The latest headlines relating to taxes and tax credits.
Scotland could be given powers to set its own Corporation Tax rates
It has been alleged that the Government is in the process of drawing up plans for a scheme that will see more power passed over to Holyrood, following the victory of the ‘No’ campaign in last week’s Scottish independence referendum. The idea of cutting corporation tax was one of several ideals pushed forward by Alex Salmond, leader of the ‘Yes’ campaign. Under the scheme alongside corporation tax, further control of other taxes, housing, benefits, borrowing, social care, job creation and employment rights could also be passed on to Edinburgh. An insider revealed that he believes that as the election draws nearer, we will see more political parties try to persuade voters by offering more to people in Scotland. A similar incentive could be dangled in front of voters in the North of England, who have previously spoke of feeling left out politically. Economists state that any new tax regime in Edinburgh could sway companies on where they base themselves in future- following complaints from several major corporations that if Scotland were to have voted yes, their businesses would have struggled economically. If tax powers are devolved to Scotland, it could be decided that different tax bands should be offered, the country would be able to create a more progressive tax system which may or may not appeal to corporations. The insider said: [quote] “Economically it has helped that the vote was not as tight as predicted. If it had been closer the issue of another referendum could have lingered.” [/quote] He also said that if greater powers for Scotland did occur, it would help diminish doubts about the union.
Taxman chases middle class parents over self-assessment error
Well-off parents who are suspected of failing to repay child benefit that they received when they weren’t entitled to it are being sent warnings by the taxman. 30,000 letters have been sent out to parents earning more than £50,000 as they are no longer entitled to claim Child Benefit but did not account for this in their 2012/13 self assessment tax return. The deadline for tax returns occurred on the 31st January and HMRC is now chasing the claimants, however it does admit that some repayments may have already been made by their partner. In this case, HMRC says that recipients can ignore the letter. The body also highlights that it is not threatening anyone with fines just yet.
The controversial changes to child benefit were first introduced in January 2013, meaning that families with at least one parent earning more than £50,000 are no longer eligible to claim child benefit. Parents who were hit by the change were given the option to forgo the payment completely or accept it and pay it back through their self assessment tax return. The repayment is known as the ‘High income Child Benefit charge’ by the taxman and it is estimated that around one million people are affected by it. 400,000 of them have already repaid, but HMRC is still chasing the latter 300,000. Critics of the change say that many of the wealthy parents may have not had to fill out a tax return before so therefore wouldn’t know how to account for the repayment.
Amount of tax credits overpaid reaches £5.6 billion
The amount of debt owed to the Government after more than ten years of overpaying tax credits to some of the poorest people in Britain has now reached £5.6bn. The shocking figure comes as the tax office begins clamping down harder than ever on people who have been overpaid, even though most of the time the overpayment has occurred due to an error on their behalf. HMRC plans to seize money from around 3,000 bank accounts per year for overpaid tax credits. It released this information following a Freedom of Information Act request from the campaign group False Economy. Tax credits are paid to people on lower incomes and sometimes mistakes may not be discovered for a year or possibly more, so when an overpayment is made and the recipient doesn’t realise, it can be impossible for them to pay it back. Tax credits are calculated based on a family’s income for the coming year. Critics say that the repayment has meant that the scheme has gone from something which was designed to help parents to almost a ‘parent tax’. A researcher for the campaign group who submitted the request said: [quote] “These figures show that tax credit overpayments are a state created debt that many families can never pay off, caused by a combination of low pay, costly childcare and Government incompetence.” [/quote] More than half of the families being chased for overpayments have a household income of less than £20,000- making them some of the poorest families in Britain.
Rest of the world sees the UK as a ‘tax haven’
To people in the UK, if you think of a ‘tax haven’, you think of the likes of Switzerland, but for the rest of the world, they most likely think of the UK. The archaic tax laws in this country regarding domicile and non-domicile mean that the UK is treated as a place to avoid paying tax. Domicile means that you live in the UK full time, but non-domicile means that you are not a full time resident. Therefore, non-domicile people are able to shelter their assets from paying tax here because their home is not the UK. For some non-doms, the UK is considered a paradise where the most tax-heavy investments can remain offshore where they are still accessible. Critics say that this is why we get many large corporations coming over to take advantage of our ‘lax’ rules. Over the last few years, the Government has tried to tighten up the rules slightly to varying levels of success. The main change has been around the amount of time that you can stay each year until you are considered a resident. The chancellor George Osborne has been particularly vocal of this, calling for those who hide their assets offshore to be named.