HMRC using new powers to chase tax debts

Posted by Amy Flower in Personal Finance on 23 September 2015 - Amy is a Senior Credit Analyst at checkmyfile

Historically, HMRC were made to chase outstanding tax debts through the courts, incurring high costs and leading the way for the new legislation which was approved in April 2014.

The new ruling has targeted business millionaires and premier league football players who have demonstrated that they have used ‘aggressive tax avoidance’ schemes and are now facing large demands, up to £10m. The new demand system is enforcing that bills are paid within 90 days and the clients can dispute the balance later, which is yet to illustrate if this new system is working effectively or ultimately costing more money and time through the disputes process.

Recent case studies are indicating that the new ruling is not 100% focussed on the target groups that it was written for, instead it is hitting moderately wealthy individuals who are being served demands to repay tax that is owing from employment years ago and not from tax avoidance schemes. This type of tax demand has always been available and did not need additional legislation to target this group of tax debtors.

A spokesman for HMRC has stated that anyone who has received a demand and is struggling to obtain the funds to clear the debt should get in touch with the HMRC as soon as possible, with the view to set up a suitable repayment plan - ignoring the demand will not make the issue go away.

Income tax can usually only be investigated up to 4 years ago but can go back 6 years if they can prove the individual was ‘careless’ or up to 20 years if it can be proven there was deliberate avoidance. Once an inquiry is made by HMRC this allows them to side step the rules, Section 39, that outline the time limits for demanding back taxes.

Freelancers working the late 2000s in the oil and gas, computing and banking sectors are currently under scrutiny and are being informed by the HMRC that their tax affairs may be classed as ‘aggressive tax avoidance’. Up to 64,000 demands are currently being made to the freelancers, who are being told that they need to pay up to a year’s salary, c£60,000 – £80,000, in 90 days. It can then take months for investigations and disputes to be concluded, with no real answer if there is to be fines or interest added to the amount or if the dispute will be successful.

Another issue with the demands is the calculations themselves being slammed by external accountants, who have reported that some demands have been inflated by up to 25% and are not within the guidelines of the target groups outlined by the new legislation. The amounts of money being demanded is sometimes being made on people who cannot afford it and there is now uncertainty about the figures and how they have been calculated.

There are schemes that were historically advised to freelancers who are no considered to be aggressive and in the HMRC’s sight along with DOTAs filed in individuals tax returns. The latter could be more fruitful for the government and aimed more appropriately at the business millionaires group, rather than the individuals currently finding an accelerated demands on their doormat.

To date, an estimated £28m has been refunded to taxpayers who made the payments in line with their demand and have since either been informed that there was a miscalculation or that the amount was not actually outstanding.

Check Your Credit Report Today

Instant Access, 30 Day Free Trial

The Advantages & Disadvantages of Store Cards

There are a number of reasons you might take out a store card: whether you’re just waiting in-line at the shop and find out you can save on today’s shopping or they offer the promise of making money in the future, these cards regularly find their way into wallets (or phones via an app). Most big retailers offer their own cards, which allow you to take your purchases home – often with a nice discount applied – without having to part with a penny at the till.

Published on 10 Jul 2018 by Tom Blandford

Full Article

What Happens To Your Credit Report When You Move Country?

Moving from one country to another results in a lot of changes and new things – a new place and culture, new job, new people and in some cases even a new language. However, one thing lots of people do not realise is that you will also be starting afresh when it comes to your Credit Report. Credit Reports and the information they contain are country-specific and do not follow you from one country to another.

Published on 27 Jun 2018 by Kirstie Day

Full Article

What To Do If You’re a Victim of Data Breach

Another day, another high-profile data breach, with the morning news bringing word of another leak of personal information that affects millions of consumers. This time it’s the turn of Dixons Carphone - the company behind PC World, Currys and Carphone Warehouse.

Published on 14 Jun 2018 by Jamie Mackenzie Smith

Full Article

What Does Bongo Know About You?

“What does Bongo know about you?” A slightly off-the-wall question I’ll grant you, but one that you might have been asked at some point in time.

Published on 7 Jun 2018 by Richard Catlin

Full Article

Why Don’t Millennials Take Out Credit?

As a millennial, it can feel like my generation is besieged with criticisms on a daily basis, and not all of them are entirely fair (though lots are). We are frequently told that as a generation we are entitled, we have it so much easier than our elders and arguably, worst of all: we buy too many avocados. While I don’t buy avocados, I do have access to credit, which makes me a minority among my age group.

Published on 16 May 2018 by Beth Jennings

Full Article

Why Is My Loan Balance Wrong On My Credit Report?

One of the single most important pieces of information to appear on your credit file is the information relating to your credit agreements and how you repay them - with this information lenders can see your borrowing history across the last six years and use it to help them decide whether or not to offer you finance.

Published on 7 May 2018 by George Coburn

Full Article

How long do closed accounts appear on my credit report?

Some people believe that as soon as a credit agreement is settled and closed, it will no longer be reported to the UK’s Credit Reference Agencies and therefore will no longer have an influence on future credit applications. However, this is a popular misconception, one that could affect your ability to get credit if not correctly understood.

Published on 2 May 2018 by Tom Magor

Full Article

How to Save Big in the Bank Holiday Sales

Bank holidays may not guarantee a day of sun-soaked fun, but as is British tradition, we’d probably be quite happy barbecuing in the snow if it came to it. But no matter what your plans are, if you want to grab a bargain, you can use the Bank Holiday sales to save some serious money.

Published on 26 Apr 2018 by Kiah Phillips

Full Article

Should I Buy or Finance an Aston Martin Valkyrie?

We’ve all been there. £3 million burning a hole in your pocket and a track-going version of Aston Martin’s latest hypercar sat in front of you. But as a shrewd, savvy business-type, you know that dropping £3m in one go on a 1,100bhp car could be considered a questionable, perhaps even ‘baller’ move. But what about putting it on finance?

Published on 13 Apr 2018 by Jamie Mackenzie Smith

Full Article

How to Build Credit History Without a Credit Card

When it comes to the best way to build up a credit history, conventional wisdom is to take out a credit card and use it for everyday purchases, while paying it off (on time) at the end of every month. There’s plenty to support this advice too, as a credit card allows you to spend as much or as little as your limit will allow, while building a history in a reasonably short amount of time.

Published on 26 Mar 2018 by Jamie Mackenzie Smith

Full Article
keyboard_arrow_left

keyboard_arrow_right

We have loads of great customer reviews