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Month: February 2013

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Close Protection abroad – UK HMRC tax-free status – rules change April 2013

By Adrian Huston

I am a former Tax Inspector, also ex RMP (TA) and Police Authority Northern Ireland. I now sort out non-residency for hundreds of guys from the UK deployed abroad. Check me out on Linkedin at http://uk.linkedin.com/in/adrianhuston

New rules from April 2013. There is intended to be new legislation for 2013/14 bringing in a new Statutory Residence Test. In the past residency has been assessed using some HMRC booklets and was not actually enshrined in law. This changes things and in my view for the better.

For most of the people for whom I work this is a genuine improvement because if working abroad full-time there will be no more lingering concerns about whether the person has substantial ties to the UK. It ceases to be a concern if you have been deemed ‘automatically non-resident.‘

The law will not be passed until after the March 2013 budget, but just last month HMRC published its ‘Guidance Note: Statutory Residence Test (SRT)’ on how it plans for the law to work , unless Parliament interferes before Royal Assent, which is unlikely. It is at
http://www.hmrc.gov.uk/budget-updates/11dec12/stat-res-test-note.pdf

For most UK guys in CP around the World they qualify as non-resident (automatically overseas) under the third test on page 5 as follows:

“Third automatic overseas test
11. You work full-time overseas for the tax year without any significant breaks from that overseas work, and:
• you spend fewer than 91 days, excluding deemed days, in the UK in the tax year, and

• the number of days in the tax year on which you work for more than three hours in the UK is fewer than 31.

The full-time overseas part of the test does not apply to you if you are an international transportation worker.“

I claim credit for changing HMRC’s policy by one day – to the advantage of members of this Group! See the ‘fewer than 91’ above. That’s how the old rules talked.

When HMRC launched its consultation
(http://www.hm-treasury.gov.uk/consult_statutory_residence_test.htm see page 12)
they said non-residence if fewer than 90. In my formal consultation response I pointed out that this was a pointless loss of one day. It moved away from the long-held understanding of the importance of 90 UK days being allowed to make it 89. I am therefore delighted to see that the HMRC December 2012 draft has corrected the matter. It is expected to be mentioned in the UK Budget March 2013 and then go into law for 2013/14.

Note the old averaging rules are gone – so from 6 April 2013 make sure your UK days are always fewer than 91.

So, in summary, if you work full-time abroad on CP work (or non-CP work indeed), your work extends over 2 x 6 Aprils, and your UK days are 90 or fewer per full tax year, then the April 2013 rules are not scary for you.

You will still have to complete the necessary paperwork or have someone help you, record your UK days and – very important – keep records and proof of leave spent outside the UK.

Stay safe, and keep your tax affairs safe too.

Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.co.uk or +44 (0)28 9080 6080    Skype Adrianhuston

HMRC names and shames tax fiddlers for first time – who and why?

By Adrian Huston

History was made today 21 February 2013.  HMRC published its first ever list of people who have fiddled their taxes but not been prosecuted.  Up to now if you were caught fiddling then in over 99% of cases HMRC just took a lot of money off you – and your secret was safe.  Only HMRC, your accountant and you would know. Only a tiny number of people are taken to court each year.

The gloves are off now and HMRC today used its new law for the first time.  They held back on spoiling Valentines Day last week!

HMRC hopes that by naming and shaming tax-fiddling businesses, some of which might be in your town, people will be encouraged to be more careful to declare all that they earn.  By the way when I say fiddling I am also referring to people who have failed in their tax obligations, and as a result HMRC did not get its tax when it should, and as a result HMRC charged penalties.

I will give a link to the list shortly, but firstly I want to set out the ground rules, and explain why the list will get much longer each quarter that it is published.  The ground rules:

  • The tax has to be paid late as a result of failing to declare it, or understating one’s income
  • The inaccuracy or failure must be for a period after 31 March 2010. (For individuals this mainly means the 2010/11 or 2011/12 tax years).
  • The offence can relate to income tax, Capital Gains Tax, corporation tax or VAT.
  • This one’s important – even when coming clean to HMRC the person still did not make a FULL disclosure.  In other words they were silly enough to continue to play cat-and-mouse with the tax-man.
  • If HMRC had not found out about the problem, the loss of tax would have been at least £25,000.  Note this must all be after 31 March 2010.
  • The law states that once the name and shame details have been published for 12 months the publication must cease.

The inaugural list 21 Feb 2013 of significant tax defaulters can be read at http://www.hmrc.gov.uk/defaulters/defaulters-list.pdf

What should you be aware of when reading this list?

  1. Firstly the list shows the name and address, at the time of the offences, plus the tax which wasn’t declared on time, plus the penalty levied. It shows the period after 31 March 2010 for which the penalties applied.
  2. Secondly when you add up the tax and the penalty you will know some of what HMRC needed paid, but you may not have the whole picture.  For example there may be interest added as the tax is paid late.
  1. Much more significantly – the traders may owe an awful lot more.  This is because HMRC can only tell us about the tax owed after 31 March 2010.  Most tax investigations go back a number of years – even up to 20 years.  Just because HMRC says they owed £30,000 and paid a £15,000 penalty doesn’t mean that’s the lot.  The trader might owe tax from 1992 to 2012 of £500,000, of which only £30,000 relates to the last year or two.

Why do I say the list is going to get longer every quarter a new one is published?

Even though names only stay on the list for 12 months, I know the list will get longer as the years go by.

At the moment HMRC can only publish where £25,000 of tax would have been lost since 1 April 2010 – less than three years.  Think forward two years to May 2015.  By then HMRC can name and shame you if you owe £25,000 in tax over a 5 year period. So the bar is getting lower every year.

£25,000 in 5 years – is that a lot?  Well if you pay tax at 40% and you failed to declare £20,000pa of your income then the tax and National Insurance would be at least £5,000 per year. So if caught in May 2015 you could find your name address and tax amounts published.

Do you think the local papers might run a wee story about the tax defaulters in their area?  You bet they will!

What lessons can we draw from HMRC naming and shaming tax defaulters?

If you yourself are fiddling – then if you stop now then chances are your tax after March 2010 will never exceed £25,000.  So even if you are caught, or come clean, your name will not be published.

If you go forward to HMRC to admit something – or HMRC catches you – then tell them the whole story.  Don’t hold back or fail to admit to some assets or bank accounts.  If you do the local press may come sniffing!

If you have something to confess to HMRC, or if they are onto you, seek tax specialist help NOW. We often take on cases from the regular accountant, settle the tax investigation, then hand the case back to the accountant for ongoing normal accounts work.

I have already had to advise some of our tax investigation cases about the naming and shaming rules, and consider whether our client stands to have their name publicised.

Contacting Adrian Huston:

As a potential client – call 028 9080 6080 – outside office hours 9-1 and 2-5 there is a voicemail.

Media and interview requests – in office hours call 028 9080 6080, outside office hours media can contact Adrian here:

http://www.huston.co.uk/media-contact.html?sTask=message&r_id=1439957649&task=display&pf=4

Tax refund email scam alert, not from HMRC

By Adrian Huston

It’s the phishing season again.  Since lots of people filed their tax returns in recent weeks, the criminal fraternity is out to benefit.  They are sending out emails suggesting people are due refunds.

Should you read no further, get this – HMRC NEVER EMAILS TO SAY YOU ARE DUE A TAX REFUND.

Read on if you want some background.

We all see these emails which purport to come from our bank and to alert us to something.  It’s great when we know we don’t have an account with that bank – we know it’s fake.  The situation is less clear where the supposed sender is your own bank, or some ‘trusted’ organisation like HMRC.

What these people want to do is have you read the email and click on some link.  Therein lies the problem.  Click on the link and you might be downloading something nasty to your computer.  It might start telling someone what keys you press (hence revealing your passwords and indeed all correspondence). This is called key-logging. 

The other thing the email will try to trick you into doing is entering your security details or bank / card details.  The surprising thing then is that rather than nice stuff happening, you find your bank account has been cleared out, or charges put on your card.

So what’s the tax angle on all of this?

At various times of the year, but especially in February and March, emails arrive saying they are from HMRC.  They can have convincing email addresses, HMRC logo, all the right colours etc.  These generally say that having reviewed your tax affairs you are eligible for a tax rebate.  Sometimes they talk about your ‘fiscal activity’ – not even the most nerdish civil servant would use such a phrase.  They invite you to click a link and/or download a form to process your rebate.  They will also say exactly how much you are due.  Bit like PPI texts – putting an amount of money in the email makes the thing seem attractive.

I received one of these emails this week and it was better than many at trying to trick me.  It quoted what looked like a legit HMRC email – I won’t give the address the oxygen of publicity!  It was even signed off by a named member of staff, with a Western sounding name.  My email did however have some clues:

  • The day was spelled incorrectly
  • I know that HMRC email addresses (used only by the chosen few) have .gsi in them
  • It talked about ‘fiscal activity’
  • It quoted a rebate number which was not my tax ref
  • The amount was shown as J123.45 rather than £123.45, and, most importantly,
  • I know that HMRC never emails about refunds. 

By the way I predict these fraudsters might move onto threatening emails about tax bills.  Again I stress HMRC will not email you about a tax demand.  Only if your specific tax debts are the subject of ongoing correspondence might a named HMRC officer give you their email address.  Then it would be OK to use email, but this would be extremely rare.  Correspondence about tax debts will come by post. (Or in person if you are really naughty!)

ACTION PLAN

  • If you receive one of these emails then forward it to HMRC (who are daily closing these things down). Simply forward the email to phishing@hmrc.gsi.gov.uk
  • If you have received an email and may have entered personal details like User ID, national insurance details or tax reference then you must contact a different part of HMRC at security.custcon@hmrc.gsi.gov.uk
  • If you have supplied bank details for your ‘refund’ then contact the bank asap.

So in summary:

  1. HMRC never ever emails about tax refunds.
  2. HMRC will not email you about tax debts.
  3. If you get such an email report it as above.
  4. Never click on a link in an email supposedly from HMRC about your tax position.

Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.co.uk or 028 9080 6080.