There has been a lot of angry reaction to the new IR35 business entity tests ever since they appeared on HMRC’s website last Wednesday.

John Whiting, the tax director at the Office of Tax Simplification, has now urged taxpayers to give them a chance. He welcomed the fact that they were drawn up in collaboration with members of the IR35 Forum and said it was important for the Forum to monitor the results of the pilot scheme in order to make an informed decision on whether the system should be abolished or retained.

Kate Cottrell, a member of the Forum, agreed with Whiting saying the tests have been blown out of proportion. They only play a minor part in the improvements HMRC is making to IR35 administration. She did however say the tests add further complexity to IR35, and that is not helpful.

In addition to the tests, HMRC is setting up three specialist teams based in Croydon, Edinburgh and Salford. When these teams select a case to investigate, they will take into consideration the reasons why a contractor feels they are outwith the scope of IR35.

The Revenue is also increasing the size of its helpline and review service, which will be staffed by employees that specialise in IR35.

These moves are likely to lead to more IR35 investigations but HMRC argues that the risk assessment tests should mean that the majority of contractors get their tax affairs in order and only those who abuse the system will be investigated.

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Britons with money salted away in Swiss bank accounts might find themselves paying more tax after changes were made to the Anglo-Swiss tax agreement.

The original agreement was that a withholding tax of between 19% and 34% would be levied on Swiss bank accounts belonging to British citizens. The banks would deduct the tax and forward it to the Treasury, but account holders would still remain anonymous. This arrangement was due to come into force in May next year.

Germany has an agreement that is almost identical to ours and the tax authorities there recently negotiated an increased withholding tax of between 21% and 41% for its citizens.

John Cassidy, a partner at PKF, said he would be surprised if the UK did not attempt to implement a similar increase. The coalition wants to raise as much revenue as possible from this agreement given the current economic climate.

Experts say that the threat of changes to the Anglo-Swiss agreement will make the Liechtenstein tax disclosure facility seem even more attractive to UK tax evaders. Critics of the current arrangement say the deal with Switzerland is too soft, although most tax experts have welcomed it.

The government has not revealed how much it hopes to bring in from the Swiss deal but it is thought it could increase Treasury coffers by more than £5 billion a year. The Germans are expecting to raise around £8.3 billion over the next 12 months from their deal with the Swiss.

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An economic think tank has claimed that an additional 1.3 million people, including contractor accountants, are going to be forced into the higher tax band thanks to the changes made in the Chancellor’s Budget last week.

As from April 2013, the threshold at which people pay tax at 40% will decrease to £41,450. Currently people can earn up to £42,475 before the 40% rate kicks in. According to the Institute for fiscal Studies, this will mean five million people in the UK will be paying the higher-rate tax by 2014. Next year, 15% of workers will be affected by the higher rate; in the 1980s it was just 5%.

The Institute also questioned the Chancellor’s claim that the Treasury will only lose £100 million when the 50p tax rate is axed in April 2013. Mr Osborne said in his Budget speech that this loss would be more than compensated for by measures such as increasing the stamp duty on properties costing £2 million or more.

The IFS has described this year’s Budget as a “hotch-potch of reforms”. Osborne said his reforms were revenue neutral but that assumes the rich who avoided paying income tax at 50p will be prepared to pay it at the lower 45p rate.

Paul Johnson, a director at the IFS, said people who got a taste for tax avoidance may carry on avoiding once the rate decreases. He also criticised the Chancellor’s decision to raise stamp duty on high value properties and said a mansion tax could have been a better alternative.

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Contractor accountants may want to inform tutors and coaches that they have only a limited amount of time remaining if they want to take advantage of the Tax Catch Up Plan.

The Revenue launched the Tax Catch Up Plan last October. Tutors and coaches were given until the 6th of January to tell the Revenue that they wanted to take part in the scheme and they now have to pay their outstanding tax, plus penalties and interest charges, by the end of March.

The head of campaigns at HMRC, Marian Wilson, said it’s better to own up now rather than wait for the Revenue to hunt you down. People who take advantage of the disclosure opportunities will face lower penalties than they would do if they were caught at a later date.

Anyone who owes tax and has still not declared it should do so now as the Revenue will begin analysing the data it holds on suspected tax evaders at the beginning of April. Although people who own up now may not receive such preferential terms as those who took advantage of the January 6th deadline, they will still receive lower fines than those who sit back and do nothing.

HMRC can fine tax evaders up to 100% of the tax they owe, and in some cases a criminal investigation will follow.

Since the Revenue started its programme of voluntary disclosures it has raised more than £500 million in tax that would otherwise have gone undeclared. An additional £105 million has been raised from follow-up investigations.

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Contractor accountants in the UK and Ireland are bitterly opposed to a legally binding EU-wide tax rate, but the prospect of such an event is moving closer.

France and Germany have now announced that they will align corporate tax rates by next year. The announcement supports the Euro Plus Pact treaty, which outlined the regulations for fiscal and economic co-ordination. The UK, Czech Republic, Hungary and Sweden all refused to sign up for the treaty.

Germany and France intend to unify their tax rates ahead of the Common Consolidated Corporate Tax Base, an aligned rate for all EU member states.

Britain does not support the idea of a CCCTB and believes it to be a precursor to pan-EU tax rates. Countries that have low business tax regimes, such as Sweden and Ireland, are vehemently opposed to the idea of harmonisation.

Richard Asquith, the TMF Group’s head of tax, said Germany and France have been pushed into going it alone due to the reluctance of those countries with low corporation tax. The UK was always going to be opposed to the idea but this could lead to a potential division between the core EU countries and Ireland. Ireland already has a risky debt position and this split will pile on more pressure.

It’s easy to see why the UK is against a uniform EU tax rate. The government is keen to promote the UK as a nation with business-friendly rates of taxation. That would no longer be applicable if all member states were legally bound to levy the same rates.

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Contractor accountants may be concerned to learn that George Osborne is considering changing tax relief on pension contributions when he delivers the March Budget.

He has various options available to him. If he cut the relief on all contributions to 20%, taxpayers who pay the higher 40% rate would lose £20 for each £100 they invested and those paying the 50% top rate would lose £30 per £100 invested. On top of that, pensions are subject to tax so a taxpayer might have to pay tax at 40% or even 50% on their pension when they retire.

If this happened, a lot of people in defined benefit schemes might have to file a tax return because the pension benefits could not be determined as easily as they can with a defined contribution scheme.

PwC’s head of pensions, Raj Mody, explained that if tax relief on pensions was reduced, those people who pay a higher rate of tax could be better off if they received cash and paid income tax on it at the time.

The Chancellor is also considering reducing the annual allowance of £50,000. PwC says this would be easier to implement and people would still have an incentive to invest money in a pension fund.

Another option would be to reduce the tax-free lump sum people are entitled to on retirement. Those approaching retirement would then pay more tax than they expected on their pension pot.

Mody did warn that there have already been various changes to pensions in recent years and the public may lose trust completely if the Government implements further amendments.

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Accountants may be interested to learn that HMRC will not be checking the record keeping abilities of accountancy firms in the future.

The Business Records Check scheme is on hold at the moment while the Revenue reassesses its strategy, but it has confirmed that it will not investigate accountancy firms’ records when the scheme relaunches later this year.

When the Revenue introduced record checking, it was designed to help businesses keep better books and receive more accurate tax bills. However, critics of the scheme say it was unfocused and more consultation was needed. 2,500 businesses, including accountancy practices, have already received a visit from an HMRC inspector under the scheme.

The news that practices had already been targeted came from a Freedom of Information request by Abbey Tax. However, HMRC was unable to confirm how many accountancy practices had been visited.

The Revenue did confirm that it had learnt from its experiences so far that its interventions need to be well targeted and therefore practices will no longer receive Business Records Checks.

Abbey Tax’s senior tax consultant, Guy Smith, said he welcomed the progress HMRC has made in improving its targeting criteria, but there is still much work to be done to establish what constitutes a failure that warrants a fine and when such a penalty should be imposed.

Last year, during HMRC’s pilot scheme, businesses that were found to have inadequate records were told they may receive a follow up visit from inspectors after three months so that the Revenue could satisfy itself that its advice had been acted upon.

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HMRC recently arrested around 16 people, including some City bankers, suspected of participating in a tax evasion.

The fraud exploited a loophole in film finance schemes but the Revenue declined to divulge the details behind it.

Among those arrested were four employees from the investment banking arm of the Royal Bank of Scotland and staff from Marex Spectron, a commodities broker, and US bank Jefferies. However, the arrests were in connection with the activities of the individuals and do not reflect on their employers.

John Cassidy, a PKF tax investigations partner, said they thought the arrested men might have been over-inflating the film finance relief. For HMRC to take the trouble to raid the men’s homes and order the arrests suggests that this was a deliberate fraud. Normally the Revenue carries out very few raids as they both time consuming and labour intensive exercises. It normally finds better ways of dealing with loopholes.

HMRC has been cracking down on high earners recently to make sure they pay their fair share of taxes to reduce the fiscal deficit.

Last November, a first tier tribunal decided that two film partnerships had not been set up as commercial operations and therefore they were not allowed to claim sideways loss relief. This suggested that a popular tax avoidance strategy was being closed down.

Sir Alex Ferguson, the manager of Manchester United, is one of several high profile figures who have used film partnerships as a means of offsetting tax losses.

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According to MPs, the Treasury has not got to grips with financial trends, nor has it made plans to deal with them, online accountants may be interested to learn.

The Commons Public Accounts Committee was amazed when the Treasury confessed its surprise at the news that HMRC had written off £10.9 billion in unpaid tax in just one year. The Treasury had no idea of the estimate until it was revealed in the WGA for 2009-10. Furthermore, it was in the dark over recent trends in claims against the NHS for clinical negligence, or whether there were any plans to reduce the £15.7 billion it has been estimated is needed to meet those claims.

According to Margaret Hodge, the committee chair, the Whole of Government Accounts are not representative of the country’s financial position.

Although the WGA could help the government detect risks that need to be managed, it took 20 months for the accounts to be prepared – twice as long as Australia, France and the USA who take less than nine months to produce similar information.

A spokesman for the Treasury explained that the UK was doing what no other country has done and consolidating all public sector organisations in a single statement of accounts. The department is now working hard to improve future publications and remove any qualifications.

He went on to explain that HMRC collects virtually all of the tax it is due and write-offs are low. Furthermore, about 90% of the write-offs are due to companies going insolvent and it is illegal to pursue that debt.

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Last week, Ben Gummer, the Conservative MP for Ipswich, called on the government to introduce statements that explained how it intended to spend the tax it collects from contractor accountants.

Under Gummer’s proposal, UK taxpayers would receive an annual statement detailing the amount of tax they would need to pay in both the current financial year and year after. In addition, the statement would show how the money would be split between individual government departments.

The data in these statements would be based around tax returns, P60s and budget statements. He also said that when it came near to an election, the statement could include information after opposition proposals.

Ben Gummer, the son of John Gummer, the former Tory agriculture minister, believes the current tax system contains too much obscurity. Providing taxpayers with information on exactly how their taxes are spent will make it much more transparent and shift public debate, he said.

Whilst this might sound like a feasible idea in principle, is there really a need to send out printed statements? If taxes are allotted to government departments on a percentage basis, maybe the coalition could publish the data on its website; x% of your tax will be spent on defence, y% on education etc.  At least that would cut down expenditure on paper and printing.

We would all like to see a more transparency in taxation, but it has to be possible to achieve that without additional cost to the taxpayer.

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Contractor accountants may already be aware that Nick Clegg, the Deputy Prime Minister, recently urged the government to speed up its plans to increase the income tax threshold to £10,000.

However, PwC has warned that implementing such a plan would cost the country £11 billion. HMRC has estimated that raising the personal allowance by £100 costs the Exchequer a minimum of £0.5 billion. This has led to Alex Henderson, one of PwC’s tax partners, saying that raising the threshold faster than originally planned would be a heavy drain on the UK’s financial resources.

Part of the original pact between the coalition partners was that the income tax threshold would rise to £10,000 by the time of the next election in 2015. This was one of the demands made by the Liberal Democrats in return for joining forces with the Tories to form the current coalition.

Nick Clegg now wants to see the plan accelerated to help relieve some of the financial pressure facing families on low incomes. But Henderson points out that such a move would have to be paid for. Either tax receipts from borrowing or growth would need to improve, or we would see significant tax rises or cuts in existing reliefs if the government was to balance the books. To illustrate the scale of the gap, he explained that raising VAT to 22% from the current 20% would just about compensate for an increase in the income tax threshold to £10,000.

Under current plans, the Chancellor is expected to increase the income tax threshold to £8,105 when he gives his Budget on the 21^st of March.

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Today really is the last day that you can file their self-assessment returns without receiving a late filing penalty from HMRC.

Normally, returns should be filed by midnight on January 31^st, but this year the Revenue extended the deadline to February 2^nd because members of the Public and Commercial Services Union were taking industrial action on the 31^st and members of the public would struggle to get through to HMRC call centres.

The Union hailed the strike as a success, saying 14,500 members of staff did not report for work. Volunteers staffed revenue enquiry centres and there were huge backlogs at call centres.

At first glance it seems a sensible move for HMRC to extend the filing deadline. It gave a bit of extra time to the estimated 90,000 individuals who were expected to phone asking for help with their tax returns on Tuesday. And these people would have swamped the Revenue will letters of complaint if they had been unable to do and as a result, received an automatic fine.

However, the extension will not help those people who had not already applied for the unique reference number they needed to enable them to complete their return online. This is sent out by mail and can take up to 7 days from date of application to arrive.

HMRC has been having major problems with their admin system over recent months. It takes weeks, sometimes months for people to get a written response to their queries, so a further deluge of mail would have swamped an already hard-pressed department.

The extension will probably will be seen as a compromise that should suit everybody. The extension has been widely publicised so there is really no excuse for filing late. Taxpayers have been given an extra couple of days to file, but the Revenue will no doubt still rake in the fines from people who had not received their URN and those who purposely ignore their filing requirements.

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