HMRC is to change its Pay As You Earn (PAYE) system to detect owed deductions on a monthly basis, rather than yearly, in a bid to make the system easier for employers.

Using Real Time Information (RTI), tax and deductions will be transmitted to HMRC each time an employee is paid, meaning employers will no long be required to provide information using forms P35 and P14 after the year end or to send p45/46 when employees start or leave employment.

The phased introduction of RTI will begin in April 2012 with an initial pilot. HMRC hope to increase the number of employers joining RTI during 2012-13 following the scheme’s success.

However some advisors and employers are being a tad nieve about the introduction of this, believing all they read. Please do not fall into this trap, the number of professional bodies that are urging HMRC to delay its introduction is huge but HMRC are beligerantly pushing ahead, which spells a recipe for disaster. Still not convinced, well don’t forget there are now in year business record checks and potential for in year penalties, to encourage you. If you need advice on this and more importantly a review of what you are doing to make sure you can handle this, call us today on 0800 917 9176

During a business records check (BRC) an HMRC officer will view the business records of the current accounting period and assess whether those records are ‘adequate’. In this context ‘adequate’ should mean the records are sufficient to compile accurate tax and VAT returns, but the BRC brief implies the HMRC officer will be looking for the following errors in the business records:

• Understated sales;
• Overstated expenses; and
• Private expenditure claimed as business costs.

If the HMRC officer concludes the business has failed to keep adequate records he can impose a penalty of up to £3,000.

HMRC tested their BRC programme between 4 April and 15 July 2011, during which up to 800 businesses were advised about their records, but no penalties were levied. However, since mid September HMRC has expanded the BRC programme and is increasing the number of HMRC officers involved from 30 to 120. HMRC plan to conduct approximately 12,000 BRC visits before 1 April 2012, and a further 20,000 BRC visits in 2012/13. On those numbers at least one of your clients is likely to be subject to a BRC in the next 18 months.

Business who were visited in the first stage of the BRC programme, and who were judged to have issues with their record keeping, are receiving follow-up letters from HMRC requesting a repeat visit; ‘to check that the appropriate improvements have been made.’ Remember the records under inspection are those raw documents that have not yet been sorted or vetted by someone who understands exactly which expenses can be claimed for tax purpose

In this second stage of the BRC programme HMRC is prepared to impose penalties for serious record keeping failures. However, certain professional bodies, including myself are not convinced of the legal basis for charging such penalties, before the tax return has been submitted.

EICG are offering a menu of Construction Industry Scheme (CIS) reviews for your company at special rates until 30 June 2011

HMRC are being very proactive in this area, even for companies that have previously been under the radar. You could be caught out whether this be via an employer compliance review, an employment status review or an in year business records check. The costs of getting things wrong can be monumental, not just the penalties but also the time taken out of your business and the resulting stress that this can cause.

So why wait, choose your review option below and contact us today on0800 9179176 begin_of_the_skype_highlighting 0800 9179176 end_of_the_skype_highlighting

• Employment status review of your subcontractors and associated paperwork
• Review of all aspects of your Construction Industry compliance
• Business record checks
• Full Employer compliance review, as HMRC would conduct them

Make your company the one that HMRC walks away from rather than feasting on your hard earned profits.

The letter will explain that, once the opportunity expires, the tax authorities will begin a clampdown on those working in the sector who have failed to declare earnings and pay the tax they owe.

Under the tax plan, plumbers, gas fitters, heating engineers and members of associated trades who owe tax which they have not yet declared can come forward anytime up to 31 May to tell HMRC they want to take part. If they make a full disclosure, most face a low penalty rate of 10 per cent, with a maximum of 20 per cent. Once they come forward, they have until 31 August to make their disclosure and arrange for payment.

After that date, using information pulled together from different sources, HMRC will investigate those who have failed to come forward. Substantial penalties or even criminal prosecution could follow.

The Plumbers’ Tax Safe Plan (PTSP) is the first initiative in a campaign focused on tradespeople. It is designed to make it easy for those in the plumbing industry to put their tax affairs in order.

Mike Wells, HMRC’s Director of Risk and Intelligence, said:

“Our aim is to make it easy for plumbers to contact us, make a full disclosure of income and face a reduced penalty.

“We are using a variety of intelligence sources to target plumbers who have not declared their full income and I urge tradespeople in this group who think they owe tax on their income to get in touch with HMRC and get their tax affairs in order simply and on the best available terms.

“The first step for those wishing to avoid a full tax investigation with much higher penalties is to notify us.

“We do not think everyone who receives a letter owes us tax. However, if you owe tax and don’t get a letter, do not assume that HMRC will not catch up with you.”

To join the tax plan people in the plumbing industry must:

* Register with HMRC to “notify” that they plan to make a voluntary tax disclosure by 31 May
* They then have until the 31 August to tell HMRC about tax due and make arrangements to pay any tax interest and penalties due. This is called “making a disclosure”.

Please be aware that before you launch forth with this “offer” from HMRC you should consult a specialist telephone 0800917 9176 begin_of_the_skype_highlighting 0800917 9176 end_of_the_skype_highlighting

A £158BN hole in the public finances means that HMRC are being used to try and raise extra cash for the Treasury, as quickly as possible and that will mean easy targets, so small and medium size firms, anyone in the construction industry are in the direct firing line for:

employer compliance reviews

PAYE/NIC investigations

Employment status reviews

tax investigations

you name it and they are heading your way and don’t think it won’t happen to you – it will, so why not take advantage of the special deal that EICG is running this month on PAYE/NIC healthchecks and Construction Industry reviews, call us today on 0800 917 9176 to see how we can help you avoid being a victim

HMRC are now out and about big style as they have told their Inspectors to bring in as much money as possible, as quickly as possible, which is not really surprising given the current economic environment.  There will be pressure to settle long running full enquiry cases and Inspectors will be encouraged to take up aspect cases (these are as they sound, looking at a particular aspect of a business, eg employment status, entertaining expenditure etc ) which are likely to be settled more quickly to optimise the tax yield in the current fiscal year.

Interestingly, it would appear that the new “Cross Tax” enquiry framework, involving PAYE/NIC, Corporation Tax, VAT etc is being shelved as it is slowing up the enquiry process so Inspectors will be reverting to just working their particular area

HMRC are planning a massive increase in the take from: tax investigations, employer compliance review, tax enquiries, employment status reviews and CIS reviews, so you have been warned

HMRC plans to seize an extra £4bn in 2010/11 through more aggressive tax investigation work and tougher powers. To achieve such a high yield, HMRC will need to widen the scope of its enquiry work to include marginal cases. This increases the risk innocent businesses are caught up in a massive fishing exercise

Tax investigations can be hugely costly to taxpayers in respect of management time, stress and advisory fees, while much of the tax HMRC claws in through investigations is not tax that has been deliberately evaded, in many cases it is the result of HMRC reinterpreting tax law and this brings in the well known scenario of my pockets are deeper than yours – otherwise known as if an individual or business can’t afford to challenge HMRC’s decision through the tribunals and court system, then HMRC wins.

So you have been warned, take specialist advice before it happens to you

The way HMRC carry out the following, are going to change beyond recognition:

• Employer compliance reviews
• Tax investigations
• Tax enquiries
• PAYE/NIC investigations
• PAYE investigations

and if you’re not up to speed it’s going to be a real shock to the system. If you’re advisor is unaware then be really concerned and give EICG a call on 0800 917 9176 to see how we can help you: before and during a visit.

HMRC Cross tax reviews is just one example of this, so moving away from potentially three visits in a year to a visit combining PAYE/NIC, VAT and Corporation tax. For very large businesses this has been trialling with a team of HMRC officials visiting (oh what joy) and is based on extensive reviews of other tax systems across the world. However, this is likely to be cascaded downwards to other sizes of business with the use of a newly retrained general tax practitioner – as you can imagine this has pro’s and cons as anyone who deals with a specialist area of tax knows it is just that, specialist and not generalist, so my advice is don’t let someone “have a go” on your behalf use specialists, as we have at EICG to cover these areas.

Keep on reading for further updates on what is an ever changing Inland Revenue approach to solving the national debt!