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Credit Card Sales Campaign
The Credit Card Sales campaign offers individuals and businesses that accept credit and debit card payments the opportunity to bring their affairs up to date and take advantage of the best possible terms. Any individual or company that accepts credit and debit card payments should be registered with HMRC.
There are a number of steps involved in taking part in this disclosure opportunity. The first is to notify HMRC that you want to take part in the Credit Card Sales campaign. Taxpayers must then make a full disclosure about all income, gains, tax and duties within four months from the time a notification acknowledgement is received. This is followed by making a formal offer and payment of tax dues together with fully co-operating with HMRC throughout the process.
HMRC guidance states that penalties for a full disclosure made as part of the campaign will usually be levied at 0%, 10% or 20% depending on the circumstances. There are higher penalties for offshore liabilities. Taxpayers who are contacted by HMRC before making any disclosure will not have the opportunity to use the terms of this campaign. Penalties of up to 100% of the unpaid liabilities, or up to 200% for offshore related income could then be levied along with the risk of criminal prosecution is serious cases.
We would strongly advise any of our readers who may be affected by this issue to contact us as soon as possible to discuss the implications of making a disclosure.
Finance (No. 2) Act 2015
The Summer Finance Bill 2015-16 received Royal Assent on 18 November 2015 to become the Finance (No 2) Act 2015. The Bill had a speedy passage through the House of Lords and the House of Commons and has now become an Act of Parliament.
The Finance (No 2) Act 2015 contains the legislation for many of the tax measures that have been announced by the Government. This includes the implementation of key government policies for business such as the reduction of the corporate tax rate to 19% in 2017 and to 18% in 2020 as well as the new permanent £200,000 Annual Investment Allowance and some changes to the VCT and EIS schemes. The Act also implements the “tax lock” provisions that rule out any increases in VAT and income tax rates during this Parliament.
The Act also enshrines in legislation an increase in the personal allowance to £11,000 in 2016-17 and £11,200 in 2017-18 and in increase in the higher rate threshold to £43,000 in 2016-17 and £43,600 in 2017-18 as well as introducing the new main residence nil-rate band (RNRB). The RNRB will allow for a new £175,000 per person transferable allowance for married couples and civil partners when their main residence is passed down to children after their death. The allowance is being phased in from 2017-18.
Tribunal mark-up appeal allowed
The First-tier Tribunal (FTT) recently heard an appeal by a fish and chip shop owner against a number of assessments issued by HMRC. The takeaways owner, Ernest Bustard has been supplying fish and chips in Ballymoney, Co. Antrim for more than 30 years and seems to be a local institution.
HMRC visited the premises in 2008 and reached the conclusion that the taxpayer's takings had been under-declared. The taxpayer was unable to produce proper evidence of his turnover as he zeroed his till each week. This prompted HMRC to undertake a mark-up exercise to assess turnover and profits over a five year period. This resulted in Mr Bustard being told that he had underpaid VAT of more than £26,000 and being hit with late payment penalties of over £25,000.
HMRC estimated the businesses gross profit margin at 68% however the Tribunal Judge agreed with the taxpayer that fish and chip shops generally have lower profit margins when other factors such as food waste are taken into account. The taxpayer vehemently disagreed with the underlying calculations and estimated his gross profit margin at 57.5%.
Whilst the Tribunal was clear that it is not HMRC’s job to do the work of the taxpayer in order to form a conclusion as to the amount of tax which is due there was some sympathy for the taxpayer.
In his closing statements Judge Connell said 'although the assessments by HMRC have not been reached capriciously, arbitrarily or as a ‘spurious estimate or guess in which all elements of judgement are missing', in our view, on the information and material available and for the reasons set out above, the assessments to VAT and Income Tax, are not to best judgement.'
The taxpayers appeal was therefore allowed and the VAT assessments and penalties were reduced to nil. Whilst this is a slightly unusual case it does serve to demonstrate the importance for small businesses especially those that deal in cash of keeping proper records to underscore their turnover and profit figures.