HMRC offers lifeline to struggling firms

UK businesses that owe money to the government have been reassured that enforcing insolvency for repayment of the debt will be a “last resort” as the country emerges from the pandemic.

Many firms have a backlog of taxes that will become due, including VAT.

HMRC has the status of “preferential creditor” when company insolvencies involve unpaid VAT and income tax. This means it is paid first in the event of a corporate failure.

But business leaders want the government to ensure this is used to help struggling companies restructure their finances to survive, rather than to shut them down.

Business Secretary Kwasi Kwarteng said in a letter to business groups this week that HMRC will take a “cautious approach to enforcement of debt owed to government” which has been accrued during this period.

The letter to the Institute of Directors and insolvency trade body R3, first reported by the Financial Times, added that enforcement of debt repayment was more likely to take place when companies failed to engage with HMRC rather than simply because they could not afford to pay.

“A flexible approach will be taken with those companies who engage with HMRC, with a view to bringing their debt into a managed arrangement,” Kwarteng explained.

HMRC estimates 1 in 10 furlough claims may have been fraudulent or paid in error

Businesses may have wrongly claimed up to £3.5bn in furlough payments, HM Revenue and Customs believes.

The UK Government has so far paid out £35.4bn through the Coronavirus Job Retention Scheme to help protect jobs and businesses during the Covid-19 pandemic. The scheme covered up to 80% of an employee’s salary while they were placed on leave due to the impact of coronavirus.

However, HMRC estimates that 5-10% of the total amount may have been claimed fraudulently or paid out in error. It intends to investigate fraudulent claims, HMRC chief executive Jim Harra said on Monday.

Speaking to MPs on the Public Accounts Committee, Harra said: “We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%.

“That will range from deliberate fraud through to error.”

Although employers will be expected to check their claims and repay any excess amount, HMRC will focus on tackling abuse and fraud.

It is currently reviewing 27,000 “high risk” cases where officials believe a serious error has been made in the amount an employer has claimed, according to BBC News.

Figures from mid-August show that 9.6 million people had been put on Government-supported furlough, with claims made by 1.2 million employers.

HMRC to open new regional centres across the UK

The UK’s tax and customs authority HM Revenues & Customs (HMRC) announced on Thursday that it plans to open 13 new regional centres equipped with new digital technology and training facilities, as the next step in its ten-year modernisation programme.

HMRC said that over the next five years there will be fewer, more modern regional centres, but better services will be provided by its highly skilled staff in every region in the UK. Most of the tax authority’s staff are expected to be able to move from their current offices to a new regional centre, with these moves being phased out over ten years in order to minimise redundancies. HMRC added that it intends to employ fewer people in the future as it streamlines how it works and uses the best of modern technology to reduce costs. New regional centres will be opened in 2016-17, with others following between 2017 and 2021. HMRC expects to generate estate savings of £100m a year by 2025.

According to HMRC, the 13 new regional centres will be in: North East (Newcastle); North West (Manchester and Liverpool); Yorkshire and the Humber (Leeds); East Midlands (Nottingham); West Midlands (Birmingham); Wales (Cardiff); Northern Ireland (Belfast); Scotland (Glasgow and Edinburgh); South West (Bristol); and London, South East and East of England (Stratford and Croydon).

In addition, HMRC stated that it will have four specialist sites for work that cannot be done elsewhere, in particular where HMRC needs to work with its IT suppliers or other government agencies or departments. These sites will be in Telford, Worthing, Dover and at the Scottish Crime Campus in Gartcosh.

Under the modernisation programme, which is currently at the halfway point, HMRC is investing in new online services, data analytics, new compliance techniques, new skills and new ways of working. The changes are expected to make it easier for the honest majority of customers to pay their tax, as well as making it more difficult for the dishonest minority to cheat the system. Already, more than 80% of people filing their Self Assessment returns online and the programme provided customers with new, simple ways to check their payments, make changes or find answers to questions.

HMRC said it raised a record £517bn for public services last year. Its 58,000 full-time equivalent employees are currently spread across 170 offices around the UK, many of which were built in the 1960s and 1970s and range in size from around 6,000 people to fewer than ten. 

Lin Homer, chief executive of HMRC, stated: “HMRC is committed to modern, regional centres serving every region and nation in the UK, with skilled and varied jobs and development opportunities, while also ensuring jobs are spread throughout the UK and not concentrated in the capital.

“HMRC has too many expensive, isolated and outdated offices. This makes it difficult for us to collaborate, modernise our ways of working, and make the changes we need to transform our service to customers and clamp down further on the minority who try to cheat the system.

“The new regional centres will bring our staff together in more modern and cost-effective buildings in areas with lower rents. They will also make a big contribution to the cities where they are based, providing high-quality, skilled jobs and supporting the Government’s commitment for a national recovery that benefits all parts of the UK.

“The changes will enable HMRC to give customers the modern services they now expect at a lower cost to the taxpayer, meeting the Government’s challenge for all departments to do more with less.”

HMRC introduces new regulations to curb tax avoidance on high value residential properties

HM Revenue and Customs (HMRC) announced today that new regulations have been established to ensure the disclosure of schemes designed and marketed to avoid paying the Annual Tax on Enveloped Dwellings, which was introduced in April this year to counter avoidance of Stamp Duty Land Tax on UK residential properties valued over GBP2m.

Companies that own high value residential properties are now required to pay an annual charge to HMRC, the UK’s tax authority. For a property valued between GBP2m and GBP5m the tax per year is GBP15,000. The charges rise to GBP140,000 for properties valued at more than GBP20m.

The Disclosure of Tax Avoidance Schemes (DOTAS) will mean that users of schemes that provide an unfair tax advantage must provide details of those schemes to HMRC, which uses the information in its compliance work. Failure to report details of these tax avoidance schemes will result in penalties of up to GBP1m. Users who fail disclose the use of a scheme on a tax return will be fined GBP100 for the first failure, GBP500 for the second and GBP1,000 for subsequent failures.

The changes to DOTAS regulations mean that the Annual Tax on Enveloped Dwellings is added to the regime where current schemes designed to reduce a user’s tax bill for income tax, corporation tax, capital gains tax, inheritance tax, national insurance contributions, stamp duty land tax and VAT must be disclosed. HMRC said these new regulations build on the work from the 2012 Lifting the Lid consultation which looked at tackling avoidance schemes.

A further measures to stop tax avoidance also requires promoters of avoidance schemes to provide HMRC with details of their client’s national insurance number and unique taxpayer reference. The provision of these details will help HMRC to detect and investigate tax avoiders. It will also be more difficult to avoid paying tax by using ‘disguised remuneration’ schemes.

Exchequer Secretary David Gauke commented:

“This Government has been clear – aggressive tax avoidance is unacceptable and will not be tolerated. The regulations we are laying mark a significant strengthening of the rules and build on the considerable work we have done to tackle not only tax avoidance schemes but also the promoters of these schemes.”

Expats who revisit the UK are being urged to brush up on strict new rules over their tax residence status

The Statutory Residence Test was announced by the Treasury in the 2011 Budget and will be introduced on the 6th April to clarify the definition of a UK resident.

As part of the new Finance Bill, the three-part assessment will determine exactly how many days an individual can spend in the UK before having to pay its taxes.

The Treasury admits existing legislation has been “complicated and unclear”, with experts agreeing that conditions for residential status have been largely decided by court cases.

In 2011, millionaire businessman Robert Gaines-Cooper lost his appeal against HMRC’s decision to classify him as a UK resident. Judges ruled that the Briton, who had moved to the Seychelles, had not made a “clean break” from the UK because he still owned a property in Henley-on-Thames and had made trips to Ascot, among other reasons.

If two initial tests cannot ‘conclusively’ prove your residential status, a third may look more closely at your connections to the UK, such as family, property and work.

The definition of a UK tie will include staying in temporary accommodation with relatives (including siblings, grandparents and children) for at least 16 nights. Furthermore, if a property is available to you for more than 91 days, you may only stay there for one night before it is considered a British tie.

The test, part of a wider crackdown on tax avoidance, may also examine how much time you’ve spent in the UK in previous tax years.

In keeping with the current rules, anyone who is in the UK for 183 days or more in any one tax year, or more than 90 days on average per tax year over four years, is viewed as a resident.  This will also apply if you have a home in Britain for more than 90 days, visit it on 30 separate days and have a period of 91 consecutive days where you do not live in a home abroad for more than 30 days.

From April, some expats may need to correlate the number of days they spend in the UK with the number of British connections they have. Longer periods may require fewer ties if you want to be classified as a non-resident, with only one connection allowed if you spend over 120 days in the country.

Price Waterhouse Coopers says the legislation “represents the most significant change to the UK’s tax residence rules for over 100 years”. It advises expats to anticipate what days they’ll be in the UK during the next tax year and consider “an appropriate way” to record that time.

The firm also believes individuals should consider whether they have any control over a “range of connection factors” that could make them liable for tax after April, such as available accommodation, family circumstances, UK employment and self-employment.

A draft copy of the rules is available on the Treasury’s website (

Company Profile

Which Offshore is an online consumer resource for those seeking information and advice pertaining to matters related to expatriate life and offshore finance. If interested in more information on expat tax, please visit –

QROPS for USA Residents

Thousands of people make the decision to relocate to the USA from the UK every year, yet there are many who make the decision without being in possession of all the facts surrounding the taxation of their pension funds. The decision to leave the UK to enjoy retirement in a country that offers a better quality of life is often driven by the heart. However, retirees need to be absolutely certain that their pension will cover the entire length of their retirement. Leaving the UK to enjoy the latter years of life will remove the safety net of the British welfare system, and that can have devastating consequences.

Unfortunately, QROPS pension rules in the USA are more complex than in most other countries in the world, and this means that a foreign-based pension fund cannot simply be ‘plugged in’ to the American system. However, recent changes to the regulations mean that QROPS USA is now live, and there are a number of schemes that have recently been brought to the market. Several US 401K pensions have now been officially registered with Her Majesty’s Revenue and Customs (HMRC), but there are still various compatibility problems seem to originate in the USA.

Problems of incompatibility arise when USA residents have accrued their pension funds in the UK or another foreign jurisdiction. Foreign pension funds are not recognised by the American government, so contributions and investment growth may be subject to taxation from the Inland Revenue Service (IRS) in the States. The IRS has extremely stringent guidelines governing the reporting of taxation issues, so a new breed of QROPS is needed specifically for expats living in the USA. Thankfully, there are now pension products that comply with the reporting requirements of both the HMRC and the IRS.

The benefits of transferring pension funds to a QROPS pension with American compatibility are wide-ranging, but the most significant involves the protection of investment growth from US Federal Income Tax. This type of overseas pension fund will also enable people to draw a tax-free initial lump-sum of up to 30% of the fund’s value. USA residents can also be confident that their pension incomes are not subject to UK taxes, and that is an issue that can allow people to plan their financial future accurately. The advantages and benefits of QROPS USA are extensive, but both the HMRC and IRC websites contain detailed information for fund-owners.

Under the British taxation system, a 55% charge is levied on unused funds that still remain in a pension fund; however, American-compliant pension funds incur absolutely no charges. This type of pension scheme incurs no tax on funds that pay regular benefits, and funds which aren’t in drawdown are also free from taxation. A QROPS also falls outside of UK inheritance tax laws, so there really are several benefits to setting up such a pension arrangement.


A Qualifying Recognised Overseas Pension Scheme is open to foreigners wishing to reside in the USA, American nationals who have been working outside the USA and American nationals who currently live outside the USA. It allows retirees to take control of their finances, as they can protect their pensions from the unfair or unnecessary tax burden imposed by the country of their origin. For more information, please visit –




Contractors warned over looming online tax return deadline

As HM Revenue and Customs (HMRC) threatens 300,000 late filers with debt-recovery actions that could include the seizure of goods, accountancy experts have issued a warning to contractors over the looming deadline for the filing of online tax returns for 2011-12. Continue reading “Contractors warned over looming online tax return deadline”

Cameron and Clegg just don’t get it

by Dave Chaplin, CEO,

Under the new off-payroll rules the Government has decided to implement processes within its own departments that 12 years ago HMRC said “would be inappropriate and burdensome” – a move which will damage public sector service delivery.

The new off-payroll rules being introduced this month apply to contractors working for a government client and earning over £219 per day on assignments lasting longer than 6 months. These contractors must demonstrate that they are genuinely self-employed and outside the IR35 legislation, or else go on the payroll.  This latest unworkable legislation demonstrates that the one element of common sense from the original IR35 legislation has just been thoughtlessly dumped by a coalition government that does not get it.

In November 1999 when IR35 was first mooted HMRC stated that “it would be inappropriate and burdensome to require a client to check” when speculating on how it might tackle the thorny problem of disguised employment.  It added that “what is required is a system to allow clients, or potential clients, to check (quickly, easily and at minimum cost) whether or not they can make payments gross.”  HMRC even proposed that workers caught by the legislation would find that “the client will account for PAYE/NICs on relevant payments made to the intermediary or to the worker – broadly following existing PAYE/NICs rules.”

Prior to the legislation going live in April 2000, lobbyists worked to have these proposals removed and contractors were expected to self-certify.  HMRC then tried imposing the rules without much success for 12 years and recently created three new specialist teams to help.

So imagine our surprise and shock when we learned that the Government is imposing a new set of rules on its own departments that its own tax-gathering team decided 12 years ago would be “inappropriate and burdensome”!

The reality is that there will be as many implementation strategies as there are government departments – some managers in the public sector will accept contract reviews by external agencies, retain genuine contractors and keep their departments running smoothly.  Others may take a more cautious approach and refer all their contractors to HMRC.

The result will see many contractors being deemed as inside IR35 and wrongly so, many contractors leaving public sector roles, voluntarily and involuntarily if their public sector client or HMRC deems them as such. This could then lead to contractors taking legal action of breach of contract if they subsequently prove in court that HMRC was wrong about their IR35 status.

So the brain drain continues as an important resource to the public sector dwindles.  Those departments accepting non-HMRC yet perfectly legitimate contract and working practices will attract the best and those operating more anachronistic policies will be left with the rest, or be charged a 20%+ premium to make up for the loss of net income for those highly competent contractors prepared to work on the payroll.

The result of this extra unnecessary red tape – higher costs, less qualified workers and poorer public service delivery.   Cameron and Clegg just don’t get it!


About the author:

Dave Chaplin is the founder and CEO of,, an online resource for freelancers and contractors that has become the expert guide to contracting.  Dave has recently published the second edition of The Contractors’ Handbook which provides all the advice freelancers and contractors need whether they are new to contracting or experienced old-hands.