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HMRC Annual Report Published

The National Audit Office has published a report on the 2015-16 accounts of HMRC. The report shows that HMRC raised £536.8bn of tax revenues during 2015-16, an increase of £19.1bn (3.7%) on 2014-15 and paid out £40bn in benefits and credits (approximately one-fifth of the government’s total benefit expenditure). The taxes that contributed to most of this increase were income tax and National Insurance Contributions (NICs), which together increased by £10.3bn (3.8%); corporation tax, which increased by £4.1bn (9.9%); and VAT, which increased by £2.1bn (1.8%). Capital gains tax and Insurance premium tax also recorded significant increases, by 28.1% (to £7.3bn); and 27.6% (to £3.7bn) respectively. The annual cost of running HMRC was £3.2bn in 2015-16 (£3.1bn in 2014-15).

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Spotlight on Tax Avoidance Schemes

HMRC have published Spotlight 31: change of date for withdrawal of transitional relief on investment growth, which covers the extension of the date of withdrawal of transitional relief currently available under FA 2011, Sch. 2, para. 59 from 30 November 2016 to 31 March 2017.

The withdrawal of the relief was announced at the 2016 Budget, as part of the package of changes to tackle the use of disguised remuneration avoidance schemes (such as Employee Benefit Trusts (EBTs) and contractor loans) and ensure that those who have used these schemes pay the correct amount of tax and National Insurance contributions.

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HMRC Focus on Contractor Loan Schemes

HMRC have recently published new guidance on contractor loan schemes, which have been widely marketed by scheme promoters as a method of receiving non-taxable income. HMRC are adamant that such schemes do not work and they are likely to challenge anyone using them.

In a contractor loans scheme, an individual is paid in the form of a loan from a trust or company, sometimes referred to as a remuneration trust. The payment is not made directly by the engaging company, and will be diverted through a chain of companies, trusts or partnerships. Scheme promoters have claimed that payments are non-taxable, because they are just loans and don’t count as income. However, since the loan is not paid back, the payments are to be treated as normal income and should be taxed accordingly. Those who use such schemes are highly likely to be regarded by HMRC as participating in tax avoidance arrangements, and this could result in additional taxes, penalties and interest becoming due.

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Casual Employees

Some employers will be considering taking on extra staff on a ‘casual’ basis to cover the summer period. There are a few issues which employers should think about when taking on people on a temporary basis.

Firstly, the employment status of the worker needs to be carefully considered. The term ‘casual worker’ is not precisely defined in statute. It is often used to refer to individuals who are engaged on an ‘as and when required’ basis, and often, the intention is that the individual will not have employment status and all the legal rights which permeant employees enjoy.

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August Questions and Answers

Q1. I have five employees who I recently took out for dinner to celebrate the success of the company. The total cost of the meal was £225. Do I have to report this as a benefit-in-kind to HMRC?
Answer

Q2. Is there any update on Finance Bill 2016 Progress?
Answer

Q3. How long do I need to keep VAT records for?
Answer

August Key Tax Dates

2 – Last day for car change notifications in the quarter to 5 July – Use P46 Car
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/8/2016

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