A recruiter, a pension administrator and a payroll services provider all avoided tax bills totalling £13.8m and face millions of pounds in fines from HMRC
During the month of November, HMRC identified £13.8m in unpaid tax by the businesses and individuals named in the quarterly deliberate defaulters’ list, £3.2m less than the £17m that was identified in the last quarter.
HMRC’s list names over 100 individuals and businesses who have failed to pay their taxes and been identified in the last three months.
In November, the level of penalties handed out amounted to £8m in total for outstanding tax evasion, as HMRC hammered down on deliberate tax defaulters.
At the top of the list of deliberate tax defaulters was a real estate agent who failed to pay a tax bill of £2,695,693 over a four-year period between April 2014 and 2018. Simon Karimzadeh, sole director of Euroland 3, now faces a penalty of £1,227,997 related to income from capital gains.
According to Companies House, Karimzadeh is listed as the director of Euroland 3 Limited, Euroland 2 Limited, and Euroland 1 Limited, which are all still active and trading. The companies buy and sell real estate.
Second place goes to a former technology consultant who failed to pay £993,729.79 in tax payments between April 2010 and 2019. Stephen Bernard Wheatley, former director of Westward Technology Limited and Qorbis Holdings Limited, received penalties amounting to £457,555.08.
In the meantime, a pension administrator failed to pay £729,596 worth of tax between April 2018 and 2020. Based in London, Avril Patricks Stewart Limited entered into compulsory liquidation in February 2011, and was fined £491,831.44 for unpaid tax by HMRC.
A recruitment and payroll service provider has been fined £533,270.96 for tax evasion over a two-year period. Arrow Logistics Ltd, based in London, failed to pay £627,377.61 in tax between April 2020 and 2022.
Bolton-based payroll services provider Ditto Payroll Ltd takes the fourth spot after not paying £542,238 worth of tax between April 2020 and 2022. HMRC handed the business a £515,126.31 fine and the group entered into a creditors voluntary liquidation in April 2021.
In addition, an international telecoms company called Akal Nation Limited based in London avoided paying £381,038 worth of tax between February and July 2019. HMRC handed the business a £220,049.44 fine.
Finally, a printing company based in Bradford avoided £359,358 in tax payments. A&S Printers was fined £211,122.66 by HMRC for tax evasion over a 10-year period, between May 2010 and July 2020.
UK crypto fraud totalled £226m in 2021-22, with almost half a billion pounds being lost to scams over the past three years, according to data from Action Fraud
Cases of cryptocurrency scams have surged by almost a third this year as fraudsters continue to rake in hundreds of millions.
The value of UK crypto fraud hit £226m in 2021-22, up from £171m in 2020-21 and £71m the year before, the data from Action Fraud revealed.
Around 10,030 reports on crypto fraud were made in 2021-22, up from 8,676 the previous year.
Law firm Pinsent Masons, which obtained the information, said despite the decline of many cryptocurrencies, small investors were still being charmed by ‘get rich quick’ schemes.
Hinesh Shah, senior associate forensic accountant at Pinsent Masons, said: ‘Whenever times are tough, fraudsters always seek to prey on less experienced investors by promising huge returns.
‘Given the huge sums which some crypto investors made during the boom, scams involving cryptocurrencies can be especially potent for smaller investors who may be desperate to make a ‘quick buck’.’
Many investors continue to lack the necessary skills and experience to tell a legitimate cryptocurrency investment from a fraudulent one, Shah warned.
Shah added: ‘People should always be cautious when they receive an unsolicited suggestion to invest, from sources which they don’t recognise. This is especially true when it comes to cryptocurrencies.’
The firm also warned of ‘rug pulls’ where developers of tokens steal funds raised from investors and ‘pump and dump’ scams where they create excitement around an asset and sell their holdings when the price rises, leaving investors exposed to any falls in value.
In addition, there are fraudulent initial coin offerings, where a new token being launched does not exist.
This follows after the collapse of the cryptocurrency exchange FTX and the resignation of its founder, Sam Bankman-Fried.
The crypto exchange, which was valued at $32bn (£26bn), filed for bankruptcy after a surge in withdrawals saw an $8bn black hole in its finances.
FTX currently owes around $3.1bn (£2.6bn) to its largest creditors after allegedly using customer funds to prop up its losses.
The threshold for the additional rate of income tax will be reduced to pull more top earners into the 45p tax bracket
The Autumn Statement reduces the income tax additional rate threshold from £150,000 to £125,140, increasing taxes for those on high incomes from 6 April 2023.
The threshold change will raise £420m in 2023-24, rising to £790m in 2024-25.
Chancellor Jeremy Hunt said: ‘We have tried to be fair by following two broad principles, by asking those with more to pay more. I have not raised headline rates of tax.
‘This means that those earning £150,000 or more will pay just over £1,200 more a year.’
At the same time, the thresholds for base rate and higher rate taxpayers will be frozen until 2028, a further two years added to current plans which will drag more people into higher rates of tax.
Rachel McEleney, associate tax director at Deloitte, said: ‘Those with income between £125,140 and £150,000 will pay an extra 5% income in excess of the new threshold. They will also lose their eligibility for the £500 personal savings allowance, resulting in extra tax on savings income of up to £225. These measures are expected to raise nearly £5bn over the next five years.’
Alex Davies, CEO and founder of Wealth Club said: ‘However necessary, this announcement is brutal for higher earners and investors.
‘Around 250,000 more people will be paying the top rate of tax, many allowances will be frozen until 2028 and the dividend and capital gains tax allowances are being slashed.
‘The good news is there are still plenty of perfectly legitimate ways you can reduce the tax you pay, from investing in pensions and ISAs to crystallising capital gains liabilities now rather than next year.’
Justine Riccomini, head of tax at ICAS said: ‘The Chancellor’s announcement that the 45p additional rate band for income tax will apply at £125,140 from 6 April 2023, instead of the current level of £150,000. This will not apply to Scottish taxpayers in respect of earned income, but will apply to interest income as tax rates are set at a UK wide level.’
The Autumn Statement set out a package of targeted support to help with business rates costs worth £13.6bn over the next five years
The business rates multipliers will be frozen in 2023-24, and upward transitional relief caps will provide support to ratepayers facing large bill increases following the revaluation.
From 1 April 2023, business rate bills in England will be updated to reflect changes in property values since the last revaluation in 2017.
The relief for retail, hospitality and leisure sectors will be extended and increased, and there will be additional support for small businesses.
Upwards transitional relief will support properties by capping bill increases caused by changes in rateable values at the 2023 revaluation. This £1.6bn of support will be funded by the Exchequer rather than by limiting bill decreases, as at previous revaluations.
The ‘upward caps’ will be 5%, 15% and 30%, respectively, for small, medium, and large properties in 2023-24, and will be applied before any other reliefs or supplements.
The 300,000 properties with falls in rateable values will see the full benefit of that reduction in their new business rates bill from April 2023.
Over the life of the three-year list the scheme will support around 700,000 ratepayers.
Support for eligible retail, hospitality, and leisure businesses is being extended and increased from 50% to 75% business rates relief up to £110,000 per business in 2023-24. Around 230,000 properties will be eligible to receive this increased support worth £2.1bn.
Rates increases for the smallest businesses losing eligibility or seeing reductions in small business rate relief (SBRR) or rural rate relief (RRR) will be capped at £600 per year from 1 April 2023. This is support worth over £500 million over the next three years and will protect over 80,000 small businesses who are losing some or all eligibility for relief.
This means no small business losing eligibility for SBRR or RRR will see a bill increase of more than £50 per month in 2023-24.
At Autumn Budget 2021 the government announced a new improvement relief to ensure ratepayers do not see an increase in their rates for 12 months as a result of making qualifying improvements to a property they occupy. This will now be introduced from April 2024. This relief will be available until 2028, at which point the government will review the measure.
Gerry Biddle, business rates lead at Deloitte, said: ‘The Chancellor’s package of benefits for business rate payers was surprisingly generous, amounting to savings of £14bn over next five years.
‘Hospitality, leisure and retail businesses will benefit from a further freeze of the current 50% relief before it increases to 75% with effect from 1 April 2023. It will be available for 12 months, capped at £110,000 relief per business.
‘A typical retailer occupying a unit of £60,000 rateable value will save £7,500 in the 12 months from 1 April 2023.’
Online sales tax abandoned
The government has also announced that it will not go ahead with the online sales tax due to its complexity.
The idea of an online sales tax was put forward by certain stakeholders to ‘rebalance’ the business rates bills paid by in-store retailers in comparison to their online counterparts.
The government’s decision reflects concerns raised about the complexity of the proposed tax and the risk of creating unintended distortion or unfair outcomes between different business models. Stakeholders also expected it would lead to higher prices for consumers.
‘Bringing in a brand new tax to remedy perceived unfairness in the business rates regime would have been a disproportionate way of addressing the challenges facing the high street,’ said the Chartered Institute of Taxation.
‘Introducing a tax that required all transactions to be deemed in or out of its scope, especially where borderlines exist such as goods versus services, business versus private consumers, and the nature of any exemptions or special rules, would have been hugely complex.
‘It has always been our view that online sales tax should not be seen as an alternative to wider business rates reform.’
Employees will see a cut in their National Insurance contributions this month following the reversal of the rise in National Insurance announced in April
National Insurance contributions rose by 1.25% in July for employees and employers under the new health and social care levy designed to raise up to £14bn to fund social care and deal with the NHS backlog following the Covid pandemic.
Following this, since the start of July, workers and employers have been paying an extra 1.25p in the pound.
However, the measure, which was introduced by Boris Johnson’s government, was reversed by former chancellor Kwasi Kwarteng in his mini Budget in September.
It is one of the few economic policies planned by Liz Truss and Kwarteng that has not been scrapped by new chancellor Jeremy Hunt.
The NI cut will be worth an extra £330 on average in 2023-24 affecting almost 28 million people across the UK, while 920,000 businesses will save an average of £10,000.
Working people across the UK will begin receiving the tax cut in their payslips this month via their employer’s payroll, though for some it could be December or January.
The reverse follows the rise in National Insurance thresholds in July, which aimed to lift 2.2 million of the poorest people in the UK out of paying the tax.
All workers earning over the annual national insurance threshold of £12,570 will see a fall in their national insurance bill in November compared to July. Above that level, the rate has gone back down from 3.25% to 2%.
Taken together, the higher thresholds and the Levy reversal means that almost 30 million people will be better off by an average of £500 in 2023-24.
Funding for health and social care services will be maintained at the same level as if the levy were in place.
HMRC will raise interest rates on tax debt from 22 November following the 0.75% increase in the Bank of England base rate
The current late payment and repayment interest rates applied to the main taxes and duties that HMRC currently charges and pays interest on are:
- late payment interest rate — 5.5% from 22 November 2022
- repayment interest rate — 2.0% from 22 November 2022
This means that the late payment interest rate will increase by 0.75% to 5.5% from 22 November 2022. The rate last increased to 4.75% on 11 October. This is the highest rate since the height of the financial crisis in January 2009.
Late payment interest is payable on late tax bills covering income tax, National Insurance contributions, capital gain tax, stamp duty land tax, stamp duty and stamp duty reserve tax. The corporation tax pay and file rate also increases to 5.5%.
The repayment interest rate will also be increased from the current 1.25% repayment interest rate to 2.0%.
Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments rises to 5.5%, up from 4.75%.
The interest paid on overpaid quarterly instalment payments and on early payments of corporation tax not due by instalments rises to 2% from 1.25%.
Government plans to tackle the fiscal black hole are likely to see inheritance tax (IHT) thresholds frozen until 2028
With the Autumn Statement scheduled for 17 November, the Chancellor Jeremy Hunt is set to freeze inheritance tax thresholds at the current £325,000 for the next six years.
Although only a small percentage of estates pay inheritance tax, it is an unpopular tax. IHT raised £6bn in tax year 2021/22, up from £5.2bn the previous year.
Unsurprisingly freezing the IHT threshold is on the menu for tax cuts; after all, it has not increased since 2008 when it was £312,000. The last increase to the residential nil rate band was in April 2020, when it went up to £175,000.
A recent YouGov poll commissioned by law firm Kingsley Napley LLP shows little support for the government bolstering tax take from IHT, despite the current pressure on public finances.
Two thirds (67%) of respondents to the poll on IHT opposed raising the current 40% rate, with only 16% in favour of a rise. A similar 63% supported raising the £325,000 threshold at which the estate of the deceased is required to pay the tax. However, 48% were in favour of abolishing IHT completely.
James Ward, partner and head of private client at Kingsley Napley LLP, said: ‘IHT is regarded by some as a double taxation given people already pay income tax during their lifetime and is often described as one of the most hated taxes.
‘Our survey results show attitudes on this are clearly not swayed by the current economic situation – a majority would oppose increasing inheritance tax rates and, further, even support the idea of raising the threshold at which IHT kicks in. If the government is tempted to tamper with IHT rules as part of the effort to plug the public finance gap, it may need to think again.’
Rising house prices have contributed to the hike in the number of estates caught by IHT.
Ward added: ‘Decades of house price growth across the UK has meant more and more households have found they fall into the threshold for paying IHT because the nil-rate band has been frozen since 2009. Whilst some have suggested the bands should be reviewed in line with inflation, downward pressure on house prices may go some way to ease the burden on tax payers without the need for regime change.
‘Whatever the future ahead for IHT, those in scope for paying it should take legal advice and ensure they have considered some form of planning.’
Steps lawyers may recommend to reduce IHT liabilities include:
• capital gifting: sizeable transfers seven years before death;
• income gifting: eg, contributing to grandchildren’s school fees or an offspring’s mortgage;
• exemptions: using all nil rate bands. Business relief in particular can lead to big savings;
• life insurance: arranging for this to be paid out to family members (insurance pays the tax);
• SKIing: spending the kids inheritance.