HMRC deems Alternative Dispute Resolution service a success

HMRC has deemed the Alternative Dispute Resolution service – a new method of dealing with disputes relating to tax – as largely successful.

The service has been seen as a positive introduction for both the taxpayer and HMRC, and two-thirds of applicants to the scheme walked away with a full resolution or a partial resolution to their dispute. The vast majority saw their disputes resolved entirely, figures revealed.

The scheme – which is aimed at both small businesses and individual taxpayers who are unhappy with a decision made by HMRC regarding a tax issue – sees an HMRC official who has not been involved in the case and has mediation training - preside over the dispute process.

Discussions are then held in order to reach a final resolution. In some cases, an external mediator can be paid for jointly between the two parties.

Yvette Nunn, president of the Association of Taxpayer Technicians, said: “Tax dispute resolution has been in need of reform for far too long. This is, I believe, the shape of things to come; I look forward to further HMRC announcements on the rolling out of ADR.”

Record £220 million haul received from high-rate taxpayers

HM Revenue & Customs' High Net Worth Unit has revealed that it has received a record £220 million haul from high-rate taxpayers over the 2012/13 tax year.

The Unit – which focuses on the tax affairs of 5,800 high-net-worth individuals with assets of more than £20 million – increased its yield from tax enquiries by 10 per cent. It collected £200 million from the taxpayers over the course of the 2011/12 tax year.

The High Net Worth Unit, which was set up in 2009 and employs 380 staff members across eight sites in the UK, has generated £665 million of additional tax over the last four years, on top of the tax usually collected from the high-net worth individuals.

Some contractors and other high tax payers could be doing more to cut down what they owe in taxes.

David Gauke, Exchequer secretary to the Treasury, told Accountancy Age: “HMRC's high net worth unit provides the specialist attention they require in ensuring the wealthy pay the tax they owe.

“This Government has reinvested almost £1 billion in HMRC and expects them to deliver almost £22 billion in 2014/15,” he added.

Martin Randall, head of the High Net Worth Unit said: “The tax affairs of the richest people in the country can be complex as they have large tax bills, and that's why we've focused resources on getting their tax right. The majority of the wealthiest taxpayers play by the rules, paying the right tax at the right time, but we take action against the minority who don't.”

Daily fines on the horizon for late tax return filings

Daily fines are soon to be levied upon more than 500,000 taxpayers as a result of the late filing of tax returns.

It has been estimated that between 650,000 and 850,000 self-assessment taxpayers have yet to file their annual returns to HM Revenue and Customs (HMRC) for the 2011-12 financial year. The taxpayers should have filed their returns by 31 January this year in order to avoid being asked to pay a fine.

The taxation body has already sent out £100 penalties to some 850,000 taxpayers by 20 February, advising them that they then had three months to file their accounts. However, despite this warning, hundreds of thousands of taxpayers have yet to file their returns.

From 1 May, a £10 daily fine will be applied to those who have still not submitted their tax return. This daily fine can be up to a maximum of £900.

“Anyone who hasn't yet sent their 2011-12 tax return to HMRC will have already incurred a £100 late-filing penalty. Non-filers have to file to avoid further penalties or contact us to ask to be taken out of self-assessment, and provided they meet the criteria, we will take them out of SA and cull any penalties incurred,” an HMRC spokesman told Sky News.

UK challenges European financial transaction tax

The UK government has launched a legal challenge against the new plans for a European financial transaction tax (FTT).

The tax, which is aimed at raising public funds, will be adopted by eleven EU states including Germany, France, Portugal, Austria and Greece.

Ministers have expressed their concern that the FTT, although not supported by the UK, could be imposed on UK firms trading with businesses based in one of those states.

This could cause the FTT to have an effect on the City of London if, for example, a British firm trades with branches of French or German banks based in the capital. In this case, the British government would collect the tax but would not be allowed to keep it.

UK Chancellor George Osborne launched a legal challenge against the FTT a the European Court of Justice this week, saying that he believed the tax was not right for Britain.

The Chancellor also expressed his concern about the affect that the tax could have on Britain, arguing that those states wishing to be involved should do so without impacting upon the British economy.

Mr Osborne said: "Britain doesn't want to take part but it also doesn't want to be caught in the effects of this tax being introduced by other countries."

Pensioners should pay more income tax, says Fabian society

According to the Fabian Society, better-off older people should pay tax at the same rate as younger people on similar incomes.

The report from the society argues that older people should share the pain of deficit reduction with younger tax payers and that all policies giving advantages to older people should be reviewed.

The paper states that many pensioners have enjoying increased income thanks to recent success in reducing pensioner poverty, but it argues that this success has had profound implications on the younger middle income households.

Andrew Harrop, author of the report, has argued that the proportional increase in middle incomes was not problematic, but disproportionate increases for pensioners, as we're now seeing, is having negative effects on the younger middle income taxpayers.

Mr Harrop suggests that increasing income tax for pensioners will provide relief for younger middle income families who are struggling to move from renting to owning property, while having little effect on pensioners who have already paid off a mortgage.

The report cites figures from 2010-11, which show that the incomes of the middle fifth of all households were no greater than in 2003-04, but middles incomes for pensioners were 13 per cent higher.

Mr Harrop said: "Since the financial crisis this disparity has become even more stark: real middle incomes have fallen by 5 per cent overall, but they have risen 5 per cent for retired households."