Author: Polaris Accountants

HMRC urges everyone to renew their tax credits early and online

HM Revenue and Customs (HMRC) is urging people to renew their tax credits claim online as soon as possible ahead of the deadline in July.

People who don’t renew by the deadline will have their payments stopped so it’s vital they do it as soon as possible. And improvements to the online system mean it’s never been so easy.

For the first time anyone can now renew online, regardless of what changes they have to make. Previously, large numbers of customers had to call us or renew by post. But this is no longer the case and HMRC is urging everyone to beat the queue and get online.

When customers renew their claim, they must tell HMRC about any changes to their circumstances that they haven’t already reported, including changes to working hours, childcare costs or income.

Everyone can notify HMRC of these changes on GOV.UK when they receive their pack and renew their claim. The online service has proved very popular, with nearly nine in 10 people using it saying they were happy with the process. On average, it takes 10-20 minutes to renew online, depending on circumstances, but many renew their claim in just 6 minutes.

A special team is there to support the most vulnerable customers who cannot go online, and some 2,000 people who we know need special support will be proactively contacted by our customer support teams.

Nick Lodge, HMRC’s Director General, Benefits and Credits, said:

This is an exceptionally busy time of the year for HMRC, as millions of people renew their tax credits. Phone lines may be very busy with long wait times possible. Using our online service means that you can renew at any time of the day or night, and on any device, without having to call us at all. Online help can also answer most queries or issues that you may have. We urge everyone who can to go online.

People should check their details and renew early to ensure they get the right money. The sooner people renew their claim, the sooner we can check payments are correct, meaning we avoid paying too little money, or too much, which claimants then have to be pay back.

Online help and information on tax credits renewals is available on GOV.UKor via HMRC’s customer service Twitter feed @HMRCcustomers.

HMRC has begun sending tax credits renewal packs to about 5.9 million households around the country. The packs are sent out from April to June in advance of the 31 July deadline.

Self Assessment Penalties

There’s been a lot of coverage over the last few days on our approach to £100 penalties for people sending in their tax return late. We want to focus more and more of our resources on investigating major tax avoidance and evasion rather than penalising ordinary people who are trying to do the right thing.

But it’s important to make clear that the deadline for appealing fines for 2013/14 tax year has now passed. Those who have already appealed will only be let off the fine if they’ve now sent in their return, paid the tax due, appealed and have a good reason for sending it in late.

This is part of our planned, proportionate approach to penalty appeals, particularly for small businesses and individuals.

The bottom line is that we don’t want to charge penalties, we just want the tax return and the tax in on time.

In addition, the more complete picture that digital technology gives us means, in the longer term, we want to move away from sending out penalty notices as a mechanical reaction to a single missed deadline. We will be able to track patterns of behaviour so we only focus on those who persistently fail to pay or send their tax returns on time.

2014-2015 PAYE Tax Calculations – over and under payments

HMRC have started the annual End of Year Reconciliation process – a normal part of the PAYE (Pay as You Earn) system – to check that people have paid the right amount of tax in 2014-15. This has been a key feature of the PAYE system since it was first introduced over 70 years ago.

HMRC are sending P800s that show an overpayment of tax first, followed by a cheque around a fortnight later. You don’t need to do anything.

The whole process should be completed in October.

This automated process ensures those who have had a change in circumstances during the last tax year (2014-15) that was not captured in their tax code have paid no more or less than they should. Any discrepancy could be because the taxpayer changed jobs, had more than one job for a time, a change of company car or received investment income that was not reported during the year.

The vast majority of PAYE taxpayers will have paid the right amount of tax for the year and will not be contacted by HMRC.

Pay as you Earn (PAYE) late filing penalties

HMRC has now issued the first in-year penalties notices to employers with fewer than 50 employees who missed the deadline for sending PAYE information to HMRC. Rather than issue late filing penalties automatically when a deadline is missed, HM Revenue and Customs (HMRC) will take a more proportionate approach and concentrate on the more serious defaults on a risk-assessed basis.

This approach is in line with the likely direction of HMRC’s general approach to penalties, outlined in the HMRC penalties: a discussion document which it issued earlier this year and in HMRC’s fresh approach to considering appeals against late filing penalties for Self Assessment.

Late reporting penalties already apply to employers with 50 or more employees, so this ‘risk-based’ approach will apply to submissions that were late from:

*6 March 2015 for employers with fewer than 50 employees, and
*6 January 2015 for employers with 50 or more employees.

HMRC will continue to issue risk-based penalties for the tax year 2015 to 2016 tax year.

HMRC does not want to charge penalties, but wants employers to report on time. It wants to help employers who are trying to do the right thing, rather than penalise them.

This move to issuing risk-based late filing penalties also continues HMRC’s strategy of adapting its approach, where necessary, before moving to the next phase of implementation.

This approach will enable HMRC to concentrate more resources on the more serious failures to comply, and to focus on educating employers about their filing obligations through targeted communications, webinars and Employer Bulletin articles.

It applies in addition to HMRC’s recent announcement that it will not be penalising minor delays of up to three days. HMRC will monitor both, and review by April 2016.

Even if employers do not get a penalty, they are required by law to file on time and if they do not may be charged a penalty on a future occasion. The deadlines for sending PAYE information stay the same, including the requirement to send PAYE information on or before the time that employees are actually paid or due to be paid.

Employers can appeal electronically using the Penalties and Appeals System (PAS) on HMRC Online. Employers who receive a late filing penalty notice for tax year 2014 to 2015 quarter 4 but who filed within three days of the reporting deadline may appeal and should use reason code A as set out in the What happens if you don’t report payroll information on timeguidance.

Government consults on EU Payment Accounts Directive

Consultation launched on incorporating new European rules on current accounts into UK law.

These new rules, which are set out in the EU Payment Accounts Directive, set common standards that EU members need to meet in order to ensure a number of services are available to consumers, including:

an account switching service

a right of access to a basic bank account for those who are legally resident in the EU

clear and transparent information on fees and charges

Bank customers in the UK can already switch their current account quickly and reliably by using the 7 day Current Account Switch Service (CASS), which was launched in September 2013. Major UK banks have also already agreed to make available fee-free basic bank accounts by the end of 2015.

The government intends to legislate where necessary to ensure that the UK complies with the directive, while minimising any negative impact on the UK’s existing CASS and basic bank account agreement. The proposed legislative approach includes:

putting in place a framework to ensure that CASS can continue as an alternative measure to the switching process described in the Directive

preserving the UK’s existing basic bank account policy

standardising the annual statement of fees consumers receive from their banks as well as ensuring customers receive a Fee Information Document prior to choosing their bank account

The regulations will not enter into force until September 2016, but the government is consulting now in order to give banks and customers as long as possible to prepare for them.

The consultation will run for 6 weeks.

Government confirms Tax-Free Childcare launch date as it welcomes judgement from Supreme Court

Tax-Free Childcare is part of the government’s long-term plan to support working families.

The government today (Wednesday 1 July) welcomed a judgment from the Supreme Court that found the government’s proposals for delivering Tax-Free Childcare to be clearly lawful.

It also confirmed that, as a direct result of the legal challenge, the scheme is now expected to launch from early 2017. The existing Employer-Supported Childcare scheme will remain open to new entrants until Tax-Free Childcare is launched.

As a result of the legal action, the court placed a suspension on the development of the scheme which prevented key delivery steps from taking place. This legal action was brought by a small group of childcare voucher providers involved in the delivery of the scheme that Tax-Free Childcare will eventually replace.

Exchequer Secretary to the Treasury, Damian Hinds said:
*We are pleased that the government’s proposals for delivering Tax-Free Childcare have been found to be clearly lawful. This government is absolutely clear on the importance of supporting families with their childcare costs.
*It is disappointing that some organisations involved in the existing scheme felt the need to take and persist in this costly and wasteful course of action, which has led to a delay in the launch of Tax-Free Childcare.
*We are now pressing ahead with the scheme as part of our ongoing commitment to support working families.

Tax-Free Childcare is part of the government’s long-term plan to support working families and will provide up to 1.8 million families across the UK with up to £2,000 of childcare support per year, per child, via a new simple online system.

The government is clear on the importance of supporting families with their childcare costs. Spending on childcare was increased by £1 billion in the last Parliament and the government has also committed to doubling free childcare for working parents of three and four year olds to 30 hours a week.

*a legal challenge was brought against the government’s decision to deliver the Tax-Free Childcare accounts through HMRC working in partnership with NS&I

*some organisations involved in the existing Employer-Supported Childcare scheme decided to pursue challenges against the government’s decision to deliver Tax-Free Childcare childcare accounts by HMRC and NS&I working in partnership, and NS&I’s use of an existing outsourcing contract to deliver childcare accounts

*the Supreme Court “unanimously dismisses their appeal”

*formal arrangements have now been made between HMRC and NS&I and they are pressing ahead to deliver Tax-Free Childcare as soon as possible

*exact rollout details for Tax-Free Childcare will be confirmed in due course

*Employer-Supported Childcare, often referred to as childcare vouchers, will remain open to new entrants until Tax-Free Childcare launches. Parents who wish to remain in Employer-Supported Childcare once Tax-Free Childcare is launched will be able to, while their current employer continues to offer the voucher scheme

*workplace nurseries will be unaffected by the introduction of Tax-Free Childcare

Scam emails double during Tax Credits Renewal Period

Fraudsters are targeting tax credits claimants with scam emails, fake websites and text messages in the run-up to the 31 July renewals deadline, HMRC warned today.

New statistics show that nearly 51,000 phishing emails were reported to HM Revenue and Customs (HMRC) between April and July last year – double the number for the same period in 2013.

Some of these scam messages claim to be from a “Tax Credit Office Agent” offering a tax refund, or include a link to a fake version of the GOV.UK website. People are often asked to provide bank details or other sensitive information such as passwords. Fraudsters then try to take money from their account, or sell their identities to criminals.

Last year, HMRC worked with other agencies to shut down 8,877 of these scam websites – a 500% increase against 2013’s figures – and the message to tax credits customers this year is to stay vigilant.

Nick Lodge, Director General of Benefits and Credits, HMRC, said:

“HMRC will never ask people to disclose personal information by email. We have cracked down on phishing emails and scam websites, but the fraudsters’ methods are constantly changing, so people must remain vigilant.

“The only way to renew tax credits and report changes online is on GOV.UK.”

HMRC has advice on recognising scam emails, and how to report them, on GOV.UK:

Top Ten Things to know about the New Tax-Free Childcare Scheme

Tax-Free Childcare will be available to up to 1.8 million households to help with the cost of childcare, enabling more parents to go out to work, if they want to, to provide greater security for their families. Here’s the top ten things to know about the scheme…

1. You’ll be able to open an online account

You’ll be able to open an online account, which you can pay into to cover the cost of childcare with a registered provider. This will be done through the government website, GOV.UK. Tax-Free Childcare will be launched from early 2017.

2. For every 80p you or someone else pays in, the government will top up an extra 20p

This is equivalent of the tax most people pay – 20% – which gives the scheme its name, ‘tax-free’. The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children).

3. The scheme will be available for children up to the age of 12

It will also be available for children with disabilities up to the age of 17, as their childcare costs can stay high throughout their teenage years.

4. To qualify, parents will have to be in work, earning just over an average of £50 a week and not more than £150,000 per year

The scheme is designed to be flexible for parents if, for example, they want to get back to work after the birth of a child or work part-time.

5. Any eligible working family can use the Tax-Free Childcare scheme – it doesn’t rely on employers offering it

Tax-Free Childcare doesn’t rely on employers offering the scheme, unlike the current scheme Employer-Supported Childcare. Any working family can use Tax-Free Childcare, provided they meet the eligibility requirements.

6. The scheme will also be available for parents who are self-employed

Self-employed parents will be able to get support with childcare costs in Tax-Free Childcare, unlike the current scheme (Employer-Supported Childcare) which is not available to self-employed parents. To support newly self-employed parents, the government is introducing a ‘start-up’ period. During this, self-employed parents won’t have to earn the minimum income level.

The scheme will also be available to parents on paid sick leave and paid and unpaid statutory maternity, paternity and adoption leave.

7. If you currently receive Employer-Supported Childcare then you can continue to do so

You do not have to switch to Tax-Free Childcare if you do not wish to. Employer-Supported Childcare will continue to run. Parents won’t be able to register for Employer-Supported Childcare after Tax-Free Childcare is introduced, but those already registered by this date will be able to continue using it for as long as their employer offers it. However, Tax-Free Childcare will be open to more than twice as many parents as Employer-Supported Childcare.

Employers’ workplace nurseries won’t be affected by the introduction of Tax-Free Childcare.

8. Parents and others can pay money into their childcare account as and when they like

This gives you the flexibility to pay in more in some months, and less at other times. This means you can build up a balance in your account to use at times when you need more childcare than usual, for example, over the summer holidays.

It’s also not just the parents who can pay into the account – if grandparents, other family members or employers want to pay in, then they can.

9. The process will be as simple as possible for parents

The process will be light-touch and as easy as possible for you. For example, you’ll re-confirm your circumstances every three months via a simple online process; and there will be a simple log-in service where parents can view accounts for all of their children at once.

10. You’ll be able to withdraw money from the account if you want to

If your circumstances change or you no longer want to pay into the account, then you’ll be able to withdraw the money you have built up. If you do, the government will withdraw its corresponding contribution.

More information will become available ahead of the scheme being introduced so parents making childcare decisions are able to consider all their options.

Offshote tax evaders to face tough new criminal sanctions

The new regime to crack down on offshore evaders, which HM Revenue and Customs (HMRC) will consult on from today, includes:

*a new criminal offence for offshore evasion – so in the worst cases it’s no longer possible to plead ignorance in an attempt to avoid criminal prosecution
*a new criminal offence for corporates who fail to prevent tax evasion or the facilitation of tax evasion on their watch
*increasing the financial penalties faced by evaders – including, for the first time, linking a penalty to the value of the asset hidden offshore
*new civil penalties on those who facilitate evasion so they will face the same penalty as the tax evader
*publicly naming both evaders and those who enable evasion

Speaking at HMRC’s Stakeholder Conference in London, Financial Secretary to the Treasury, David Gauke, said:

Time’s up for people who don’t pay their fair share of tax by hiding their money offshore. People who evade tax, facilitate or turn a blind eye to tax evasion will now face powerful criminal and civil sanctions under our tough new regime.

We’ve already seen over 90 countries across the world sign up to automatically exchange information on taxpayers. This, together with our new sanctions, will mean there is nowhere left to hide for offshore tax evaders.

In the last few years there has been huge progress in tackling offshore tax evasion. HMRC has already collected over £2 billion from previously undisclosed offshore income through agreements with Switzerland, Liechtenstein and the Channel Islands. As announced in the March 2015 Budget, these offshore disclosure agreements will close early (31 December 2015) and be replaced by a tougher last chance facility ahead of the automatic exchange of tax information with over 90 countries, including tax havens, from 2017.

HMRC win accelerated Payments Challenge

A challenge in the High Court to the legality of Accelerated Payment Notices has been comprehensively rejected. The accelerated payments regime, introduced by the Government last year, changes the underlying economics of tax avoidance. People who try to avoid tax have to pay the tax up front while their avoidance is investigated. A number of users of an avoidance scheme challenged notices issued under this regime through a judicial review.

They claimed that HMRC’s action in issuing the accelerated payments notices were unreasonable, breached natural justice and represented an abuse of their rights under the European Convention on Human Rights to a fair trial and protection of property. They also claimed it took away the legitimate expectation they had when they joined the avoidance scheme that they wouldn’t have to pay tax before the dispute had been resolved.

The Court found in HMRC’s favour on all the challenges.

David Richardson, Director of Counter Avoidance, HMRC, said:

This is an important result, and good news for the vast majority of taxpayers who do not try to avoid paying their fair share of tax.

Those who use tax avoidance schemes need to know they can no longer hold on to the money while their affairs are investigated. They have to pay their tax up front like everybody else.

We expect to complete the issue of around 64,000 notices tax by the end of 2016 bringing forward £5.5bn in payments for the Exchequer by March 2020.

HMRC wins 80% of all avoidance cases that people litigate, and many more are settling before things get to that stage.

Anyone who has received an accelerated payment notice but has further questions on what they need to do now should contact HMRC