How Very Suspicious - HMRC is Meant To Be Politically Neutral!

An HMRC spokesman said: 

“We have postponed the publication to allow for the completion of a review of some of the key assumptions underpinning the estimates in the bulletin".

 

Burnham has clearly intervened!  

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HMRC Miscalculating CGT on Non Residents' Property Sales

 

Where a taxable gain arises on a UK residential property disposal the taxpayer must report this gain through the UK property account service and pay the tax due within 60 days of the completion date. It is reasonable to assume that the HMRC online system would correctly calculate the gain based on the figures reported.

For UK residents the UK property account does appear to calculate the gain correctly based on the figures supplied.

However, where the taxpayer is not a UK resident, HMRC has confirmed on the Agents Forum that the service does not calculate the gain correctly, and the system may even tell the taxpayer there is nothing to pay.

Spiffing, another HMRC IT design fail!

Tax does have to be taxing.

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FTT Quashes CGT On Home with Large Garden

 

My thanks to a loyal reader who point this case out to me.

The First-tier Tax Tribunal (FTT) has voided a capital gains tax (CGT) assessment imposed on a English couple's sale of their home, whose garden HMRC considered to be larger than necessary for the property's 'reasonable enjoyment’.

The FTT judges decided to take into account not just comparable properties, but all of the relevant facts and evidence, including the size and value of the house and buildings themselves, and the nature of the property's location. 

The facts that the Phillips' house was large and was set in a rural area suggested that it would appeal to somebody who was looking for a larger house and more space around it for privacy and other reasons. 

'We accept that the whole of the area of 0.94 of a hectare comprising the garden and grounds of Mr and Mrs Phillips's property was required for the reasonable enjoyment of the dwelling-house and so falls within the permitted area qualifying for PPR relief', said the FTT judges. 'The assessments made by HMRC...in respect of both Mr and Mrs Phillips in the amount of GBP162,820 are therefore reduced to nil'

Tax does have to be taxing.

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Beaker's Tax Matters

A loyal reader opined the following yesterday, about Beaker:

"wonder if our mate Danny will be caught preaching one thing and doing another like his Two friends today reported to be selling their time!

Hundreds of old has beens, fiddling bastards, and corrupt liars and we're paying their wages..... sorry 'part' of their wages, oh, and only the bit they have to declare.

HMRC Don't ever chase me for my tax, not until you get off your arses, put your own house in order and are seen to be treating everyone consistently and fairly."

Ironically I came across this article in the Telegraph from 2010, which noted:

"Mr Alexander, who was appointed on Saturday after the resignation of fellow Liberal Democrat David Laws, designated the property as his second home for the purpose of claiming parliamentary expenses but described it to HM Revenue and Customs as his main home."

All perfectly legal, as indeed was the fact he took advice from a tax professional to avoid CGT on the sale of the taxpayer funded house at the time.

However, I find it "tedious" that the very same people who use tax professionals to minimise their tax bill, then lecture everyone else about the "morality" of paying their "fair share" of tax (whatever that really means?) and the "immorality" of tax avoidance.

Tax does have to be taxing.

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HMRC Guidance For Selling Olympic Torches

Given that the forthcoming Olympics are about making money, rather than sport, HMRC has very wisely issued some guidance to those people who are thinking of selling their Olympic torches.
"

Selling your Olympic Torch

If I sell my torch will I be charged tax?

If the torch is worth less than £6,000 when you sell it then you will not have to pay Capital Gains Tax (CGT) on your proceeds. If it is worth more than £6,000 then you will have a chargeable gain, and you may have to pay CGT, depending on whether you have other gains in the tax year. If you have to pay CGT, the rate charged will be either 18 per cent or 28 per cent, depending on your total income for the year.

You should bear in mind the possibility that selling your torch might be, or might be part of, a trade, in which case any profit would be charged to Income Tax rather than CGT. People who occasionally sell a few personal possessions to raise some cash are not trading, but the things they sell may still give rise to taxable gains as explained above. However if someone regularly sells goods or services, they are likely to be trading and will be liable to Income Tax on their trading profits.

Find out more about what is liable to Capital Gains Tax and how to calculate any liability

If I sell my torch and give the proceeds to charity through Gift Aid what is my tax position?

Depending on the amount received, you may incur a CGT charge. There is no exemption from CGT even if you donate the money you receive on selling the torch to charity.

If you decide to donate the sale proceeds, or the net sale proceeds after CGT, to a charity you will be able to make the donation of money under Gift Aid. For every £100 you donate the charity will reclaim £25 from HM Revenue & Customs (HMRC). In order for the donation to be valid under Gift Aid you will need to pay enough Income Tax or CGT in the tax year to cover the amount of tax the charity will reclaim on your gift.

What if I donate my torch to a charity rather than sell it myself?

If you give the torch to a charity for them to keep or sell themselves there will be no charge to CGT."

Tax does have to be taxing.

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Power Corrupts

Accountancy Age reports a rather interesting story about HMRC arresting a tax advisor on the day he was due to give evidence in a capital gains tax tribunal, only for the charges to be dropped on the same day.

However, and here's the "rub", his briefcase containing his court papers for the day (where he was to act on behalf of a client) were seized; ie legally privileged information was taken and read by HMRC.

The arrest took place last year, but the facts are only now coming out.

Watkin Gittins of Montpelier Tax Consultants was representing Brian and Doreen Foulser in a dispute over holdover relief from capital gains tax. The courts found in principle that the couple was liable to pay tax on £27M worth of shares, which was sent to the first-tier tribunal to determine.

However, on the day of the tribunal hearing (27 September 2010), Gittins was arrested on suspicion of cheating HMRC and false accounting. He was also asked to hand over his briefcase and his premises were searched,.

He was released the same day without charge, and no charges have been brought against him since.

In January 2011, Gittins took the Central Criminal Court to the High Court for granting the warrants. The High Court found that the Central Criminal Court and HMRC had acted fairly.

The Foulser case was adjourned on 27 September and the appellants made an application to remove HMRC from the proceedings based on its "serious misbehaviour", which would have the effect of allowing their appeal.

The Foulsers said that HMRC had obtained sight of legally privileged and confidential material held by Gittins relevant to the hearing. They also claimed that HMRC had arrested Gittins for the purposes of: alerting the tribunal hearing to the arrest and detention; causing the postponement of the hearing; causing publicity to the arrest of Gittins and thus embarrassing the appellants; and "oppressively" placing pressure on them.

Judge Roger Berner dismissed the application to disbar HMRC. He decided that it did not have this power and another court would have to make the decision whether to allow HMRC to make representations.

A representative of Gittins said the procedural decision was going to be appealed so it would be inappropriate to comment further.

This is a case that will be one to watch.

Tax does have to be taxing.

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Tax Avoidance - MPs Only

The message that ZaNuLabour and various senior members of HMRC have been broadcasting is that tax avoidance (whilst not being illegal) is not OK in their eyes, and that they will move heaven and earth to stamp it out.

Why then did Shaun Woodward (cabinet member) choose to avoid paying capital gains of up to £1.5M?

Is this not a tad hypocritical?

The real message is that tax avoidance is OK if you are a member of the government, but not OK for anyone else.

Here's what Shaun did:

Source The Times.

SHAUN WOODWARD, the richest member of the cabinet, avoided a capital gains tax bill of up to £1.5m on one of his London homes, which he sold to Sting, the singer.

Woodward, the Northern Ireland secretary, who has a portfolio of properties stretching from London to the Caribbean, sold the townhouse in May 2003 for £5.7m.

He told the taxman this was his main home — and thus avoided a hefty tax on the sale.Capital gains tax (CGT) is imposed on second homes.

However, in 2001 he said that his family were based in Oxfordshire, where his children were schooled. All available records of his Commons claims also indicate that he was based in Oxfordshire.

Others have “flipped” their claims from one home to another, to maximise their allowances by ensuring their second home is the one needing the most maintenance or the highest mortgage payments. Woodward, who has a grace and favour residence at Hillsborough Castle in Northern Ireland has claimed more than £138,000 in MPs’ housing expenses since 2001. He last night issued a categorical denial that he had flipped his home or set out to avoid tax.

He also said that, far from saving himself money by avoiding capital gains tax, he lost money in the longer term when he sold off another, more valuable, property three years later.

He said he had to pay more capital gains tax when he sold off Sarsden House, a grade II-listed mansion set in 458 acres of Oxfordshire countryside. It went for approximately £25m in May 2006.

However, although questions were submitted to him by The Sunday Times last Wednesday afternoon, he failed to clarify whether he declared different “main” residences to the taxman and the Commons authorities in May 2003.

In a statement issued at 4.19pm on Saturday he strongly denied that his arrangements were an attempt to avoid capital gains tax and said there was no “inappropriate personal gain”.

He conceded in a statement that the Westminster townhouse was exempt from CGT. However, he said the sale of Sarsden was subject to CGT.

He provided a letter from the accountants Horwath Clark Whitehill which said: “Your tax liability would have been dramatically lower had you made different arrangements because the greater liability arises from the sale of Sarsden.”

However, he failed to disclose which specific property he was claiming Commons allowances on during this period, saying that he was having trouble finding the records.

Woodward, who once worked as a researcher on Esther Rantzen’s BBC television show That’s Life!, is regarded by many MPs with a mixture of suspicion and envy. He is married to the supermarket heiress Camilla Sainsbury and defected from the Tories to Labour in 1999.

Two years later, in June 2001, he was parachuted into the safe seat of St Helens South where he bought a small detached house without a mortgage for about £55,000.

After the election, he and Camilla went on a property spree in London, buying a £2.7m penthouse in a building with panoramic views of the Thames, and a one-bedroom flat in the same development.

The couple, who married in 1987 and have four children, also purchased two apartments on London’s South Bank at the end of 2001 for £2.25m. Woodward now claims expenses against one of these properties.

One of their best investments was the Westminster townhouse, reportedly bought in 1997. Lord Mandelson once stayed as a guest.

“At the time there was only one other house in 50 or 60 offices in a terraced row,” said Woodward in a 2006 interview. “They were remarkably well priced, yet it was a risk. By the time I sold it nearly half of the street had become residential. I made a lot of money from it.”

His profit on the sale was about £3.7m and a second residence would have been liable for CGT of up to 40%.

John Rosenheim, a lawyer acting for Woodward, said: “Woodward has no direct or personal dealings with the tax authorities or the fees office and always acted on professional advice.”

Tax does have to be taxing.

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Blears - The Tax Overpayment

It seems that Blears has made a tax overpayment, if Dave Hartnett's tax assessment of her zero liability for CGT is accurate.

Telegraph

"I've got round to asking after Hazel Blears and her cheque, which I mentioned a while back. My query was prompted by an item in the Independent's Pandora diary which claimed she was minded to hand the money over to a charity rather than see it credited to her future tax liabilities. What I've discovered rather increases the pressure on Geoff Hoon and James Purnell, who also face some property/CGT questions.

According to her office, on the day Ms Blears popped up in front of the cameras waving her cheque, she spoke to Dave Hartnett, the permanent secretary for tax at HM Revenue and Customs. Mr Hartnett is, in effect, the country's top tax man. He worked out for her what her capital gains tax liability would have been had she been liable for one. However - this is the crucial bit - he assured her that she was not liable and therefore did not have to pay the cash. Ms Blears, in line with the point she has made that her constituents aren't impressed even if it was legal (no kidding), decided to pay the cash anyway, and was given a special dispensation to do so. The cheque was walked around to HMRC headquarters that evening and handed over to a senior official, who had stayed behind to receive it.

The cheque has been cashed, I'm told by Ms Blears' advisers, and is now sitting in an account at HMRC. What happens to it now is unclear. If it goes into the general Government account and therefore becomes available to pay for hospitals, nuclear weapons, or police uniforms, Ms Blears will be happy. But if HMRC rules that it can only be credited to her by offsetting it against her future liabilities - in effect repaying her the money - she will make an equivalent contribution to a charity.

Which is why all eyes are on Messrs Hoon and Purnell to see how they respond. Ms Blears has set them a precedent."

Tax does have to be taxing.

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Above The Law

It seems that our "honourable" members are regarded by HMRC as being above the law.

That at least is according to this article in The Sunday Express.

I assume that the "special status" of MPs, and the fact that HMRC seemingly treats them with kid gloves, is due to the fact that HMRC has been politicised during Brown's tenure of the Treasury and Number 10.

How ironic that the voters (ie ordinary taxpayers) are not treated by HMRC in such a deferential manner!

"TAX inspectors who suggested investigating MPs were threatened with the sack, a whistleblower claimed last night.

Thomas Casagranda, a former tax compliance officer with HM Revenue and Customs, said MPs' tax affairs were effectively 'above the law' because senior managers refused to scrutinise them.

Mr Casagranda, who quit his post at HMRC's Reading office 18 months ago, said he had been 'shocked' by their reluctance to act.

He confirmed he suggested an investigation after receiving a tip-off that an MP was failing to declare rental income from a property.

He said: 'During a routine meeting to discuss possible projects, such as investigating taxi drivers or subcontractors in the building in??d???u???stry, I suggested running a project on MPs.

'The meeting went on as normal but afterwards I was taken aside by the head of the regional risk intelligence team and told I would be 'out on my ear' if I mentioned MPs again. I was told that if I looked at an MP's tax return or checked them out on PAYE records I would face disciplinary proceedings.

'I was boiling with anger afterwards because I was effectively being told there was one law for MPs and one for everyone else. I was being leant on very heavily to drop it and it was quite clear that the manager who was leaning on me was being lent on himself from above. It was disgraceful.'

MPs' tax returns are dealt with by a special unit which also handles celebrities.

But Mr Casagranda, who is writing a book on his experiences at HMRC, said there was no similar ban on investigating famous names.

His claims will raise fresh concerns about the apparent impunity of MPs milking the system.

Dozens are thought to have avoided paying capital gains tax on their taxpayer-funded second homes by nominating them as their main residences for tax purposes.

Communities Secretary Hazel Blears last week paid £13,332 in capital gains tax after it emerged she had avoided it on the sale of a previous home.

She insisted she had done nothing wrong. Work and Pensions Secretary James Purnell has also avoided paying capital gains tax in the past but has not offered to repay any cash.

In the wake of the expenses scandal HMRC has launched an inquiry into whether MPs have been routinely avoiding capital gains tax.

Last night it denied Mr Casagranda’s claims and insisted MPs had not been above the law.

A spokesman added: 'We cannot comment on the tax affairs of clearly identifiable groups of taxpayers. One of our key roles is policing the tax rules and we do this very effectively.' "

Tax does have to be taxing.

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Snouts in The Trough - No Special Rules For MPs

From the horse's mouth (HMRC) itself:

"There are no special capital gains tax rules covering MPs' homes."

Does this mean that MP's, in the event that they have underpaid tax, may expect a tax investigation going back several years? That is what would happen to the rest of us, were we to find ourselves in this situation.

It would be a salutary lesson for the people who gave HMRC its extra powers, and who politicised it, to be on the receiving end of one of its investigations. It might even bring MPs closer to the people!

I assume that the offending MPs will be named and shamed by HMRC!

Source The Times:

"Was HM Revenue & Customs warned several years ago that MPs were playing fast and loose with the tax system as regards their homes? So claims Thomas Casagranda, an HMRC employee, who says that he highlighted for his local compliance team the use of second homes by MPs and whether this should be taxed. "My idea was instantly shot down in flames by a manager and I was told that if I looked at a local MP’s tax returns, I would face conduct and disciplinary procedures."

As Ken Frost, a long-time critic of the taxman who drew Casagranda's letter to my attention, points out, if the profits from second homes are not taxable, then repayments by Blears et al would be a tax overpayment. If they are taxable, then they owe interest and fines.

The HMRC ducks the issue. "We cannot discuss identifiable individuals' tax affairs. The capital gains tax relief for people’s homes applies to only one residence at any one time," they tell me. "More than one home can qualify for relief at the same time but it will completely depend on the facts of the case. There are no special capital gains tax rules covering MPs' homes."

Tax does have to be taxing.

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Snouts in The Trough - Tax Avoidance

Isn't it ironic that Smiler Brown and his party of "fiscally prudent" lackeys have been so very very vocal over the "heinous crime" (so they would have us believe) of tax avoidance, given that they are experts at tax avoidance themselves?

Flipping one's primary and secondary homes willy nilly, so as to avoid CGT etc, is something of a right of passage for members of ZaNuLabour.

Ooh the irony that their political cudgel, HMRC, has now been forced to investigate whether MPs have deliberately evaded capital gains tax when selling their second homes.

I wonder if any Labour MPs will be "named and shamed"?



Tax does have to be taxing.

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Delays

In the run up to the new tax year, there was a scramble by business owners keen to sell their businesses before the new Capital Gains Tax (CGT) took effect.

The sell off is somewhat at odds with Labour's oft repeated claim that they are "business friendly".

The stampede to sell was of such gargantuan proportions that it overwhelmed HMRC with applications for approval of sales before April 5. This backlog in applications for approval exposed many businesses to potential tax bills of millions of pounds.

To be eligible for the CGT rate of 10%, the sale must have been completed before April 5. However, businesses that had not received clearance from the Revenue before selling do not have any guarantee about how much tax they will have to pay. Thus they are exposed to the anti avoidance crackdown announced by the Chancellor in the Budget.

The Revenue (HMRC), in theory, should have processed clearance applications within 30 days of receipt. However, it can push back the time limit if it has any queries about the transaction.

Can you guess what happened?

Yes, that's right, there was a noticeable spike in questions being sent back by HMRC around Christmas. One accountant has described the quality of questions being raised by HMRC as being "absurd".

A cynic might conclude that HMRC were slowing down the process, so as to ensure that clearance was not given in time for the change of tax rate. Thus leaving the businesses exposed to further tax demands in the coming year, as HMRC and Brown desperately scrabble around for more cash (tax take) to fill the ever burgeoning budget deficit.

The risk of being delayed by the HMRC in this manner prompted many professional advisers to tell businesses to take the risk of a business not receiving clearance, and go ahead without it.

What a mess!

This is no way to run an efficient, effective and ethical tax collection system.

Tax does have to be taxing.

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Paranoia

I am not alone in thinking that HMRC and Brown and his minions have something of an unhealthy obsession with tax avoidance (which is, as I keep repeating, perfectly legal).

The Institute of Chartered Accountants of Scotland (ICAS) also think that HMRC have lost the plot over this issue, in fact they use the word "paranoia" to describe the government's approach to tax avoidance.

ICAS recently issued a press release warning about the dangers of HMRC's/Brown's approach to tax avoidance, and the adverse effects it will have on business owners.

Now you know that things must be bad when a leading accountancy body, that has been around for well over a century, starts calling the government/HMRC paranoid!

Here is the press release in full:

"The Finance Bill provisions which give effect to Chancellor Alistair Darling's proposed new capital gains tax relief for entrepreneurs reflect Government paranoia about tax avoidance and could adversely affect thousands of business owners, according to The Institute of Chartered Accountants of Scotland (ICAS).

Donald Drysdale, Assistant Director of Taxation, said, “Entrepreneurs’ relief has been described as a partial replacement for business asset taper relief or a resurrected form of the old capital gains tax retirement relief - both of which were intended to help taxpayers disposing of favoured business assets.”

'In practice, the proposed new relief is much less readily available than either of those previous reliefs. Because of the narrow definition of qualifying disposal, the stringent test applied in determining trading status and the reintroduction of the rental test when considering associated disposals - for example, where a business and the premises from which it operates are in different ownership - there is much greater likelihood that these entrepreneurs will be denied relief because obscure technical tests are not satisfied.'

Stephen Taylor of Carters Accountants LLP and also a member of the ICAS Tax Committee, said,

'We are concerned that the proposals adversely affect taxpayers on a retrospective basis, since existing commercial arrangements that have been regarded as perfectly acceptable under the current taper relief rules will be penalised. We also believe it is unfair that employee shareholders and certain trustees will be denied relief.'

Calling for further reconsideration of the proposals, ICAS believes that the impact of capital gains tax would fall much more fairly on taxpayers if the legislation provided for a transitional period after 5 April 2008 during which a measure of taper relief would continue to be available, and if for all purposes of capital gains tax there was a rebasing of assets to a relatively recent date such as March 2002 so that inflationary gains accrued up to that date would not be taxed unfairly. "

My advice to Brown and HMRC, given this diagnosis of paranoia by a respected and leading institution, seek suitable treatment with all due haste.

Tax does have to be taxing.

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