Taxman Closing in on Undeclared Rental Income

A London council which has been working with HM Revenue & Customs (HMRC) to identify tax dodging landlords is a sign of things to come, warn Brearley and Co.

“Almost half of Newham Council’s 27,000 registered landlords have failed to register with HMRC” says Tax Manager, Andrew Cowe.  “This will further strengthen HMRC’s resolve to catch up with landlords who don’t declare rental income, an area we know they are already looking at closely”.

“Discovering such a high level of tax evasion in just one council area will prompt them to work with other local authorities”, continued Cowe.  “Given that local government funding is directly affected by taxes raised nationally, councils will no doubt happily assist their enquirers”.

There are numerous other ways HMRC can track down tax evading landlords.  “They now have access to banks, letting agents and the Land Registry, to name but three”, said Cowe.  “The message is that if you are letting a property and not declaring rents, it’s only a matter of time before they find you.  Penalties are far less severe if you ‘come clean’, so the clear message is contact them before they contact you”.

Andrew Cowe, Tax Manager, Brearley & Co

 

 

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Modest growth in UK retail sales continued in July, latest statistics show

The volume of UK retail sales continued to grow at a modest pace during July, new statistics published by the Office for National Statistics (ONS) have revealed.

Retail sales grew by 0.3% in July – exceeding analysts’ expectations, and matching the 0.3% rate of growth recorded in June.

The growth in July has been largely attributed to a rise in the volume of food sales: such sales rose by 1.5% in July, representing a small increase on June’s figure of 1.1%.

Online sales in July also increased by 15.1% when compared to the same period in 2016.

However, the ONS data revealed that the gap between wages and inflation continues to widen.

Ole Black, Senior Statistician at the ONS, commented: ‘The underlying trend at the beginning of 2017 showed a relatively subdued picture in retail sales.

‘Strong food sales have been responsible for the growth of 0.3% in July compared with June, as all other main sectors have shown a decrease. Whilst the overall growth is the same as in June, trends in growth in different sectors are proving quite volatile.’

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Online service launched for estates under inheritance tax threshold

HMRC has introduced an online service for estates that are unlikely to pay any inheritance tax (IHT) as they are under the £325,000 threshold

The HMRC form, IHT205 (2011), which is used to provide HMRC with estate information for inheritance tax purposes, has been made into an online service.

Form IHT205 must be completed to get a grant of representation which is needed to get access to the assets in the deceased’s estate.

Before receiving a grant, inheritance tax must be paid or it must be proved that there is no tax due. For most estates no tax is due and individuals will only need to fill in form IHT205 to provide brief details of the estate.

If tax is due on the estate, form IHT 4000 must be submitted to HMRC.

Currently any estate above the £325,000 inheritance tax threshold (per person) is taxed at 40% on any amount above the threshold. It is taxed at 36% if at least 10% is left to a charity.

HMRC’s online service to submit estate information is available here.

CCH Daily

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Retirement income ‘boosted by private and workplace pensions’, statistics suggest

Data published by the Office for National Statistics (ONS) has revealed that retirement income has been ‘boosted’ by private and workplace pensions over the last 40 years.

The ONS found that 80% of retired UK households received income from a private pension in 2016, compared to just 45% of retired households in 1977.

It revealed that just 21% of retired households had an annual disposable income over £10,000 in 1977: in 2016, 96% of retired households had a disposable income of £10,000 or more.

The ONS also found that incomes have grown at a faster rate for older individuals than they have for the young.

Anna Dixon, Chief Executive at the Centre for Aging Better, said: ‘We have seen a dramatic and necessary reduction in pensioner poverty since the 1970s. Being financially secure is a key part of a good later life.

‘However, these averages mask inequalities. In particular, the growing disparity between those who have been unable to save into a pension and those who have not.’

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Firms with poor cyber security measures could face fines of £17m, government warns

The government has warned that businesses could face fines of up to £17 million or 4% of global turnover if they do not take appropriate measures to protect against cyber-attacks.

Water, energy, transport and health firms have been advised to safeguard against hacking and cyber threats. The government has stressed that fines will only be issued ‘as a last resort’.

Businesses will also be required to demonstrate that they have plans in place to cover power failures and environmental disasters.

The proposals have been put forward as part of a consultation which aims to decide how to implement a new Network and Information Systems (NIS) Directive. The new Directive will form part of the government’s National Cyber Security Strategy.

The Directive relates to loss of service, as opposed to loss of data, and will be implemented from May 2018.

Digital Minister, Matt Hancock, said: ‘We want the UK to be the safest place in the world to live and be online, with our essential services and infrastructure prepared for the increasing risk of cyber-attack and more resilient against other threats such as power failures and environmental hazards.’

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New trade body to be created by government

The government has revealed its intention to create a new trade authority, termed the UK Trade Remedies Organisation, ahead of Britain’s departure from the EU in 2019.

The UK Trade Remedies Organisation will help to combat incidents of unfair trade that may occur once Brexit has taken place.

It will also build upon the UK’s ‘capability and capacity’ to investigate complaints in relation to unfair competition, and will allow the UK to establish its own trade rules.

The government is looking to recruit around 130 employees, and intends to have the new organisation up and running by October 2018.

Commenting on the news, Jill Rutter, Programme Director at the Institute for Government (IfG), said: ‘The government needs to prepare for Brexit, and that includes being able to run our own system of trade defence.

‘The government’s current policy is to leave the single market and the customs union and has to be ready for leaving with no deal. So this is a sensible part of that contingency planning.’

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UK ‘won’t cut taxes post-Brexit’, Chancellor states

Chancellor Philip Hammond has suggested that the UK won’t cut taxes and fiscal regulations after Brexit.

The Chancellor stated that the UK will remain within the ‘EU average’ in terms of tax rates, and will not seek to reduce taxes in a bid to become more competitive.

He commented: ‘I often hear it said that the UK is considering participating in unfair competition in regulation and tax.

‘That is neither our plan nor our vision for the future.

‘I would expect us to remain a country with a social, economic and cultural model that is recognisably European.’

In January, Mr Hammond stated that the government may have to ‘change its economic model’ if the UK was unable to remain in the EU single market.

He commented: ‘We will change our model, and we will come back, and we will be competitively engaged.

‘I personally hope we will be able to remain in the mainstream of European economic and social thinking. But if we are forced to be something different, then we will have to become something different.’

The Chancellor’s recent statements come amid ongoing Brexit negotiations, with government officials debating the free movement of EU citizens in the UK.

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Making Tax Digital: are you up to date?

Following the dropping of Making Tax Digital (MTD) plans from the first Finance Bill of 2017, the government recently outlined new proposals for its landmark digital scheme, to be legislated for in the next Finance Bill, due in the Autumn. Here, we examine the changes.

A new MTD timetable

The government recently stated that it has ‘listened to concerns’ raised by the Treasury Select Committee and business in regard to the pace of change and the ‘short timetable’ for the successful introduction of MTD, and will be taking steps to ‘ensure a smooth transition to a digital tax system’.

Under the government’s new timetable for MTD, from April 2019 businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and provide quarterly updates to HMRC for VAT purposes only. As VAT registered businesses must already submit quarterly VAT returns, initially firms will not need to supply HMRC with information any more regularly than they do now.

Businesses will not be required to keep digital records or update HMRC quarterly for other taxes until ‘at least 2020’.

The government intends to pilot Making Tax Digital for VAT on a small scale ‘by the end of this year’. Wider live piloting will begin from Spring 2018.

The four new Making Tax Digital foundations

The government has outlined the four ‘foundations’ of MTD, which set out the key aims of the new regime as follows:

1. Better use of information

This foundation outlines the perceived benefits of MTD when it comes to obtaining and making use of information. This includes the fact that HMRC will be able to obtain information from other sources, such as employers, banks and other government departments, rather than requiring the taxpayer to provide it.

Digital tax accounts will also allow taxpayers to view the information HMRC holds on them, and to ensure that their information is accurate and up to date. The government also intends to make use of the information to tailor its services to taxpayers’ requirements.

2. Tax in real time

HMRC has stated its intention to collect and process taxpayers’ information in ‘as close to real time as possible’. It believes that this will help to prevent errors and reduce the number of taxpayers who end the year having paid too much or too little tax.

3. A single financial account

By 2020, the government aims to provide taxpayers with a single overview of their tax liabilities and entitlements – in a similar way to online banking.

4. Interacting digitally with customers

Under the new system, taxpayers and their agents will be able to interact with HMRC digitally. Taxpayers will be able to access government advice and support via webchats and secure messaging, and digital record keeping software will be linked directly to HMRC systems.

The MTD changes will be legislated for in the upcoming Finance Bill, which the government will debate following its Summer recess.

The changes to the MTD timetable offer taxpayers additional time to prepare for the new system ahead of its initial introduction in 2019. As your accountants, you can rest assured that we will be keeping up to date on all the latest MTD news and information.

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Tax credit renewal – one week to go

With just one week to go until the 31 July tax credit renewal deadline, HM Revenue and Customs (HMRC) is urging the 960,000 customers that are still to renew to do it now – or risk having their payments stopped.

The online renewals system is now easier and more accessible, allowing customers to track the process of their renewal, receive email confirmation once submitted, and removing the need to scan or type in the barcode number from the back of the renewals pack.

Last year 410,000 customers had their payments stopped or altered because they missed the deadline to inform HMRC of changes to their circumstances. These include changes to working hours, income and childcare costs and can be done through Gov.uk or via the HMRC app.

Rachel McLean, HMRC’s interim Director General of Customer Services, said:
“We’ve made some really helpful improvements this year to our online and app services to support our customers. We know life can be hectic so the start and stop feature allows customers to begin and complete their renewal on a day and time convenient for them.

“It’s fantastic that 32,000 have used our app and 733,000 customers have already renewed their tax credits online. I urge customers who have yet to renew their tax credits to do so as soon as possible, thereby avoiding having their payments stopped.The 31 July deadline is fast approaching.”

Online help and information on renewing tax credits is available at GOV.UK and via HMRC’s customer service Twitter feed @HMRCcustomers. Support is also available on the tax credits helpline. 0345 300 3900

 

HM Revenue & Customs Press Office

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Official figures reveal surprise fall in UK inflation rate

The UK’s rate of inflation as measured by the Consumer Prices Index (CPI) fell unexpectedly to 2.6% in June, down from 2.9% in May, figures published by the Office for National Statistics (ONS) have revealed.

The latest rate represents the first fall in inflation since October 2016.

Lower petrol and diesel prices, alongside a decline in prices for recreational and cultural goods, helped to drive down inflation, the ONS stated.

Commenting on the data, Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said: ‘While the fall in inflation in June will surprise many, consumer price growth is likely to resume its upward trend in the coming months, with the elevated cost of imported raw materials still filtering through supply chains.

‘Inflation remains a major risk to the UK’s growth prospects this year, with rising cost pressures for both consumers and businesses likely to dampen overall economic activity.’

Experts have also warned that inflation continues to outstrip wage growth.

Frances O’Grady, General Secretary of the Trades Union Congress (TUC), stated: ‘The government must stop this cost of living squeeze. Many working people are caught in a vice as rising prices crush their pay.’

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