Tag Archive | "tax avoidance"

Yet More ‘Footballer in Tax Scandal’ News

Another year, another case of footballers and their tax affairs coming to the fore. This time, it appears to be a group of former professional footballers who are suing wealth management company St James’s Place for what they claim to be poor financial advice given to them by the company.

The group of 14 ex-professional footballers, including Ireland professional-turned-pundit Andy Townsend, claim that they were given poor advice by SJP and were advised to invest in the now highly controversial Film Partnership Schemes. HMRC now view these investments as a tax avoidance move and are cracking down on those who invested in them. The group of footballers are looking to sue SJP for around £15million.

SJP, by reply, say the claim is ‘without merit’ as many of the investments were made through a Sipp which was administered by a third party and that the statute of limitations meant that the claim was expired.

This is just one of many claims by former footballers for similar cases, including cases made by Steven Gerrard and Andy Cole. 

There is something of a ‘six of one, half a dozen of the other’ issue here. Anyone making investments should do their own due diligence to know what it is that they are getting in to, however, not all of us have the financial acumen to do much more than hazard a best guess, based on the actions and advice of our peers and professionals around us. If the experts who we hire to help us manage our financial affairs can’t be trusted to be giving us good advice, it doesn’t leave anyone looking good. 

Thankfully, our list of trusted accountants for contractors held here means you can choose the best possible contract accountant for your business from a very large pool.  But, be sure to do your own due diligence, ask the right questions of them and realise that this has to be a relationship built on mutual trust. If something doesn’t feel right, be sure to ask questions and ensure you’ve done your own due diligence when it comes to limiting your own tax liabilities. If in doubt, check with HMRC. Tax isn’t something to be messed with and ultimately, the buck stops with you. 

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Jose Mourinho Guilty of Tax Fraud

Things might not be going well on the pitch for Man Utd boss Jose Mourinho…and now off the pitch…even worse!

That is because he has just been found guilty of tax fraud by Spanish Authorities.

“Guilty!” The Spanish judge shouted as he or she slammed down that hammer in a Madrid Courtroom.

I reported about all of this a long time ago if you remember. In those blog posts I speculated about the possible guilt of Mr Mourinho, while also mentioning that all of this could have been avoided if he used reliable accountants from Contractor Accountants.

It’s possible Jose has now found our website and is keeping his nose clean with UK authorities, but that still doesn’t change the fact he now has to face up to his past crimes.

So what is going to happen with Mourinho? Will he be deported to Spain and then sent to a Madrid Jailhouse to serve time for doing the crime?

Will he become the manager of the Madrid Prison Football Team and turn those bunch of convicts into “special ones?”

Actually no. And in fact, he won’t even have to spend a single night inside a Spanish slammer…or an English slammer…or any kind of slammer.

Why? Because although Jose was found guilty and sentenced to a 1 year prison sentence, his sentence has been suspended, which means as long as he stays on the straight and narrow then he won’t have to spend any time behind bars.

If reports are true and he is indeed using a contractor accountant to do all of his books now, then I reckon he is going to be just fine.

Just like the ordinary contractors in the UK. You might not sit in the dugout at Old Trafford and you might not walk out of press conferences with a “monk on” – but as long as you have a contractor accountant by your side then you won’t ever find yourself on the wrong side of the law.

Back to the story, and it looks like Jose defrauded the Spanish tax man or woman of a cool £2.9 million pounds, although it has yet to be confirmed whether or not he will have to pay that money back.

I’m sure Mourinho wouldn’t mind having to write out a cheque, as he is used to paying out large amounts of money and then not seeing much in return.

Anyway, Jose Mourinho can now focus all of his attention on getting Manchester United back to the top of the league, and you, the UK contractor, you can focus all of your attention on hiring a contractor accountant, right here.

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129 Premiership Stars Accused of Tax Avoidance

It was only a few weeks ago that Wayne Rooney was under scrutiny for tax avoidance…well, now you can add 129 more players to the list.

Not just any football players either. These are top of the line Premiership Stars we are talking about here. The kind you see on Sky Sports and BT Sports week in and week out, diving around and hugging each other when a goal is scored.

Yes, it is those very stars who are now being looked at very closely by HMRC. 129 to be exact, although the names are yet to be released.

What we do know as of right now is one player on the list is a very famous ex Manchester United Star.

Apparently, this former red put nearly 33.5 million quid into something called a Kingsbridge scheme, in what HMRC are claiming was tax avoidance. The taxman is now trying to get at least 70% of that cash back.

Are these just helpless football players who didn’t understand what they were doing, or are they cold and calculated…ready to avoid tax at all costs? Many experts are claiming it is the latter, and with the help of clever accountants they are avoiding millions in tax every single year.

Of the 129 Premiership Stars on the list, it is estimated that a total of £250 million was put into the Kingsbridge scheme, although some pundits say this could just be the start of an avalanche that might send shockwaves through the footballing world.

Another of the clubs named on the list is Liverpool, so we can be sure that it will be headline news around the world when everything is eventually revealed.

Which brings me to an important point. In my opinion, I think there is a fine line between hiring a good accountant and hiring an accountant that is “too good.”

Take your average contractor for example, who might not be able to hit a barn door with the ball at their feet and probably wouldn’t do very well if they took to the pitch at Old Trafford or Anfield.

What contractors do have in common with Premiership Stars is the desire to pay less tax. That is something everybody wants.

The difference is that doing it legally won’t get you in trouble with HMRC, while doing things that are considered shady like investing in offshore schemes, well, that will get you in trouble.

That is why you want to be careful of accountants who try to claim you won’t pay any tax at all. It just isn’t possible (legally) and I reckon some of these football players might have been taken in by the hype.

Instead, what you want to be doing is hiring a contractor accountant who is good, and can save you tax (legally), but also keeps you on the right side of the law.

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Tax Avoidance – Accountants Called to the Dock

The recent Panama and Paradise papers have highlighted the fact that tax avoidance and evasion is a real problem in the UK.

Because of this, HMRC and MPs are looking to come down on offenders hard, which means you can be expecting to see a lot of convictions in the headlines over the coming months.

It isn’t just the self employed and business owners who are going to be put into the spotlight either. Usually, in these type of situations the accountants who mastermind the whole thing are given a free pass and allowed to continue with business as usual, but, this time around they won’t be so fortunate.

For example, a subcommittee of the Treasury select committee are soon going to be getting together to look closer at self employed people who are named in the Panama and Paradise papers, and if they feel the need, this subcommittee can use their powers to summon any accountant to face the music.

Major accountancy firms are expected to come under fire during this whole process, many of which have took on high profile clients in the past who went on to be named in the Panama and Paradise papers.

If you ask me, this sends out a clear message to accountants all around the country…if you help to commit the crime, then you could very well end up doing the time.

They are the architects of many of these tax evasion and avoidance schemes, so it shouldn’t comes as any surprise that MPs now want to speak with them.

Sure, in the past accountants have usually been left alone when high profile tax evasion cases have come into the public domain, but this time around something tells me things are going to be a lot different.

The chairman of the subcommittee had this to say -”We’ll be pressing the enablers and facilitators in the tax profession and others, summoning them before parliament to hear how their schemes work and how they justify it.”

One trick that accountants invented for their clients is the act of setting up offshore companies and then buying private jets through these companies, renting them back to themselves, and saving a substantial amount on VAT.

The VAT man is not happy, as you would expect, and now he has the power of the government behind him, you can expect action to be taken.

It might even get sent to the high court of England, where ordinary accountants will be summoned to the dock and be tried in front of a judge and jury. The hammer may even be slammed down, and a prison sentence given out…all for masterminding these tax avoidance schemes.

My advice to the self employed, business owners and contractors out there…choose your accountant wisely, and if they start telling you about these “amazing schemes to save you money,” then run a mile.

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Over 100 BBC Presenters in Tax Avoidance Scandal

Is it really surprising to learn that more than 100 BBC presenters are suspected of trying to con the tax man? Of course not.

With the BBC, which is all funded by the UK public don’t forget, it just seems like there is one scandal after another, and if the high wages are not enough, they are now trying to cheat their way out of paying tax. I bet they thought it would be easy to get away with…they were wrong.

If you didn’t know already, the vast majority of BBC presenters are employed which means they are paid a wage and are expected to pay the higher tax band if their salary goes above a certain amount per year.

When you consider that most of these presenters are paid 6 figures a year for not doing a lot, then they should be paying a lot of tax.

Well, this whole scandal seems to involve the fact that many presenters are trying to become self employed or contractors, and then forming their own company to pay the money into. It’s then a simple case of working things out so they end up paying less tax.

However, the HMRC have started to catch on to what is happening at the BBC, and recently 2 presenters have been found guilty of avoiding tax and ordered to pay extra tax and National Insurance.

This has led to over 100 more presenters being investigated, which could ultimately lead to millions of pounds of back payments ordered to be paid.

I just find it ironic that a company funded by the UK public, has employees that are basically trying to avoid paying money back into the system.

Surely this is a wake up call to everyone in the UK about the BBC and if they want to continue as a company then they should do it independently by generating their own money through advertising or other revenue just like any other TV channel out there.

The UK public should not have to fund these people anymore. It’s just scandal after scandal and we have all had enough.

Not to mention that very average TV presenters are being paid 6 figure, and even 7 figure salaries to sit in a chair and read from a script for an hour or two a week.

I’m sure if the BBC had to run itself like a normal company those salaries would quickly become 4 figures and 5 figures, with the vast majority of presenters finding themselves down the job centre. It might be a while until that happens though.

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Google Paris HQ raided over alleged tax avoidance

French authorities decided enough was enough and stormed Google’s Paris headquarters based on some rather pointed tax avoidance claims.

Around 100 investigators have been reportedly involved in efforts to suss out just what the search engine giant has been doing with the income it’s been raking in over the years, especially since their profits seem to be mysteriously unavailable when it comes to paying corporate tax. It’s almost as if the company has been deliberately hiding their enormous gains by funneling it offshore to tax havens or something.

Oh, I’m sorry, was I being a bit too sarcastic just now? Yes, everyone knows that big multinational companies like Google have been heavily criticised when it comes to not paying their fair share. Somehow, Google was shamed into paying around £130 million in back taxes here at home, despite the fact that the sum was just a very, very small fraction of what the company could have paid to Her Majesty’s Revenue & Customs.

Of course the Government will never go after Google with much fervour, as Treasury ministers usually try to suck the nation’s self-employed dry instead. It’s simply less hassle to harass contractors and freelancers, as they don’t have armies of lawyers and accountants to hide their money for them in locations like the Seychelles.

Hopefully the French are less willing to just roll over and let Google to do whatever they want with the money they actually owe tax authorities over the world. Yes, yes, the search and advertising giant may argue that it’s not breaking any laws because of all the tax loopholes out there, but come now – do we have to legislate moral, ethical behaviour now along with everything else?

Oh, who am I kidding? Of course we’ll have to. Multinationals are soulless, completely amoral entities when it comes to the money they make. Sure, Google’s motto may be “don’t do evil,” but that certainly doesn’t extend to how they handle their financial obligations, now does it?

Certainly not when there’s profit to be made. Think about that the next time you do a Google search for “tax avoidance,” or anything else for that matter! Sneaky multinationals, rolling in their vast gains like Scrooge McDuck in his giant vault, endear themselves to nobody. At least Uncle Scrooge was generous with his nephews!

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IR35 reform plans questioned by contracting bodies

The Government’s IR35 reform plans have fallen under fire from contracting bodies after a recent report contradicted official compliance data.

A new report from a Public Accounts Committee says that the tax compliance figures that Her Majesty’s Revenue & Customs are wildly inaccurate. In fact, compliance among freelancers and contractors is likely much higher than HMRC’s suggestions, the PAC report says – in fact, the report’s findings say that an overwhelming 90 per cent of temporary workers in the public sectors are tax compliant! That’s not an insignificant figure, especially since the PAC report gathered figures from a wide variety of Government departments.

Meanwhile, the compliance rate as formerly believed before the Budget 2016 was a paltry 10 per cent. Based on this (obviously massively erroneous) figure, HMRC estimated that the new IR35 reforms would rake in some additional £400 million in tax revenue. Treasury officials and representatives from the tax authority maintained their belief in this ridiculously low figure at a compliance seminar recently, though when they were pressed on the matter they didn’t exactly come forward with any more information. Normally when something like that happens, most people will begin to look a bit askance on an organisation that won’t back up their claim with valid statistics and official figures.

Listen, no one is saying that non-compliance is nonexistent. It happens, of course. People either make mistakes or are trying purposefully to get one over on HMRC. But for pity’s sake, the difference between only 10 per cent of public sector contractors being in compliance with tax regulations and 90 per cent being in compliance is not within the standard margin of error! Either HMRC has gone completely around the bend or this recent PAC report is completely fabricated – and my money is on the taxman being complete rubbish.

The data in the PAC report is all there right in front of us, for anyone to read and understand. Yet HMRC hasn’t exactly publicised their own data that led them to their now obviously outrageous claim. Honestly if you ask me the fig leaf of “ending tax avoidance” has been snatched away from the tax authority’s grand plan when it comes to their IR35 reforms, laying bare for all the Government’s blatant plan to grab as much cash from public sector contractors as humanly possible. Honestly hasn’t anyone ever told them that you can’t get blood from a stone?


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Bank of Ireland caught out on tax avoidance

Sorry, Bank of Ireland – if contractors and the self-employed can’t get around new tax avoidance rules, neither can you, mate!

The BoI made a good run of things, but eventually it’s going to have to pay the piper after trying- and failing – to avail itself of a corporation tax loophole to the tune of £27 million.


Her Majesty’s Revenue & Customs took issue with how the bank tried to use former building society Bristol and West, a subsidiary of the Bank of Ireland, to avoid the tax. HMRC challenged the move, and lo and behold – the Court of Appeal threw the book at the bank.

For its part, the taxman said the scheme was a move to exploit the transition from one piece of legislation to another. Contracts from the Bank’s subsidiary, which were controlled by the original legislation, made their way into the hands of yet another subsidiary (how many subsidiaries does one bank need?), but under the newer legislation instead. With the Bank freely admitting it was doing what it was doing solely to weasel out of its tax obligations, the only defence it would raise was essentially, “well, the loophole was there, so we decided to use it,” a move the HMRC’s Director General of Business Tax Jim Harra denounced as “cynical.”

It absolutely tickles me to know these big, bad corporate entities – that likely thought they were above the law, simply because they were so large – are getting roughed up quite a bit by the taxman for their hubris. I’d love to see other companies get the same treatment – namely these giant multinationals that funnel all their taxable income offshore – especially since if HMRC could just get its hands on those  hundreds of millions in unpaid taxes, maybe it would stop harassing freelancers, contractors, and other self-employed folk who actually work for a living.

Will this actually ever happen? Probably not. Most of these multinationals are so powerful that, to a degree, they really can write their own rules – especially since they’ve got ministers and other legislators on the run out of fear that they’ll pull up tent stakes and leave the UK altogether. Still it’s nice to dream that maybe one day our country won’t be beholden to these grotesquely massive companies that run roughshod over our tax laws, isn’t it?

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EU struggles with corporate tax avoidance

Much like here at home in the UK, member states of the European Union can’t seem to get a handle on how to manage corporate tax avoidance.

It’s one thing to have MPs here at home argue for and against any number of tax avoidance measures to curb corporate tax dodgers.We’re used to Her Majesty’s Revenue & Customs talking big but then backing down at the last minute, instead leaving self-employed blokes like personal service company contractors and freelancers to shoulder the tax burden that should be rightfully laid at the feet of multinationals sheltering their taxable income in overseas havens.

Meanwhile, it turns out that things aren’t that different when it comes to the European Union, with EU ministers again talking a good game to curb corporate tax avoidance. Will this actually materialise into real change? Most likely not. I mean let’s just be honest here.

The big brouhaha at the moment is all about the Panama Papers, those cleverly leaked documents highlighting just how many massively rich corporations and individuals are making use of international tax shelters to avoid paying their fair share. Public outrage is high, and as a result everyone is clamouring for something, anything, to be done.

The leaked documents were called a “game changer” by Alexander Stubb, the Finnish finance minister. His French counterpart, Michel Sapin, likewise called the revelations “intolerable” for citizens of the EU. Yet at the same time German finance minister Wolfgang Schäuble expressed his reluctance to sign on to a plan that would make large companies required to disclose their taxes paid and their profits made internationally, citing concerns about leaving companies and individuals on display in a “public pillory.”

Well you know what I say? Maybe dragging these bastards out into the light and forcing them to confront public scrutiny would be a good thing for once. Maybe it’s just me but I think we’ve all become too afraid of offending these big multinationals because they threaten to pull up their tent stakes and relocate offshore to countries with more amenable tax laws. That’s extortion, plain and simple, and it’s time we stood up to these companies – not to mention the finance ministers and other professional politicians that they have in their back pockets, constantly writing and passing legislation that benefits only the top income earners around the world instead of the rest of us. Change needs to happen, and not just here at home but in the EU, in the US, and around the damned world.

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New IR35 rules likely to catch everyone, experts say

Now that 6 April has come and gone and industry boffins have had a chance to ruminate over the changes, the consensus is we’re all doomed.

The new IR35 rules that were published in the March Budget announcement are, for lack of a better word, deliberately targeted at contractors who work through personal service companies (PSCs) or limited companies. In a move that’s ostensibly designed to clamp down on tax avoidance, the new regulations are so broad that contractor accountants, tax experts, and contracting trade industry bodies have all come out of the woodwork to condemn and criticise – and honestly I can’t blame them one whit.

In fact, many experts simply assume that when it comes to the public sector, contractors working through PSCs are simply going to be assumed to be within IR35 without any sort of even cursory examination. These experts feel that this places an undue burden on contractors themselves to prove otherwise – and that it sets the bar so high to prove they’re not subject to IR35 that it’s effectively impossible to do so.

Recruitment organisations in particular are up in arms, as the burden it places on them to engage contractors to make the IR35 determination themselves is particularly onerous. The Association of Professional Staffing Companies (APSCo) has been quite vociferous in its condemnation of the new regulations. With the possibility that these new IR35 rules will eventually be applied to the private sector as well sometime in the future, almost everyone is alarmed and concerned. To its credit, Her Majesty’s Revenue & Customs says there’s no plans on the part of the Government to broaden the new rules to the private sector, though I’m sure most individuals and companies are taking HMRC’s statements with a very large grain of salt.

For now, there is some respite. Since the umbrella company model is PAYE, and thus exempt from IR35, PSC contractors can go that route if they want to avoid having to muck about with all that. Of course, if you became a PSC contractor to get a break on your taxes, going PAYE isn’t going to help you out in that regard. However, if the writing on the wall ever becomes a reality, we’re all going to end up under PAYE before long as the Government seeks to eliminate one of the many advantages of working for yourself instead of as a traditional employee. What else is new?

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HMRC sends serious signals about tax avoidance clampdown

the Her Majesty’s Revenue & Customs has been dropping some serious hints about going after tax avoidance amongst the affluent.

If you make more than £150,000 per annum, better watch out – HMRC may just have you squarely in its sights. With the Treasury under increasing pressure to rake in as much filthy lucre as it can and budget cuts practically crippling the Government, the taxman is keen to squeeze every stone in the British Isles until it bleeds, and now big earners are up on the chopping block.

This, I have to say, is an incredibly pleasant shift in tactics from the tactics seemingly employed by HMRC in years past, as the tax authority has seemed to be keen on harassing contractors and other self-employed Brits with all sorts of schemes designed to separate them from their earnings, all the while leaving the biggest earners unmolested to swim about in their vast piles of money. Now, however, it seems that the Government is gearing up to take down the bigger fish instead, if the fact that the last two years has seen the number of employees in HMRC’s Affluent Unit balloon by some 54 per cent – and that is funding has gone up by 68 per cent as well. In other words, the taxman wants to have the ability to go after high earners hiding behind tax planning schemes thought up by the cadres of accountants the less successful Brit can’t afford to hire.

So what’s going to make you more susceptible to an examination by the Affluent Unit? Well if you’ve been harbouring assets offshore in the form of property or in bank accounts, that’s a surefire way to get a visit. If you’ve been paying little in the way of income tax even though your earnings are high you’re likely to get a little visit as well, even if you’ve been using legal means to do so. All of these things are strong indications that you might not have been paying your fair share in taxes. That’s HMRC’s opinion of the matter, of course – and the definition of “not paying your fair share” is certainly widening as of late, as evidenced by how the tax authority has been targeting freelancers left and right. But don’t worry, I’m sure you won’t be affected by this new initiative. You’ve been forthright with all your self-assessments, of course – haven’t you?

Oh dear. Well, hope you have a good contractor accountant in your corner when the Affluent Unit comes a-knocking, mate.


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CIOT tells HMRC to change its approach to IR35

The Chartered Institute of Taxation (CIOT) has had it with Her Majesty’s Revenue & Customs when it comes to the approach the tax authority takes to IR35 rules.

HMRC simply has to call greater attention to these disguised employment rules, says the CIOT, and it needs to do so by showing how contractors and other types of temporary workers can fall under the IR35 rule by specifically pointing out cases that were actually decided against contract workers. Disguised employment regulations are designed to target anyone trying to engage in tax avoidance by masquerading as an employee of a company while still operating like a contract worker by “working” for their own limited companies, even though they’re really operating like a regular employee; this tax avoidance process has been in the press everywhere over the last few years as some high-profile agency workers in the public sector were found to be pulling the wool over everyone’s eyes. Now, HMRC has IR35 violators squarely in its sights in an attempt to regain some respectability.

The tax authority is in the middle of considering changes to IR35 rules in order to make them more effective, and CIOT recently commented on the possible changes that HMRC has been considering. One, which is to transfer the obligation away from the individual but the organisation he or she is working for is likely to be an abject failure according to the trade industry body, as it’s unlikely to make non-compliance any less nor is it going to make administration of the rule any easier.  Meanwhile, the CIOT says that the new “supervision, direction, control” test to determine if agency workers are indeed masquerading as employees or not is flawed to the point where genuine workers might end up being called on the carpet when they actually haven’t done anything wrong.

So what’s the professional taxation industry body suggesting instead? Well it would like to see an annual reporting obligation that would be shared between organisations and the freelancers and contractors they hire in order to see if IR35 would apply on a case-by-case basis. The CIOT says that HMRC could target the organisation if it wilfully misled the taxman when it came to non-compliance.

So is this approach by CIOT actually a good one? Is it something we should look into adopting? Damned if I know. IR35 has been such a mess for years that it seems almost impossible to unravel the massive snarled rat’s nest that it’s become. At this case we might need to deal with it the way Alexander the Great dealt with the Gordian Knot – just cut it to ribbons and move on.

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Tax Evasion: It’s All Greek To You AND The Taxman

Today’s article was going to be all about the differences between the UK and US tax systems. Set against the backdrop of the Greek tragedy, it may have given contractors and freelancers some hope that HMRC (and the IRS) are getting some things right.

Why write an article that uplifts the spirits when those accused of exorcising any hope are so clearly guilty?

Well, that’s just the point. With so much of the buzz around the Exchequer about how it’s going to screw limited company contractors for the deficit in taxes, self-employed people need that lift.

The research started well enough. A pleasant read on Bankrate.com explained that tax evasion is not limited by international boundaries. In the Med/Aegaen, the sport of dodging the taxman may have become “Greece’s national pastime”, and indeed be the reason that the country’s economy is the lame man of Europe.

But the fact is, everyone’s having a go.

The Global Threat of Tax Evasion and Avoidance

Tax avoidance in the US is between 83-85%, the additional 2% coming after a friendly nudge from the IRS. Bang, that was one of my points nailed.

I then found another friendly article on Sollertia, this one providing an overview of the differences between HMRC and the IRS. Yes, that’s what I needed. It points out the differences of our tax systems, but something struck me as odd.

The Bankrate.com article suggests that Americans don’t want the IRS to transform from an ambivalent overseer to a tax enforcement agency. The Sollertia article then suggested that the US method of collecting taxes is even more complex than that imposed by HMRC.

A conflict of opinions? Or a different attitude to taxation?

Could a more relaxed attitude to taxes encourage taxpayers to be more forthcoming?

Heaven knows, trying to crack down on tax caused Harry Theoharis to quit the role he assumed in Greek parliament before he’d been in it a year and a half. Death threats and warnings from those in government to ease up on the wealthy would do that to you, I guess.

Well, God bless everyone in the Land of the Free, where pundits forecast 50% of workers to be self-employed by 2020. They must have undying faith in their government that their taxes are going towards just causes.

Until this week, there was a similar forecast for self-employment in the UK labour market: half of the workforce to be their own bosses by 2020. But ONS figures published on Friday saw a huge drop of 131,000 self-employees year-on-year. Perhaps Britizens don’t have the blind faith engendered by our US cousins.

The tax gap – is it really unfathomable?

Looking to end my confusion, I turned to the one man I know who’d give me a no-bull answer on the difference in the tax gaps across the Atlantic: Richard Murphy.

As if it was written in the stars, his most recent publication (and he writes 3-4 blog posts per day) was bang on the money. Entitled The National Audit Office, the tax gap, HMRC and ‘other estimates’, it promised to fill in the missing blanks for my article here.

The problem is, it seems that HMRC has so many holes in its own calculations, any estimates the NAO can give are ‘wishy-washy’ at best.

You must go and read Richard’s article to see the extent of the problem. The more worrying thing for contractors is this: when justifying the amount HMRC is going to take from you, they have no real benchmark.

They don’t know the deficit they need to make up in the tax gap. They don’t even know if their estimates are close, despite the IMF encouraging them to take America’s lead in how they work out how much they are due.

The Exchequer believes it needs protecting from £430M of tax avoidance from disguised employees masquerading as limited company contractors and freelancers. To me and you, that may seem like a drop in the ocean.

For the taxman? Trying to work out how much evasion is happening here in Blighty is a ship that’s already sailed…

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HMRC to err on the side of wrath with penalties

Her Majesty’s Revenue & Customs is likely to be erring on the side of caution when it comes to penalties, deciding lenience is best for errors in tax returns.

The taxman seems to be hardening its heart when it comes to inconsistencies or errors on tax returns, making it more likely that it will simply assume that taxpayers are trying to get one over on it instead of just making an honest mistake. In fact, the latest penalty figures show that when it comes to inaccurate returns, HMRC isn’t only meting out higher penalties but more of them.

This is something that accountants have been suspected for quite some time, with many financial experts wondering whether the tax authority has made a conscious decision to draw in additional revenue through fines by deliberately classifying cases where errors were made by legitimate accident as those made with intent to engage in tax avoidance or otherwise diminish an individual’s tax responsibilities.

Whilst most people would simply dismiss such ideas as the rantings of a febrile mind that has been staying up late reading too many conspiracy theories on the Internet or late-night television, but the truth is there’s cold, hard figures to back this up. It turns out that in the 2012-13 rax year there were more than 5,000 taxpayers who were issued penalties for so-called ‘deliberate behaviour’ on their tax returns – yet in tax year 2013-14 this figure ballooned to nearly 15,000.

That’s one hell of a smoking gun if you ask me. But wait, there’s more – it turns out that when it comes to total penalties, those classified as ‘deliberate behaviour’ went from being 9 per cent of the total to 16 per cent. This has tax experts up in arms as it looks like HMRC is deliberately choosing to attribute more incorrect returns as calculated attempts at tax avoidance.

If this is indeed some scheme on the part of the tax authority to generate additional cash through trumped-up ‘deliberate behaviour’ penalties, this is truly reprehensible. Are you going to truly argue that the number of idiots tripled from one tax year to the other? Don’t be ridiculous – those figures stick out like a sore thumb, and something is definitely going on here that’s not aboveboard. I dare you to argue otherwise!

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  • Switch Accountants for FREE

    Switch Accountants for FREEAt K&B Accountancy Group we have introduced a simple and straightforward approach to changing accountants. We’re offering contractors, consultants and freelancers the opportunity to switch to K&B Accountancy Group for FREE without the need to pay for any ‘catch up’ or retrospective accountancy fees for the previous year’s accounts and corporation tax return* *T&Cs apply

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