HMRC large business unit reveals increase in ‘tax under consideration’

HM Revenue & Customs has revealed that its estimate of the amount of tax large businesses might have underpaid rose to £24.8 billion for the year ending March 31, an increase of almost 14 percent from the previous year, while the department stressed that the figure did not represent tax actually owed or unpaid.

HMRC released its estimate of “tax under consideration” to the law firm Pinsent Masons in response to a freedom of information request … “A £3 billion rise in the tax HMRC is querying shows that HMRC is broadening its horizons and putting a far wider range of transactions under scrutiny,” said Heather Self, a partner at the firm.

“Tax under consideration is not tax owed or unpaid, it’s an estimate of what might be at stake if we didn’t investigate,” an HMRC spokesperson said in an emailed statement. Read more:

My news story for Tax Analysts, August 31 (paywall)

UK government to consult on promoting ‘taxpayer certainty’

HM Treasury officials will explore several potential opportunities to promote “taxpayer certainty” for large businesses, Chancellor of the Exchequer Philip Hammond has told the Office of Tax Simplification.

In response to the OTS’s recommendations on the computation of corporation tax liabilities and a separate report on stamp duty on paper documents, Treasury on August 29 released two letters from Hammond to the OTS, both of which were dated August 14.

Hammond said in response to the corporation tax report, “I encourage the OTS to engage with the consultation announced at spring budget 2017 on the risk profiles of large business and promoting stronger compliance.” The consultation, originally intended to be released before the summer parliamentary recess, will be issued “in due course,” an HMRC spokesman told Tax Analysts. Read more:

My news story for Tax Analysts, August 30 (paywall)

HMRC figures confirm higher corporation tax receipts

UK corporation tax receipts reached a record £49.5 billion in the financial year ending on March 31, an increase of 12 percent over the previous year, according to HM Revenue & Customs.

The increase was due to higher receipts from industrial and commercial, financial, and insurance sector companies, HMRC said in “Corporation tax statistics 2017″ an analysis published on August 24 of receipts from corporation tax, the bank levy, and the bank surcharge. The bank levy accounted for £3 billion and the bank surcharge, which was introduced in 2016, raised £1.1 billion. The diverted profits tax, introduced in 2015, is excluded because it is a different head of duty, HMRC noted, but the corporation tax figures will include any additional tax arising from behavioural change in response to its introduction …

Total corporation tax liabilities for 2015/16 were estimated at £43.4 billion, HMRC said, an increase of 1.4 percent on the previous year. The number of companies with a liability was 1.37 million, up 11.2 percent. The distribution of liabilities was “highly skewed”. Read more:

My news story for Tax Analysts, August 28 (paywall)

Tax increase would have little impact on highest earners, says UK think tank

UK policymakers need to be “up front” about the uncertainty of the impact of changes in income tax rates, said the Institute of Fiscal Studies, which argues that any additional revenue from Labour’s proposed 50 percent rate would be paid predominantly by those with incomes between £80,000 and £200,000.

In a briefing note published on August 22, the IFS said that some of the uncertainty reflects significant “forestalling” undertaken by taxpayers between March 2009, when an increase to 50 percent for taxable income over £150,000 was announced, and the implementation of that change in April 2010. Read more:

My news story for Tax Analysts, August 23 (paywall)

HMRC vows to pursue tax evaders in ‘intentionally scary’ documentary

HM Revenue & Customs officers made it “absolutely clear” in a TV documentary that there is no hiding place for people intent on tax evasion, RSM UK partner Mike Down observed.

Catching the Tax Dodgers is “intentionally scary,” Down said, after the programme makers sought to portray what they called “the war between the tax dodgers and the taxman.” The documentary, filmed over a period of four years, was broadcast by Channel 4 on August 13.

HMRC thinks it has “discovered a £36 billion black hole,” the documentary’s narrator said in reference to the department’s estimate of the tax gap for 2014/15. That sum represented 6.5 percent of theoretical tax liabilities, HMRC said in its October 2016 report. The report notes that the tax gap showed an “overall downward trend” from 8.3 percent in 2005/06 before levelling out in recent years. Read more:

My news story for Tax Analysts, August 21 (paywall)

UK government urged to do more to tackle tax evasion by landlords

A local authority urged Philip Hammond to do more to tackle tax evasion as it suggested that “rogue” landlords could be costing the Treasury as well as exploiting vulnerable tenants.

Sir Robin Wales, mayor of the east London borough of Newham, said the council’s “private rented licensing scheme” introduced in 2013 had “unearthed that many unscrupulous landlords may be benefiting from undeclared tax.” The Newham council works in close partnership with HMRC to help ensure that landlords meet their financial obligations, Wales wrote.

“We understand that nearly 13,000 Newham landlords have questions to answer and we estimate that across London unpaid tax by landlords could be costing the public as much as £183 million,” Wales said in the council’s emailed statement. HMRC did not recognise the estimate of 13,000, which represents almost half of the borough’s registered landlords, but a spokesman told Tax Analysts that it was working with the borough as part of its UK-wide Let Property Campaign. Read more:

My news story for Tax Analysts, August 21 (paywall)

HMRC warns against rebranding loans as critics challenge retrospective charge

Rebranding loans to avoid a controversial income tax charge scheduled for 2019 on “disguised remuneration” will not work, HMRC has warned, while tax professionals insist the proposed charge is disproportionate. Scheme users are being told they can sign documents saying that the sums they’ve received under loan agreements are not loans at all, HMRC said in an August 10 statement

The U.K. government announced in the 2016 budget that there would be a new charge on “loans paid through disguised remuneration schemes which have not been taxed and are still outstanding on 5 April 2019” …

The loan charge formed part of the finance bill published in March, but it was one of several measures dropped to make way for the general election in June. A revised draft measure including six clarifying amendments was published July 13.

“We do not condone disguised remuneration schemes but we do feel that the remedy contravenes normal standards of fairness,” said the Tax Faculty of the Institute of Chartered Accountants in England and Wales on its website July 25. Peter Bickley, a technical manager at the Tax Faculty, told Tax Analysts that if the charge is passed into law, its application should be proportionate, perhaps “going back no more than six years before the measure was announced.” Making taxpayers bankrupt would not help the exchequer, he said.

Read more: My news story for Tax Analysts, August 14 (paywall)

See also the Tax Faculty’s updates and representations of July 25 and April 20.

Tax professionals have also noted that HMRC will need to consider, in taking forward the proposed loan charge, the impact of the Supreme Court’s recent decision in the “Rangers case”.