HM Revenue & Customs (HMRC) has announced that it is to introduce tougher procedures for civil fraud investigations.  Their "Contractual Disclosure Facility" (CDF) will be launched on 31 January 2012, and follows consultation with interested parties in the autumn.

Under the new facility HMRC will contact a taxpayer, in writing, to inform them that they are suspected of serious tax fraud and offer them the opportunity to enter into a contract to disclose that fraud within 60 days. In return HMRC will agree not to criminally investigate, removing the risk of prosecution by HMRC. The investigation will then be carried out using civil powers with a view to a civil settlement for tax, interest and a financial penalty.

Those who choose not to make this commitment will face a full investigation by HMRC – in some cases a criminal investigation with a view to prosecution. Anyone who signs the contract but does not go on to admit and disclose fraud will also face the possibility of a criminal investigation.

Taxpayers who are not under investigation but who want to admit to tax fraud may fill out a form to voluntarily request that HMRC consider their suitability for a CDF contractual arrangement. HMRC still retains the discretion to decide which cases are dealt with civilly and which are investigated with a view to criminal prosecution.

Further information on the changes is available on the HMRC website at www.hmrc.gov.uk/admittingfraud

The Alternative Dispute Resolution (ADR) was launched today and is a pilot for small and medium enterprises. It uses independent HMRC facilitators to resolve disputes between HMRC and customers during a compliance check but before a decision or assessment has been made. ADR aims to find a fair and quick outcome for both parties, helping to reduce their costs and avoid a tribunal.

The pilot in North Wales and the North West follows a successful trial earlier this year, where 60 per cent of disputes were either fully or partially resolved

ADR does not affect existing processes or review and appeal rights, and covers both VAT and direct taxes.

Cases potentially suitable for this pilot may involve any of the following features:

* Facts that are capable of further clarification

* Disputes that might benefit from obtaining more suitable evidence

* Factual and/or technical matters in which there is legitimate scope for any party to obtain a better understanding of the other’s arguments

* Issues which are capable of further mediation and settlement by agreement within the framework of the Litigation and Settlements Strategy

Cases not suitable for this pilot may involve any of the following features:

* Cases which cannot be legitimately settled within the parameters of the LSS other than by litigation

* Issues which require clarification in the wider public interest. These might include matters of industry-wide application

* Issues linked to or involving co-ordinated appeals issues (“Stood behind” cases) e.g. ‘Compound Interest’ type disputes

* Cases that could only be resolved by an HMRC departure from its established technical or policy view.

Find more information at http://www.hmrc.gov.uk/adr/intro-note.pdf

The Liechtenstein Disclosure Facility (LDF) is a ground breaking tax agreement between HM Revenue & Customs (HMRC) and the Government of Liechtenstein which will ensure that the right tax is paid to the UK by those with investments in the Principality.  As at 30 September 2011, 1721 had come forward to declare previously hidden tax liabilities.

A number of improvements to the Memorandum of Understanding have been agreed between the Liechtenstein Government and HMRC which will make the Agreement more transparent and easier to use.

1. The New “Confirmation of Relevance” to Simplify the LDF Registration Process

One of the conditions for using the (LDF) in order to disclose unpaid tax is that you must already own or acquire qualifying assets in Liechtenstein, but from 1 December 2011, UK taxpayers will need to provide HMRC with a simple Confirmation of Relevance (COR) to register.

The COR will be issued by the Liechtenstein financial intermediary as proof their UK clients has acquired a qualifying asset or established a connection with Liechtenstein’s financial centre. This will streamline the registration process, providing certainty as to what is needed.

2. Deadline for Notifications extended to 31 March 2012

Liechtenstein’s financial intermediaries are required to tell their UK clients they must meet their UK tax obligations. HMRC and Liechtenstein have agreed to a three month extension of the notification deadline to 31 March 2012 due to the complex steps in ensuring all UK residents affected are identified and the larger than anticipated number of people likely to receive a letter.

The Chancellor of the Exchequer, George Osborne, has today announced that the Government will waive VAT on sales of the Military Wives choir's Christmas single by making an exceptional one-off charitable donation to the Royal British Legion, and Soldiers, Sailors, Airmen and Families Association (SSAFA), the charities chosen to benefit from sales of the song. The donation will be equivalent to the sum of the VAT receipts collected on sales.

Recognising the service of the armed forces and the high levels of public support for the single, as well as the exceptional contribution both charities make through their work with members of the forces and their families, George Osborne and Defence Secretary Philip Hammond want to maximise the donation that the charity receives by adding the VAT equivalent.

George Osborne said: "Our armed forces demonstrate incredible commitment to the nation and make sacrifices for all of us. The Military Wives choir is doing a great job of raising money for this hugely worthy cause. We will donate the tax collected on the single so that as much as possible of the money spent by the public on this fantastic song goes to charities helping our armed forces and their families this Christmas."

Philip Hammond said:  "Christmas can be a particularly difficult time for our brave service personnel deployed on operations, but also for their families at home. I am delighted to be supporting the Military Wives choir in this initiative, who in turn are supporting our Armed Forces community."

From 1 April 2012, all VAT-registered businesses must send their VAT returns online and pay their VAT electronically. (Newly-registered businesses, and those with turnovers of more than £100,000, have had to file and pay their VAT online since 1 April 2010.)

The new rules will cover VAT returns filed for accounting periods beginning on or after 1 April 2012.

If you’re not already filing your VAT online, switching now makes sense. By doing this, you’ll avoid a last-minute rush, and be able to enjoy the benefits of online filing sooner rather than later. These benefits include:

* an automatic acknowledgement that your return has been received;
* a handy arithmetic checker to help make sure you’ve done your sums correctly; and
* an email alert to remind you when your next online return is due (as, after April, HMRC will stop sending out paper returns to customers who are now required to file online).

To file your VAT return online, you’ll need to register for HMRC’s VAT Online Service – visit www.online.hmrc.gov.uk and click “Register” under the “New user” section or simply contact your local abacus accountant.

VAT rule-breakers have until 31 December to complete the VAT registration process under the time-limited HMRC VAT Initiative.

In July this year HMRC launched its campaign in which rule-breakers were offered a special plan to put right their tax affairs. The chance to participate, and be guaranteed the conditions contained in the plan, ended on 30 September.  Since the opportunity ended, HMRC has been identifying those who did not come forward. Substantially higher penalties and even criminal prosecution could follow.

The VAT Initiative campaign focuses on businesses trading above the VAT registration threshold – for this year, an annual turnover of more than £73,000 – but who have not registered for VAT with HMRC. The trades affected include construction, business services, hair and beauty, hotels and catering, retail distribution, recreational services, motor vehicle distribution and repair, sanitary and domestic services, agriculture and horticulture, property and road haulage.

Under the terms of the VAT Initiative, those who have notified their intention to take part must register for VAT by 31 December 2011. They will then receive their VAT registration number and instructions on how to complete their first VAT return. Once this has been submitted most will face a lower penalty rate of 10 per cent on the VAT that has been paid late.

Although it is now too late to obtain the VAT Initiative terms, if businesses do still need to register for VAT but didn’t make a notification, it may still be beneficial to do so before the VAT Initiative ends as the penalty paid will still be lower than if HMRC approaches them first. Businesses needing help can call HMRC on 0845 600 5217.

For many taxpayers, the tax system can feel remote and confusing. The Government believes that people’s understanding of what they pay could be better, and is today publishing Modernising the Administration of the Personal Tax System; a discussion paper setting out a range of ideas how people can more easily access information on their personal taxes. 

The Government is calling on taxpayers, representative bodies, and tax professionals to give their views on:

• what taxpayers know about the tax they pay;
• what areas of the personal tax system create the most difficulty;
• how technology can help them better access and understand their tax position; and
• how we can engage with individual taxpayers in hearing their views on how the tax system could be modernised.

In parallel, and as part of its ongoing reform of the UK tax system, the Government is publishing a paper setting out the next steps in its work on looking at the options to integrate the operation of income tax and National Insurance contributions (NICs). The paper summarises the results of the recent call for evidence on this issue, and establishes the principles and parameters by which Government will assess options for reform. The Government is establishing technical working groups to identify and explore options over the coming months, and is looking for employers, tax and payroll professionals to join these groups.

To respond or enquire about this consultation you can email HMRC: PTAdministration.responses@hmrc.gsi.gov.uk

The Prime Minister has today announced the extension of film tax relief, the Government’s targeted tax break for the British film industry, until the end of December 2015.

The film tax relief scheme promotes the sustainable production of culturally British films and in 2009/10 provided around £95 million of support to the British film industry, supporting over £1 billion of investment in 208 films.

Recent productions certified as British under the cultural test include films such as Brighton Rock, Attack the Bloc, StreetDance3D, Gnomeo & Juliet, Clash of the Titans, Horrid Henry 3D, Coriolanus and Harry Potter Deathly Hallows (Parts 1 and 2).

The extension of film tax relief follows the European Commission’s State Aid approval of the Government’s application to extend the duration of the scheme to 31 December 2015. The design of the scheme remains the same as that previously authorised.  The relief is aimed directly at film production companies for the expenses they incur on the production of a film intended for theatrical release in commercial cinemas. For a film to be eligible for relief, it must be certified as British, either by passing a cultural test or under an agreed co-production treaty, and must incur at least 25% of the total production expenditure in the UK.

Relief can only be claimed on production expenditure in the UK, up to a maximum of 80% of the total budget, and a higher rate of relief is available for limited-budget films (with total production expenditure of £20m or less). Companies not making a profit may be able to surrender the relief for a payable tax credit worth up to 20% of the total budget for a limited-budget film and up to 16% for other films. A higher value of support may be achieved if the relief is used to reduce company tax liabilities.

The Government has today announced that from 1 April 2012 Low Value Consignment Relief (LVCR) will no longer apply to goods sent to the UK from the Channel Islands. This reform will bring increased fairness for UK businesses, benefit the UK economy and protect millions of pounds in tax revenue.

At Budget 2011, the Chancellor stated the Government’s intention to take action to end the exploitation of LVCR, which in recent years has been used on an increasingly large scale to sell low value goods to UK customers VAT-free. Most of this trade is from, or via, the Channel Islands.

The Government took the initial step of reducing the LVCR threshold, below which items are imported free of VAT, from £18 to £15. The new threshold came into effect on 1 November 2011 and will apply to goods from the Channel Islands until 1 April next year.

If you are going abroad to do your Christmas shopping, or buying goods online from non-EU countries, you need to know how much you can buy before you have to pay import duty or VAT.

Many people like to go abroad at this time to buy their Christmas gifts, or buy online from non-EU countries, and think that the ‘cheaper’ price they see is always the price they finally pay. HMRC is keen to remind the general public how much they can actually bring back from abroad or buy from an online overseas seller without having to pay import duty or VAT.

Arriving in the UK by commercial sea or air transport from a non-EU country, you can bring in up to £390 worth of goods for personal use without paying customs duty or VAT (excluding tobacco and alcohol, which have separate allowances, and fuel). Arriving by other means, including by private plane or boat for pleasure purposes, you can bring in goods up to the value of £270. Above these allowances and up to £630, there is a duty flat rate of 2.5 per cent.
Detailed information on the non-EU limits for alcohol and tobacco products can be found on HMRC’s website at http://www.hmrc.gov.uk/customs/arriving/arrivingnoneu.htm

Should you buy goods over the internet or by mail order from outside the EU, you will have to pay VAT if the value of the package is over £15.

If the goods are over £135 in value, customs duty may also be due, although this will depend on what they are and where they have been sent from. Where, however, the actual amount of duty due is less than £9, this will not be charged.

If someone sends you a gift from outside the EU, import VAT will only be due if the package is valued at over £40. To qualify as a gift, the item must be sent from one private individual to another, with no money changing hands.
Please note that excise duty is always due on all alcohol and tobacco products purchased online or by mail order.

If you are thinking of going across the Channel to replenish beers, wines, spirits or tobacco products, there are no limits on the amounts of duty and tax paid goods you can bring back personally from another EU country, as long as they are for your own use. You may, however, be asked questions at the UK border if you have more than:

- 110 litres of beer,
- 90 litres of wine,
- 10 litres of spirits
- 20 litres of fortified wines,
- 800 cigarettes,
- 200 cigars,
- 400 cigarillos or
- 1kg of tobacco