HMRC leaps into action
HM Revenue & Customs (HMRC) has been given substantial funding with the aim of raising an additional £7 billion each year – so unsurprisingly it has been very busy with a wide range of initiatives.
A new approach for HMRC is to use task forces for an intensive burst of activity targeting specific business sectors and locations where there is a high risk of tax evasion. The first task force focused on the restaurant trade in London, with Scotland and the North West to follow. The most recent task force tackles VAT abuse in London’s fast food outlets, with nine further task forces planned for 2011/12. The latest software makes it very easy for HMRC to compare the tax returns of different businesses, and to identify those that appear not to be doing so well.
HMRC is following up the Plumbers Tax Safe Plan with the VAT Initiative, aimed at businesses that are trading above the VAT turnover threshold of £73,000, but are not VAT registered. HMRC is writing to more than 40,000 businesses to make them aware of the initiative. Businesses have until 30 September to notify HMRC of their intention to take part, and VAT registration is then required by 31 December. A penalty of just 10% is likely to be charged on VAT that is paid late.
It has been estimated that last year HMRC investigated more than 9,000 inheritance tax valuations. Many estates are only subject to tax because of the value of the deceased person’s home, and it is often a family member who takes on the task of administering the estate. With a 40% tax rate, it can be tempting to value property below its true worth. However, an undervaluation of, say, £25,000 will mean additional tax of £10,000 and a penalty of up to 100%. It is therefore advisable to obtain several valuations and to have property professionally valued.
Finally, in an effort to collect tax as quickly as possible, HMRC has been sending letters to taxpayers informing them that HMRC will be collecting and selling their goods in lieu of outstanding tax. However, in many cases nothing is actually owed or payment plans have been already been agreed. So if you receive such a letter, contact us immediately.