TaxBuddies

Penalties for incorrect returns and failure to notify a taxable activity

For return periods ending on or after 1 April 2009, where the filing date is after 1 April 2010, the new penalty regime for incorrect returns introduced in 2007 for income tax, CGT, VAT, PAYE and NICs has been extended across all other taxes and duties. From 1 April 2009, the penalty regime for failure to notify HMRC of a new charge is aligned across all taxes and duties.

The new provisions for incorrect returns provide for penalties in line with Schedule 24 to FA 2007, which are based on the amount of tax understated, the nature of the behaviour and the extent of disclosure by the taxpayer. There is no penalty where a taxpayer makes a mistake, having taken reasonable care, but there is a penalty of up to:

• 30% for failure to take reasonable care
• 70% for a deliberate understatement
• 100% for a deliberate understatement with concealment.

Each penalty is substantially reduced where the taxpayer makes a disclosure (takes active steps to put right the problem), more so if this is unprompted.

Vehicle scrappage scheme

A vehicle scrappage scheme designed to boost the car industry will be introduced from May 2009. A discount of £2,000 will be offered to consumers buying a new vehicle to replace a vehicle more than ten years old, which they have owned for more than 12 months. The Government will set aside £300 million, with funding matched by participating manufacturers. The scheme will end by the start of March 2010, or when funding for the scheme has been used if earlier.

‘Name and shame’ legislation for tax defaulters

Legislation will be introduced in Finance Bill 2009 enabling HMRC to publish the names and details of individuals and companies who are penalised for deliberate defaults leading to a loss of tax of more than £25,000. Details will be published quarterly within one year of the penalty becoming final and then removed from publication one year later.

Names will not be published of those who make a full unprompted disclosure or a full prompted disclosure within a time limit (currently unspecified).

There is an appeal right to an independent tribunal against all elements of the penalty which would determine whether names would be published and taxpayers will be informed prior to publication and be able to make representations to HMRC. Details will not be published until all appeal avenues against the additional tax and penalties are exhausted or expired.

Reclaiming tax overpayments

Finance Bill 2009 will introduce a means of reclaiming overpayments of income tax, CGT and corporation tax where there is no other statutory route. It will replace any non-statutory claims. The legislation also amends the error or mistake relief rules to provide additional taxpayer safeguards.

The measure will have effect for claims made on or after 1 April 2010. The time limits for claiming repayments are currently from five years and ten months to six years from the end of the period for which the return was made. From 1 April 2010 they must be claimed within four years.

Penalties and interest regime harmonisation

Legislation will be introduced to create a harmonised interest regime and aligned penalties regimes for late filing, across the taxes and duties administered by HMRC, starting with interest and penalties on late paid PAYE from April 2010.

NIC credits for families

From April 2011, grandparents and other family members will be able to gain NIC credits toward their basic state pension for caring for their grandchildren or members of their family aged 12 or younger, for 20 hours a week or more.

Remittance basis

A number of changes were announced to the rules applying to the remittance basis. In some cases they will be backdated to 6 April 2008 (the date from which the new regime applies), others will have effect from 22 April 2009. The changes include:

• removal of the obligation for individuals employed in the UK, who in the same year receive income from an overseas employment, to file a return so long as their overseas employment income is less than £10,000 and their overseas bank interest is less than £100 in any tax year, and it is all subject to a foreign tax

• an extension of the exemption allowing an individual using the remittance basis to bring into the UK property which was purchased from relevant foreign income, to property purchased out of foreign employment income and foreign chargeable gains

• confirmation that the £30,000 remittance basis charge will count as UK tax for the purposes of Gift Aid.

National Minimum Wage decision delayed

New National Minimum Wage (NMW) rates are traditionally implemented on 1 October, following the recommendations of the Low Pay Commission (LPC).

Since its establishment in 1998, the LPC has been charged with independently advising the Government on the NMW. However, as the UK grapples with the effects of the recession, the LPC has requested more time to compile its suggestions for 2009/10.

The Commission will now report to the Prime Minister and Secretary of State for Business by 1 May 2009, although the delay is not expected to affect the enforcement date of 1 October for any new rates.

The decision has been postponed from February to May 2009 to allow the LPC to amass an additional two months' worth of economic data, including the Bank of England's inflation report, employee job figures for December, GDP figures for the fourth quarter of 2008, and updates on average earnings.

The current NMW for those over 21 is £5.73 per hour. For those aged 18 to 21 the rate is £4.77 per hour, while 16 and 17 year olds must be paid a minimum of £3.53 an hour.