November 2013 Tax News
No secrecy for beneficial shareholders of UK companies
The British prime minister has announced that a publicly available central registry will be created listing all the beneficial owners of UK companies as part of the ongoing crackdown on tax evasion and avoidance. The Opposition is expected to support the legislation. The proposals would result in a central registry – managed by Companies House – detailing individuals with more than 25% of company shares. “For too long a small minority have hidden their business dealings behind a complicated web of shell companies – and this cloak of secrecy has fuelled all manners of questionable practice and downright illegality,” Mr Cameron said in a speech. “We need to shine a spotlight on who owns what and where money is really flowing.” Since May 2013, all the UK’s overseas territories have been signed up to automatic information-sharing deals, with a pilot currently underway. This means that the UK, along with other countries involved in the scheme, automatically receive much greater levels of information about bank accounts held by taxpayers in those jurisdictions, including: names, addresses, dates of birth, account numbers, account balances and details of payments made into those accounts. “Some people will question whether it’s right to make this register public,” Cameron added. “Of course we in government will use these data to pursue those who break the rules. And we’re going to do it relentlessly. But there are so many wider benefits to making this information available to everyone.”
Four in ten people pay the wrong tax
Thirty-seven per cent of PAYE tax codes are wrong, according to data gathered and analysed by accountancy firm UHY Hacker Young. Errors in the amount of tax taken out of pay packets by HM Revenue & Customs (HMRC) are unlikely to be questioned by taxpayers. As a result taxpayers may end up paying more tax than they need to and/or could end up owing HMRC significant sums that will eventually be clawed back when the error is spotted. HMRC refuted the numbers cited by Hacker Young, and said in a statement: “The numbers being cited are not correct, accuracy of annual PAYE coding notices is now 99%. The vast majority of people are paying the right tax at the right time through PAYE.”
Deloitte accused of encouraging avoidance
The charity ActionAid has obtained a report that indicates that Deloitte has been advising businesses with operations in Africa how to legally avoid paying taxes. The document, Investing in Africa through Mauritius, sets out how a company could reduce withholding tax in Mozambique from 20% down to 8% and corporation and capital gains tax from 32% down to zero. ActionAid Tax Policy Adviser Toby Quantrill said: “Tax revenues are desperately needed to meet people’s most basic needs and to move countries away from aid dependency. Big businesses have an important role to play in economic development in poor countries. But they also have to act in a socially responsible way.”
HMRC misses £3bn target
HMRC tax assurance director Edward Troup and director-general Jim Harra told a hearing of the Public Accounts Committee that £440m had been recovered this year and £782m received in total since the tax deal targeting UK residents with accounts in Switzerland had been launched last year. The original target was £3bn but the eventual amount raised is likely to fall well short of this. Both Troup and Harra said the forecasts were originally “inaccurate” owing to the “secrecy” of the Swiss banking system. In October, HMRC began sending UK holders of Swiss accounts the first of 6,500 letters warning them of a deadline to settle their liabilities.
Tax system failing, says EY
EY has surveyed 68 tax directors and from their comments has said: “Public confidence in the UK tax system is at the heart of an effective tax regime but it has been shaken by the recent furore over the taxation of multinational companies. There’s now a real need to repair and restore, re-building trust that tax law is fit for purpose, tax authorities have the skills and resources to police them and that big business is paying the appropriate amount of tax.” More than a third of companies have already made or planned to make additional voluntary disclosures, and nearly a quarter are actively considering their approach. Despite those findings, concerns about the challenges associated with greater tax disclosure still remain. Almost a third of survey respondents said they were concerned about the risk of information being taken out of context and negatively interpreted, while 28% said it would be difficult to provide information in a form that would be easily understood.
Isle of Man news
The Isle of Man has become the first Crown dependency to extend its tax information-sharing deal with the UK. The agreement sees financial information on UK taxpayers with accounts in the Isle of Man reported to HMRC automatically every year. The island already exchanges information with the UK and other EU nations. On the current timetable, UK residents with assets concealed on the island will have until September 2016 to disclose details to the taxman and pay any tax owed to HMRC, as well as a fine of between 10% and 20%. While in most cases the deal will see evaders escape prosecution, HMRC offers no guarantees.
Data analysis trial a success
HMRC’s data analysis trial identified £20m of potential losses after 5,500 cases from a sample of 16,000 showed irregularities. The Revenue is now planning to use “sophisticated data analytics” as part of its strategy to tackle the problem of tax credit fraud and error, which despite being at its lowest level yet cost the taxpayer £2.09bn in incorrect payments in 2011/12.
Ireland closes loophole
Ireland has announced that it will close a tax loophole used by many large businesses, such as Apple. As it currently stands companies that had Irish subsidiaries could declare that they had no tax residency anywhere in the world. The government said it is now planning to make it illegal for companies to declare that they have no tax domicile. Earlier this year the US Senate Committee said Apple had used complex “offshore entities” to avoid the payment of billions of dollars in taxes.
Fraudulent VAT reclaims targeted
People making fraudulent VAT claims in Scotland and Northern Ireland are to be targeted as HMRC launches a new taskforce.
Tax shortfall £35bn
HMRC figures indicate that the value of the tax shortfall has hit £35bn, a marginal rise in value on last year. The tax gap is compiled from 30 separate estimates for different taxes, and breaks down reasons tax is not collected. These include tax evasion and avoidance, taxpayer error, the black market, criminal attacks and corporate insolvencies.
£1,000 tax break
Married couples and civil partners will be able to transfer up to £1,000 of their personal allowance to their partner from 2015/16. HMRC says its “current working assumption” is that it will deliver the breakthrough end-of-year processes in the first period, after which “people will receive [the allowance] through their tax codes”. The Treasury expects four million couples to qualify.