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Wednesday, 16 April 2014

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If the taxman comes calling there are very few treats

It is the time of year when we offer goodies on the doorstep to groups of children dressed up as wizards and witches.

In a sense this is a sort of taxation which is demanded to ward off evil spirits or the like.

Real taxation is also being presented a bit like that. Demands are made for money by the Chancellor’s agents in HM Revenue & Customs (although they do not generally get dressed up) in the hope that we will be able to fend off the sort of financial nightmare that has engulfed Greece and threatened other southern Eurozone countries.

This month we are told that we are out of recession, but I am afraid that does not mean that taxation is about to reduce any time soon.

Indeed, we can expect that the Chancellor’s Autumn Statement, which will be delivered before the end of this year, will include an announcement that tax receipts have not been as high as he hoped this year and that borrowing will be higher than predicted.

Headline tax rates will not necessarily go up; the Government will have to make a judgement on the balance between increasing taxes and cutting spending – or maybe accepting that borrowing will rise for now.

Those are political judgements and I do not propose to comment on them here but it is clear that HMRC will be tasked with collecting every penny they can under whatever tax regime we have.

In the coming year we will see a new anti-avoidance regime which is intended to stop “unreasonable” artificial (but legal) types of tax planning.

Potentially, that could be a major earner for the treasury but we will have to see.

Right now we are also seeing a crack down on tax evasion. This is different to avoidance in that it is undeniably illegal.

Interestingly, HMRC say they are adopting an approach aimed at gathering in the biggest yields for the investigation time spent.

That seems to make sense if that is what they are doing but, in practice, they seem to be picking on different occupations or situations in turn and having a campaign before moving on to the next one.

Doctors and dentists have had their turn and internet traders have also been in the firing line.

The next round of targets will be higher rate taxpayers with investment incomes.

The theory is that many are not paying enough tax on their investments.

More and more people are becoming higher rate taxpayers as the threshold has not been increased.

HMRC expects to pick this up through a closer examination of self-assessment tax returns and see if there is back tax owing for earlier years. Of course, not everyone receives a return but more of us will in future.

Indeed, the new provisions starting in January to claw back child benefit from those earning over £50,000 will mean many more returns issued.

If you might be affected seek advice now.

It can be expensive to wait for the brown envelope to arrive from HMRC!

For further information on tax matters call Armstrong Watson on freephone 0800 195 2161 or email moneytalk@armstrongwatson.co.uk.

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