Abbey

Chartered Tax Advisers
Old Bishops' College
Churchgate
Cheshunt
Hertfordshire
EN8 9XP

T: 01992 642024

E: abbey@abbeyaccountants.com

Smiling businessmen and women

  TAX E-NEWS - August 2017


Welcome to the August monthly tax newsletter.  These newsletters are designed to keep you informed of the latest tax issues.

Please contact us if you need further information on any of the topics covered.

Peter McDaid
CTA ATT TEP
Director




BIG BROTHER

HM Revenue and Customs (HMRC) have spent in excess of £100m on a new super computer and this is being fully deployed for the first time.

This extremely powerful "Connect " IT system is being used to collect and compile data to create a profile and income/wealth details for each taxpayer. Information will be drawn from across a number of government departments and also from various numerous external corporate sources.

For example, information can be obtained from Government Departments such as, the Land Registry, the DVLA, the Child Support Agency. etc. Externally from any employer, banks, Visa and Mastercard transactions, eBay, Gumtree. Airbnb, Zopa, to name but a few. The Connect IT system will also have access to social media including Twitter, Facebook and Instagram to evaluate lifestyle.

HMRC have been energetically extending their data gathering power. It recently acquired the rights to force apps and platforms such as Apple and Amazon to hand over data -including names and addresses of sellers and advertisers. This would help them target tax evading businesses.

Paypal is another new source of data and according to a recent consultation, money service businesses such as currency exchange services are next on the list.

In this modern world, we all leave a massive electronic footprint of where we are, what we do and what we spend. This new super computer gives HMRC the ability to evaluate if taxpayers are declaring all their income capital gains etc. and paying the correct amount of tax.

To add to this as of September last year HMRC can gather information from banks and financial organisations from British Overseas Territories such as the Channel Islands and from this year it can gather information from 60 more countries

In addition, HMRC will also be able to gain access to information under new laws commonly known as the "Snoopers Charter". What this means is that they can obtain access to web browsing history and emails going back for at least one year.

This is truly frightening and it is very scary to think just how much information a government department has the legal right to and now the actual ability to obtain on an individual. This must be an invasion of privacy, human rights etc. The Data Protection Act must also impinge on this and I suspect that some stage this will be taken through the Courts.

To conclude, HMRC's latest estimates give a figure of £11.4b pa of lost tax revenue which relates to illegal tax evasion and the hidden economy.

In the coming years HMRC will focus on those who deliberately understate or indeed fail to disclose all their income and gains and it will use all its tools that it has available to aggressively tackle this problem. Now is the time to come clean because if HMRC do in the future discover that you have not fully declared your income/capital gains the penalties/sanctions imposed will be punitive indeed.

We can help in preparing disclosures and dealing with investigations with HMRC so please do feel free to contact us for advice and help if it should be required.
NEW GOVERNMENT CHILDCARE SCHEMES

Working parents can start applying for two new Government childcare schemes launching this year – Tax-Free Childcare which begins immediately and 30 hours free childcare which starts in September.

This means that working parents of children, aged under 4 on 31 August 2017, can now apply through the new digital childcare service for Tax-Free Childcare and receive a Government top-up of £2 for every £8 that they pay into their Tax-Free Childcare account. This will apply to children under 12 years old but parents of disabled children under 17 will also be able to apply for Tax-Free Childcare.

This new scheme is designed for working families, including the self-employed, in the UK. For every £8 you pay in, the government will add an extra £2, up to £2,000 per child, or £4,000 per year for disabled children under 17 years old. The special account is then used to pay for childcare with an OFSTED registered nursery or childminder.

In addition, parents of 2-3 year olds, who will be eligible for a 30 hours free childcare place in September 2017, can apply through the childcare service and start arranging a place with their childcare provider.

THINKING OF WINDING UP YOUR COMPANY?

Up until 6 April last year, the distribution of cash to shareholders on the winding up of a trading company by a liquidator, was usually taxed as a capital gain, potentially taxed at just 10% with the benefit of entrepreneurs’ relief.

However, last year’s Finance Act introduced a targeted anti-avoidance rule that may tax such a distribution as a dividend at income tax rates up to 38.1% under certain circumstances.

HM Revenue and Customs have recently issued guidance in an attempt to clarify when the new anti-avoidance rule would apply.

Broadly the anti-avoidance is intended to catch situations where the old company is wound up and a similar business is carried on by a connected business. Note however, the distribution would only be taxed as a dividend at income tax rates if one of the main purposes of the transaction was to avoid tax. This is a complex area so please contact us to discuss your plans so you do not fall foul of the new anti-avoidance rule.

SECOND FINANCE BILL THIS AUTUMN

It has been announced that the second Finance Bill will legislate for all policies that were included in the pre-election Finance Bill but had to be dropped in order to rush through theFinance Act 2017 before the snap general election in June.

The Government has re-confirmed that all policies originally announced to start from April 2017 will be effective from that date.



TAX DATES AND PAYMENTS

1 September Corporation tax for year to 30/11/15
19 September PAYE & NIC deductions, and CIS return and tax for month to 05/09/2016 (due 22 September if you pay electronically).