Topical Tax Investigations 2016

Transcription

1 25 th NOVEMBER 2016 Topical Tax Investigations 2016 Mike Down, RSM Kevin Igoe, PFP

2 Topics HMRC s approach to tax compliance Worldwide Disclosure Facility Requirement to Correct / Failure to Correct Penalties what s happening?

3 HMRC s approach to tax compliance Background The tax gap HMRC reorganisation - a new structure NAO report on High Net Worth Unit

4 HMRC s approach to tax compliance Background Public perception of HMRC Tackling tax avoidance and evasion Approach to compliance Promote (voluntary compliance) Prevent (non-compliance) Respond (firmly to those who cheat the system)

5 HMRC s approach to tax compliance The tax gap Continues at 36bn But 11bn drop as a % of tax yield over 10 years 16.2bn (45%) of tax gap relates to Hidden economy ( 6.2bn) Evasion ( 5.2bn) Criminal ( 4.8bn) HMRC targets dishonest minority Unprecedented attack on evasion and avoidance

6 HMRC s approach to tax compliance HMRC reorganisation - a new structure HMRC resource and staff morale Regional centre locations Reorganised into three streams Tax strategy and policy Customer service Compliance Complaints rising - hope is that communication will improve

7 HMRC s approach to tax compliance High Net Worth Unit NAO Report Report published 1 November 2016 HNWU established ,500 individuals at April 2015 Threshold is assets over 20m (will be 10m) Just 0.02% of taxpayers Next affluent tier to be examined by NAO in future

8 HMRC s approach to tax compliance High Net Worth Unit NAO Report Some 4.3bn paid in 2014/15 3.5bn income tax and national insurance High Net Worth Individuals have complex tax affairs Amount of tax revenue at stake is significant Customer Relationship Manager role

9 HMRC s approach to tax compliance High Net Worth Unit NAO Report 416m extra from HNWU in 2015/16 260m target up from 200m in 2011/12 One in three HNWU customers under enquiry Risks estimated at 1.9bn with 1.1bn from avoidance 15% of HNWU customers have used a scheme

10 25 th NOVEMBER 2016 Worldwide Disclosure Facility

11 Worldwide Disclosure Facility Background Offshore Disclosure Facility New Disclosure Opportunity Liechtenstein Disclosure Facility

12 Worldwide Disclosure Facility LDF Update LDF registration ceased 31 December 2015 The (not quite) final tally Total registrations = 7,607 Total disclosures = 6,576 LDF yield = 1.42bn Average settlement= 179k LDF had highly beneficial Full Favourable Terms LDF had advantages even with only Limited Terms

13 Worldwide Disclosure Facility Background Offshore Disclosure Facility New Disclosure Opportunity Liechtenstein Disclosure Facility Common Reporting Standard A last chance to voluntarily disclose

14 Worldwide Disclosure Facility Terms No special terms..! No criminal immunity A 30% penalty? 90 days to complete forms Clearance procedure for complex cases Digital Disclosure Service (DDS)

15 25 th NOVEMBER 2016 Requirement to Correct

16 Requirement to Correct The consultation Consultation published 24 August 2016 Response deadline closed 19 October 2016 Wednesday s Autumn Statement Disclosure to be submitted by 30 September 2018 Use of CRS data Method of disclosure

17 Requirement to Correct Failure to Correct Sanctions if RTC disclosure not made Potential for 300% maximum penalty Assessing time limits Naming and Shaming

18 Requirement to Correct Role of Tax Agent Client notification regulations Review UK tax position of clients with offshore interests Residence and domicile Remittances Corporate and trust structures Liaison with offshore trustees Don t leave it too late..!

19 25 th NOVEMBER 2016 Penalties An Update

20 Penalties an update Inaccuracy Penalties Failure To Notify Penalties Late Return Penalties Late Payment Penalties Future MTD Penalties

21 Penalties an update Inaccuracy Penalties Potential Lost Revenue (PLR) Behaviour-based Prompted or unprompted Special circumstances / Reasonable excuse Opportunity for suspension

22 Penalties percentage levels

23 Penalties an update Reduction factors Telling Helping Giving access Quality of disclosure includes Timing Nature Extent

24 Penalties an update Current HMRC approach Very inconsistent Reasonable care Suspension Special circumstances Drift towards deliberate HMRC s failure to understand consequences of PDDD

25 Penalties an update Consequences of deliberate No opportunity for suspension 20-year assessing time limit In frame for potential criminal investigation? Need to consider seeking COP9 Naming and Shaming (PDDD) Managing Serious Defaulters (MSD)

26 Penalties an update Failure To Notify Penalties New regime starts 2009/10 20 year assessing time limit May be 0% penalty under old regime Typical minimum 10% penalty under new regime But watch for notification and filing dates And always consider reasonable excuse What does unprompted mean?

27 Penalties an update Late Filing Penalties Automatic penalties Tax-based penalties What does unprompted mean? Consequences of deliberate?

28 Penalties an update Late Payment Penalties Imposed in addition to Late Filing Penalties 5% plus 5% plus 5% = 15% Different from old surcharge regime Results in significant minimum penalty if Return filed late Tax paid late Deliberate

29 Penalties an update FTT case E Eastman (TC5276) Capital gain omitted from tax return Accountancy firm at fault had not checked file HMRC imposed careless prompted penalty HMRC refused suspension because one off Taxpayer appealed

30 Penalties an update FTT case E Eastman (TC5276) FTT noted Fane, which endorsed HMRC s view However Testa and Boughey cast doubts Suspension conditions need not be issue specific HMRC must exercise discretion reasonably FTT said that decision not to suspend was flawed An effective means of double checking required

31 Penalties an update FTT case Steady (TC0473) Taxpayer included bank interest on 2013/14 TR Figure based on certificate provided by bank Certificate showed 2012/13 figure so wrong tax year HMRC launched enquiry and extra tax of 2,500 due HMRC imposed prompted careless penalty HMRC refused suspension because of one off

32 Penalties an update FTT case Steady (TC0473) Taxpayer appealed against suspension refusal FTT suggested that SMART conditions could be set FTT described HMRC decision as flawed Tribunal judge also questioned whether careless Taxpayer would have had a strong arguable case that his behaviour was not careless

33 Penalties an update Future MTD Penalties Late Filing Penalties Late Payment Penalties A points-based penalty system with re-set to zero Cumulative failures Escalator model

34 Penalties an update Future MTD Penalties 12 month period before penalties are imposed Tax-geared penalties for deliberate non-compliance Penalty interest (as well as interest) for late payment Two penalty models - Based on current LPP regime New system based on length of debt outstanding

35 Topics HMRC s approach to tax compliance Worldwide Disclosure Facility Requirement to Correct / Failure to Correct Penalties what s happening?

36 25 th NOVEMBER 2016 Topical Tax Investigations 2016 Mike Down, RSM Kevin Igoe, PFP