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Tax update week ended 17 September 2010

20th September 2010

Naming and Shaming

The ability to “name and shame” is one of HMRC’s most controversial powers.

4 conditions must apply:

1. After deliberately evading tax, the individual has suffered at least one penalty.

2.The penalties relate to wrongdoing, tax returns and VAT returns for periods after 1 April 2010.

3.The underpaid tax is £25,000 or more.

4.The individual has not fully co-operated, hence HMRC levied more than the minimum penalty.

As above, the new powers relate to periods after 1 April 2010. However, some people are complaining of receiving letters containing reference to “name and shame” in opening enquiry letters with respect to earlier years. This could be construed as a threat and is wrong in any case.

If you receive a letter like this please note that HMRC has a complaints procedure and that complaints are recorded.

Making publically available deliberate defaulters’ details

Factsheet CC/FS13: Publishing the details of defaulters

How to complain to HM Revenue and Customs

Updated complaints manual

VAT repayments: DIY builders

This is an uncommon scheme. However, if you are building your
own home or converting a non residential building into a home, you may find this scheme useful.

The objective of the DIY scheme: treating the DIY builder the same as a VAT-registered housebuilder i.e. reclaim VAT on materials and most labour/services (but not accountants/architects fees). However, if the VAT was incorrectly charged in the first place, this cannot be reclaimed.

Mr J Frost discovered this last point to his cost as he tried to recover the costs of his barn conversion, which included some VAT incorrectly charged at 17.5% rather than at 5%.

He had relied on information sent to him on 14 June 2002, but in fact the law had changed a month earlier i.e. the 5% rate was brought in for residential conversions.

Mr Frost took the case to tribunal, who rejected his reclaim although they were sympathetic. The suppliers were also blocked from reclaiming the difference between 5% and 17.5% VAT as the invoices were over 3 years old.
The relevant claim forms are VAT 431C, VAT 431NB and the accompanying notes listed below. Please note that the claim form must be registered within 3 months of the completed
of the construction work.

J Frost case

Claims (conversions): VAT 431C

Guidance on DIY conversions

Claims (new builds): VAT 431NB

Guidance on DIY new builds

Address changes

From 1 September 2010 tax correspondence for UK resident trusts should now be sent to the Trusts Office in Nottingham. The previous office (Truro) will still deal with compliance and correspondence for non-resident trusts only.

All new IHT forms – C1 Inventory and IHT400 Inheritance Tax account – should now be sent to the Nottingham office also.

If you move house, notifying HMRC is probably not on the top of you to-do list. However, you may miss important correspondence (e.g. tax coding notices which no longer go to your agents). Also, you may elect your new home as your principal private residence (Capital gains tax exemption) even if you own more than one residence.

It is an extremely worthwhile exercise completing the new online form telling HMRC about your new contact details. This will update them on (amongst other taxes)

* PAYE & Nic
* Income tax
* Self assessment
* Child Benefit
* Student loan
* Tax credits

Trust Office addresses

Changes to your name or address

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“This information is taken from Mark Lee’s weekly practical tax newsletter, published by the Tax Advice Network”