NEWSLETTER

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UK Tax Office Issues Reminder About VAT Changes In January

UPDATED 1st APRIL 2011

If you have any comments or news please email me - pete@uktaxadvisory.co.uk

HMRC BLUNDER...... TAX DEBTS CANCELLED

Around 10,000 consumers who appealed against shock tax demands from HMRC last year have had their tax debts cancelled, according to a report by the Daily Telegraph.

It has emerged that nearly a quarter of those who appealed as a result of the huge HMRC blunder in 2010 using

the "extra-statutory concession" A19 were successful, and anyone with outstanding tax demands may still be able to appeal.

David Gauke, a Treasury minister, disclosed that 23% of those who appealed under the A19 concession had their debts cancelled. This is despite Mr Gauke claiming in Parliament last year that it "does not apply that often in practice and I do not want people to build up their hopes that it will offer some kind of panacea". A further 250,000 pensioners had already had their tax cancelled under the concession.

Around 1.4 million people were sent tax demands for a total of £3.8 billion, after HMRC admitted last September that it had got millions of tax bills wrong due to problems with the PAYE system. At the time, accountants urged those who had been sent tax demands to appeal using A19.

Under the concession, HMRC will back down if the taxpayer "could reasonably have believed that his or her tax affairs were in order". A 12-month rule also usually applies, which means the tax can be written off if the victim was told by HMRC more than a year after the end of the tax year that information was provided.

There is no limit to the amount of money that can be written off under this concession.

Deliberately discouraged
The Telegraph reports that a spokesman for HMRC denied that the tax office had deliberately discouraged those who owed money to appeal under the concession. "All our experience indicated that this concession which we developed will apply only in a small number of cases," he said.

"We have issued well over a million letters asking for underpayments so the percentage of accepted cases should be seen as a proportion of that rather than the percentage who made an application."

Taxpayers who have received tax demands from HMRC can still apply using the concession, and may be able to appeal if they have been rejected. "We would never discourage anyone from applying but they should do some work first to see if their case is appropriate for consideration," the spokesman said.

"We don't want someone disappointed if we can't grant the concession if their case does not meet the criteria." 

We at UTA say:

 'Let us appeal for you, we won't be discouraged'

Brits waste £13.5bn in needless tax payments

Mention the word tax and most people think they're paying too much – and in fact we are, completely unnecessarily, according to a recent report.

Cash-strapped Brits are handing over £13.5 billion in needless payments to the taxman, so how do we stop this wastage?

The 2011 Tax Action report, from unbiased.co.uk, found the South East is the most inefficient region for tax planning, wasting a huge £1.8 billion each year, followed by London (£1.7bn) and the North West (£1.5bn). These are enormous amounts to be throwing away in a year when public spending cuts are set to take their toll on already tight purse strings.

The number one area of tax wastage is through tax credits, with over £8.5 billion being lost through people failing to claim their child benefit, child tax credits, working tax credits and pension credits. The second highest area of wastage is through inheritance tax, with £1.3 billion being wasted through mistakes that could have been avoided with some basic tax planning  inplace.

Despite the nation's huge tax waste mountain, the study found a massive 88% of people have done nothing in the past 12 months to reduce the amount of tax they pay, rising to 91% of females.

Karen Barrett, Chief Executive of unbiased.co.uk said: " While consumers are increasingly aware of saving money by switching utilities provider or using online moneysaving websites, they could actually be saving themselves even more by being tax efficient and not giving away more than they should to the taxman."

Six tax planning tips from the experts

1) Use your partner's income tax rate
"If you are about to sell an investment that has performed well for you, but has taxable gains on it, then try to transfer it to your partner's name," explains Jaskarn Pawar from Investor Profile. "If your partner is in a lower income tax rate band than you are then selling the investment under their name will reduce or eliminate your tax bill."

2) Avoid extra taxes
Consider whether your choice of vehicle excludes you from Vehicle Excise Duty or the London congestion charge. If you need extra income and have a spare room, Harry Katz from Norwest Consultants suggests renting a room. "Provided you receive (after expenses) no more than £4,250 per year this is tax free. That's almost £82 per week in your pocket."

3) Play the pension tax relief system
To get the most out of your pension, be clever about contribution levels and review your payments each year, explains Jason Witcombe from Evolve Financial Planning "If your income is in the 20% tax band, it will cost you £8,000 to get £10,000 into your pension after basic rate tax relief. Higher rate tax starts at £43,875 for 2010/11. Therefore, if you wait until your income is £53,875, getting £10,000 into your pension only costs you £6,000 as you get 40% relief."

4) Use your ISA allowance 

Holding your savings and investments in a tax efficient wrapper will improve your returns by protecting a chunk from the taxman, explains Danny Cox from Hargreaves Lansdown. "This tax year, which ends at midnight on the 5th April, you can invest  £10,200 in ISA of which £5,100 can be cash. From the new tax year, which starts on the 6th April 2011, you can invest  £10,680 in ISA or which £5,340 can be in cash. This means during April a couple could shelter as much as £41,760 in an ISA."

5) Use your capital gains tax allowance
"The last couple of years have seen most people's share portfolios increase in value," explains Gordon Bowden, Quainton Hills Financial Planning Ltd. "Everybody has an annual Capital Gains Tax (CGT) allowance of £10,100 and gains realised of up to this amount are tax free."

6) Children's capital gains tax allowance
"Parents who have school or college age children often overlook the capital gains tax allowance their children can use, says Kevin Tooze, Equity Partners UK Ltd. "For example a child can hold a growth OEIC or unit trust and make gains of up to £10,100 in one tax year and not be subject to any tax on the proceeds if realised."

The hidden taxes that are bleeding you dry

Think you know how much tax you are paying? Think again. A recent investigation has revealed that people who think they are on basic rate tax of 20% are paying tax at around 39%, and those on the higher rate are losing around 45% of their income to the taxman.

An investigation by the Daily Mail looked at two households earning £45,000. The first made this sum from two working adults, and the second made it all from one.

Outrageous tax bill
The dual income family paid income tax at 20% and National Insurance at 12%. However, this was just the start. They also spent a small fortune on other taxes, with an estimated £60 a week in VAT on everything from groceries to clothes and shoes, eating out and utility bills. Another massive charge was for petrol, with an incredible £33 a week on VAT and few duty. Then of course there's council tax at roughly £29 a week. In all this couple made £865 a week and spent £340 of it in tax.

The couple where one person made all the money were hit even harder, because they faced income tax at a higher rate, paying £154 in income tax and £82 in national insurance. This put the total weekly tax bill at £390 - or 45% of their income.

The examples also showed just what a knife edge we are on at the moment, the dual income family were left with £38 a month after expenses, but the single income family had just £12. It means very small changes in things like the cost of groceries and petrol are at risk of sending even these comfortable earners over the edge financially.

Government failures
These figures are enough to make your blood boil. When we consider just how hard we have to work in order to earn our money, and just how hard we work in order to control the bills that are within our control, it's outrageous that we should have to hand over such a massive portion of our income to people we know don't know how to cut costs or spend efficiently. We have no choice but to sign it over and watch the government spend £50 on a packet of pasta or a council worker's expensive mobile phone bill.

If the government is going to keep taking such a massive chunk of our income, they are going to have to prove they can do a better job of spending it, and from past experience, there's a very real doubt that any government can prove they are up to the task.

Weekly News Update!

1^st July 2011

HM Revenue & Customs (HMRC) is alerting taxpayers to a surge of fake ‘phishing’ emails sent out by fraudsters in the run-up to the tax credits renewal deadline.

The email informs the recipient they are due a tax rebate, and provides a click-through link to a cloned replica of the HMRC website. The recipient is asked to provide their credit or debit card details. Fraudsters then try to take money from the account using the details provided. Victims risk having their bank accounts emptied and their personal details sold on to other organised criminal gangs.

Since the beginning of April, when the first tax credits renewals forms were sent out to claimants, more than 46,000 phishing emails have been reported by customers. During the same period of time HMRC helped shut down more than 150 scam websites.

Joan Wood, Director of HMRC Online and Digital, said:

“We currently only ever contact customers who are due a tax refund in writing by post. We don’t use telephone calls, emails or external companies in these circumstances. If anyone receives an email claiming to be from HMRC, please send it to phishing@hmrc.gsi.gov.uk before deleting it permanently.”

HMRC thoroughly investigates phishing attacks and works with other law enforcement agencies in the UK and overseas. In the last two years, scam networks have been shut down in a number of countries, including Austria, Mexico, the UK, South Korea, the USA, Thailand and Japan.

HMRC strongly advises customers to: 
* Check the advice published at www.hmrc.gov.uk/security/index.htm to see if the email you have received is listed
* Forward suspicious emails to HMRC at phishing@hmrc.gsi.gov.uk and then delete it from your computer/mail account
* Do not click on websites, links contained in suspicious emails or open attachments
* Follow advice from www.getsafeonline.co.uk

If you have reason to believe that you have been the victim of an email scam, report the matter to your bank/card issuer as soon as possible. If in doubt please check with HMRC athttp://www.hmrc.gov.uk/security/fraud-attempts.htm

Notes for editors