NEWSLETTER 67

We often think that HMRC are interested only in collecting in tax due by way of cash into the Treasury. During the last month however we have seen a position emerge where HMRC are keen to deny tax relief which would otherwise have been due and would have reduced a taxpayer’s liability.

Under Self Assessment it is the responsibility of the taxpayer to notify any circumstances which could lead to additional tax becoming payable. It seems however that some taxpayers may have taken the view that as their main source of income is through PAYE and tax correctly deducted, their rental property income which results in a loss after interest and overheads does not require disclosure. They may take the view that when profits are made then they will tell HMRC. Rental losses can only be carried forward to use against rental profits but HMRC are challenging undisclosed losses from earlier years and seeking to open enquiries into all aspects of a return as a consequence.

Our advice is to disclose everything including losses on a tax return as this will potentially avoid any unnecessary investigation into tax affairs.
   
LOANS FROM A COMPANY TO SHAREHOLDERS

Draft legislation has been published which confirms an announcement made in Budget 2013 and which has effect from 20 March 2013.
 
INCREASE IN NMW RATES

The Government has announced increases in the NMW rates which will come into effect on
1 October 2013.  

HMRC LAUNCH MANAGING SERIOUS DEFAULTERS (MSD)

Following on from Managing Deliberate Defaulters (MDD) programme, under MSD HMRC will closely monitor the tax affairs of more individuals and businesses who have deliberately evaded tax for up to five years.
 
EMPLOYER END OF YEAR FORMS

HMRC are reminding employers that in order to avoid penalties they must file the Employer Annual Return (P35 and P14s) online and on time.
 
EMPLOYMENT PARTICULARS

The government has updated the template of written employment particulars.
 
P11D DEADLINE APPROACHING

The forms P11D, and where appropriate P9D, which report employees and directors benefits and expenses for the year ended 5 April 2013, are due for submission to HMRC by 6 July 2013.
 
SCOTTISH RATE OF INCOME TAX

On 14 February 2013 Scottish and UK ministers agreed the final text of the Memorandum of Understanding between HMRC and the Scottish Government covering the Scottish rate of income tax.

DIVIDENDS VERSUS SALARY

In a long standing case which reached The Court of Appeal,
PA Holdings has conceded that dividends it paid to sections of its workforce under a contrived scheme of arrangement will now stand to be taxed as remuneration.  HMRC announced last week that
PA Holdings had decided against taking the case before the Supreme Court.


It is possible that HMRC could use the decision to challenge
dividends paid out by ordinary SME companies to their shareholders but HMRC state that this will not be their intention. They stated that the PA Holdings scheme was complex and that a deduction for Corporation Tax was being sought from both the Dividend and the remuneration and that the Court of Appeal had correctly drawn the conclusion that payments were either remuneration or dividends and that having decided that it was all remuneration then there was no way that it could attract the lower 10% rate of tax applicable to dividends.  Of course with remuneration there must be tax of at least 20% and NIC’s as well.


If HMRC do begin enquiries into dividends paid to shareholding members of staff then the correct paperwork voting the amounts etc will prove invaluable. If in doubt contact us on 024 7663 5522