By Maximilian Clarke

Richard Godmon, tax partner at Menzies LLP, provides a digest of the latest tax policy developments at HMRC.

HM Revenue and Customs (HMRC) has turned the spotlight on two new groups as part of the government’s ongoing campaign to raise additional tax revenue.

HMRC targeting owners of overseas property
The latest group to be singled out are people who own land and property abroad. HMRC is targeting taxpayers with undeclared income and gains as part of its £900 million tax investigation programme.

They will search public records to identify taxpayers who own property overseas and will compare the results against its own records. They are trying to identify taxpayers who:

Have overseas property but don’t appear to be able to legitimately afford to own it
Are renting out overseas property and not declaring the profits
Have sold an overseas property and not declared the capital gain

Richard Godmon says: “HMRC’s approach is to put people on the spot. It will ask you to confirm that you either received no income or capital gain from the property, or that you have failed to disclose it. The penalties for unprompted disclosure are lower. So it is always better to take the initiative and approach HMRC to disclose any irregularities rather than wait to be contacted.”

HMRC threat to schools and colleges
A new government programme to claim unpaid tax from self-employed tutors and coaches could create havoc for schools and colleges. We have learned that HMRC is issuing enforcement notices to schools and colleges demanding that they supply details of payments to non-PAYE workers.

These notices, known as Section 16 notices, oblige organisations to supply details of payments for services that are made gross to persons other than employees — such as private tutors and coaches. Schools and colleges cannot ignore these notices, as failure to comply within the timescale will result in penalties.

Richard Godmon says: “Schools and colleges rely heavily on contract and agency staff. We are concerned that this exercise will lead to a wider review of the employment status of workers, which could be a problem for employers if they are incorrectly treating people as self-employed.

“When it has details of private tutors and coaches, HMRC will cross-check this against declared income and tax records. Clearly HMRC is suspicious that people undertaking private coaching, instruction or tuition are not declaring this income.

“The government is yet again using the carrot and stick policy — with the carrot being the promise of reduced penalties to encourage early participation. The stick on this occasion is particularly unpleasant — being the threat of substantial penalties and even criminal prosecution for those who fail to come clean.”

To take advantage of the facility, you need to register your intention to disclose by 6 January 2012. The deadline for the disclosure itself and payment of the tax, interest and penalties is 31 March 2012.

Anyone who thinks they may be affected should seek advice before responding to HMRC.

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