Pension cashing in tops £6bn

Nearly 400,000 people took out £6.45bn of their pension cash in year to April, taking advantage of the new pension freedoms, HM Revenue and Customs said.

The figure covers both cash withdrawals and income drawdown, through which pensioners maintain an investment fund and take a regular income.

On average people pulled out more than £16,400 each between April 2016 and March 2017.

It's the second year that pension savers have been able to use their retirement nest eggs as they like, from the age of 55, subject to paying some tax.

It's hard to gauge from the HMRC figure how much more "cashing in" has been going on. The first year saw at least £4.35bn withdrawn - but pension providers weren't forced to submit full records.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/610451/Pensions_Flexibility_April_2017.pdf

1,100 tax dodger prosecutions

Here is the counterblast from HM Revenue & Customs, in the face of today's attack from MPs on the Public Accounts Select Committee, accusing officials of not doing enough to tackle tax fraud...

HMRC says it has 1,100 prosecutions of tax dodgers in the pipeline.

Last year it secured 1,200 prosecutions, resulting in prison sentences of 407 years.

Those prosecuted included barristers, accountants, lawyers, bankers, medical consultants, people hiding money offshore, money launderers and smugglers.

Two out of five of those convicted had dodged more than £50,000 of tax.

So what about the criticism that HMRC only has 35 wealthy people either in court or waiting to be prosecuted for tax evasion, despite having 26,000 staff working on enforcement and compliance?

Well, the figure is correct, but the explanation from the tax office is that all of the 35 have wealth of at least £1m.

In other words, the number isn't as small as it looks because the people involved are from a tiny proportion of the population.

Critics will, no doubt, say that this is exactly the well-off part of the population which tax officials need to concentrate on, to make it clear that no one gets an easy ride.

How many avoid Inheritance Tax?

If giving money or other assets to family or friends to avoid inheritance tax is standard practice among the better off, as experts say, why do we have no idea how much of it goes on?

Not one of these bodies has any clue: HM Revenue and Customs, the Institute of Chartered Accountants in England and Wales, the Chartered Institute of Taxation and the Institute for Fiscal Studies.

Just by way of a reminder, you can give away the assets and avoid 40% Inheritance Tax, as long as you live for another 7 years.

Between 7 and 3 years before you pass away there is a tapered rate, so less than 40% is paid.

The only figure that HMRC can provide is the amount of tapered relief which is granted, which adds up to £35m a year.

One suspects that is a tiny proportion of the quantity of tax avoided, legally, by making what are called PETs or Potentially Exempt Transfers.

But the total isn't tracked, because PETs don't have to be registered with the tax office.

The Prime Minster says the exemption allows parents to pass on money to their children, while Labour says it wants the wealthy to pay their tax.

Meanwhile, some accountants warn that imposing Inheritance Tax on gifts made more than 7 years before death could lead to double taxation.

If you give property or shares, they argue, Capital Gains Tax is triggered, while gifts from earnings would have incurred Income Tax.

But can someone tell us how much the Exchequer is losing from allowing PETs?

It would be nice to know.

£2bn seized from tax avoidance

Tax officials say they have received £250m in the last few days from people who were involved in tax avoidance schemes.

The biggest of these recent payments was for £5m.

HM Revenue and Customs has new powers to demand that users of tax avoidance schemes pay disputed tax up-front while their tax affairs are investigated, instead of waiting for a decision.

It does not name particular avoidance schemes behind the rush but sports figures, celebrities and other wealthy investors have been reported as facing demands for tax.

By sending out Accelerated Payments Notices, officials say they have "seized" £2bn since 2014, with half of that pouring in since September.

3,000 Notices a month are being issued, with a view to bringing forward over £5 billion tax revenue by March 2020.

Tax boss Homer resigned

HM Revenue & Customs tells me:

Lin Homer told the Cabinet Secretary, Sir Jeremy Heywood, in the summer of 2015 that she wanted to leave at the end of the 2015-16 financial year, after completing the 2015 Spending Review.

Like any other employee who hands in their notice, Lin is leaving without any compensation payments.

Tax office apology

The chief executive of HM Revenue and Customs has apologised to MPs for the poor performance of tax call centres between April and June, when only half of calls for help from the public were answered successfully.

Lin Homer said she was "very apologetic" after Mark Garnier MP, on the Treasury Select Committee, said the record was "staggeringly bad".

She added that after HMRC struggled to cope during those months, managers introduced a series of changes which resulted in an improvement between July and September when 76 per cent of enquiries by phone were dealt with either by a member of staff or an appropriate recorded message.

She said that performance during the second three month period was "marginally higher than last year".

Mr Garnier responded that it was still "completely unacceptable" that 24 per cent of calls were not being answered.

Lin Homer told MPs that a new telephony system had been introduced which allowed calls to be dropped into any call centre, so that up to 20,000 staff could be deployed to answer the phone at any one time.

And she revealed that more people were being taken on to deal with calls in the evening.

Your rights to stop tax officers grabbing cash from your account

This how HM Revenue & Customs explain ways you now be able to challenge their planned power to grab cash directly from bank accounts. 

Its what they call Direct Recovery of Debt and it only applies to people who they say have ignored 4 demands by letter or phone.

Direct Recovery of Debts – routes of appeal and opportunities to object to HMRC

Debtors will have several ways to challenge the use of DRD:

- Taxpayers already have appeal rights if they do not agree that the tax or tax credit debt due is correct. The exact process differs depending on the type of tax, but usually involves first requesting an internal review by HMRC. If the taxpayer does not agree with HMRC’s decision, they can appeal to an independent Tribunal. DRD will not affect these existing rights.

- Debtors who are considered for DRD will receive a guaranteed face-to-face visit from HMRC’s agents. Even those who have failed to respond to the numerous attempts to contact them  – by letter, telephone or SMS message – will again be made aware of their debt and have a further opportunity to discuss their case. This will confirm beyond doubt the identity of the taxpayer and that the debt is owed.

- Once DRD has been applied, debtors will have as a minimum 30 days before any money is transferred to HMRC. During this window, in which money is held in their account, the debtor can get in touch with HMRC directly and object to the use of DRD if they believe HMRC has made a mistake, or that removing the funds will cause undue hardship. HMRC will promptly carry out an internal review of their case. If there is clear evidence that DRD action will cause undue hardship, it will instruct the debtor’s bank to release an appropriate amount to the debtor.

- If the debtor still does not agree with HMRC’s decision, they will have a further right to appeal to a County Court on HMRC’s use of DRD or on the grounds of hardship. 

Tax grabbing powers watered down

The government has watered down its plans to given tax officers the power to take money directly out of the bank accounts of people who don't pay their tax.

Those targeted will have the right to appeal to the county court and each will receive a face to face visit.

The proposals from the the Budget in March were designed to deal with about 17,000 persistent non-payers of tax, people owing more than £1,000 who have ignored a minimum of 4 letters and telephone calls.

But campaigners objected, saying that the power was excessive, enabled HM Revenue and Customs to get around the need for a court order and didn't allow for the likelihood that it would make mistakes.

So the government has backed down to an extent.

While still planning to let tax officers take money from bank accounts, it will bring in 30 day notice period and lay down that those targeted will receive visits designed to check they understand the process and can pay.

And crucially, they will have the right to appeal to a County Court.

The Treasury expects to gain £100m a year from the measure, but some accountants believe that the numbers affected will be cut drastically as a result of today's change.

Britain's £34bn tax gap

Britain's tax gap -- the gap between was is collected and what should be -- widened to £34bn in the year to April 2013.

HM Revenue and Customs say there was a rise from £33bn the previous year, partly the result of an increase of nearly a billion in the VAT shortfall and a widening of the tobacco tax gap.

It is the biggest overall gap in cash terms since 2009 and will add to concerns that some are managing to avoid tax in a time of austerity.

HMRC says causes include taxpayers simply not taking enough care with their tax returns and criminal attacks on the tax system.

It points out that the shortfall on the £500bn which should be brought in is much narrower in percentage terms than in 2006, at 6.8 per cent of tax owed compared with 8.5 per cent seven years before.

And that some other countries have much bigger shortfalls: Mexico's is in excess of 25 per cent.

£1.9bn tax error

HM Revenue and Customs has come under fire from the National Audit Office, and from an influential committee of MPs, for exaggerating its performance in squeezing more revenue out of tax avoiders.

In a report on the tax office's 2013-14 accounts the head of the National Audit Office, Amyas Morse, said he was concerned "that an error of as much as £1.9 billion in HMRC's baseline calculation led it to report the trend in its performance in a way that inadvertently exaggerated the improvement since 2010-11".

The error did not affect the amount of tax collected but made it appear that tax compliance targets had been exceeded by a significant margin.

Margaret Hodge, the Labour MP who chairs the House of Commons Public Accounts Committee has called HMRC officials in to give evidence later this month.

She said, "It is truly depressing that HMRC's failure to take appropriate action has led to its unwittingly misleading Ministers, Parliament and the taxpayer".

There are a lot of red faces at the Revenue, where I understand officials are "penitent" at the shambles over targets.

HMRC has said: "We regret an historic error made in 2011 when we wrongly calculated the baseline against which our performance was measured. 

"We have corrected this error and even against the corrected baseline we have still exceeded our targets. We will work closely with the NAO to prevent this happening again."

Changes afoot with stamp duty?

Here are the stamp duty rates, from HMRC.

Some Tory MPs are calling for the starting rate to be raised to £500,000.

Scotland is considering moving to stepped rates from 2015, so higher percentages will only be charged on amounts over the relevant threshold.

Residential land or property SDLT rates and thresholds

Purchase price/lease premium or transfer value	SDLT rate
Up to £125,000	Zero
Over £125,000 to £250,000	1%
Over £250,000 to £500,000	3%
Over £500,000 to £1 million	4%
Over £1 million to £2 million	5%
Over £2 million from 22 March 2012	7%
Over £2 million (purchased by certain persons including corporate bodies) from 21 March 2012	15%

If the value is above the payment threshold, SDLT is charged at the appropriate rate on the whole of the amount paid. For example, a house bought for £130,000 is charged at 1 per cent, so £1,300 must be paid in SDLT. A house bought for £350,000 is charged at 3 per cent, so SDLT of £10,500 is payable.

£2 million threshold for wholly residential property

From 22 March 2012 SDLT on residential properties over £2 million is charged at 7 per cent It does not apply to non-residential or mixed-use properties.

235,000 risking Child Benefit fine

235,000 Child Benefit claimants on higher incomes need to register with HMRC by midnight on 5th October or face fines.

After that they will need to fill in self-assessment tax returns, to be returned on paper by the end of October or by 31st January 2014 if submitted online.

HMRC says that 1.1m were caught by the new policy of removing Child Benefit progressively, through a tax charge, from those on between £50,000 and £60,000 a year and completely from those on over £60,000.

405,000 have simply opted out of the benefit. Others are already caught up in the self-assessment process or have recently registered.

But 235,000 have only 11 days to register or risk fines ranging up to 100% of the extra tax they owe. As Radio 4's Moneybox highlighted over the weekend, the fines could be many hundreds of pounds, in theory.

Child Benefit is paid at the rate of £20.30 a week for the first child and £13.40 for each subsequent one, so a family with two children receives £1,752 a year.

In reality, HMRC is only likely to impose 100% fines on deliberate tax-dodgers.

And there is a way to redeem yourself, even if you fail to register by the 5th October deadline.

If you still pay the extra tax due, through the self-assessment system, the penalty is likely to be offset against your tax - in other words, it reduces to zero.

Here's the government website which tells you how to register. It's a simple process - the tax forms come later.

Twitter's tax

Much of the recent outcry over corporate tax avoidance erupted on the rapidly expanding social media site, Twitter, with tax campaigners, MPs and financial experts rushing to compose their 140 word tweets to stir up argument and debate over the tactics used by Google, Amazon and Starbucks.

So it is ironic that Twitter itself is remarkably coy about how much tax it pays and where.

Twitter submitted a brief set of UK accounts this week and by looking at them you can deduce that it declared profits of £92,000 in the UK in 2012, up from a mere £16,000 the year before.

Worldwide its advertising sales are expected to top $1bn or around £660m in 2014, mainly from charging advertisers to promote their tweets on the website.

There's not much more detail, because Twitter is a private company, though it gives an assurance that it pays all relevant taxes as set out by HM Revenue and Customs including corporation tax, VAT and all applicable payroll taxes.

What will tickle the interest of tax geeks is that San Francisco-based Twitter has located its European headquarters in Dublin, along with the majority of its international sales, finance and legal staff.

Google was condemned as "evil" by the chair of the House of Commons Public Accounts Committee, Margaret Hodge, for booking UK sales through Dublin, thus bypassing the need to pay UK corporation tax on the business.

Twitter declined to comment on whether it accounts for sales to UK customers in Ireland. It has 100 staff in Dublin and 60 in London.

Of course, it is important to point out that none of these companies is breaking the law in the way they structure their operations or declare profits for tax.

Google, for instance, has said it complies with all British tax rules and that it is up to politicians to change the law if they are unhappy with the outcome.

Tax defaulters named and shamed

The tax authorities have named and shamed 15 individuals and small businesses who have been penalised for deliberately defaulting on tax bills of more than £25,000.

The new list from HMRC, which adds to a collection of 8 names published in February, includes two pubs, a Tandoori takeaway and a kebab shop.

Paymaster Ltd, a labour provider from St Paul's Square, Birmingham, has been fined over a million pounds over a tax bill of nearly two million, while an Essex petrol wholesaler, EU Oil Ltd of Harlow, is named as facing a £719,000 penalty and owing over a million pounds in tax.

James Joseph Farmer, a painter from Belfast, was fined £132,000 on a £222,000 tax bill.

The tax debts relate to the period 2010 to 2012, but HMRC says the money still hasn't been paid.

Tax evasion or avoidance?

It might be perfectly legal and above board to AVOID tax, when its what the Revenue calls tax PLANNING.

For instance, if you put your money in a tax-free Individual Savings Account, or if you're a company and you invest in research, you're taking advantage of tax breaks which the government actually wants you to use.

The tax AVOIDANCE the authorities condemn is when you seek out loopholes in the law to pay less.

At one time workers in the City of London were paid in crates of wine to avoid having to pay National Insurance - it was legal, but not at all what parliament intended, so the loophole was closed.

But the worst the perpetrators risk is having to pay the tax they owe, along with interest and, if there's a delay, a penalty.

Tax EVASION is the deliberate flouting of the law in order to get around tax - and hiding money in an offshore tax haven in a way specifically designed to escape scrutiny is a likely first step towards evasion.

It might be income tax, capital gains tax or corporation tax that's rightly due in the UK.

The fines range up to twice the amount of tax owed and the evader can be prosecuted and sent to prison.

In one recent case the sentence was 5 years.

Deadline for tax evaders

Tax evaders who have hidden money and investments in Jersey, Guernsey or the Isle of Man are being given three and a half years -- until 30th September, 2016 -- to own up or face prosecution.

HM Revenue and Customs has announced details of the new voluntary "disclosure facilities", which were promised after the three Crown Dependencies agreed to start handing over the names of people with offshore accounts.

The Chancellor revealed in the budget that he hopes to realise £1bn in extra tax from the islands over a 5 year period.

Tax evaders manage to skirt around UK income tax and capital gains tax by parking their assets in overseas accounts and investment schemes.

Those who ignore the opportunity to come clean could face criminal prosecution, significantly bigger penalties, and having their names published.

Even people who own up in time could face penalties ranging from 10% to 40% of the sum owed, depending on the behaviour of the tax cheat.

Penalties for those who fail to come forward could rise to 100%, doubling the amount to be paid.

The new disclosure facilities come after a similar arrangement was drawn up to encourage tax evaders with accounts in Liechtenstein to come forward.

Tax enquiry centres axed

HM Revenue & Customs has revealed that it is planning to close all its 281 tax enquiry centres across the UK next year.

2.5m million people visited the centres in the 2011-12 tax year, seeking face-to-face help with self-assessment forms and tax problems, but that was down from 5 million in previous years.

The plans envisage replacing the service with help over the telephone, offering home visits where necessary, and saving £13m a year.

The planned closures put 1,300 jobs under threat, although HMRC said it would do everything possible to redeploy enquiry staff within the organisation or help them find work elsewhere.

There will be a five-month pilot of the new telephone-based service in the North East of England, starting in June.

13 enquiry centres will be closed as part of the pilot, including Darlington, Durham, Middlesbrough and Newcastle.

End of 0845 for tax calls

By the summer, the tax people at HMRC say they will have stopped ripping people off through the use of costly 0845 numbers.

People ringing for tax help using a mobile can pay 41p a minute after dialling 0845. Typically they then have to wait 6 minutes and millions are kept waiting for more than 10 minutes.

From April, calls about Child Benefit - which is now being taken away from high earners -- will be via numbers with the 03 prefix, which is already being used for tax credit enquiries.

03 calls should count as part of inclusive minutes in a phone contract and are charged at the same rate as 01 or 02 numbers.

All customer calls will be switched to the 03 prefix by the "end of the summer" according to HMRC officials who were giving evidence to MPs today.

Here's a useful guide to phone number prefixes.

Waiting to speak to HMRC

The UK's head of tax, Lin Homer, has admitted to MPs that typical telephone waiting times of over 4 minutes do not include the time spent listening to recorded messages, which can be more than 2 minutes.

HM Revenue & Customs is setting itself a new target, from April, of making 80% of people wait no longer than 5 minutes to speak to a real person, including recorded messages.

Lin Homer, chief executive and permanent secretary at HMRC, was answering questions from the Commons Public Accounts Committee, in the wake of a National Audit Office report which calculated that taxpayers were losing £136m a year in call charges and wasted time.

Last year, HMRC failed to answer 26% of calls - or 20 million calls in total. Of the callers who did get through, millions had to wait more than 10 minutes.

Over the winter the proportion of calls not picked up has fallen to around 10%.

300,000 in dark on Child Benefit cuts

WHAT'S GONE WRONG?
The first thing to say is that the 300,000 who have had warning letters are still going to be paid their child benefit when the cuts kick in next week.

It's just that they may have to pay it back later, and fill in a tax return so it can be taken back through the tax system.

Here's the situation...

If one of you in the home earns £50,000 or more the tax office will start clawing back any child benefit being claimed. And if you earn over £60,000 they will take it all back.

Revenue and Customs estimate that 1.1m households will be affected.

But they've only written to 800,000 warning them, so 300,000 may not have heard, though the Revenue says they should have seen adverts.

WHAT SHOULD PEOPLE DO ABOUT IT?
If you know you're earning so much you'll never be able to keep your Child Benefit, you can simply opt out and save yourself the trouble of doing extra paperwork in future.

170,000 have done that already. You need to opt out by Sunday night to be sure that you've made a clean break and won't have to enter the benefit in a Self Assessment tax return.

If you're not sure - you can just carry on receiving Child Benefit but the high earner in the household will need to fill in a tax return, declaring the money.

Then it'll be clawed back during the following year, in most cases as part of the monthly tax deduction from wages.

There's plenty of time to fill in the form but there is a deadline. For this tax year, it has to be in by the end of January 2014 if you do it online.

You could be fined if the form doesn't arrive.