It is hoped RTI will make it easier for employers, pension providers and HMRC  to administer PAYE. real time tax information will allow employers and pension  providers to inform HMRC of PAYE payments as they are made, instead of at the  end of every year.

If successful, most employers will join the regime in April 2013 and all  employers will be using it by October 2013.

David Gauke, exchequer secretary, said: “RTI will ensure that the PAYE system  meets the needs of the 21st century. It will improve the service to taxpayers by  making it easier to ensure that people pay the right tax after a change of  job.

“HMRC is committed to a smooth and on-time transition. The start of the pilot  today demonstrates that RTI is on track.

“RTI will remove administrative burdens of £300m a year from employers,  mainly from the abolition of the end-of-year PAYE returns process – the biggest  single contribution that any tax change could make.”

Launching the new initiative Marian Wilson, head of HMRC Campaigns, said: ‘This campaign is part of a wider HMRC initiative to provide support and guidance to the public on tax evasion and is aimed at people using online marketplaces to buy and sell goods as a trade or business and who fail to pay the tax owed. Those who only sell a few items and who are not traders are unlikely to be liable to pay tax on what they sell and will not be targeted by this campaign.’

As a first step, qualifying taxpayers must notify HMRC by 14 June 2012 of their intention to make a disclosure by completing an online notification form available at www.hmrc.gov.uk/campaigns/notify.htm.

An actual disclosure together with an arrangement to make payment of all tax, interest and penalties due must be made by 14 September 2012.

As part of its initiative to improve service standards, the tax department worked with the bodies to tackle some of the most aggravating issues, one of which was the way companies were hit by hefty fines out of the blue. When the new joint working group got started in autumn of 2011, the P35 penalty problem was identified as a major issue that needed early resolution. The group tabled this to be resolved before the end of March 2012.

The issue became increasingly acute when tribunals started dismissing penalty levies where the judges thought HMRC’s approach amounts to revenue-raising rather than enforcing the deadline, as documented during the past year in AccountingWEB’s Reasonable Excuse scorecard. Judge Geraint Jones effectively brought the credibility of the penalty system into question with his ruling in HOK v HMRC, a decision which has subsequently been followed by other tribunal chairs. HMRC appealed Hok, but essentially Judge Jones had ruled that the penalty system was unfair in seeking a £400 penalty at the first point. Employers were not able to rectify their mistake when the penalty was £100, which the Judge ruled unfair.

To encourage employers to comply with the 19 May PAYE filing deadline, Taxation reported a statement from HMRC and the tax bodies this morning which said it will undertake to:

• Change the notification date for 2011/12 P35 annual returns from mid-February to mid-March 2012, so that employers will receive it much nearer to the end of the tax year.
• Annual return reminders will be sent out from 28 April 2012, where HMRC thinks there are outstanding P35s for the year.
• From 31 May 2012, HMRC will introduce a “P35 Interim Penalty Letter” that will go to employers within a month of the filing deadline. The letter will tell employers they have incurred a late return penalty and explain what to do to avoid it increasing.
• Improve online guidance for submitting P35s online, including specific advice about the test-in-live service to reduce the number of employers who believe their test submission is the live submission. “The on-screen messages within the HMRC online product will also make it much clearer that even when a successful test transmission has been made, a live transmission is still required.”
• Instruct Employer Helpline staff to tell employers about filing dates when setting up new employer schemes, to help them avoid a penalty.
• For next year, improve the information on the P35 and the reminders to include a warning that the first penalty notice will cover four months.

“Taken together, these measures should help employers to avoid incurring unnecessary penalties and significantly reduce the number of cases where penalties in excess of £100 are charged,” HMRC said.

Today’s announcement of what this “work around” to deal with the P35 penalty issue is a real feather in the cap for the Joint Working group between the professional bodies, tax charities and senior HMRC management.

The problem arises because HMRC is unable to be absolutely certain which employers have failed to file their P35s before the final update of the files on computer which happens around mid-September. This led to many employers receiving penalty notices in September showing a penalty of £400 or £500 because the penalty accrues at a minimum rate of £100 per month from 19 May.

Employers appealed against these penalties in their hundreds in 2011, and other issues came to light in the appeal process. Many believed that they had filed successfully online because the receipt message did not make it clear that a “test” return had been filed, and therefore the employer needed to re-file in “live” mode.

The joint working group spent time trying to resolve this issue for 2011/12 returns, and a great deal of behind the scenes work has gone into coming up with a solution. Although official penalty notices will still not be issued until September, the measures announced today address the main issues and try to ensure that employers have every opportunity to sort the issue out while the penalty is still £100.

Employers and their agents have every reason to welcome the announcement, not only for resolving the issue, but as a sign of more to come from the joint service quality working group.

Special units from HM Revenue and Customs are highlighting the sectors where the authority thinks there is evidence of tax evasion.

HMRC said that it expected to collect £50m in unpaid tax owing to the work of existing units.

These have put restaurants and scrap metal firms under the microscope.

“HMRC’s taskforces are cracking down on people who choose to break the rules and creating a level playing field for the majority who play by them,” said David Gauke, the exchequer secretary to the Treasury.

“HMRC has received lots of useful information on its evasion hotlines, which shows that the honest majority are quite rightly fed up with the dishonest minority.”

The clampdown is part of a wider challenge to raise an additional £7bn each year by 2014-15 through tackling tax evasion, avoidance and fraud.

A taskforce aiming to locate unpaid tax among fast food franchises in London, set up in July, had already harvested £10m, HMRC said.

In the next financial year, the targets for 30 new units will include the rag trade – involved in the import, wholesale, marketing and sale of clothing – and the motor trade, as well as indoor and outdoor markets.

www.bbc.co.uk/news/business-17125368

Per Accountingweb:

The 50p tax rate is not having the effect that was desired, according to Grant Thornton’s Francesca Lagerberg, despite the government ending up with its highest monthly surplus in four years.

The ONS released its public finance figures for January showing that although overall receipts are up 6.2%, in part due to large corporate tax payments this month, Self Assessment (SA) receipts are down.

Lagerberg, head of tax at Grant Thornton, said this could be because people under SA knew the 50p rate was coming in so took action in advance of 6 April.

“While PAYE receipts are up 2.3%, the SA receipts actually fell by £509m (4.7%) despite the new 50% tax rate coming in for 2010/11,” she said. “The 50% rate should have boosted SA receipts in January 2012. My guess, is that because the 50% rate was flagged up in advance, many taxpayers, particularly those with their own businesses, decided to extract dividends ahead of the change.

Lagerberg added: “They would have boosted the January 2011 receipts but it also means that they then held back and will probably do so again until the rate comes down again. It highlights the historical fact that high tax rates don’t always deliver high tax revenues.”

The public sector finances for January reveal the following: •VAT – up £1.5bn (17.5% increase) •Capital Gains Tax – up 26% •NIC – up 3% •Corporation tax receipts – up £1.2bn (15%)

“These figures show CGT is working, as is VAT, but there is a question mark over how effective the 50p rate is when looking at revenue raising alone.” Lagerberg said.

The ONS said the public sector made a net repayment in January – excluding financial interventions – of £7.75bn, up from £5.2bn a year ago.

It said the surplus followed a fall in local government borrowing and a rise in tax receipts, and that the government is on track to meet or even beat its borrowing target of no more than £127bn this year.

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