John Harrison and Company - Charter Accounts

HMRC has responded to a Freedom of Information request and confirmed the following:

• The new Business Records Checks (BRC) annual target is 20,000 visits, a 30,000 reduction from the original objective of 50,000, as outlined in the BRC Consultation Paper.
• The 20,000 annual target has been reduced on a pro rata basis for this tax year. 12,000 BRC visits are due to be conducted before March 2012.
• The 30 staff who carried out the original ‘Test and Learn’ BRC visits between April and July from Edinburgh, Irvine, Liverpool, Manchester, Portsmouth, Sheffield, Stockport and Sunderland tax offices are going to be assisted by a further 90 staff. More tax offices are going to be involved. The additional 90 staff are being drafted on to the BRC Team between September and November 2011.

In addition to this second round of BRC visits which have already begun, HMRC is also revisiting businesses deemed to have been keeping inadequate records during the first ‘Test and Learn’ exercise. The follow up letters state the intention is ‘to check that the appropriate improvements have been made.’

There is no official clarification from HMRC yet as to whether fines will be levied for poor record keeping during the second round of BRC visits, although HMRC has previously said that businesses visited during the ‘Test and Learn’ phase would not receive fines unless in the most significant circumstances.

HM Revenue and Customs (HMRC) has announced plans to make online value-added tax (VAT) filing, payment and registration mandatory in the coming year.

From April, 2010, online filing of VAT returns and electronic payment became compulsory for all newly established businesses (regardless of turnover) and all existing businesses with a turnover of over £100,000. The decision to mandate the remaining businesses to do so was confirmed in the March Budget. In addition, in 2012, HMRC intends to introduce an enhanced and streamlined online service for VAT registration and deregistration.

"VAT: consultation on the next steps for moving VAT online" opened on August 8. It includes proposed legislation and seeks views on how to ensure and enhance assistance for those having difficulty moving online. Under the current rules, businesses with a turnover of less than GBP100,000 can still choose how to file their VAT returns. Under the plans, it will become a legal requirement to file these online, irrespective of the size of the business in question. According to the consultation document, online filing provides speed, security and convenience for customers and efficiency benefits for HMRC.

The consultation also states that HMRC's experience so far shows that those early mandated customers have demonstrated good compliance, with few practical problems encountered and a faster than expected take-up noted. In addition, of the 750,000 existing businesses left out of the initial phase in the scheme, 400,000 have thus far chosen to move to online filing.

“Once in force, the new rules will require online filing for all accounting periods starting on or after April 1, 2012, with any VAT due to be paid electronically from the same date. HMRC will write to the businesses affected in February next year, explaining the changes and their impact. In addition, HMRC is to offer a period of grace to those experiencing difficulty in moving online, and will not penalise those who fail to do so within the first year”.

An online registration, variation and deregistration service is also intended to become available from October, 2012. This, HMRC says, will make matters easier on both sides, and drive down costs.

If you need more information or would like to talk the implications through for your business please contact us.

HMRC announced in May that it was to introduce specialist teams referred to as ‘task forces’ to undertake ‘…intensive bursts of compliance activity in specific high risk trade sectors and locations across the UK’. The first task force was to focus on the restaurant trade in London, followed by the restaurant trades in Scotland and the North West. Since then, HMRC have added 'London fast food outlets' as a task force target area and are planning further task forces in both 2011/12 and 2012/13.

Mike Eland, Director General Enforcement and Compliance, said:
‘These task forces are a new approach which uses HMRC’s resources to identify and tackle rule-breakers and evaders swiftly and effectively. Only those who choose to break the rules, or deliberately evade the tax they should be paying, will be targeted. Honest businesses have absolutely nothing to worry about. But the message is clear - if you deliberately seek to evade tax HMRC can and will track you down, and you’ll face not only a heavy fine, but possibly a criminal prosecution as well.’ 

I will obviously keep you informed of developments.

The First Tier Tribunal has heard the case of Russell Francis Interiors relating to a penalty imposed regarding the failure to take reasonable care in completing A VAT return.

Russell Francis Interiors was in the furniture business and held a small property portfolio, which the taxpayer had opted to tax. In May 2009 the owner exchanged contracts for the purchase of a commercial warehouse and mistakenly believed that the date of exchange of contracts was the tax point for the transaction and incorrectly claimed the VAT Input Tax in the quarter 06/09. For Capital Gains Tax purpses the date of sale is indeed the date of the contract, provided that it is unconditional. For VAT purposes though the tax point is normally the date of delivery (or payment if earlier) and this means that the relevant date is the date of completion.

Consequently, even though there was no loss of tax to H M Revenue and Customs, VAT was recovered three months earlier that it should have been. HMRC checked the return and in line with its new policy of imposing swinging penalties to support the beleagured Treasury charged a penalty of 15% of the tax claimed.

The taxpayer appealed, and the Tribunal decided that although the transaction was one off, unusually large, with no loss of tax, decided a penalty still chargeable and determined that a penalty of 7 ½ % of the tax was due.

More care than ever is needed in filing tax returns with HMRC if you don't want to be their next victim.