As the new tax year is just around the corner, PayStream turn to their in-house tax expert David McManus, in order to gain an expert insight into what the new tax year holds for contractors.
We also went into greater depth surrounding HM Revenue and Customs tougher approach to tax collection and were keen to obtain an insight into what David had to say on the subject. Here are his thoughts;
- Can you tell us what the new financial year holds for contractors?
"Yes of course. With April 6th highlighting the start of the new tax year relevant individuals will receive a notice to complete a tax return with HMRC's deadline of the 31st January 2015. It is always crucial to understand that the sooner you complete your tax return the sooner you will be aware of any tax liability. If you do owe tax you can have up to £3000 included in your tax code number, which you can pay over a 12 month period. You can also request that HMRC place any owed tax into your tax code, which will only go into your 2015 tax code, giving you an extra year to pay off any outstanding tax liabilities. Therefore, it will always be advantageous for individuals to stay ahead of their tax responsibilities. Another advantage of filing your tax return early is that you will also get any tax overpayment in your hands sooner".
- HMRC's tougher approach to tax has been a hot topic as of late. Have you noticed a change in the number of people signing up to our Personal Tax return service as a result of this and have you noticed HMRC clamping down in recent months?
"Yes absolutely. I have found that since HMRC have enforced a tougher approach to tax a lot of individuals that were not in self-assessment before, because they didn't register, have decided to come forward and get registered in time".
- What are HMRC's main tools to seek high risk candidates?
"I'd say the two main tools used by HMRC have to be via the use of public data and also through computerisation. HMRC build up case files on individuals that are perceived as 'high risk' through the use of public data, pinpointing candidates who appear to have a high net worth but who are not paying very much tax. They then use a variety of information from different information sources such as banks to check that the level of an individual's income stacks up".
- It has been mentioned that HMRC have turned to more innovative methods to seek out 'high risk' individuals, even through the use of Google street view. Have you seen any evidence of this and do you think it’s a tactic that will stay?
"Yes definitely. In the past, when an individual was perceived as a 'high risk' candidate an Inspector would physically visit the person's property. With a high case load it may take the Inspector some time to get around to this form of checking. Now the Inspector can quickly turn to Google street view to suss out what kind of assets an individual apparently owns. For example, does the individual have a large property, a couple of expensive cars on the drive, even a swimming pool? HMRC have found this a very useful tool."
What are the dangers of not being responsible with your tax duties?
"HMRC take tax evasion very seriously, an individual could even face criminal prosecution. However, if fraud is not involved HMRC will normally come to a monetary settlement that will include not only the tax owed but also the interest and a penalty. The currently penalty level for what HMRC class as 'careless error' is between 15% and 30% of the tax due".
- What can you do to be prepared for potential future HMRC investigations?
"It is always important to keep proper records of all your expenses, receipts and all other important paperwork, if HMRC raise an enquiry. You should always ensure you get your tax return completed on time".
- How can PayStream help you with your tax responsibilities?
"PayStream can take the pressure off you by helping you to meet your tax responsibilities giving you added peace of mind. We will complete and fill in your tax returns in a timely manner, providing you give us all of the relevant information required.
In the very near future PayStream plan to bring in our Tax Protection service. This means that if you get caught out by the tax man for whatever reason, you can be liable to pay for hefty accountancy fees. If you have been prudent and taken up our TP service you do not need to worry about such costs. More information on our service will be available from 6th April onwards".
So, it is clear that HMRC's tougher approach to tax will only continue to strengthen via a wider range of tools and more innovative techniques. Our tax expert David McManus has pinpointed that individuals must remain proactive and organised when it comes to tax responsibilities in order to avoid hefty penalties. PayStream is here to support individuals with their tax responsibilities, not only that, they will also chase any overpaid tax you may be due and give advance warnings of any potential tax liabilities, leaving you with complete peace of mind. Visit here for more information on how our Tax Team can help you.