Contractors are being reminded to proceed with caution if ever they receive a phone call from someone purporting to be from HM Revenue & Customs (HMRC) insisting they need to pay an overdue tax bill.

The warnings come after several reports emerged earlier this month suggesting that bogus phone calls from fraudsters posing as HMRC officials were growing increasingly common across the UK.

Police crime watchdog Action Fraud has warned that scammers are cold-calling taxpayers and demanding immediate payments of several hundred pounds in order to settle bogus tax debts – while Police forces all around the country have reported instances where unsuspecting taxpayers appear to have been conned.

For example, Avon and Somerset Constabulary issued a warning over the bogus phone calls after an unnamed pensioner in the area purchased a number of iTunes gift vouchers worth hundreds of pounds after being pressured by a cold-caller purporting to be from HMRC.

Fraudsters had asked the gentleman to pass on these vouchers to a bogus HMRC representative, but fortunately, the unnamed man phoned the police first amid concerns that the scheme looked shady.

Similar reports have emerged this month in national newspapers such as The Sun and The Telegraph, suggesting that fraudsters have taken a liking to iTunes and similar gift vouchers in their scams due to their relatively untraceable nature.

In recent weeks, HMRC has issued a press release indicating that it has been successful in halting numerous scams before taxpayers are targeted.

However, HMRC’s successes relate solely to text message scams – and cold-calling scams appear to still be at large.

Contractors are reminded to think twice if they receive any unsolicited contact purporting to be from HMRC. If in doubt that unsolicited contact is real, they should consult HMRC’s guidance on how to spot genuine contact here.

As part of the global fight against tax evasion, the major world economies (aside from the USA) have agreed a system of annual automatic exchange of financial information about individual taxpayers’ bank accounts and other assets. This is known as the Common Reporting Standard (CRS).

The USA has it‘s own legislation called The Foreign Tax Account Compliance Act (FATCA) and international agreements based on this.

Reporting under the CRS started in 2017 for some countries and others will start reporting in 2018.

What does this mean for Cogent clients?

Many Cogent clients are Britons who have worked overseas for part of their career. Often they have had foreign earnings paid into a foreign bank account and, when they return to the UK, they have left the money overseas as a nest egg and not considered that there might be UK tax implications. After all, they have paid appropriate foreign tax on that money while they were not UK resident so it is nothing to do with the UK tax man – Right? – WRONG.

Other Cogent clients originate from overseas and, while working in the UK, continue to own income-producing assets in their home country. These might be shares producing dividends, interest-paying bank accounts or possibly rental income from letting out their home. If they are paying tax at home then it is nothing to do with the UK tax man – should be Right? – could be WRONG.

But some clients have their money in the Isle of Man/Channel Islands/Gibraltar – they are part of the UK, aren’t they? – WRONG.

These are all overseas territories – and penalties charged on previously-undisclosed tax liabilities will always be charged at the higher penalty rates that relate to overseas assets.

We have already had three clients approached by HM Revenue & Customs (HMRC) with the suggestion that they have failed to include income from foreign assets on their UK tax returns. In all three cases, it is apparent that these letters were based on actual information.  The clients did have overseas bank accounts, but did not appreciate that the income from them was taxable in the UK.

So, what should clients do?

If you are subject to UK income taxes but have not been including income from overseas assets on your UK tax return, you need to collect together information on your excluded income for the last several years and then take advice about whether you should voluntarily disclose this information to HMRC.

But if the tax authorities haven’t caught up with clients yet, why should they disclose this information now? – This is where the Requirement to Correct (RTC) comes in.

This is a new requirement written into tax law from 2017 which obliges anyone with undisclosed UK tax liabilities involving overseas assets or funds to notify HMRC by 30 September 2018.  Failure to disclose the appropriate information by 30 September will result in being liable to significantly higher penalties than apply at present. Currently, the penalties could be as low as 20 per cent of the tax (on top of the tax and late payment interest). In comparison, penalties for liabilities notified after 30 September are likely to be at least 100 per cent of the tax (on top of the tax and late payment interest).

From 6 April 2018, the existing tax-free dividend allowance of £5,000 will be reduced to £2,000, it has been confirmed.

The measure, which is intended to “ensure that support for investors is more effectively targeted and that the total amount of income they can receive tax-free is fairer and more affordable,” will be widely felt by all individuals with a dividend income above £2,000 – who will now be taxed on this income.

The Government has estimated that the change will affect some 2.27 million individuals in 2018 and 2019 – however, it is thought that some two thirds of all those who enjoy dividend income will not be affected.

Further information about the change can be accessed on the GOV.UK website here.

Once the changes have taken effect, the first £2,000 of dividend income will be exempted by an allowance and taxed at zero per cent. However, the remaining dividends will be taxed at the individual’s appropriate tax rate, unless these are covered by their personal allowance.

Previously, when it comes to dividends, many contractors have benefitted from remuneration strategies – such as accepting a low salary up to the National Insurance (NI) threshold or their personal allowance, and then accepting the remainder of their income in dividends.

This approach can prove to be tax-efficient, as dividends do not attract NI. However, with the dividend tax free allowance falling drastically from £5,000 to £2,000 next month, such simple tax-planning strategies may prove difficult. Due to this, contractors would be better placed to seek specialist advice in relation to tax planning going forward.

In recent days, rumours have emerged that the Government’s intended extension of new IR35 rules to the private sector could be delayed until at least 2020, after Chancellor Philip Hammond failed to address the issue in his Spring Statement announcements on Tuesday 13 March.

Previously, the contracting community was expecting the Chancellor to confirm that an extension of the new off-payroll rules to the private sector would be introduced in April next year.

However, the Chancellor’s Spring Statement contained no updates on the proposals.

Furthermore, an excerpt from policy papers delivered on the day in relation to the new Budget timetable suggests that the Government is effectively ‘running out of time’ to legislate the intended change in time for April 2019.

Commentators have noted that realistically, a consultation needs to be launched within a matter of weeks in order to guarantee enough time for full consideration of the reforms.

Meanwhile, contractors in the private sector are hopeful that the news will see any potential legislative changes delayed until at least 2020.

In addition, commentators have said the Spring Statement’s omission of an update might be indicative that lobbying efforts spearheaded by campaigners and contracting bodies might be having some weight on the Government’s policy-making decisions.

A petition recently launched against an extension of the new off-payroll rules to the private sector has so far gained more than 15,000 signatures. This petition can be accessed here.

What do Betamax, a Donald Trump Board game and the Nokia N-Gage have in common? The answer – they are all exhibits at a brand new museum known as ‘the Museum of Failure’.

Previously located in Sweden, as many as 100 bemusing reminders of forgotten products and failed business ideas have all been shipped to Los Angeles this year to go on display in a truly one-of-kind museum.

The Museum of Failure will contain original examples of long-forgotten product flops such as Colgate-branded lasagne, pink Bic pens ‘aimed at women’, Harley Davidson aftershave and more.

Originally collected by prominent psychologist and innovation researcher Dr Samuel West as part of a research project into corporate success, the museum hopes to provide it‘s visitors with “a new perspective on failure.”

Dr West, who is acting as the museum’s curator, said: “At large, as a society, we are too obsessed with success and underestimate failure.

“I started the Museum of Failure out of frustration – it’s time we accept failure, learn from it, and truly achieve progress.

“I am thrilled to bring the hilarious, yet impactful memories of these colossal flops to Los Angeles.”

The museum’s opening date is yet to be confirmed.

By the time Chancellor Philip Hammond rose to his feet in the House of Commons to deliver the first Spring Statement, he had already offered plenty of hints that this would be a low-key affair.

Gone was the primetime Wednesday slot after Prime Minister’s Questions, gone was the trailing of policy announcements in the days and weeks beforehand and gone was the set-piece photo call with the red box outside Number 11.

This was all carefully orchestrated. Mr Hammond could not have been clearer that there were to be no rabbits pulled from hats.

In line with the move towards a single fiscal event each year, this was to be a straightforward response to the Office for Budget Responsibility’s (OBR) updated economic forecasts, dispensing with the usual drama of Budget Day.

Indeed, Mr Hammond may well be relieved that he does not need to deliver a Budget until the Autumn. A year ago, his first Budget was widely seen as disastrous for the Government, with the Chancellor having to quickly backtrack on heavily-criticised tax rises for the self-employed, providing helpful ammunition for the opposition at the subsequent general election.

Nevertheless, being the first of its kind, the Spring Statement was still something of an unknown quantity and the business community was still curious to see what he might have to say as they waited for the cheers and jeers to quieten in the Commons.

As it turned out, the Chancellor stuck to his guns, saying at the start of the speech that the UK had been unique amongst major economies in making tax changes twice each year. He added the move to a single fiscal event is intended to give greater certainty to business.

• The Economy
• The Public Finances
• Business measures
• Consultations
• Summary

The Economy

There was a strong emphasis on jobs in the Chancellor’s assessment of the state of the UK economy. He noted that the wages of the lowest paid have increased by seven per cent since 2015 and that there are three million more people in work since 2010. He told MPs that the OBR now predicts 500,000 more people will be in work in 2022.

The OBR revised up its GDP growth forecast for 2018 from 1.4 per cent to 1.5 per cent. This is then predicted to remain in line with previous predictions at 1.3 per cent in 2019 and 2020, before rising to 1.4 per cent in 2021 and 1.5 per cent in 2022.

Following the recent rise in interest rates, the OBR now expects that inflation will now return to its two per cent target over the next year, while wages are expected to rise faster than prices over the next five years.

The Chancellor said figures show that the manufacturing sector has enjoyed its longest period of expansion for half a century.

The Public Finances

Moving to the state of the public finances, the Chancellor noted that the UK has now had its first sustained fall in public sector debt for 17 years, saying that this represents a ‘turning point’ for the economy.

Debt as a percentage of GDP is expected to fall from 86.5 per cent in 2018-19 to 77.9 per cent in 2021-22.

Meanwhile, borrowing is now forecast to be £45.2 billion in 2018, £4.7 billion less than had been predicted by the OBR in November 2017.

In the wake of what he was eager to present as positive predictions, the Chancellor said that he is on course to increase public spending at the Autumn Budget, so long as the OBR’s predictions for the public finances are borne out.

Business measures

Mr Hammond said he was keen to support British business, before promising that the next business rates revaluation exercise will be brought forward by one year to 2021, meaning rates will better reflect current rental values.

He also said that there will be a review of how to tackle the problem of late payments, which are seen as an ever-increasing problem for SMEs in particular.

Continuing the theme, and appearing to go against the suggestion that there would be no spending commitments in the speech, Mr Hammond said the Education Secretary will make up to £80 million available to small businesses to take on new apprentices.

Consultations

As had been widely expected, Mr Hammond took the opportunity to announce a number of consultations on the future of the tax system.

Top of the Chancellor’s list was a consultation on ‘Reducing single-use plastic waste through the tax system’. He said the Government is inviting views on how to tackle the problem of plastic waste through the tax system.

He also set his sights on large multinational digital businesses, publishing a position paper on ‘Corporate tax and the digital economy’, including measures relating to VAT.

Maintaining the focus on the digital economy, the Chancellor announced a consultation on the role cash will play. He said the Government will seek views on how to support consumers and businesses to use digital payments, while ensuring those who need to can continue to use cash. The consultation will also seek views on the use of cash in tax evasion and money laundering.

Meanwhile, the Chancellor also said that the Government would consult on extending tax relief for employees and the self-employed who fund their own training.

Although not mentioned in the Chancellor’s speech, the hours following the Statement also saw the Treasury publish a consultation into the VAT registration threshold, suggesting that the current flat threshold disincentivises businesses from pursuing growth.

Summary

One of the biggest advantages a politician has in Government is the ability to set the terms of the political debate and to mark where the dividing lines should fall.

That is what the Chancellor appears to have aimed for with his first Spring Statement. He made a clear statement of intent on the Government’s direction of travel on tax and spending by hinting at spending increases in the Autumn Budget.

Much of the debate in the coming months is likely to revolve around the question of who should benefit from any increases.

So while there were no specifics on tax and spending for businesses to take away from the speech, there were important indications about what may be to come for businesses and the economy.