What s new in tax compliance

Transcription

1 What s new in tax compliance Tuesday 22 July 2014 BUSINESS WITH CONFIDENCE ICAEW 2014 icaew.com Introduction Jane Moore, ICAEW Tax Faculty Audio problems if you experience poor sound quality you may benefit from selecting Use Telephone from your Audio Mode settings VAT Changes in 2015 BUSINESS WITH CONFIDENCE ICAEW 2014 icaew.com 1

2 Today s presenter John Cassidy, Partner Crowe Clark Whitehill BUSINESS WITH CONFIDENCE ICAEW 2014 icaew.com Ask a question VAT Changes in 2015 BUSINESS WITH CONFIDENCE ICAEW 2014 icaew.com 2

3 Join the Tax Faculty Representing 142,000 members Helping to develop your career and keeping you up to date All the information you need from one place Interactive Website Extensive range of publications including TAXline Referral Scheme Events and networking opportunities icaew.com/jointax icaew.com/taxwebinars BUSINESS WITH CONFIDENCE ICAEW 2014 icaew.com What s new in tax compliance John Cassidy, Partner Crowe Clark Whitehill 22 July

4 Topics for today An update on self assessment enquiries Other enquiry methods, campaigns etc The Contractual Disclosure Facility, its use in practice and recent changes Offshore developments, data gathering, assumptions and investigations Dishonest tax agents - relevance and pitfalls Self assessment enquiries A reminder of previous comments For a filed return, an enquiry is still required Schedule 36 FA 2008 does not change this See paragraph 21 Unless there is a genuine suspicion of a discovery But see Kevin Betts, August 2013 Relevant to offshore enquiries? 4

5 Self assessment enquiries Schedule 36 and meetings Visits to inspect business premises, assets, records Power is only to inspect, not force a meeting Information notices cannot demand a meeting Self assessment enquiries Date of enquiry notice is key Must be received on time HMRC should tell you what is wrong - Single Compliance Process openness and early dialogue HMRC should communicate the risks identified at the outset and concentrate only on those risks 5

6 Other enquiry tools Benchmarking Initial test and learn phase Restricted business areas.for now Not an investigation tool.for now Effective rate letters Similar nudge technique Flawed from the outset Other enquiry tools High Volume Agents What is a HVA? See CH An education process 90%+ are unqualified, but Perfectly legitimate ICAEW members included, eg CIS repayments Sign up to memorandum agreeing to: Raise client awareness of record keeping requirements and test those records Test expenses Not submit any return unless certain expense to turnover ratios are met 6

7 Other enquiry tools Current campaigns Let property; 2 nd incomes Very successful - 261m ignoring ODF/NDO Business records checks Third test and learn from April 2014 Scaled back HMRC s Connect system Other important matters a quick reminder Suspension of penalties Available in all careless cases Don t forget to ask Alternative Dispute Resolution Mediation, facilitator helps parties reach agreement Now part of mainstream HMRC Very useful what s the worst that could happen? 7

8 Direct recovery of debts Still a proposal only, not yet law HMRC views as simply an extension of distraint of assets Procedure: Establish the debt problems here? Verify funds how, unless new information power? Freeze funds, 14 days to contact HMRC appeal rights? Joint accounts are 50/50 Contractual Disclosure Facility Code of Practice 9 recent history: Gill & Gill in 2005 Civil Investigation of Fraud, or CIF No real threat of prosecution Numerous cases of non cooperation Poor case selection Inexperienced inspectors and advisers Penalties and yield too low Contractual Disclosure Facility, or CDF, in January

9 CDF in a nutshell HMRC s undertaking No prosecution Tax payer s undertaking Admission of fraud(s) Enter into contract with HMRC and make Full disclosure - Outline within 60 days - Full, complex disclosure to follow Contract settlement Contractual Disclosure Facility Has its teeth back - threat of prosecution: Accept offer of CDF = no prosecution, but Denial = criminal investigation possible Denial with cooperation = criminal investigation possible Ignore = criminal investigation possible False disclosure = criminal investigation possible Hence the need to fully engage and fully disclose 9

10 Extended use of Code 9 Code 9 is titled investigations where we suspect tax fraud Defining fraud is complex and a matter for the courts but For tax purposes it is very low bar Brief definition at 8.1 of Code 9 A person commits an offence if he is knowingly concerned in the fraudulent evasion of tax or duty, by him or another person. There are various tax fraud offences, but all involve intent. You cannot commit tax fraud accidentally. Tax fraud includes, deliberately: concealing or withholding relevant facts, or failing to disclose a liability to tax or duty, or misrepresenting your tax affairs. Extended use of Code 9 Extension into (apparently) non-fraud cases Offshore matters Swiss bank accounts or trusts more later Tax avoidance cases Mostly Montpelier cases, but not all May be more than avoidance if taxpayer knew what he was doing was wrong 10

11 Tax avoidance cases A raft of cases opened under Code 9 relating mainly to Montpelier arrangements, mainly Capital losses Pendulum arrangement Trading losses Alphabeta arrangement HMRC s view Underlying transactions are a sham The taxpayer s motive all along was to create a loss The arrangements were so unreal that the taxpayer knew or must have known they did not work The taxpayer lied during the self assessment enquiry Tax avoidance cases Examples of the problem areas BUT Section 16A TCGA 1992 denial that arrangements were for tax mitigation purposes when they were Knowingly not trading with a view to profit, yet claiming losses Unsecured interest free loans over 50 or 80 years really? Losses created quickly, very short trading period before cessation Large loans made by new, unknown, offshore companies under same ownership as Montpelier substance? Sophisticated investors 11

12 Tax avoidance cases The investors were not sophisticated in tax matters investment bankers for example are not tax experts The documentation was voluminous and convincing Eg lengthy loan agreement, information memorandum, professional services agreement, Master agreement, Agency agreement The loans had other recurring fees attached No interest but hefty potential and regular fees due to the lender The arrangements were sold as backed by Counsel s opinion Generally not read but isn t that normal? The individuals played no part in the underlying transactions All arranged and undertaken by the appointed agent Tax avoidance cases The individuals did not implement the arrangements (other than signing up) Everything was done by the advisers Correspondence with HMRC was prepared by the promoters As apparent experts in the complex issues Not necessarily seen by the client The individuals did not have the fraud mindset, merely tax reduction Expensive professional advice from specialists; audit trail; continued exposure to large loan The individuals relied on professional advice They are not tax experts let alone tax planners; introduced to the promoter by their accountant 12

13 Tax avoidance cases Various relevant cases to study, eg January 2011, Gittins v Central Criminal Court (EWHC 131) Litman & Newell v HMRC [TC03229], February 2014 Jeremy Stephen Tetley, TC discovery case Rowland, 2006 STC reasonable excuse case Mr J R Hanson, TC reasonable care/penalty case Underlying theme is that taking advice is good Each case very much on its own merits there are plenty of these cases where CDF or criminal investigation appears relevant CDF - latest developments The wording is ambiguous and inconsistent Behaviour HMRC may suspect to be fraud vs actual fraud Can cause problems with clients Amended from 30 June Use of deliberate rather than fraud, with a definition attached Denial with cooperation It s either fraud or it isn t per HMRC, no middle ground According to HMRC this has been abused and become a route map in its own right - poor/inappropriate case selection? Removed entirely fraud, yes or no? 13

14 CDF and offshore matters Huge amounts of data available to HMRC, eg Stolen Swiss bank data UK/Swiss tax agreement [Plus UK FATCA & Government level agreements coming up] Discovery of significant Swiss asset Out of step with known income so Code 9 issued Apparently with no or little further checks Numerous examples of this Example Geneva bank account Found due to HSBC Geneva data theft Straight to Code 9 (apparently due to size) Denial of fraud and capital explained, non domiciled client HMRC began its own investigation HMRC aggression Formal information notices AGAINST THE ACCOUNTANT. Justified by: An offshore bank account exists The balance is not commensurate with declared income No remittances have been disclosed We need to check the source of capital and that no remittances have been made 14

15 Example Geneva bank account Dave Hartnett confirmations in 2008 The intention is that those using the remittance basis will not be required to disclose the source of those remittances [They] will not be required to make any additional disclosures they will not be required to disclose information on the source of the remittances No fishing allowed Kevin Betts again HMRC s arguments are no justification Seascope Insurance Services Ltd (UKFTT 828) No tax and case closed, but costly, unpleasant and the point is that HMRC WILL investigate these cases strongly Offshore bank accounts fraud assumed No safe havens 2014 published 14 April 2014 Automatic exchange of information between governments; data passed to HMRC (plus UK FATCA already in place) A new criminal offence: Strict liability, ie if offshore income exists and is taxable it is automatically treated as evasion Consultation later this year Expect more offshore Code 9 cases in future Tell clients now 15

16 Dishonest tax agents a reminder Effective from 1 April 2013 So relevant to 2012/13 tax return work HMRC is not known for being right every time with CoP 9 If targeted HMRC can inform professional body at an early stage All files can be accessed, not just affected clients Not necessarily dishonesty by you, could be an ex employee Crucial you are up to date just in case John Cassidy, TAX INVESTIGATIONS HELPLINE INVESTIGATIONS@CROWECW.CO.UK 16

17 Any Questions? BUSINESS WITH CONFIDENCE ICAEW 2014 icaew.com Future events Practical Tax Conference Peebles - 10 October 2014 to 11 October 2014 Get up-to-speed with the tax issues that matter to your business Our wide range of expert speakers including Rebecca Benneyworth, Peter Rayney, David Heaton, Paul Aplin and Carl Bayley will share their insights and expertise. BUSINESS WITH CONFIDENCE ICAEW 2014 icaew.com 17

18 Thank you for attending Contact the Tax Faculty. +44 (0) icaew.com/taxfac Please take the time to fill out our short BUSINESS WITH CONFIDENCE ICAEW 2014 icaew.com A world leader of the accountancy and finance profession BUSINESS WITH CONFIDENCE ICAEW 2014 icaew.com 18