50 per cent tax rate is reduced to 45 per cent

The lowering of the 50 per cent tax rate to 45 per cent has brought about tax cuts for some of Britain's most wealthy.

Labour has calculated that the country's 13,000 income millionaires are receiving an average tax cut of £100,000 a year after the tax rate alteration.

Statistics have also found that 643 bankers from the UK's top five big banks who earn more than £1 million will receive a combined tax cut of £34.6 million per year. This works out as an average of £53,775 per banker.

Similarly, the change in tax rate will benefit a number of millionaire bankers from RBS and Lloyds who are set to get a tax cut of over £7.5 million per year, averaging out at £63,686 each.

The 40 highest paid senior bank executives in the UK will also receive a tax cut of £4 million, an average of £99,694 each.

George Osborne has previously indicated that banks would not benefit from the tax rate reduction and maintains that the 50 per cent rate was ineffective due to the ease of which it was avoided by the rich.

However, figures show that the 50 per cent rate earned £1 billion in its first year and would have raised more.

Chris Leslie, shadow financial secretary to the Treasury, said: "People on middle and low incomes, who are paying more in higher VAT and seeing their tax credits and child benefit cut, will be totally appalled at the size of this government's tax giveaway to highly paid banking executives."

HMRC accused of poor customer service

MPs have criticised HM Revenue & Customs for providing a poor level of customer service to taxpayers across the country.

Despite spending £900 million a year on customer service, the taxation body has reportedly been costing callers £136 million a year by not answering telephone enquiries. HMRC hopes to change its “abysmal record,” as the Commons Public Accounts Committee called it, by rolling out a call-back system and getting rid of expensive 0845 numbers.

The Committee found that the taxation body left 20 million phone calls unanswered last year, and only managed to respond to 66 per cent of letters from taxpayers making enquiries. This was despite plans to respond to 80 per cent of letters within 15 days.

Chair of the Committee, Labour MP Margaret Hodge, commented: “HMRC's 'customers' have no choice over whether or not they deal with the department. It is therefore disgraceful to subject them to unacceptable levels of service when they try to contact the department by phone or letter.”

“HMRC plans to cut the number of customer-facing staff by a third by 2015. At the same time, the stresses associated with introducing the real-time information system, universal credit and changes to child benefit are likely to drive up the number of phone calls to the department,” Ms Hodge added.

An HMRC spokesperson responded to the report, saying that the taxation body was planning to invest an additional £34 million into its contact centres in order to improve its customer service.

HMRC rebate rules could impact tax advisers

Tax advisers are being warned that they could be given the responsibility for deducting the income tax that is owed to HMRC from platform rebates to clients.

Under the new rules that will come into force on 6 April, investors must pay income tax on any fund units or cash that they receive as part of tax rebates. Any of those rebates that are given to taxpayers from that date onwards, are annual payments and, as a result, do not count towards taxable incomes. In the past, investors have not had to declare tax rebates as taxable income.

James Hay Partnership, the self-invested personal pensions and small self-administered schemes provider, has warned advisers that the reporting to HMRC and the deducting of tax could now fall squarely on their shoulders, rather than it sitting with the platform or provider.

The head of the technical support unit at James Hay Partnership, Neil MacGillivray, told FT Adviser that the new rules would be likely to result in a “quick rethink by many providers and a speedy move to clean funds for all wrappers.”

“The biggest issue for advisers is noted in the detail of the papers and not contained in the bulletin. This refers to the fact that advisers could find themselves responsible for the deducting of tax and reporting of this if they hold the agreement with the client on the rebating of commission,” he said.

Mr MacGillivray went on to say that the agreement was “typically between the investor and the fund platform, although it can be as a result of an agreement between the investor and their adviser.”

Employee ownership option could offer tax break

Employers who sell their business on to employees could get a tax break under new proposals from Deputy Prime Minister Nick Clegg.

The Liberal Democrat leader has said he wants to boost the number of companies that are employee-owned and which follow a similar sort of model to John Lewis. Under the plans, employers who offer employees a controlling stake in the company could be eligible for lower levels of Capital Gains Tax – which is normally levied at the rate of 28 per cent when a business is sold.

Currently, employee-owned companies in the UK have an annual turnover of around £30 billion, which represents around three per cent of GDP. The Employee Ownership Association is working to increase this to 10 per cent of GDP over the next seven years.

Nick Clegg has been quoted as saying, “My goal in government is to help lay the foundations for a stronger economy and a fairer society and employee ownership helps do both.”

He added, “We know our economy needs to be rewired to properly assess and share risk, to properly motivate and reward workers and to think for the long term.”

UK businesses set to miss out on Patent Box tax break

A stagnating number of patent applications from UK firms has led to concern that too many innovative British companies will miss out on the Patent Box tax break which comes in next month.

While the number of patent applications submitted by UK firms flatlined just above the 15,000 mark in 2012, there was a 14 per cent increase in applications from foreign companies, from 6,916 to 7,865.

The Patent Box scheme was announced in 2011’s Autumn Statement and under the initiative, businesses can get a 10 per cent reduction in corporation tax on profits from patents.

HMRC’s website explains that to benefit from Patent Box, “Your company must own or exclusively license-in the patents and must have undertaken qualifying development on them. If your company is a member of a group, it may qualify if another company in the group has undertaken the qualifying development.”

Paul Joseph, intellectual property and technology partner at RPC, commented: “These figures show that foreign companies, which are unlikely to be able to benefit from the patent box, are being more proactive in registering their patents in Britain.” He warned, “The UK is in danger of falling behind.”