Late Tax Returns Net £87m For HMRC

HMRC is to expect a windfall of £87million after one in 13 taxpayers did not file their self assessment tax returns by the deadline at the end of January. It is estimated that 870,000 taxpayers will face an automatic fine of £100 for missing the deadline, whilst over 10 million managed to do theirs by the deadline of midnight on the 31st January.

HMRC Self Assessment

HMRC said that 89% of the people who were required to complete a self assessment tax return chose to complete it online. This meant that they had an extra three months to get their affairs in order and file their return, an increase of 85% from the last year. A representative from the Institute of Chartered Accountants said that the increase in online tax returns was ‘fantastic’ for HMRC. However, he said that HMRC would struggle to get the figure above 95 per cent as there is a ‘small percentage’ of taxpayers who don’t know how to file online or are unable to afford professional help.

The HMRC Director for Personal Tax said that the new online tools had proven to be popular, with over 300,000 people using a webchat facility in the last two weeks of January. She said that HMRC is dedicated to making the self assessment tax return process ‘easier and more intuitive’ every year. Last year, the UK Government pledged to replace annual self assessments with digital tax accounts, to give taxpayers a perspective of their affairs at any point in the year. By 2020, it hopes to have moved HMRC fully online, therefore eliminating the need for annual returns. tax-return-home-picture

Currently, taxpayers have to file a self assessment if they earn money outside of a regular salary, where tax is deducted using a PAYE scheme. Property landlords and people with a one off income, along with the self employed will have to file a tax return.

Critics have said that if HMRC is determined to take the self assessment process online, they must support the vulnerable and elderly. Over 110,000 taxpayers recently called for a debate in parliament by signing a petition calling for plans for quarterly tax reports to be stopped. The proposals were part of HMRC’s digital first initiative and meant that self employed people, as well as landlords who earn more than £10,000 a year would have to report their tax affairs quarterly rather than annually. The financial secretary to the Treasury said that quarterly reports would be ‘far less of a burden’ but there are still concerns that it could drive up administrative costs, putting pressure on the flow of cash from taxpayers.

To find out more about processing a self assessment tax return, see our guide.

To speak to HMRC about the process, call the HMRC contact number.

EU Plan Could Question VAT Exemptions

The EU Executive is planning to hold a review of Value Added Tax (VAT) which may call into question the right of Britain to waive sales duty on medicines, food and children’s clothing. The comment was made by Pierre Moscovici who is the economics commissioner. The plan could cause controversy as David Cameron aims to organise a referendum on the membership of Britain in the EU.

VAT Rates

Mr. Moscovici, who is a former finance minister for France said that the EU is looking to overhaul the VAT system. They will be looking at whether to scrap the zero rate policy on certain items in Britain, a policy which outdates the current EU 5% VAT rate. When pressed by the media, he said that no decision has been made yet, but added that zero rate VAT is ‘not the best idea’. Lastly, he said it was ‘far too early’ to discuss any proposals which may emerge as a result of the review.

Within the EU, Britain along with Ireland, is deemed to be ‘unusual’ in the way that it waives VAT. It would be able to veto any proposal to do away with the historical exemptions to the 5% rule, which was established back in the 1990’s. There is an ongoing argument with Brussels over tax and it is said that this could add to pressure on David Cameron from people who wish to quit the EU. There was a campaign late last year to protest against the Government’s inability to waive VAT on womens sanitary items, known as the ‘tampon tax’. Pound

Several people have pushed the European commission to review the VAT system, as a result of certain technological developments. For instance, last year the EU ruled that ebooks wouldn’t be able to benefit from lower VAT charged on their paper equivalents because they were not included in a law which was written before they were invented. States in the EU must levy VAT of at least 15 per cent, but can go as low as 5% for items on a ‘reduced rate’ list.

Mr. Moscovici said that the EU could create a new list of items, or countries could be allowed to create their own. This would give them more freedom to choose which goods can benefit from a lower tax rate. Officials from Britain had no comment on this.

This Friday, David Cameron will be in Brussels for talks with the Commission president, Jean-Claude Juncker. The talks come three weeks before a summit where he hopes to make a deal on an EU reform before holding a referendum.

For more information on VAT rates, as a business owner or customer, contact HMRC to speak with the VAT Helpline.

Carers Benefit Cap Lifted

The Government has finally abandoned controversial plans to impose benefit caps on full time carers for adult relatives, just two months after a court found the policy to discriminate against disabled people. Lord Freud, the welfare reform minister told his peers during a debate on welfare this week that people who spend more than 35 hours a week caring for someone will be exempt from the benefits cap. Many charities have welcomed the turnaround as a victory for carers’ rights.

Carer’s Allowance Exemption

The Chief Executive of Carers UK said that by changing the law to make carers who receive carer’s allowance exempt from the cap, the Government has shown that they recognise the ‘valuable contribution’ that carers make to wider society. She added that the welfare cap unfairly punishes carers who are already facing financial problems as a result of their role.

Mr Freud made the announcement about carer’s allowance after a Labour MP put forward a welfare reform bill, which sought to exempt carers who look after adult relatives from the cap. A spokesperson for the Department for Work and Pensions said that they were exempting carers ‘in recognition of the hugely important contribution carers make to society’. shutterstock_240407473

Government lawyers had previously defended the policy by arguing that carers who are unpaid should be treated in the same way as unemployed people, by having to make the same choices as unemployed people about working and living costs. Critics said that describing carers as ‘workless’ was offensive as caring for someone severely disabled was difficult and could be regarded as work. An estimated 1,400 people are currently affected by the cap, though this would have risen once the criteria for the cap was lowered in April.

The Shadow Employment Minister said that he was ‘delighted’ the Government had succumbed to pressure by deciding to exempt carers from the benefit cap. He added that it was ‘depressing’ that the Conservatives took so long to reach the decision. Figures uncovered by the Labour party showed that last year, the Government spent over £53,000 in fees for one failed legal case to apply the benefit cap to a carer’s family.

Carers who look after children under 18 and disabled partners are already exempt from the benefits cap. It does affect people who care for adult disabled children, parents or siblings. The Labour minister who put forward the bill regarding welfare reform withdrew her amendment once Freud promised to bring it forward at the bill’s third reading in the House of Lords. Carers UK has estimated that it could take six months for the exemptions for certain types of carers to take place.

The benefit cap was previously introduced to limit people of working age to benefits of £500 a week. It was brought in on the basis that it sent a message to unemployed families that they must put more effort into trying to find a job.

If you wish to find out more about eligibility for Carers Allowance, you should call the Carers Allowance contact number to see if you are eligible to receive it.

Google Agrees Corporation Tax Deal

Internet giant Google has agreed to pay £130 million in back taxes after the UK tax authorities conducted an ‘open audit’ into its accounts. The payment will include money owed since 2005 and is the result of a six year inquiry conducted by HMRC. Google is just one of several international companies who have been accused of avoiding tax, even though they have had millions of pounds worth of sales in the UK.

Senior figures at the company which is based in the USA said that they would follow new rules which would see them pay more tax. The head of Google Europe told the media that tax rules are changing internationally with the UK Government taking the lead, so the company would be following the rules to make sure that they pay the right amount of tax.

HMRC chose to act after there was outrage over the amount of tax that large corporations pay in the UK, particularly those who have headquarters abroad. The UK is one of Google’s largest markets and paid £20.4 million in tax in 2013, despite the fact that it made sales of over £3 billion that year. The company has also been criticised for its complex tax paying structure. The European headquarters are in Ireland where the corporation tax rate is lower than it is in the UK. Overseas, the company has used structures in Bermuda where the rate of corporation tax is zero. These moves are legal and Google, which pays the majority of its taxes in the USA, says that it has abided by international tax rules. _87852074_google.g

Google has agreed to change the way that its accounting system operates so that a higher amount of their sales activity is registered in Britain rather than Ireland. It will also use a different structure to account for its profits between 2005-2015.

The European CEO said the company will pay £130m ‘in respect of previous years’ when the rules were to pay ‘in respect of profits that you make in a country’, adding that going forward the company will be paying for sales to UK customers, which are made mostly through advertising. When pressed to say if the back payment meant that Google’s critics were right in their complaints over the amount of tax that the company has been paying, the CEO said they had not, citing the company were constantly abiding by the right rules.

A spokesperson for HMRC said that the conclusion of the enquiries had led to them scoring a ‘substantial result’ stating that ‘multinational companies must pay tax that is due’ and that HMRC would not accept any less. Google isn’t the only US-based company which has faced criticism for the amount of tax that it pays in the UK: Starbucks, Amazon and Facebook have also come under fire.

Not everyone was happy with the settlement, with a Labour MP calling for HMRC to publish full details of what Google owed. A Conservative MP said that the amount was ‘relatively small’ in comparison to how much profits the company made in the UK.

To find out more about corporation tax, call the corporation tax contact number.


Housing Benefit Freeze Affects Landlords

Over half a million tenants who receive low pay are facing financial difficulty after the Government chose to freeze housing benefit. This move is also set to cause problems for landlords. The Chancellor George Osborne announced the four year freeze back in his summer budget in an attempt to make the welfare system more sustainable.

It has been said that the freeze will mean that low income households will be ‘priced out’ of several parts of the country. By 2020, families with low income in Manchester and Bristol will have had a shortfall of around £1,300 per year between their rent costs and the benefits that they receive. Since 2009, the amount of households who need help to pay their rent has doubled. Over 550,000 people who receive housing benefit work more than 16 hours a week, an astonishing increase from just under 300,000 six years ago. getting-a-mortgage

The reforms to the benefit system are already deterring landlords from renting to low income families. According to the National Landlord Association, the amount of landlords who are willing to rent to benefit claimants has fallen drastically in recent years. The NLA have also warned that the cuts leave tenants vulnerable to landlords who are looking to exploit them. The amount of money that Britain spends on housing benefit for privately rented homes has increased to over £9 billion a year. Figures show that one in four private sector tenants now claim housing benefit.

The Government has been asked to build more homes ‘that people can afford’. Back in 2012, the Mayor of London Boris Johnson said he opposed using housing benefit reforms to price poor families out of the city’s more expensive residential areas. However, critics are saying that they believe this is exactly what has happened since the Conservatives came into power. One said that the ‘low wage economy’ was forcing working families to claim housing benefit just to stay in their homes.

A spokesperson for the Government said that the reforms would ensure ‘work always pays’ and that with the introduction of the National Living Wage, a ‘higher wage society’ would be developed. She added that the Conservatives have set out an ‘ambitious’ house building plan, the likes of which haven’t been seen since the 1970s. She said that this was to make sure people could afford to achieve their aspirations of buying their own home.