taxes

News Roundup: Mansion Tax, Tax Avoidance, Corporation Tax & Tax Credits

Mansion Tax Will Cost Homeowners £250 A Month

The ‘mansion tax‘ set in place by the Labour party will cost homeowners around £250 a month for living in a house worth £2 and £3 million according to the Shadow Chancellor Ed Balls. Anyone on an income of below £42,000 would be allowed to defer payment of the the tax until they decide to sell their home or they pass away. london house

Mr.Balls responded directly to concerns amongst the Labour party candidates for Mayor of London who have publicly said that they thought ‘cash poor, asset rich’ households would be stung by the new tax rules. Mr Balls said:

[quote] “Ordinary Londoners should be protected and wealthy foreign investors must finally make a proper tax contribution in this country. The tax will be fair, sensible and proportionate. We will ensure those owning properties worth £2-3 million will only pay an extra £250 a month through this new tax- the same as the average top band of council tax. Owners and investors in properties worth tens of millions should make a much bigger contribution.” [/quote]

He added that overseas owners who opt to have second homes in the UK could be forced to pay a bigger contribution than people who are living in their only home. Some critics had voiced an opinion that poorer pensioners living in expensive properties could be hit by the tax- Mr Balls responded by stating that ‘long-standing residents’ who were on less than the higher rate of income tax (less than £42,000 a year) would have the right to defer the charge until the property changes hands.

HMRC Tax Avoidance Demands Reach £250 million

HM Revenue and Customs has sent notices to users of tax avoidance schemes to pay more than £250 million of tax under the new ‘accelerated payments’ incentive. The regime was introduced in this year’s Finance Act. Recipients have 90 days to pay the tax that has been demanded in the notices- however many have already contacted HMRC to begin arrangements to make payments, covering around £25 million of the missing tax. tax-avoidance

The Government also said that more people are getting in touch to sort out their tax affairs first before they receive an accelerated payment notice. David Guake, who is the Financial Secretary to the HM Treasury said on the 21st of October that more than 600 accelerated payment notices had been sent since late August, when speaking to MPs who were criticising the National Insurance Contributions bill.

He added:

[quote] “Accelerated payments are changing the economics of avoidance by removing the cash flow advantage that avoidance scheme users have had until now. It is only fair that those who use avoidance schemes should have to pay their tax upfront, like the vast majority of other taxpayers who don’t try to shirk their responsibilities.” [/quote]

By January of the new year, HMRC will be issuing around 2,500 accelerated payment notices per month and by the end of March the following year it should have delivered 43,000 tax avoidance scheme users, covering around £7.1 billion of missing tax.

 Facebook Pays No Corporation Tax For The Second Year Running

Today, Facebook is facing a new row over offshore tax avoidance as its UK accounts showed that it paid no corporation tax for the second year in a row, despite granting shares worth millions of pounds to London staff. Research firm eMarketer estimates that Facebook’s London operation, which is based in Euston, made £371 million in revenues last year, an increase from £223 million the previous year.

Facebook’s accounts show lower revenues because it processes many of its British sales in Ireland, where tax is lower. facebookFacebook UK declared revenues of £49.8 million and a pre-tax loss of £11.6 million. As a result, it incurred a tax charge of just £3,200 and it ended up receiving a credit of £182,000 because of adjustments in previous years. The US company is highly profitable, reporting a net profit of $1.5 billion last year.

The company ran up a £15.5 million cost for ‘share-based payment’ for its 208 London based staff, but they got larger windfalls. The staff collected more than 1.5 billion free shares which were ‘settled’ and are estimated to be worth £72.5 million based on Facebook’s current stock price.

Facebook has declined to comment on the scandal but said that it always pays tax according to the laws of each country. Chancellor George Osbourne has promised that a change in the law will come in order to help crack down on offshore tax avoidance after warning in the last month: ‘some technology companies go to extraordinary lengths to pay little or no tax here.’

 Tories Vow To Slash Migrant Tax Credits

Migrant workers could be stripped of up to £100 million a week in tax credits under Conservative plans to seize the initiative from UKIP on immigration. The Home Secretary Theresa May has told the media that the Treasury is undertaking detailed work on ways to restrict access to tax credits which are seen as a major incentive for workers coming to the UK.

She said:

[quote] “The tax credits issue is something the Treasury has looked at and the Treasury is continuing to look at it.” [/quote] Tax-Credits-1

Britain spends around £5 billion a year on tax credits to migrants, both located inside and outside the EU. Tax Credits aim to top up lower paid jobs and they can treble the income of a worker with a family on minimum wage. However, any attempts to restrict the rights of EU nationals will ignite a ferocious row with Brussels. The new plan came about as David Cameron warned that he will campaign to leave the EU unless it agrees to let Britain constrict the free movement of workers to this country. When visiting Rochester, the PM said that he was willing to give the EU ‘one last go’. He called for a a return to the founding purpose of the EU as a common market. Ministers are pushing for an ’emergency brake’ on arrivals from EU places if numbers exceed expectations.