Quarter 3, 2014 » Total Tax Group

30/09/14 - Total Tax has expanded

This is a particularly exciting post for me, as I’m proud to announce that Total Tax has expanded. We are now the Total Tax Group comprising Total Tax Consultancy Ltd, Total Tax & Accounts Ltd and Total Audit Ltd.

We have found it essential to our core business as Chartered Tax Advisers, to incorporate a separate arm for all tax and accountancy services of an annual compliance nature.

Total Tax Consultancy Ltd will deal with all tax project work including the outsource consulting service for accountants, solicitors and Chartered Financial Planners together with the newly developed Business Strategy service.

Total Tax and Accounts Ltd provides the compliance services; bookkeeping, payroll, VAT, accounts preparation and tax filing for businesses, and all aspects of personal tax compliance for individuals.

Total Audit Ltd is to develop an assured audit service for those businesses that do not require a statutory audit but are compelled by their investors’ interests to go through the audit process.

We are working on a new website to be launched later this month which will showcase the different areas of our expertise.

This is an exciting time for all the Team at the Total Tax Group and we look forward to giving you further updates on our expansion over the next few months.

Sophie White – Director

01/09/14 - Am I a criminal if I under declare my tax?

Tough new laws that could see expats branded criminals for failing to declare offshore income, gains or assets are being proposed by HM Revenue & Customs the Telegraph has reported.

The proposals could see expats convicted as a result of a mistake or omission rather than any criminal intent or dishonesty on their part.

In a consultation document, 'Tackling offshore tax evasion: A new criminal offence', David Gauke, Financial Secretary to the Treasury states: "Since the end of June, financial institutions in the Isle of Man, Guernsey, Jersey, and all the UK’s Overseas Territories with financial centres have been collecting information on UK residents’ offshore accounts to share with HMRC.

"Shortly after, financial institutions in a further 33 jurisdictions will do the same under the new common reporting standard. We know some of these people will have tax to pay. That is why HMRC is offering time-limited disclosure facilities allowing people to come forward and settle their bills as quickly and easily as possible.

"If taxpayers do not come forward to clear up their past non-compliance, or if they continue to fail to comply with their obligations in this new era of transparency, then they must face tough consequences. One of these consequences should be the realistic threat of a criminal conviction."

The proposed new criminal offence would be a "strict liability" offence which means it is not necessary for the court to ascertain the state of mind of the defendant before convicting. Therefore, the act in itself warrants the imposition of a criminal sanction, regardless of why the individual broke the rules.

While tax experts are keen to welcome the debate, they are concerned about the extension of HMRC’s powers to such a degree as not everyone who under-declares their tax is acting with criminal intent.

Currently the Revenue must demonstrate intent, but the change of law would require the department to show only that taxable income was undeclared. Motive won’t matter, which is alarming for at least 3 reasons.

If it’s criminal and strict liability, that could mean imprisonment for failing to declare trivial amounts of income. So – if you have a rented property overseas, and all the rents and expenses are properly declared, but you are caught forgetting £10 equivalent of interest on a local bank account, you could be heading for jail.

The decision as to whether or not to declare interest on an offshore bank account can depend on some pretty grey areas of tax law. One of them might be your domicile ; which is far from cut and dried. Relevant facts can date back to your parents’ domicile when you were born. Or, you might decide not to declare the income because you believed yourself to be non resident in the UK. The new statutory residence rules are also not black and white. They can depend on subjective and vague new terms like “home.” So, if HMRC disagreed with your interpretation of your status, and there was offshore income to declare as a result, off you go to jail. No quibbling.

HMRC has had plenty of data on offshore accounts for a long time but we have seen no evidence of follow up using existing powers of enquiry, even where people have failed to respond. Why don’t they use the powers they have or will they simply concentrate on soft targets?

Meanwhile, it’s clear that seeking expert advice will become more and more important. Keep in touch!

29/08/14 - Latest HMRC Disclosure Opportunity for Contractor Loan Scheme

HMRC have announced the details of their latest disclosure opportunity which is expected to give approximately 16,000 tax avoidance scheme users the opportunity to pay the tax they owe.This opportunity is for the tax years up to 5 April 2011 and is open until 9 January 2015.

The contractor loan scheme used non-UK employers to pay untaxed income or a loan instead of paying part of an employees salary.

HMRC are inviting those who have used the scheme to bring their affairs up to date using the contractor loans settlement opportunity which will allow taxpayers to settle their liability in the best possible terms.

If they do, they will pay the tax and interest due on the sums they received as loans under the scheme. HMRC are warning that if participants continue to challenge HMRC in the courts, they risk having to pay additional tax charges and penalties - as well as the costs of litigation if they lose.

Jennie Granger, HMRC Director General for Enforcement and Compliance, said: 'Many people regret ever getting involved with complex aggressive tax avoidance schemes and HMRC is providing an opportunity for contractors to come forward and straighten out their tax affairs.'

'This is an important opportunity and we are working hard to encourage users to withdraw from such schemes. We also want to ensure they've understood our position. They can choose to continue to litigate for a better outcome but they risk a worse result. HMRC has a strong track record of winning tax avoidance cases in court, with around 80% of decisions in our favour. The costs for users are high, potentially resulting in penalties, charges and significant legal costs for scheme users.'

We regularly deal with non disclosure issues so if this applies to you please get in touch, getting advice at the outset is critical to obtaining favourable terms.

15/08/14 - 10 things a tax avoidance scheme promoter won’t always tell you

To help protect taxpayers from unscrupulous promoters we have put in place new High-Risk Promoters rules, but people need to be aware of the dangers. So I would strongly advise anyone thinking of signing up to a scheme which they have been told will legally reduce their tax bill to carefully consider today’s list of things a promoter may not tell you.

The list sets out the risks that people face when they sign up to a tax avoidance scheme. These include not only the possible monetary costs and reputational damage of tax avoidance, but also a potential criminal conviction.

David Gauke - Financial Secretary to the Treasury

This list is being published as HMRC writes to the first promoters who will be caught by new High-Risk Promoters rules. If they don’t change their behaviour, HMRC could name them publically and fines might be imposed of up to £1 million.

Speaking at an HMRC stakeholder conference today, the Financial Secretary to the Treasury, David Gauke, said:The government has taken unprecedented steps to clamp down on the selfish minority who practise tax avoidance, because we are firmly on the side of the vast majority of taxpayers who play by the rules. As a result, tax avoidance is now very high risk.On top of a substantial fee to join a scheme that will almost certainly fail a challenge by HMRC, tax avoiders will also have to pay the tax they dodged, plus interest and penalties.To help protect taxpayers from unscrupulous promoters we have put in place new High-Risk Promoters rules, but people need to be aware of the dangers. So I would strongly advise anyone thinking of signing up to a scheme which they have been told will legally reduce their tax bill to carefully consider today’s list of things a promoter may not tell you.The 10 things a promoter won’t always tell you:

Most schemes don’t work. You may be told that avoidance is legal, but if the scheme doesn’t work you’ll have made an incorrect tax return which is not in accordance with the law. You are legally obliged to pay tax that is due and you may be charged penalties if you try to avoid it.
It could cost you more than you bargained for. Avoidance schemes are complex. They can give rise to unintended additional tax consequences, and the fees you pay the promoter do not count as tax paid. So you could end up paying much more than just the tax you’re trying to avoid.
You may have significant legal fees to pay. If the scheme is taken to litigation, you’re likely to have hefty legal fees to pay. Your promoter may ask you to pay into a ‘fighting fund’ up front.
You could face criminal conviction. If you deliberately mislead or conceal information from HMRC you could be prosecuted and convicted.
You could face publicity as a tax avoider. If you are named in court papers when the case is litigated, or in public registers, you could be reported in the media as a tax dodger.
Your scheme is never HMRC approved. Getting an avoidance Scheme Reference Number from HMRC doesn’t mean the department has cleared the scheme. HMRC issues these numbers when a scheme has signs of being designed to avoid tax.
You could be marked out as a high-risk taxpayer. Use of a scheme could mark you out as a high-risk taxpayer, which means that all of your tax affairs will be closely scrutinised in future, not just your claim for relief.
HMRC is likely to beat your scheme in court. HMRC wins eight out of ten cases where taxpayers and promoters take avoidance schemes to court.
The risk is normally all your own. It’s unlikely that a promoter will give you a guarantee that a scheme will work. And they probably won’t be around to support you once HMRC starts investigating your tax affairs. Some promoters set up simply to sell the scheme, and then disband.
You’ll have to pay the tax up front anyway. You won’t get a cash-flow advantage while HMRC investigates a scheme. New legislation means you’ll have to pay the disputed tax up front.

If you have any worries please do get in touch as we have excellent experience when dealing with the fallout from such schemes. Advice at the outset is essential as is proactive, professional disclosure to HMRC.

Email: Rose Duly

05/08/14 - Worries DOTAS schemes are going underground

THE DOTAS REGIME has become the "kiss of death" for tax avoidance schemes and has pushed some promoters into providing non-DOTAS structures instead.

The Disclosure of Tax Avoidance Schemes (DOTAS) sees anyone entering into a scheme generating tax savings issued with a number by HM Revenue & Customs, which later investigates the structure.

It has proven an effective tool for the taxman, which has seen a string of contrived structures shut down as a result of those investigations and subsequent tribunals. Most notably, the Icebreaker and Liberty schemes have been defeated, which will see investors including several celebrities forced to repay billions in sheltered tax.

But advisers are now warning such high-profile defeats for DOTAS-registered schemes are now causing those determined to avoid paying to seek alternatives.

"Around late 2007 or early 2008 intermediaries started to understand that a DOTAS number was likely to bring HMRC attention more quickly than not having it. As such, their focus switched to having non-DOTAS products. This led to promoters finding ways not to DOTAS schemes, or to notify only very late in the day. Penalties for non-disclosure were relatively low and this was a risk that they were prepared to take," said Rebus head of professional relations Graham Webber.

"HMRC initially thought that DOTAS was working as the number of notified schemes fell dramatically. They then understood that the rules were being interpreted in such a way as to prevent registration. In particular if a promoter could get a QC opinion that registration was not required, the penalty could also be avoided," he said.

HMRC are now in the process of strengthening the legislation and is currently consulting on measures, which will conclude on 23 October.

It's the first reconsideration of the rule since it was introduced in 2004, and will examine what has to be disclosed and potentially broaden the scope in order to take in schemes currently going undisclosed.

HMRC said in a statement: "The DOTAS regime captures a wide range of tax avoidance activity, and has proved instrumental in closing down tax loopholes. It is backed up by a strict regime of penalties of up to £1m for those who don't disclose the schemes they are required to.

"HMRC published yesterday the consultation announced at Budget 2014 on strengthening DOTAS. The regime has been in place for ten years, although has been revised at various times. Now is the right time to look at DOTAS again to ensure it continues to be effective."

"Non-disclosure of schemes required to be disclosed under DOTAS is also one of the criteria for triggering the new high-risk promoters rules, which will allow HMRC to tackle the small and persistent minority of tax advisers promote tax avoidance schemes and are not transparent with HMRC."

If you have any concerns at all please contact us as we are very experienced in dealing with such matters. It is much better to tackle things early to avoid further penalties later down the line. Rose@totaltaxgroup.co.uk

This article has been taken from Accountancy Age publication

28/06/14 - Come rain come shine

A local story that caught our eye. A bet on two raindrops on a window pane that was made 123 years ago has now netted the family of the winner almost £65,000.

The wager was made between an aristocrat and his friend during a rainy day at a Dorset stately home in 1890. The two men bet £5 on which one of two drops would reach the bottom of the window pane first.

The loser (unknown) was so cross he went straight to the bank to withdraw the funds in the lowest denomination possible which amounted to 2,794 farthings, dated 1890 in mint condition. These were subsequently stored by the family wrapped in tissue paper, representing the equivalent of £220 today. However 123 years later the family has had the last laugh as local agents Wooley and Wallis, sold the coins at auction for £63,440. This means each coin is worth almost £23, around 22,000 times its original value.

Although farthings are not especially rare, it is pretty much unheard of to have this number of mint condition farthings altogether, the original valuation was placed at IRO £14,000. The strangest thing about this story is the length the loser obviously went to great lengths to get five pounds in farthings – a huge a amount of coins that many banks would not have typically stocked. Ultimately the last laugh was on him, albeit some time later.

19/07/14 - To complain or not, that is the question

Our client was a very straight-forward voluntary tax disclosure case. Having sent in accounts for six years’ arrears, but having spent his cash on partying and motors, he could not pay in full straight away. Our covering letter made it clear that he would need to fund the arrears out of future earnings. We advised him to start making regular payments on account which he did.This is a tale of two ways of making complaints – the best of times, and the worst of times.

The HMRC department we were dealing with insisted that he should pay all the arrears before any of the actual amounts disclosed could be reviewed or agreed. Yes, that is what you read.

This was later “softened” to an insistence that a full payment agreement had to be in place before they would pass the file upwards for review and clearance. This process soon became very muddled, with one staff member being unusually hostile in manner, not typical of our dealings with HMRC.

The payment arrangements our client needed were complex as they affected current taxes as well as the arrears, but HMRC remained unhelpful. A detailed letter was sent in where upon we were told it was being sent to a specialist section. Six weeks later we had still heard nothing. The local section didn’t respond to chaser calls, and would not provide a direct line to the special section. Meanwhile no one was reviewing the accounts…as the payment plan was still in limbo.

After two months we sent in a complaint after following online instructions. Five weeks later we phoned to chase a response. HMRC could not find the first complaint and said we had to treat this call as a new complaint. We were not happy. Six weeks later we received a reply to the phone complaint which showed no sign of having seen the first letter, and focused only on the side issues –not the main point. It offered no problem solution and merely restated events from HMRC’s viewpoint. Meanwhile we still heard nothing about our client’s payment plan let alone the disclosure review.

Following the published complaint procedure we sent a reply explaining our dissatisfaction. At this stage we felt we were heading – very slowly – for the Adjudicators’ office. The client was naturally very worried we were upsetting HMRC and making things worse for him. Although we knew that this was not the case we could understand his concerns. He was convinced he would be sent to prison however much we tried to explain that the government wanted his cash, not his custody.

By chance we then attended a conference where a very senior HMRC executive was speaking. We raised the issue in a Q and A session, and cornered the executive when the conference ended.

The senior executive asked us to write to them directly with details which we duly did, with all the letters attached. Despite receiving an immediate and courteous acknowledgement, three weeks later we chased again.

What a difference. All the ducks were lining up. The disclosure was agreed. The payments process was accelerated. The case was reassigned within the local office. They agreed that looking for payment first and delaying the review was not the right way round and payment arrangements were approached in a co-operative, helpful manner. The local office told us rather nervously, that they had never seen anything move so fast. We made sure we were extra nice to them…..

This has been a long haul for our client, but shows that complaining is worthwhile. The payment agreement now in place gives him favorable terms. When HMRC knows they have mishandled things, they do tend to go out of their way to offer favorable settlements and resolve logjams.

We have incurred considerable time costs in following this through which HMRC should reimburse. Unfortunately though it doesn’t raise confidence in the normal complaints procedure, however we do still have the senior executive’s email address up our sleeve – and we’ve probably gained some notoriety with the original office as well.

If you find yourself, or you know someone else who is experiencing similar difficulties do get in touch for impartial, proactive, practical advice.

Words by: Rose Duly

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