UPDATE:  The verdict in the case of Hok Limited v HMRC has now been overturned by the Upper Tier Tribunal in favour of HMRC.  See our blog on the case for more details.

We recently posted a case where the tribunal found that HMRC’s policy of waiting 4 months before issuing a penalty notice for late P35s was unfair.

This finding was also confirmed in the recent case of Hok Limited v HMRC. The judgement stated that HMRC’s practice was, “unfair and falling very far below the standard of fair dealing and conscionable conduct to be expected of an organ of the state”.

The tribunal went further than in the previous case by stating that “the statute does not provide that the penalty or any part of it must be levied.”

They go on to assert that merely being ‘liable’ to a penalty does not mean that the penalty stated is the minimum penalty but rather the maximum and therefore it is possible to impose a lower penalty.

It will be interesting to see if this principle could be applied to other ‘fixed’ penalties which had previously not been seen as mitigable.

The tax return season for 2010/11 returns is due upon us.

This year though the rules for penalties have changed

Late Filing

  • Initial £100 late filing penalty still exists
  • From three months late, additional daily penalty
    of £10, up to a maximum of £900
  • From six months late, additional penalty of 5%
    of the tax due (de-minimis £300)
  • From twelve months late, additional 5% or £300

Late Payment

5% surcharges will apply at:-

  • 30 days
  • 6 months
  • 12 months

If you’re an accountant, when will you start telling your

Eaves & Co, Tax Specialists, Leeds, West Yorkshire

HM Revenue and Customs (HMRC) issued guidance in March 2011 confirming
that where a person works full time abroad, UK duties of fewer than 11 days per
annum will not usually be considered in determining a taxpayer’s residency
HMRC have now issued a statement confirming the treatment of those
taxpayers working abroad that have returned to the UK due to the ongoing
conflict in the Middle East.
The advice applies to those countries that HMRC have confirmed where
exceptional circumstances apply (Tunisia, Libya, Egypt, Syria, Bahrain and
The exceptional circumstances arose towards the end of the 2010/11 tax
year, therefore HMRC have confirmed that the residency status of taxpayers that returned to the UK temporarily and intending to return to work abroad will not be affected by the number of days of UK duties undertaken in this period.
The exceptional circumstances may potentially apply for a much longer
period in the 2011/12 tax year.
With this in mind, HMRC have confirmed that in line with previous
advice UK duties of less than 11 days per annum will not usually be considered
in determining a taxpayer’s residency status.
Cases whereby taxpayers have spent more than 10 days on UK duties will
be considered in light of individual circumstances.
Eaves & Co have extensive experience in providing residency
advice.  Please contact Paul Davison on
0113 2443502 if you have any queries.

UPDATE: Please see Eaves and Co’s Swiss Treaty Brochure for full details of the treaty
After much anticipation, details of the treaty between Swiss Federal Department of Finance and the UK Treasury aimed at tackling offshore tax evasion were announced on 24 August 2011.
Broadly speaking there will be two routes to go on under the agreement:
1) Retain anonymity via making an initial one off payment and paying withholding tax from 2013 or;
2) A voluntary disclosure to HMRC regarding Swiss assets and associated income
Option 1
If option one is chosen there will be an initial one-off deduction of between 19% and 34%, on a UK resident’s existing Swiss accounts which were open on 31 December 2010 and remain so on 31 May 2013. This deduction is in order to settle past tax liabilities.
The rate charged equation accounts for the number of years of investment and the account movement. It is estimated by the Swiss Banking Association that the applicable rate will be 20-25% for most taxpayers.
In addition to this from 2013 there will be a withholding tax of 48% on interest income and 27% on Capital Gains, with the level of withholding tax for dividends to be announced later.
Option 2
Alternatively the UK resident can make a full disclosure of untaxed Swiss income and gains to HMRC.  HMRC will then seek unpaid taxes, interest and penalties from this disclosure.
If a disclosure is made, the accounts of UK taxpayer will not be subject to the one off charge and future withholding tax.
A disclosure under this option could be made under the Liechtenstein Disclosure Facility (LDF) which may offer reduced penalties.
It is clear then that this deal will have a big impact on UK residents with a Swiss account. Possibly affected taxpayers should consider which option might be most beneficial.   This will require calculating the effect of both options on their funds.  This initial assessment exercise will be very important and may not be straightforward.
If you would like to discuss the impact of the treaty further or would like help deciding which option to choose please feel free to contact us in our Leeds office.

HM Revenue and Customs have issued draft guidance on the use of Alternative Dispute Resolution (ADR) to resolve tax disputes.  The draft guidance is available at http://www.hmrc.gov.uk/practitioners/lss-intro.htm
If you/your client have reached an impasse in a dispute with HM Revenue and Customs and believe that the issue could be resolved without the need for litigation then ADR could  be suitable for you.
HM Revenue and Customs believe that in certain cases, ADR may be a cost effective alternative to litigation through the Tribunal/Court system.
Under ADR, different types of mediation may be used depending on the nature and status of the dispute:

  • Facilitative mediation – the mediator tries to bring the two sides together but without offering an opinion on the merits of each side’s arguments.
  • Evaluative mediation – similar to facilitative mediation however the mediator will offer an opinion.
  • Expert determination – uses a third party expert, such as a valuer, to provide a view.

Eaves & Co have extensive experience with tax investigations and enquiries. For more information please contact Paul Davison on 0113 2443502.