of the next five years.

Commenting on the new measure, John Cridland, Director General of the CBI said:

'International tax rules are in urgent need of updating but there is already an OECD process underway to do this. It is unfortunate that the UK has decided to go it alone with a Diverted Profits Tax outside this process, which will be a real concern for global businesses.''The legislation will be complex to apply, and if other countries follow suit businesses will have a patchwork of uncoordinated unilateral rules to navigate, which risks undermining the whole OECD approach.'

Please do get in touch with Rose Duly rose@totaltaxgroup.co.uk if you are concerned about this.

Holiday pay should reflect non-guaranteed overtime.

Under the Working Time Regulations 1998 most workers are entitled to paid statutory annual leave. This is 5.6 weeks (28 days) if the employee works five days a week. A worker is entitled to be paid in respect of any period of annual leave for which they are entitled, at a rate of one week's pay for each week's leave.

The EAT considered three cases in which employees were required to work overtime if requested by their employers. The EAT referred to this type of overtime as non-guaranteed overtime. The Tribunal decided in the context of non-guaranteed overtime:
•overtime payments must be taken into account in the calculation of holiday pay if there is a settled pattern of work
•if the amount of overtime varies but is regularly paid, overtime payments must also be taken into account on an average basis.

Following fears that employers may face large backdating claims the Government has taken action to reduce potential costs to employers by limiting claims by introducing regulations which will mean that claims to Employment Tribunals on this issue cannot stretch back further than two years.

Employees can still make claims under the existing arrangements for the next six months which will act as a transition period before the new rules come into force. The changes apply to claims made on or after 1 July 2015.

If you would like any help in this area please do get in touch.

The government has announced that it will implement a package of improvements to the CIS. The stated aim of the changes is to reduce the administrative and related cost burden on construction businesses. The measures should result in more subcontracting businesses being able to achieve and maintain gross payment status so improving their cashflow. These changes are to be implemented in stages.

From 6 April 2015 the following amendments will be made to the system:

•The requirement for a contractor to make a return to HMRC even if the contractor has not made any payments in a tax month will be removed. Contractors may make a voluntary nil return but will no longer be obliged to do so.
•The requirements for joint ventures to gain gross payment status will be relaxed where one member already has this status and that firm or company has a right to at least 50% of the assets or the income or holds at least 50% of the shares or the voting power in the joint venture.
•Earlier repayments can be made to liquidators in insolvency proceedings. Currently where a subcontractor is a company, no repayment of any amount deducted and paid over to HMRC by a contractor can be made to the subcontractor until after the end of the tax year in which the deduction was made. These rules will be amended so that in certain cases where the amount deducted by the contractor is excessive, a repayment can be made during the tax year.

From 6 April 2016 further changes are proposed:

•Mandatory online filing of CIS returns will be introduced with the offer of alternative filing arrangements for those unable to access an online channel by reason of age, disability, remote location or religious objection.
•The directors' self assessment filing requirements will be removed from the initial and annual compliance tests.
•The threshold for the turnover test will be reduced to £100,000 in multiple directorship situations.

From 6 April 2017 mandatory online verification of subcontractors will be introduced.

Internet link: CIS

According to a report by the independent taxpayers are being urged to tweet their queries instead of phoning helplines as it emerged that waiting times doubled in a year.

HMRC reports show callers had to wait 10 minutes and 53 seconds on average for advice in September – more than twice the five minutes 21 seconds during the same month in 2013.

The government department is directing people to use Twitter for general questions by contacting @HMRCcustomers despite the move being derided as “laughable” by politicians.

Mark Garnier, a Conservative MP, said he could not think of one query that could be condensed into the social network’s 140 character limit.

The shadow Treasury minister, Shabana Mahmood, said the policy “beggars belief”, while Margaret Hodge, the Labour chair of the Commons public accounts committee, called it “laughable” as Twitter users lambasted HMRC.

HMRC naturally expects an increase in calls as the self-assessment deadline of 31st January approaches despite the 1,500 extra staff who be manning HMRC’s phones in January.  HMRC is reported as saying,

“We are serious about the use of Twitter as a supplement to going online and using the telephone,” he told BBC Radio 4’s Today programme.

"What we don't want people to do is to give us any personal details.

“It's a very useful social media device to get guidance, to help point people to where they can get information online.

"It's a pilot, it is starting small, but the whole point of social media is you answer a question once and hundreds or thousands of people can see the answer, rather than answering the phone to all of those people asking the same question."

More than a third of calls in September were cut off and the number answered in under two minutes fell from half to a quarter.

Waiting times on tax inquiry lines rose from four minutes and 42 seconds to 11 minutes and 51 seconds, while the time to reach a tax credit adviser doubled from seven minutes and 13 seconds to 14 minutes and 28 seconds.

Mr Hardwick acknowledged that HMRC "did not do well enough" answering the phones in that month, which is not classed as a peak time. One is in January, before self-assessment returns must be received, and the other is in July for the tax credits deadline.

"We have to, like any Government department, work within the budget we have and in a modern organisation like we are trying to be we are doing more digital online services for people, we are trying to provide people with the type of service they want, where they want it, when they want it,” he added.

“On the telephone we are not meeting the standards we want to provide and people expect and we are really sorry.”

Unsurprisingly, the invitation to contact HMRC on Twitter has turned up some less-than serious enquiries.  Alternatively employing an accountant will mean you do not have to resort to such devices.

From the New Year the sale of digital services (including Broadcasting, Telecoms and E-services) by UK businesses to customers within the EU, will require VAT to be charged at the rate of that customer’s country.

This can range from as high as 27% (Hungary) down to 15% (Luxembourg).

MOSS stands for ‘Mini One Stop Shop’ and is an optional VAT scheme started by the HMRC that allows businesses owners in the UK to report VAT on supplies of digital services. If businesses don’t register for MOSS, they would need to register for VAT in each individual European country that they trade in.

By registering for VAT MOSS, businesses can report VAT for digital service sales in a single quarterly return to HMRC. HMRC will then send the payment on to the appropriate country.

If you feel this development may affect your business get in touch with Chris Southon by emailing chris@totaltaxgroup.co.uk

As the rush to file tax returns looms nearer, HM Revenue and Customs (HMRC) is warning taxpayers to be on their guard against fraudulent phishing emails, after almost 75,000 fake emails were reported to the taxman between April and September 2014.

Emails promise a tax refund, and often ask for a recipient’s name, address, date of birth, bank and credit card details – including passwords and their mother’s maiden name. Once the victim has provided the information, money is stolen from their bank account and details are sold on to other criminal gangs, which can lead to identity theft.

Steve Singh, Deputy Head of Operations, HMRC Digital Security, said: “HMRC never contacts customers who are due a tax refund by email – we always send a letter through the post.

“If you receive an email which claims to be from HMRC, and which offers you a tax refund, we recommend you send it to phishing@hmrc.gsi.gov.uk and then permanently delete it. We can, and do, close these websites down and we continue our efforts to work with law enforcement agencies around the world to bring down the criminals behind these scams.”

HMRC asks people to:

• Check http://www.hmrc.gov.uk/security/advice.htm for its online security advice
• Check to see examples of phishing emails online at http://www.hmrc.gov.uk/security/examples.htm
• Forward suspicious emails to HMRC at phishing@hmrc.gsi.gov.uk and then delete them
• Avoid clicking on websites or links in suspicious emails, or opening attachments.

Use the email facility to report issues rather than the telephone lines as these are even more busy than normal at this time of year.