Garbetts Newsletter - April 2008

Revenue Powers and Penalties

Powers
From the 1 April 2009 HMRC will be aligning its powers across all taxes and duties. In a nutshell they will be able to exercise the following powers:

a power to inspect records required under the record-keeping legislation - this restricts the existing VAT and PAYE inspections to statutory records and introduces a new power of inspection for direct tax;
a power to require supplementary information which is relevant to establishing the correct tax position;
a power to require third parties to provide information which is relevant to establishing a taxpayer’s correct tax position;
a power to visit business premises and to inspect records, assets and premises;
removal of VAT and PAYE powers to undertake inspections at private homes without taxpayer consent;
appeal rights against any penalty, and against information notices which have not been pre-authorised by an appeal tribunal;
penalties for failure to allow an inspection and failing to comply with an information notice, including a tax-geared penalty which can be imposed by the new upper tier tribunals; and
an updated criminal offence of destroying or concealing records requested under a notice authorised by a tribunal.

An additional power that has recently been granted to HMRC is the right to intercept phone calls - "bugging" powers! The Customs branch have always had this right, and it is now rolled out to investigations that involve all taxes. The powers were granted in the Serious Crimes Act 2007; the relevant implementation date was 15 February 2008.

Penalties
The Budget March 2008 included provisions that will enable the Revenue to introduce a single penalty regime across all the taxes, levies and duties they administer.

The changes are likely to commence for all incorrect return periods commencing on or after 1 April 2009, where the return is due to be filed on or after 1 April 2010.

New penalties for failure to notify the commencement of a new taxable activity are expected to have effect for those that arise on or after 1 April 2009.

The penalty will be determined by the amount of:

the tax understated,
the nature of the behaviour giving rise to the understatement, and
the extent of disclosure by the taxpayer.

The use of suspended penalties will be extended.

There will be no penalty where a taxpayer makes an honest mistake, but there will be a penalty of up to:

30 per cent of the tax understated for failure to take reasonable care;
70 per cent of the tax understated for a deliberate understatement; and
100 per cent of the tax understated for a deliberate understatement with concealment.

The measure will provide for each penalty to be substantially reduced where the taxpayer makes a disclosure (takes active steps to put right the problem), more so if this is unprompted.

For an unprompted disclosure of a failure to take reasonable care the penalty could be reduced to nil.
Where a taxpayer discloses fully when prompted by a challenge from HMRC each penalty could be reduced by up to a half.

Campaign on undeclared income from property
HMRC launched a campaign earlier this year targeted at tax payers who have had income from property and have not declared it on their tax returns from 2001/02 onwards. The campaign is focused particularly on income from renting a room, buy to let income, and income from furnished holiday lettings.

If you by chance receive a letter from HMRC on this topic be sure to call us to discuss the matter further.

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		Its tax return time....
	If you are a client of ours, then you should have received a questionnaire for completion of your Self Assessment return from us, in the past few days. Where we have e-mail addresses we’ve simply sent a link so these can be downloaded from our www site, otherwise we’ve posted hard copies to clients who prefer post. Please remember to complete all parts of the questionnaire, and return it to us by 31 May – thank you! The download addresses are: http://www.garbetts.com/download/sadr.pdf or http://www.garbetts.com/download/sadr.doc Your tax return needs to be submitted by 31 January, but a completed questionnaire now means we can process you return quickly and accurately once your accounts are completed. This helps us improve our service to you. Back to top

		Farewell Jennie
	Jennie Lewis, our marketing manager, left us on 31 March for pastures new - we wish her well, and thank her for her hard work for us over recent years. Back to top

		ISA allowances
	In the last Budget, the Chancellor announced changes to ISAs which will become effective at the start of the next tax year, 6 April 2008. The highest profile is the change to investment limits as the Government eliminates the mini and maxi components. Instead, there will be Cash ISAs and Stocks and Shares ISAs and the overall limit goes up from £7,000 to £7,200. Within this, the limit for Cash ISAs - or the cash element within a Stocks and Shares ISA - will go up to £3,600. Within these limits, there is flexibility. You can, for example, put the maximum £3,600 in a cash account and £3,600 in a stocks and shares account. Alternatively, if you place just £2,000 in cash, you can use the remaining balance – £5,200 - to invest in stocks and shares. If you don’t need cash at all, you can put the full £7,200 into stocks and shares. You can also transfer existing Cash ISA holdings to a Stocks and Shares ISA without impacting on your current tax year allowance. So, if you have £10,000 already sitting in existing ISA plans then this amount can be moved to a Stocks and Shares ISA, and your allowance of £7,200 will still be available. The only other change is to finally get rid of PEPs. Although no new money has been invested in PEPs since 1999, the distinction has remained but the Government has now finally given providers the opportunity to consolidate. Existing PEP holders should actually see no difference, but do check with your Garbetts Financial Strategies adviser if you are unsure. Give us a call on 01983 527111 if there is anything you wish to discuss. www.garbetts.com/gfs Back to top


	DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.