There have been, and continue to be, many changes in Tax legislation which could impact on all Taxpayers, so we thought that the easiest way to bring these to your attention would be via the written press.
H M REVENUE & CUSTOMS
As from 1 April 2009, HM Revenue and Customs are introducing a new penalty regime for inaccurate documents that are submitted to them. This encompasses not only Self Assessment Tax returns but also VAT, CIS, PAYE and NI, Corporation Tax and Capital Gains Tax returns. The new regime is far more severe than the present system. At present any penalty charged is negotiated between the taxpayer and HMRC. This is replaced with a statutory system. Penalties are charged on the additional tax which is due arising out of the investigation. At present this penalty can range from 10% of the tax due to 100% of the tax due.
As from 1 April 2009 HMRC are going to calculate penalties using the following guidelines :
Class of Offence
• Carelessness – an inaccurate return due to a failure to take reasonable care
• Deliberate but unconcealed inaccuracy
• Deliberate and concealed inaccuracy
Once the class of offence has been decided, HMRC will then look at the disclosure of the inaccuracy. Again there are different types of disclosure, prompted and unprompted. An unprompted disclosure is made at a time when the person making it has no reason to believe HMRC has discovered or is about to discover the inaccuracy. Prompted disclosure is any other disclosure.
Based upon HMRC review of the inaccuracy the following penalties will apply :-
• Carelessness – 30% which can be reduced to nil for unprompted disclosure and 15% for prompted disclosure
• Deliberate but unconcealed inaccuracy – 70% which can be reduced to 20% for unprompted disclosure and 35% for prompted disclosure.
• Deliberate and concealed inaccuracy – 100% reduced to 30% for an unprompted disclosure and 50% for a prompted disclosure.
It is highly likely that HMRC will push for most errors being in the deliberate but unconcealed category.
Following on from these new penalties HMRC will be introducing new powers for them to visit/inspect taxpayers’ premises to review records, record-keeping, etc which could give them an opportunity to discover inaccurate returns. Again there are various types of inspections :
1) Inspection by agreement – This is an inspection which takes place at any time so agreed by the occupier. Whilst this seems reasonable enough an example of where this could be an issue would be if an HMRC officer made an unannounced visit and asks to be let in. If permission is granted then this would amount to the inspection being carried out at a time agreed to by the occupier. The worry is that overzealous officers may exert pressure on the occupiers to gain entry under the new legislation.
2) Inspection by notice – This inspection may take place at any reasonable time provided that the occupier of the premises has been given at least 7 days notice of the inspection. It needs to be made clear that this is 7 calendar days and not working days. Also there is no definition of what constitutes a “reasonable time” however it is believed that HMRC are working on providing guidance on what is a reasonable time.
3) Unannounced inspection – The legislation provides that an unannounced inspection may take place provided it is carried out either by or with the agreement of an authorised officer. An officer is said to be authorised if he/she has been approved by HMRC. It therefore needs to be assumed that any IR officer is authorised!
It is pretty clear that these new rules give HMRC a lot in the way of new powers with very little taxpayer safeguards. We will continue to update you on the potential impact of these new rules in our future newsletters.
ANNUAL INVESTMENT ALLOWANCE
The new Annual Investment Allowance (AIA) allows businesses – Companies, partnerships and sole traders – to claim 100% first year allowances for expenditure on most purchases of plant, machinery, equipment and vehicles (other than motor cars).
Qualifying expenditure is capped at £50,000 a year. The claim is available for all qualifying expenditure from the 6th April 2008 (1st April 2008 for Companies) but the capped threshold is restricted if the business accounting period spans the commencement date. The available allowance is calculated on a pro-rata basis. For example, if the accounting period end is 31st December 2008, the maximum qualifying expenditure for the 100% AIA will be £37,500 i.e. nine-twelfths of £50,000 as the accounting period ends nine months after the introduction of the claim. However, in this example, the business could purchase £37,500 of machinery in December 2008 and £50,000 in January 2009 and so qualify for 100% first year allowance of £87,500 over the 2 years.
The detailed rules are, inevitably, more complex so please contact us for individual advice if you are planning a substantial investment in machinery, equipment or vehicles.
COMPANIES HOUSE
Companies House will be increasing their penalties for the late filing of Company Accounts from the 1st February 2009 as set out below.
Penalty £150 if not more than one month late
£375 if more than 1 month late but not more than 3 months
£750 if more than 3 months late but not more than 6 months
£1500 if more than 6 months late