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

The current delays within HMRC are getting ridiculous and it’s not just the taxpayers that are having problems, even professional tax advisers are having problems.

Sue Moore, associate director for BTT and A, has been struggling to get hold of anyone at HMRC.

“We’re having difficulties when dealing with the HMRC. It would seem that most offices are eight weeks behind dealing with post. When you telephone it is just the call centre and if you want to speak to somebody actually dealing with the case, that is almost impossible. All this was before the cuts in the department spending.

Everybody is affected by the delay. Issues take longer to resolve and cost the clients more in professional fees as we have to keep chasing HMRC. Working on a case is very inefficient as we have to pick up the threads of the case after several months’ delay.”

Now we are finding that we are having to escalate matters in order to get a response to correspondence which is no good for anyone

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

Now we’ve all heard of how much money HMRC needs/should bring in with tax investigations, employment status reviews, PAYE investigations etc and as soon as possible you would think. Well, this morning was a relevation, in an attempt to speed up an enquiry I had agreed with the investigating officer that it would be a good idea to have a meeting, at our offices to go through the information they required, no problem until this morning. The very apologetic investigating officer explained that they had been told that due to all the cutbacks they were unable to travel for a meeting and would have to deal with the enquiry via correspondence and telephone. After checking it wasn’t 1st of April I said that this made no sense as this would prolong the enquiry because of HMRC backlogs etc to which to be fair the officer completely agreed, so what is going on – is this just a daft local decision or something more widespread?

HMRC you need to wake up and use some common sense – meetings can speed up the whole process – you are investigating someone or some entity, so they shouldn’t have to pick up the cost – you should be prepared to travel and guess what if there is a settlement to be made the money will be in the coffers quicker and the officers involved will be free to move onto another case – simples!

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

It has now been a year since HMRC introduced the internal review system which was intended to be a bridge between the case worker and the First Tier Tribunal in cases such as tax investigations, employment status cases and HMRC penalties to name but a few areas. Initially viewed with suspicion, and still to a certain extent, HMRC have published figures on the process to date.

Unrepresented tax payers have been relatively enthusiastic to use the system, probably on the basis of what have they got to lose – this made up 81% of those using the system. There are however strong distinctions to be drawn between automatic penalty cases where approximately half were cancelled compared with those that are far more substantiative. Even the latter category showed that about 25% were either cancelled or varied – so there is a definite moral here – don’t reject the internal review system out of hand it can be a useful process if dealt with correctly you just need to make sure the person dealing with your case understands the process. So, if you need advice call us today on 0800 917 9176

Well we have a date for the emergency Budget and that is 22 June 2010, but what can we expect:

• Increases in employees national insurance contributions, but not employers NIC
• Increase in the rate of Capital Gains Tax to probably 40%
• VAT rate to increase from 17.5% to 20%
• Increase in the level of PAYE/NIC compliance checks
• Increase in the personal allowance level to nearer the £10,000 mark
• A crack down on tax evasion, albeit HMRC cannot seemingly tell the difference between this and tax avoidance – the latter being perfectly legal

The Government has indicated that most of the initial debt reduction will come from spending cuts rather than tax rises but we would recommend that you review all your employer compliance procedures with the help of an employment tax expert as they will be seeking extra revenue from basically whereever it can get it from – so call us today on 0800 917 9176 and see how we can save you money

HMRC have recently published details of their internal review of tax enquiries, employer compliance reviews, tax investigations etc in relation to cases that have occurred since 1 April 2009 which does make for interesting reading:

“Outcomes excluding penalty cases 3,443 cases out of 18,526

Upheld: review complete – 2,603 (76 per cent)
Deemed Upheld: time limit expired – 20 (1 per cent)
Varied – 349 (10 per cent)
HMRC decision cancelled – 471 (14 per cent)

Outcomes penalty cases 15,083 cases out of 18,526

Upheld: review complete – 6,281 (42 per cent)
Deemed upheld: time limit expired – 48 (0 per cent)
Varied – 793 (5 per cent)
HMRC notice cancelled – 7,961 (53 per cent)”

In basic english this means that 24% of non penalty cases were varied or cancelled and a staggering 58% of penalty cases were varied or cancelled

The results clearly show that it is in your interest whether you are an individual or a company (where there is reason to doubt HMRC’s assessment) to complain. We would also add that it is advisable to obtain specialist help when HMRC comes a calling, it’s not a time to dabble so give us a call on 0800 917 9176

There are still a number of individuals and companies out there that think the Inland Revenue won’t pursue them to the ends of the earth regarding tax debts – you need to wake up, seriously!

HMRC compliance visits and tax investigations take on real significance when you focus on HMRC’s mission to maximise tax take, as such its stated litigation settlement strategy (LSS) aims to push for a full settlement or court action if it believes it has a better than 50/50 chance of winning.

Now the issue is always the fact that HMRC have deep pockets when it comes to arguements, you only have to look at some of the employment status cases that have taken 3/5 years to conclude but the cost in terms of money, time and effort expended by HMRC (and delayed cash flow for the government’s coffers – this is most likely the issue) in pursuing these disputes is mounting.

Therefore some in HMRC are considering using a more “common sense” approach – can it be possible?

A new unit would split the dispute resolution unit from the anti avoidance division. The mission of the new unit would be to resolve the disputes more quickly; thus improving cash flow, even if the speedier resolution means a lower tax bill – I can’t see that being popular within HMRC, can you? So stick with the principle of getting things as correct as possible in the first place and if you’re not sure give us a call on 0800 917 9176 as a PAYE/NIC healthcheck could save your company, in more ways than one!

At last the results of the consultation exercise into false self employment in the construction industry have been published and we have summarised the more salient details below:

• Nothing is going to happen yet and nothing will happen until the industry picks itself up, certainly not before the Olympics in 2012

• The simplistic approach of the government having three tests has been widely criticised and they have conceded that further consultation will be required – no surprises there then

• There is also a lot of criticism that any simplistic approach away from case law is only being geared at the Construction Industry, what about other industry sectors?

• The government have indicated that they will look into organisations purporting to get round the rules such as umbrella companies, managed service companies and labour style agencies – this type of compliance is no bad thing as they are so blatantly flouting the rules and taunting HMRC (never a good idea for them or more importantly their clients)

• Interestingly, the Trade Unions aren’t happy as they could potentially see a lot of new members but the government proposals actually mean that although subcontractors would suffer PAYE/NIC they would not be regarded as “employees” but “deemed employees” which means that they would have no employment rights or benefits. This has been widely criticised because it would actually create “false employment” and the employment law side of this has not really been addressed

• There is a General Election due, probably around 6^th May, which could mean a different party in power. The Conservatives have not indicated that they will pursue what is effectively a witch hunt in the Construction Industry

So if you have self employed subcontractors and would benefit from an employment status review call us on 0800 917 9176