Old IR35 wounds may be reopened, Outcry prompted HMRC helpline rethink, MPs to question HMRC chief head over CGT rules
THE HOT STORY
Old IR35 wounds may be reopened
The Sunday Times reports on HMRC’s ongoing IR35 litigation in light of the decision last week by the Upper Tribunal to support the tax office in its appeal of a 2019 ruling in favour of IT contractor Richard Alcock. HMRC contested the ruling by claiming that the tribunal judges had made “errors in law” and now others who won their cases fear they’ll be dragged back to court. John Williams from Moore Kingston Smith said: “The Alcock case will provide no comfort for others who have won their IR35 case. There is still time for HMRC to appeal against decisions made in the taxpayers’ favour, hitting them financially and emotionally during the process.” TV presenter Kaye Adams, who recently won a ten-year battle over a ￡124,000 tax bill, commented: “If IR35 legislation is so complicated that tribunal judges can’t work it out, it’s time it was withdrawn.” But Seb Maley from the IR35 consultancy Qdos said the case will be reheard because the way the judges reached their conclusions wasn’t deemed to be accurate by the higher court - not necessarily the verdict itself.
HMRC
Outcry prompted HMRC helpline rethink
BBC News / The Independent / The Daily Telegraph / The Times ?
Jim Harra, HMRC’s permanent secretary, has told MPs that an unexpected “strength of feeling” prompted the tax office to rethink the closure of its helpline. Earlier this year, HMRC announced that the phone line would be closed between April and September. However, it reversed the decision within 24 hours after the move drew criticism from tax professionals and MPs. HMRC said the reversal was made “to match the public appetite” and Mr Harra told the Commons Treasury Committee that the “strength of feeling was not what we had been expecting.” He added that HMRC still wants to move taxpayers to online services, telling MPs: “We are not knocked off our strategy, but knocked off its implementation course.” Mr Harra also insisted that if the revenue body had been able to proceed with the plans, more vulnerable and digitally excluded customers would have been helped.
HMRC is probing blacklisted Chinese telecom company
A Chinese technology business accused by GCHQ of threatening national security in 2018 is being investigated by HMRC over alleged tax underpayments spanning a decade. ZTE admitted in its accounts it may owe as much as ￡1.5m to the tax authority and has set aside a provision for the amount. Although it was blacklisted six years ago by the National Cyber Security Centre, the Shenzhen-headquartered company has reported climbing UK revenues on the back of sales of its consumer mobile broadband routers.
CAPITAL GAINS TAX
MPs to question HMRC chief head over CGT rules
Tory MPs are set to question Britain's most senior tax official, Jim Harra, over the Capital Gains Tax (CGT) rules at the heart of the row involving Labour deputy leader Angela Rayner's property dealings. The committee will also discuss the tax support available to home sellers. Rayner bought her former council house under the Right to Buy scheme and sold it for a profit, but questions have been raised about whether she was actually living in the property.
INCOME TAX
Higher earners are leaving Scotland to reduce tax burden, research finds
Higher earners are leaving Scotland to reduce their tax burden, HMRC research suggests. Official data found that about 8,000 more people were moving to Scotland than leaving for elsewhere in the UK in 2022. However, the report also found that about 1,030 higher-rate taxpayers — equivalent to ￡61m in tax receipts — moved south of the Border. “This implies that more individuals moved from Scotland to [the rest of the] UK and/or less individuals moved to Scotland from UK following the policy change,” the report said. A new Scottish tax band of 45% on earnings between ￡75,000 and ￡125,140 came into force on April 1. Recent research by Scottish Financial Enterprise, the trade body, found that more than 80% of financial services firms believe the tax divergence is routinely affecting their ability to attract and retain people in Scotland. Overall, the HMRC report found that after 2017, when Scottish tax rates started to diverge from those south of the Border, net migration to Scotland increased and the amount of taxable income moving to Scotland increased from about 2019 onwards.
Tax code errors are worth ￡5.8bn
Daily Mirror ?
New research from Canada Life reveals that almost one third of UK adults who have checked their?tax?code were on the wrong one. The study found that 6% of adults were on the wrong tax code in the past year, with average overpayments of ￡689 per year. This equates to a total of ￡5.8bn. Many UK adults do not understand their tax code, with almost four in ten admitting they don not know what it means. One in six do not know if they are on the right?tax?code, while a fifth have never checked their?tax?code.
INHERITANCE TAX
IHT receipts reach record high of ￡7.5bn
The Daily Telegraph / The Times / City AM / Daily Express / The I / Daily Mail / Evening Standard ?
Inheritance tax receipts in the UK reached a record high of ￡7.5bn in 2023, surpassing the previous year's record by ￡400m. The increase in inheritance tax revenue comes despite the threshold remaining unchanged since 2009. The Office for Budget Responsibility has forecast that inheritance tax receipts will reach ￡9.7bn a year in 2028/29, while the Institute for Fiscal Studies recently estimated that the number of estates liable for inheritance tax will rise to more than 7% by 2032/33. The freeze on the inheritance tax nil rate band, combined with rising asset values, has resulted in more people being affected by the tax than originally intended. While just 4% of estates are reportedly paying the death tax, research from the Wealth Club shows the proportion of families affected is higher. Alastair Black, head of savings policy at investment manager abrdn, said: “This month marks 15 years since the inheritance tax nil rate band was last increased. This freeze, combined with rising asset values, means that the tax is affecting more and more people than it was ever intended to capture. This needs to be fixed if inheritance tax is to go back to its original purpose.”
IHT exacerbating housing crisis, say building societies
Inheritance tax is making the housing crisis worse, according to building societies. A report from the Building Society Association (BSA) suggests that Britain’s property tax system is “ineffective” and incentivising older homeowners to remain in larger homes. Lenders have called on ministers to review inheritance tax, arguing that tax breaks on family homes are encouraging homeowners to remain in larger homes in later life to capitalise on the allowances. They argue that reforms could free up homes and help younger buyers onto the property ladder. Paul Broadhead, head mortgages and housing policy at the BSA, said: “We want the government to remove as much tax friction as possible at the point of sale, to improve liquidity in the market and free up more stock.” He added that “introducing more liquidity into the market allows families to keep moving up and down the ladder and this – in turn – does free up more first-time buyer homes.”
VAT
Labour’s VAT on fees 'will see exodus from private schools'
Data from a survey conducted to accompany the latest Saltus Wealth Index report found that 26% of parents would have to remove their children from independent school if VAT is added to fees. The survey of 2,000 people with investable assets of more than ￡250,000 found that 71% thought that rising school fees would have an impact on their choices around private schooling. Other options being considered include moving house so children who are boarding can remain as day pupils or removing them from their present school and enrolling them in a less expensive one. Mike Stimpson, partner at Saltus, said: “Private school fees are likely to rise by a further 5% this September. If Labour wins the next general election and carries out its pledge to impose VAT on school fees, then we could see the cost of private tuition rise by at least a further 20% in the years to come.” These rises “will almost certainly price some families out of private education completely.”?
LEGAL
领英推荐
No exemption from tax for prisoners
The Times ?
Serving time in prison is no excuse for not paying your taxes as landlord Stanley Herrmann has discovered, The Times reports. Herrmann failed to declare rental income from three properties between 2002 and 2018, resulting in a tax bill of ￡22,000 and penalties of over ￡5,000. Herrmann argued that he should not be liable for income tax while incarcerated because he could not conduct any business while in prison. However, the first-tier tax tribunal ruled in favour of HMRC, stating that there is no exemption from tax for prisoners. Chris Etherington from RSM said: "Those with time on their hands due to an enforced stay at His Majesty's pleasure might want to put that to good use and ensure that they are up to date with their tax obligations."?
CASES
Barnes banned as company director for tax evasion
Sky News / BBC News / The Daily Telegraph / Daily Mail / Daily Mirror / The Guardian / The Sun / The Times ?
Former England footballer John Barnes has been banned from acting as a company director for three-and-a-half years after his media firm, John Barnes Media Limited, failed to pay over ￡190,000 in corporation tax and VAT between 2018 and 2020. The Insolvency Service, which investigated the case, found that the company paid "no tax whatsoever" during that period despite earning well over ￡400,000.
CORPORATE
Windfall tax 'is killing off North Sea oil'
Daily Mail ?
A leading North Sea oil and gas firm has criticised the Conservatives and Labour over the windfall tax on oil and gas profits, accusing politicians of a "race to the bottom" that is driving investment and jobs overseas. Serica Energy chairman David Latin warned that UK policy is causing the company to look for acquisition opportunities in Norway instead. The windfall tax, imposed in 2022, has been extended to 2029 and currently stands at a 35% levy on top of existing taxes, resulting in a 75% overall rate. Labour plans to raise it to 78% if it wins power.
CARBON TAX
Government under pressure to set up green levy on UK imports
The Guardian ?
Ministers are under growing pressure to introduce a carbon border adjustment mechanism (CBAM) on imports to the UK, the Guardian reports. The CBAM would require overseas companies exporting key goods to the UK to show they are paying for their carbon emissions or face a levy equivalent to the price paid by UK manufacturers. The aim is to ensure a level playing field for British manufacturers who are reducing their greenhouse gas emissions. The CBAM is likely to affect imports of carbon-intensive goods such as steel, cement, glass, and ceramics. The plans have support from many MPs, businesses, and economists, but face opposition from some Conservative party members. The EU has already introduced a trial CBAM and the UK could potentially face charges unless it can show it is paying an equivalent carbon price.
REGULATION
Fraud victims call for better protection from regulators
Yorkshire Post / Yorkshire Post / The Sunday Times ?
The Sunday Times reports on how former footballers have joined a campaign demanding better financial regulation to protect victims of investment scams and tax avoidance schemes. Many former footballers invested in complex projects after relying on the advice of professional accountants and advisers, but they were later found to be tax avoidance schemes, resulting in huge fines. The Transparency Task Force organised a demonstration in London, calling for improved protection for investors and criticising the Financial Conduct Authority, HMRC, and Action Fraud for failing victims. The Yorkshire Post also covers the campaign, focussing on the victims of the collapsed Philips Trust Corporation. The FCA was warned it was a Ponzi scheme 18 months before its collapse. The Transparency Task Force’s Mark Bishop calls on MPs to back legal changes that would allow people to sue the FCA and change its complaints scheme.
STRATEGY
Government borrowing exceeds expectations, raises doubts on tax cuts
The government borrowed ￡6.6bn more than expected over the last year, raising doubts on Jeremy Hunt's ability to implement substantial tax cuts ahead of an anticipated general election. The deficit for March reached ￡11.9bn, higher than City analysts' expectations. The Office for National Statistics estimated borrowing for the fiscal year 2023/24 at ￡120.7bn, surpassing the projection of ￡114.1bn by the Office for Budget Responsibility (OBR). The debt-to-GDP ratio increased to 98.3%, driven by increased government spending due to the financial crisis, the Covid-19 pandemic, and the energy price shock. Despite increased spending on public services and benefits, the deficit still fell. Hunt is considering a third reduction to national insurance and raising the threshold for stamp duty. However, economists question the feasibility of his plans. The Conservatives are expected to oversee the largest increase in the tax burden among developed countries, with taxes reaching 37.1% of output in 2029, according to the OBR.
Chancellor urged to launch tax raid on unspent pension pots
The Daily Telegraph / Birmingham Mail ?
The Institute for Fiscal Studies (IFS) has said Jeremy Hunt could raise ￡1bn to ￡2bn in the coming decades by ending the tax-free passing on of unspent pension funds. The Chancellor was also urged to scrap exemptions for the passing on of agricultural land. David Sturrock, senior research economist, said: “Inheritance tax is littered with special reliefs and exemptions which make the tax unfair. Rather than gradually carving out more and more assets from the tax, the government should take steps to reduce or eliminate some of the major exemptions in the system.” The IFS also argues that there is no rationale for relief on AIM shares as they are held similarly to regular shares. The removal of business relief for AIM shares could potentially raise around ￡1.1bn in the current tax year, rising to ￡1.6bn in 2029–30.
INTERNATIONAL
Billionaires should pay 2% wealth tax, G20 ministers say
The Guardian ?
The world's 3,000 billionaires should pay a minimum 2% tax on their fast-growing wealth to raise ￡250bn a year for the global fight against poverty, inequality, and global heating, according to ministers from Brazil, Germany, South Africa, and Spain. They argue that a 2% tax would reduce inequality and raise much-needed public funds after the economic shocks of the pandemic, climate change, and military conflicts. The ministers are calling for more countries to join their campaign and French economist Gabriel Zucman is working on the technical details of the plan, which will be discussed by the G20 in June. Mr Zucman commented: "Billionaires have the lowest effective tax rate. Having people with the highest ability to pay tax paying the least - I don't think anybody supports that."
German prosecutor quits cum-ex tax probe citing weak law enforcement
The German prosecutor leading the €10bn cum-ex tax scandal probe, Anne Brorhilker, is quitting her role due to a lack of political backing and weak law enforcement. Brorhilker criticised the German system for allowing powerful players to escape punishment, stating that defendants can often buy their way out of prosecution. She has decided to join Finanzwende, a political action group monitoring the financial industry, in order to address the root of the problem. The cum-ex scandal involved a tax-driven trading strategy that allowed multiple investors to claim refunds on a tax that was only paid once. Brorhilker's efforts to bring those responsible to justice have targeted international investment banks. However, she faced criticism and had to defend herself against her own state justice minister.
Ireland expects €8.6bn budget surplus from tax receipts
Financial Times ?
Ireland is expecting bumper corporation tax receipts to deliver an €8.6bn budget surplus this year, giving the government leeway in an expected preelection budget even as it cautions that the bonanza based on outsized contributions from multinationals could soon wane. Michael McGrath, finance minister, said Ireland's economy was "in reasonably good shape." Growth in modified domestic demand, Ireland's preferred measure of output, is now forecast to be 1.9% this year, rising to 2.3% in 2025. The forecast surplus, which is projected to hit €10.7bn in 2027, comes after a nearly 25% drop in corporation tax receipts in the first quarter this year. Taxes paid by global tech and pharma firms with European headquarters or large operations in Ireland have been booming for a decade. "I would caution that this surplus is heavily dependent on volatile 'windfall' corporation tax receipts," said McGrath.