New criminal offence for individuals who hide money offshore

The government is consulting on plans to introduce a new strict liability criminal offence for individuals who hide their money offshore. Under the plans announced by the Chancellor, HM Revenue & Customs (HMRC) would no longer need to prove that individuals who have undeclared income offshore intended to evade tax, in order for a criminal conviction to be handed down.

At present, HMRC has to demonstrate that even when someone failed to declare offshore income that the individual intended to evade tax. This change will mean HMRC only has to demonstrate the income was taxable and undeclared meaning it will be easier to secure successful prosecutions of offshore tax evaders.

As well as introducing the new criminal offence, the government will consult on a range of options building on the existing penalties faced by those hiding their money in offshore accounts – currently up to 200 percent of the tax owed – to make sure they act as a clear and effective deterrent.

The consultation will look at whether the existing penalty limit should be raised further, how penalties could be increased if individuals try to move money around in a bid to avoid detection and extending the penalty regime to include inheritance tax. It will also publicise that HMRC is ready and able to financially reward whistleblowers for significant information that helps uncover offshore hidden untaxed assets.

Chancellor of the Exchequer, George Osborne, said:

“The government has taken significant steps to clamp down on those hiding their money offshore. HMRC has brought in over £1.5billion over the last two years and, through our leadership at the G8, we have taken significant steps towards greater transparency and tax information sharing.

But there can be no let up and we will continue to pursue offshore tax evaders. Those who continue to believe they can hide wealth offshore should know that there is no safe haven and that serious consequences await them.”

Unemployment drop…

Figures recently published by the Office for National Statistics show that unemployment has dropped below 7% for the first time since the recession and employment has seen the biggest annual jump in a generation.

Unemployment fell by 77,000 in the last 3 months, taking the unemployment rate to 6.9% for the first time since 2009.

In the largest annual rise in nearly 25 years, the number of people of people in a job rose by 691,000 – more than double the population of Newcastle – bringing the record number of people in work to 30.39 million.

Wages also rose on the year by 1.7%, against yesterday’s announcement that March’s inflation had dropped to 1.6%, and job vacancies rose again, up 108,000 over the past year bringing the number of vacancies in the UK economy to 611,000. The 1.7% increase in wages includes bonus payments, without bonuses the rate of increase is 1.4%, still below the rate of inflation.

Minister for Employment Esther McVey said:

More young people are in work, more women are in work, wages are going up, and more and more businesses are hiring – and it’s a credit to them that Britain is working again.

But there is still more to do – which is why I’d go even further and call on more employers to work with us to tap into the talent pool the UK offers.

The number of people in work has increased by 1.5 million since 2010 – over a million of these jobs are full-time – and the employment rate is now 72.6%, showing the government’s long-term economic plan to back enterprise and businesses so they can create jobs is working.

The proportion of women in work also hit a new record of 67.6% – the highest since records began.

Long-term unemployment is down 93,000 on the year, which is the largest annual fall since 1998. The number of unemployed young people also fell, by 38,000 over the last 3 months, and has been falling now for the last 7 months.

Government announces extension for pension decision period

The government announced recently that people who have recently taken a tax-free lump sum from their defined contribution pension will be given 18 months rather than 6 months to decide what they wish to do with the rest of their retirement savings, and will not be put at a disadvantage should they wish to wait to access their pension savings more flexibly.

This follows an earlier announcement confirming that the government would take action to ensure that people do not lose their right to a tax-free lump sum if they would rather use the new flexibility this year or next, instead of buying a lifetime annuity.

Under current tax rules, once a tax free lump sum has been taken, individuals have six months before they are required to make a decision regarding their pension, either by buying an annuity or entering into capped drawdown.

Currently, if this is not done, the lump sum is then taxed at 55%. This extra time will allow people to make the right decision for their pension.

Exchequer Secretary to the Treasury, David Gauke, said:

“At Budget the government announced the most fundamental change in the way that people access their pension in almost a century, ensuring that over 400,000 people who have worked and saved hard will be able to access their retirement savings more flexibly.

However, we recognise that decisions people take regarding their pensions are important and take time. This extension to the decision making period will give people the opportunity to take full advantage of the new flexibilities introduced at the budget.”

Radical proposal to change private residence relief

At present, it is possible to make an election, in certain circumstances, allowing owners of more than one residential property to choose which property is their main residence. In this way a measure of Private Residence Relief (PRR) can be achieved for the elected property. This process of swapping properties for tax purposes achieved notoriety during the MPs’ expenses scandal when certain MPs were found to have “flipped” between properties in London and their constituency to achieve capital gains tax advantages when they sold.

HMRC have recently published a consultation document entitled “Implementing a capital gains tax charge on non-residents”. Surprisingly, section 3 of the document proposes that the present PRR election is to be scrapped for UK home owners and replaced by less advantageous rules. Here’s what the report says:

“The government is considering two possible approaches, both of which involve changes to the process by which a person can benefit from PRR. The government may:

  1. Remove the ability for a person to elect which residence is their main residence for PRR. This would mean that PRR would be limited to that property that is demonstrably the person’s main residence. The government envisages that this would build on the existing process that applies where an individual with two or more residences has not made an election. In these cases, the person’s main residence is determined by the balance of all the evidence including factors such as the address where the taxpayer’s spouse or family lives, mail is sent, and that is on the electoral roll.
  2. Replace the ability to elect with a fixed rule that identifies a person’s main residence e.g. that in which the person has been present the most for any given tax year. Depending on the test that is devised this may mean that taxpayers have to keep different or additional records.”

It is likely that any changes to legislation will be effective from April 2015. This does give owners of more than one property a chance to consider their options in the interim period. Please contact us if you would like an update on the present capital gains tax opportunities. 

Office for Budget Responsibility (OBR) issues conflicted information

It would seem that economic indicators confuse economists as well as the rest of us. The first two paragraphs of the recently published Executive Summary of the OBR makes for interesting reading.

 Here’s a bullet point summary:

  • The UK economy has continued to recover.
  • In the final quarter of 2013, GDP growth matched our December forecast, inflation fell back to target and unemployment dropped more quickly than expected.
  • But productivity and wage growth remained disappointing.
  • Revised data published since our last forecast suggest the economy grew slightly faster over 2013 as a whole than we expected in December, with GDP up 1.8 per cent on the previous year.
  • Consumer spending, supported by a falling saving ratio, has been the biggest driver of recent growth.
  • The latest data suggests that business investment is recovering.
  • Housing market indicators have picked up sharply.
  • But export performance remains disappointing.
  • Given the momentum the economy carried into 2014, we have revised our GDP growth forecast up slightly to 2.7 per cent in 2014 and 2.3 per cent in 2015.
  • We expect quarterly growth rates to ease through 2014 as consumer spending growth slows to rates more aligned with household income growth.
  • The outlook for productivity growth, which underpins income growth and the sustainability of the recovery, remains the key uncertainty.

Whilst this is positive news let us hope that we are not led into another “boom and bust” scenario fuelled by unsustainable property prices and consumer expenditure funded by lower savings and increased household debt.

Hopefully, Government will see the sense in stimulating business investment, encouraging productivity growth, and supporting our exporters.

Don\’t forget to claim Employment Allowance

Employers are reminded to claim the £2,000 Employment Allowance which commenced 6 April 2014. Basically, employers can reduce their National Insurance contributions by a maximum £2,000 in the current tax year.

 Here’s the instructions on claiming the allowance as posted on GOV.UK’s website:

 “You can use your own 2014 to 2015 payroll software (see your software provider’s instructions), or HM Revenue and Customs’ (HMRC’s) Basic PAYE Tools for 2014 to 2015 to claim the Employment Allowance.

 When you make your claim (using the software of your choice), you must reduce your employer Class 1 NICs payment by an amount of Employment Allowance equal to your employer Class 1 NICs due, but not more than £2,000 per year.

 For example, if your employer Class 1 NICs are £1,200 each month, in April your Employment Allowance used will be £1,200 and in May £800, as the maximum is capped at £2,000.”

 Naturally, if we look after your payroll we will take care of these formalities for you.

 The following employers cannot claim the allowance, for instance if you:

  • employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener, care support worker
  • already claim the allowance through a connected company or charity
  • are a public authority, this includes; local, district, town and parish councils
  • carry out functions either wholly or mainly of a public nature (unless you have charitable status), for example:

    • NHS services
    • General Practitioner services
    • the managing of housing stock owned by or for a local council
    • providing a meals on wheels service for a local council
    • refuse collection for a local council
    • prison services
    • collecting debt for a government department

If you are unsure if you are entitled to claim we would be happy to discuss your options.

Investing in plant and equipment?

If expenditure on plant and equipment qualifies for the Annual Investment Allowance (AIA) 100% of the cost can be written off against taxable profits.

The amount that can be written off as AIA expenditure has changed a number of times in the past few years.

  • Immediately before 31 December 2012 the (AIA) was set at a maximum spend of £25,000.
  • From 1 January 2013 the £25,000 limit was increased to £250,000 for a temporary period of two years to 31 December 2014.
  • The Budget 2014 has increased the limit again, to £500,000 from 6 April 2014 (for unincorporated businesses) and 1 April 2014 (for companies). This further, temporary increase will end 31 December 2015 when it is assumed the limit will return to £25,000.

According to the Office for Budget Responsibility the increase to £500,000 will bring forward business investment decisions amounting to £1bn, from 2016 and 2017 to 2014 and 2015.

Readers who are contemplating significant business investment in plant and machinery should seek tax advice before making any buy decisions. Depending on your accounts year end date, the amount of tax relief you may qualify for may be reduced if the date straddles the 1st or 6th April 2014.

Lifestyle victory for taxi driver and his family

Glen Whittle must be feeling pleased with the outcome of his recent appeal against assessments issued by HMRC.

An enquiry instigated by HMRC resulted in the issue of assessments on the basis that the income of Mr & Mrs Whittle was insufficient to meet their outgoings. HMRCs argument centred on the level of household and holiday costs.

Fortunately, Mr & Mrs Whittle were able to prove that their actual expenditures, rather than those estimated by HMRC, were much lower. For example they were able to demonstrate that:

  • Only one of two daughters was at school, the other worked and had made a contribution to the household budget.
  • Mrs Whittle was employed by a travel agent and had secured unusual terms and conditions. She was absent from home for lengthy periods and received an allowance and discounted flights.
  • The family home was eco-friendly with consequent savings in running costs.
  • HMRC had also failed to adjust their figures to account for Mrs Whittle’s significant absences.

 The tribunal accepted the accounts of personal income and expenditure presented by the Whittle family and their appeal was allowed.

 Readers who are thrifty, or whose personal circumstances mean that their outgoing are below the norm, should keep records to justify their position. In Glen Whittle’s case this has paid dividends.

Tax Diary April/May 2014


  • 1 April 2014 – Due date for Corporation Tax due for the year ended 30 June 2013. 
  • 19 April 2014 – PAYE and NIC deductions due for month ended 5 April 2014. (If you pay your tax electronically the due date is 22 April 2014.)
  • 19 April 2014 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2014. 
  • 19 April 2014 – CIS tax deducted for the month ended 5 April 2014 is payable by today.
  • 19 May 2014 – PAYE and NIC deductions due for month ended 5 May 2014. (If you pay your tax electronically the due date is 22 May 2014)
  • 19 May 2014 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2014.
  • 19 May 2014 – CIS tax deducted for the month ended 5 May 2014 is payable by today.
  • 19 May 2014 – The payroll forms P35 and P14s must be filed by this date – employers late in filing these forms may receive a penalty.
  • 31 May 2014 – Ensure all employees have been given their P60s for the 2013-14 tax year.

State Pension and tax

If you have recently started to receive your State Pension, you may, or may not, have noticed that it is paid without deduction of tax. This can have a number of unforeseen tax consequences:

  • If your total income including your State Pension is less than your personal tax allowance then there is no tax to pay and you can spend your pension, no problem.
  • If you are still in business and self-employed, and if your self-employed earnings exceed your personal allowance, then you will need to save part of your State Pension to cover tax due. The amount you will need to put by depends on your marginal rate of tax.
  • If you are employed, or if you receive private pension payments, HMRC may adjust your code number(s) to recover tax due on your State Pension. However, this process does not always recover the correct amount and you may receive a bill after the end of the tax year for any arrears. And occasionally, you may have overpaid and you will receive a rebate.

 If you are concerned that you may be overpaying tax, or should be reserving for future tax and are unsure how much to put by, please contact us.