October 15, 2009Hartnett vows to 'bear down' on 50% top rate tax cheats

Dave Hartnett promises crack down on those helping clients dodge 50% income tax rate

The taxman has given tax advisers its clearest signal yet that it will "bear down on those who bend or break the rules."

HMRC said it would crack down on those who help clients avoid the new 50% top rate of income tax, which comes into effect next year, by the use of schemes converting income into capital.

The huge disparity between the incoming top rate of income tax and the rate for CGT could potentially be a cause for concern for any new government if Labour " who introduced the 18% rate in April 2008 " were to lose next year's general election.

Would a newly-elected government look to reduce or abolish the disparity? There is some historical precedent for this.

Nigel Lawson, chancellor of the exchequer for the Conservative administration in the 1980s, equated the top rate of income, which was then 40%, to the top rate of CGT to prevent tax accountants and tax lawyers coming up with ever more elaborate schemes to convert one to the other.

Hartnett cautioned that HMRC would not hesitate to ask ministers to change the law in relation to turning income into capital arrangements if necessary.

Story from: Accountancy Age

October 5, 2009Taxman waiting for £286m

Over 16,000 IT firms deferring tax payments

HM Revenue & Customs is waiting on £286m in corporate taxes as the Business Payment Support Service scheme comes into play, essentially allowing companies to delay their tax bill.

There are 16,930 IT companies which have taken up the offer totally more than tourism, charity and transport combined.

Tony Harris, an independent financial advisor to IT companies said: "It could be that companies in IT may just be better run and better advised than those in other industries"because I can’t think of any reason why a firm would not take advantage of this scheme if eligible."

Adding: "It has to make sense for any business to defer payments to the taxman and instead use the money to make a short term repayment of potentially far more costly alternative forms of borrowing, such as an overdraft."

Although the scheme can be used by many, HMRC is hoping to take a tougher line with companies seeking to defer tax payments more than once.

A spokesman said: "Where businesses ask HMRC for a further rescheduling of tax payments, it is correct that they would be asked additional questions."

"HMRC has a duty in these circumstances to find out what other steps a business has taken to arrange for payment of all its debts," he added.

Story from: Accountancy Age