News Archive - February 2012
Motorists tell Treasury to cut upcoming 3p fuel duty - 29.2.2012
Plans to increase fuel duty by 3p should be axed in order to boost the UK economy and create thousands of jobs, campaigning group Fair Fuel UK has told the Government. Backed by over 20,000 road freight companies, Fair Fuel UK presented their initial findings ahead of a report by the Centre for Economics and Business Research (CEBR) in last minute talks with ministers including Treasury minister Chloe Smith. According to the Fair Fuel UK's petition, 1 billion fewer litres of fuel were sold in the first three months of 2011 compared with the same period before the 2008 financial crisis, equating to a £637.8 million loss in tax revenues to the Treasury. The same period also saw a 15.2 per cent dip in petrol sales and a six per cent fall in diesel sales, after it revealed that the UK now has the highest fuel duty in the EU. Initial findings from the CEBR report are expected to show that a cut of 2.5p per litre would create 18,000 new jobs in the first year. Fair Fuel UK has stated that reducing fuel duty is 'key' to UK economic recovery and hopes the full report will demonstrate that a cut in duty would help Treasury revenues. Quentin Willson, broadcast journalist and national spokesman for Fair Fuel UK, said: "We've been saying this all along and now we can prove it. This conclusively backs up our claim that a cut in fuel duty will boost the economy without harming Treasury revenues. Quite rightly, the Chancellor's priority is on stimulating growth in order to pay down the deficit. Here is a way to do both." He continued: "The Government now needs to embrace these findings and follow through on the 1p cut they made last year." However, despite axing a fuel duty rise last month, and limiting a planned 5p rise in August 2012 to 3p, the Government has indicated that further fuel duty cuts are not in the pipeline. Speaking to Sky News this weekend, Chancellor George Osborne said that fuel duty concessions had already been made and that the Treasury would not be able afford the £1.5 billion needed to cancel it.
£4 million of red tape cuts for businesses - 28.2.2012
Businesses in the UK will save around £4.17 million if the Government sticks to plans to cut regulatory burdens between January and June 2012, a new report published by the Department for Business, Innovation and Skills (BIS) says. The latest Third Statement of New Regulation report, part of the Government's ongoing strategy for reducing red tape, shows that there has been a net reduction in regulation over the last 12 months, partly attributed to a 'one-in, one-out' rule. Departments are to remove more legislation in the coming six months as a result of the Red Tape Challenge, which aims to reduce red tape restrictions that are hampering business' growth.The report also claims that the number of regulations that reduce business costs continue to outweigh the number which put new costs on businesses. Mark Prisk, business and enterprise minister, said: "The One-in, One-out process is one of the best tools we have to cut the costs and burden of regulation on our businesses. "But we know that changing the culture of regulation in Whitehall is a long-term job, and all of us in Government have to, and will, continue to root
out any red tape which poses more of a hindrance than a help to UK businesses." The latest report is published four weeks ahead of the April Common Commencement Date on 6 April in preparation for regulations that are to come in on that date.
Meanwhile, radical Conservative MPs known as the Free Enterprise Group have called for a more drastic approach, and are calling on the Chancellor to 'bulldoze red tape' with further deregulation.
New HMRC taskforces to target market and auto traders - 24.2.2012
HMRC is to launch 30 new taskforces in 2012/13 which will specifically target market stall holders, car sales people, and rag traders - concerned with the import, wholesale, marketing and sale of clothing - as it continues its clampdown on those who attempt to dodge the tax man.The revenue already expects to collect more than £50 million as a result of 12 taskforces launched last year and on-going criminal investigations. These 2011 taskforces, including the scrap metal taskforce launched in Scotland in November, will also be extended to different locations across the UK. HMRC's director of local compliance, Richard ummersgill, said that some of its clampdowns from last year, which included targeting restaurants and fast .food franchises in London, Scotland and the North West, had hit rates of '100 per cent', indicating that the tax man was targeting the 'right' high risk people. In addition to continuing campaigns and offshore penalties, taskforces form part of the Government's £917 million spending review investment to tackle tax evasion, avoidance and fraud, which aims to raise an additional £7 billion for the Treasury by 2015. David Gauke, the exchequer secretary to the Treasury, said: "The Government is committed to tackling tax evasion and avoidance. HMRC's taskforces are cracking down on people who choose to break the rules and creating a level playing field for the majority who play by them. "It is completely unacceptable, at a time when we are trying to bring down the deficit that, while most hard-working people pay the right tax, there are others who try to get out of contributing their fair share. HMRC has received lots of useful information on its evasion hotlines, which shows that the honest majority are quite rightly fed up with the dishonest minority."
HMRC alters stance on employee smartphones - 23.2.2012
Smartphones such as BlackBerrys and iPhones which are provided by employers to employees will no longer be subject to tax as a 'benefit in kind', HMRC has announced. The change of heart from HMRC means that many tax payers may be able to reclaim hundreds of pounds in tax refunds from the last few years. HMRC had originally classified smartphones as personal digital assistants (PDAs) and not conventional mobile telephones in the view that they were not originally designed for the primary purpose of transmitting and receiving calls or in connection with a communications service provider. This has meant that unlike ordinary mobile phones, which can be provided tax free to employees, smartphones have been treated as taxable benefit.
However, technological advances since their emergence in 2007, and their increasing popularity, mean that HMRC has now acknowledged they conform to their definition of 'telephone apparatus' and will therefore no longer be subject to tax. HMRC admits that many people may have already assumed that smartphones were already covered by the mobile phone exemption and included in the benefit of a PAYE settlement agreement. However, those wishing to seek repayment can do so by contacting HMRC.
HMRC: Late tax return penalties being issued - 21.2.2012
HMRC has begun issuing hundreds of thousands of penalty notices to those who have failed to submit tax returns on time, it has announced. Although the number of penalties fell by over half a million from last year, 850,000 letters will still be sent over the next two weeks outlining the £100 late-filing penalty. The 31 January deadline for online returns was this year extended by two days following strike action at HMRC's call centres, and those who submitted their tax returns on 1 or 2 February will not receive penalties. Appeals against the fines should be made in writing by 31 March. Reasonable excuses for failing to submit tax returns in time, such as serious illness, family bereavement or a delay in HMRC sending out online activation codes, will be individually considered. HMRC has warned those who have yet to file their 2010/11 tax returns to do so as soon as possible, or risk additional penalties. Returns that are still not received after three months will be liable for the £100 fine, as well as £10 for every additional late day accrued, and risk a maximum fine of £1,600. HMRC's acting director general, Steven Banyard, said: "We want the returns, not the penalties. So anyone who still hasn't sent theirs should do so as soon as possible. "People who receive a penalty notice should act now to avoid further penalties. They should send in their return, appeal if they think they have a reasonable excuse, or contact us if they think they shouldn't have been in Self Assessment."
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More start-ups financing business from their own pockets - 15.2.2012
More small and medium sized enterprise (SME) owners are dipping into their personal savings to finance their businesses, research by the Federation of Small Businesses (FSB) has revealed. Questioning more than 11,000 of its members, it found that 70 per cent of new businesses aged between one and two years old relied on funding from their owner's own savings and inheritance, whilst 34 per cent of owners borrowed money from friends and family. Only a quarter had access to a bank overdraft.
Even established SMEs were found to struggle in securing adequate finance, as the number of them using a loan or bank overdraft facility fell over the past two years. 35 per cent of these used an overdraft facility, while only 11 per cent used a secured bank loan, and seven per cent an unsecured bank loan - a drop of 8, 3, and 4 per cent respectively since 2009. The research comes after targets for the Government's Merlin Project scheme - a commitment made last year between the state and five major UK banks to lend more to small businesses - were missed by £1.1 billion. The figures from the FSB will sit alongside another report published by Bibby, which found that only four per cent of SMEs had applied for funding through Government initiatives, despite the Merlin banks stating they had met 'overall' lending targets. In fact, two thirds of UK business owners had not
even applied for external funding over the past 12 months. The FSB now wants to see more competition amongst high street banks and better promotion of alternative sources of funding available to small and developing firms. John Walker, the FSB's chairman, said: "Even though overall lending is above target, this shows that money is going to bigger businesses and
not new and fledgling firms that need it to take advantage of growth opportunities that are there even in these challenging times.
"The Government also needs to put in place their bold credit easing plans, which will help small businesses access finance on better terms."
HMRC launches latest tax avoidance campaigns - 9.2.2012
HMRC is set to launch various new campaigns throughout the coming year as it continues its drive to clamp down on those who attempt to dodge the taxman. Higher rate taxpayers and those failing to make tax returns will come under HMRC's spotlight, as will trades people in the home improvement market and e-marketplace traders selling direct to others. The tax authority will use new web technology to scour the internet for any liable information about specific targeted groups and businesses. In addition to existing and ongoing campaigns that have targeted offshore investments, medical professionals and private tutors, HMRC will now focus on:
- An extension of its plumber's campaign that will target traders - specifically builders and electricians - allowing them to come forward and declare unpaid tax.
- An E Marketplaces campaign focusing on those who buy and sell bulk goods direct online as a trade or business but fail to pay the tax owed.
- An on-going drive to tackle missing tax returns and those who are liable to pay higher tax rates.
As usual, the authority is giving these workers the option to come forward voluntary and settle any outstanding tax, or risk facing heavier fines when the campaign ends. Marian Wilson, of HMRC's Risk and Intelligence, said: "Using new technology, we have been able to analyse returns to HMRC covering a range of taxes and to cross-reference these with other information to build a picture of where we believe we have taxpayers with missing returns. "We are offering all the people targeted the opportunity to come forward. Penalties will be higher if we come and find people after the opportunity. A criminal investigation may also result. I therefore urge them to disclose unpaid tax voluntarily." HMRC's clamp down coincides with an announcement made by the Treasury today who, in a joint statement with the Governments of the United States and some EU countries, will aim to combat cross-border tax evasion.
HMRC to clampdown on PAYE and NIC avoidance - 8.2.2012
Employers who deliberately attempt to dodge their PAYE or National Insurance contributions (NICs) may land themselves in hot water when new HMRC powers come into force this spring. As of 6 April 2012, HMRC will be given the power to force employers to pay a security deposit if there is a serious risk that PAYE deductions will not be handed over to the taxman.
The new legislation will not affect employers with genuine financial problems but instead target employers who deduct income tax and NICs from employees' pay packets with no intention of paying it to HMRC. It has detailed instances of companies allowing PAYE and NICs debt build up before claiming insolvency - thus avoiding tax- and then setting up a new 'phoenix' company.
A security in the form of a cash deposit will now be required, either from the business or director, or via an approved bond that is payable on demand should anything go awry. The deposit amount will be decided on an individual basis depending on tax risks and the employer's history of tax behaviour. Those who fail to provide a security face a fine of up to £5,000.
HMRC already uses the security model for VAT, insurance premium tax (IPT) and environmental taxes and says: "They are affective - in around half the cases the trader becomes and remains compliant after receiving the first warning letter."
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P45 tax form to remain - 7.2.2012
Plans to replace to the current P45 tax form with a new 'leaver statement' have been scrapped following a consultation about HMRC's introduction of its Real Time Information (RTI) programme. HMRC had originally drafted the use of a leaver statement in RTI for use by employers when an employee moves jobs. However, following the consultation with employers and representative groups, the P45 will remain. The RTI system is being introduced by HMRC to improve the operation of PAYE by making it easier for employers and HMRC to operate. It will mean that employers can report tax and National Insurance contributions nstantaneously, rather than waiting until the end of the tax year.
A 12 month pilot programme of the RTI is due to roll out from April this year, with hopes that it will monitor staff movement more efficiently. Stephen Banyard, acting director general for personal tax at HMRC, said: "We have been working closely with employers and stakeholders about the introduction of RTI. Employers told us to keep the P45 - which is exactly what we have
done. RTI is on track and we want to work in partnership with employers and other stakeholders to make its introduction as smooth as possible."
HMRC business record checks halted - 6.2.2012
HMRC has announced it will delay the implementation of its business records checks (BRC) programme, following a review with trade and professional bodies' representatives. The pilot programme began in April last year but has been heavily criticised
over recent months because it subjects small and medium size enterprises (SMEs) to spot checks on their business records, potentially issuing fines up to £3,000 for incorrect paperwork. Business leaders, MPs, and business groups such as the Federation of Small Businesses, had all voiced concern over the programme's potential to affect
thousands of SMEs already struggling with HMRC red tape.
The internal review found that HMRC over stated how much the initiative would collect for the Treasury and acknowledged that it should be working in closer consultation with representative bodies as to what constitutes inadequate record
keeping. It also said that further work should be done to agree on a reasonable penalty tariff.
2,437 BRCs had been carried out up until the 4 January 2012, with HMRC finding that 28 per cent of businesses had some issue with record keeping, with a further 11 per cent of these requiring a follow up visit.
However, HMRC will now postpone the scheme which was due to roll out in April this year and will instead launch a 'revamped' approach in the 2012/13 financial year.
HMRC's director of local compliance, Richard Summersgill, said: "Four out of ten businesses had an issue with their business records, and of those that required a follow-up visit, we found that some 90 per cent subsequently improved their record-keeping.
However, after reviewing the pilot programme and listening to the views of businesses and representative bodies, we acknowledge the need for a fresh approach to business records checks."
'Corporation tax should be cut to 20% in 2012 Budget', says think-tank - 1.2.2012
The main rate of corporation tax should be cut to 20 per cent to boost business and economic growth, according to a report published by the Centre of Policy Studies (CPS).
The report, titled "How to cut Corporation Tax" by tax lawyer David Martin, urges Chancellor George Osborne to cut the tax rate in this year's Budget.
Although the main rate of corporation tax has fallen gradually from 52 per cent in 1982 to 26 per cent in 2011, the halving of the tax rate has in fact resulted in an increase in revenue generated for the Treasury.
Corporation tax remains an important source of revenue for the Treasury, which estimates that this year will yield revenues equivalent to 2.8 per cent of GDP, or around £43.2 billion.
The CPS is now calling for a further reduction on corporation tax to 20 per cent. Whilst the report acknowledges that a further drop in rates would theoretically create a fall in revenue for the Treasury by £4 billion, it estimates that the cost could easily be offset by enhanced growth.
The report says that a decrease in corporation tax: "would boost business confidence, encourage new investment by businesses (as it would improve net returns) and would send a strong signal that the Coalition is taking the .supply-side measures necessary to restore growth."
Corporation tax was cut from 28 per cent to 26 per cent in the last financial year, with smaller companies charged at a lower rate of 20 per cent with other exceptions. However, the report also argues that the system is complicated and that the changes would also represent 'a major simplification of the tax system'.
Tim Knox, Director of the Centre for Policy Studies, comments: "Anyone who has complained recently about 'high rewards for failure' should be equally vehement about high penalties for success. This tax penalises the most successful businesses in Britain."
According to the report, struggling households cannot be expected to lead a rescue of the economy and the Government's attention should be turned towards profitable businesses which, Knox called, 'the only source of a viable economic economy'.
