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How will HMRC’s plans for the future affect you?

28 July 13 | By: Jas Jhooty

Introduction

hmrc

HMRC has some far reaching plans that will have a significant impact on every single employer in the country. The rushed introduction of Real Time Information is just the start of an ambitious restructuring program within HMRC that is politically driven. To unravel this plan, let us look at the clues that have been announced so far.

HMRC Publications

Earlier on this year HMRC published their compliance progress report titled Levelling the tax playing field

This makes for some very interesting reading. Particular highlights are: –

  • large businesses pay around 60% of UK tax receipts including PAYE & NIC.
  • since 2010 large businesses have paid £14.8 billion in additional compliance revenues. – This comes as no surprise as the onus for tax compliance has now fallen onto the shoulders of the Senior Accounting Officer for businesses with a turnover of over £200 million
  • In 2011-12, the 10,400 largest businesses accounted for more than 40 per cent of HMRC’s additional compliance revenues
  • HMRC are investing £25 million in the skills of their people to identify risks

HMRC restructuring

Lin Homer’s speech at the HMRC stakeholder conference held on 18 July 2013 summarised HMRC’s restructuring plans: -

  • HMRC in 2016 will be a very different organisation from the HMRC of 2010.
  • HMRC’s annual budget will be £3.4 billion, down from £4.2 billion
  • HMRC will secure £24.5 billion in additional revenues from compliance activities, up from £12.6 billion.
  • HMRC have made a brand new board level position of Director of General Enforcement & Compliance to ensure that these targets are met
  • HMRC will be an increasingly online organisation, with most individuals and businesses increasingly being able to deal with their taxes online
  • HMRC will have 52,000 better trained full time equivalent employees focused primarily on compliance by the end of March 2016, down from 75,000 mainly clerical staff in March 2010

What this means for employers

From the above clues you don’t have to be a rocket scientist to work out that employment tax compliance will be very high on HMRC’s agenda to achieve their stated targets of raising an additional £12 billion per annum in compliance yields.

They will soon have exhausted the yield available from larger employers and will be refocusing their attentions on SMEs and smaller organisations. These types of employers do not usually have the systems in place to strictly adhere to the all of the intricacies of employment tax legislation, and HMRC will have a field day when they come knocking.

What you should be doing now

Employers should be preparing for the inevitable HMRC Employer Compliance Review by arranging for a dummy inspection of their payroll and expenses procedures now. This will highlight any areas of weakness that can be put right, thereby saving you a small fortune at the time of the actual review.

You should also know that HMRC’s new policy appears to be, not to negotiate in any way on the settlement figure they demand on their presumptions of unpaid tax & NIC at the actual Employer Compliance Review.

Instead they insist that all cases of dispute are held at First Tier Tax Tribunals in the first instance, without any regard to the associated additional costs to the employer.

This change in policy has come about as an unwanted repercussion of the widely reported “sweetheart” deal HMRC made with Vodafone that was condemned by Margaret Hodge, the Chair of the Public Accounts Committee. This so-called Hodge effect has scared HMRC officials so much that none of them want to be named and shamed and in effect has left them extremely reluctant to negotiate any settlements.

How emTax can help

emTax consists of a network of Employment Tax consultants who have made their ”Big 4” expertise affordable. The very same advice that normally costs at least £500 per hour if you were to go to the “Big 4” accountancy firms, is now available to every size of employer at a small fraction of that extortionate rate.

In this politically charged environment, emTax offers common sense pragmatic advice. To help employers prepare for their inevitable Employment Compliance Reviews we recently devised and made available (free of charge) our PAYE & NIC Audit questionnaire. This details all of the possible questions that you will be asked when the taxman visits. Please feel free to download this invaluable form if you have not already done so.

Make sure you do not leave it too late and contact us now to arrange your dummy PAYE audit.

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