If you are a contractor and are in the process of disputing an HMRC investigation, it may be worth considering a voluntary settlement. Emma Perry BSc ACA, tells you why you should give this some thought below.
Of the 65,000 individuals and businesses under investigation for having used various tax reducing schemes, many may be required to pay the amount of tax in dispute before the end of this year!
When the new law receives Royal Assent in about mid-July 2014 those with an open enquiry or appeal may receive a notice to pay the tax upfront where their case is deemed by HMRC to be similar to another scheme that has been defeated in the Courts.
This will also apply to any scheme reported under the Disclosure of Tax Avoidance Scheme rules (DOTAS) or where a General Anti-Abuse Rule (GAAR) Counter-action Notice has been issued.
It is estimated that it will take three to four years for HMRC to contact and request payment from all of those expected to make upfront payments.
The new tax rules will apply to employee benefit trusts, contractor avoidance, partnership schemes and stamp duty land tax. However, contractor avoidance is likely to be the largest category where this involved individuals using offshore intermediaries to obtain loans instead of remuneration, in an attempt to avoid or defer Income Tax.
The Queen’s Speech 2014 announced similar measures to be enacted for National Insurance Contributions.
Those affected are required to take “corrective action” to resolve their dispute.
HMRC are using this new tax regime “to rebalance the economics of entering into avoidance schemes” by getting taxpayers “to pay disputed tax earlier in the process”.
Now is perhaps a final opportunity to consider and, if appropriate, start voluntary settlement negotiations with HMRC to possibly avoid National Insurance, penalties, Follower and Accelerated Payment Notices.
Emma qualified as a Chartered Accountant (ACA) in 2009 and is a Member of the Institute of Chartered Accountants in England & Wales. She worked with Harvard Business School and for Deloitte, Intermediate Capital Group and Fitch Ratings before establishing her own practice. Emma is a member of the Tax Faculty and Tax Investigation Practitioners Group. Should you need assistance with an HMRC dispute, you can call her on 07811 767 478 or email email@example.com.