Companies House given powers to tackle fraud
Companies House has begun a phased rollout of new powers to improve the quality and reliability of its data and clamp down on abuse of the companies register
The register is used 14 billion times a year and the new rules are designed to ‘improve the quality and reliability of the register. Cleaning up the register will not happen overnight but it will enable us to improve transparency,’ Companies House said. ‘We will use data matching to check the company details and we will do more and more as time passes.’
Most of the changes require significant IT investment and will take place over a number of years with a need to hire more specialist investigators. Companies House has already heavily invested in data science capabilities so they can be ‘ahead of the curve in terms of our future capabilities. We recognise that technology is changing all the time and we have to keep pace with that’.
The organisation has grown quite dramatically in the last year with the recruitment of over 160 people, and plans to take on another 60 over the next few months to deal with the rollout of identity verification using the new Gov.uk One Login, which is replacing Government Gateway accounts.
Down the track, Companies House will introduce compulsory identity verification in 2025, as well as streamlining accounts filing requirements for small companies to require all companies to provide profit and loss accounts, a director’s report where accounts are not audited, and no more abridged accounts from 2026.
A timetable for these changes has not been announced but they are expected to come in over the next two to three years. The measures will require secondary legislation through a number of statutory instruments.
‘This large and complex set of changes will be introduced in phases over the coming years,’ Companies House said.
The first measures under the Economic Crime and Corporate Transparency Act 2023 (ECCT Act) came into force on 4 March.
Companies House currently has quite limited powers to question information – under the new rules, it will be able to take a much more robust approach, and will be able to query information already on the register. This will see officials at the registry challenging any inconsistences from new and existing entries on the register, for example, if a company has unusually high share capital, or directors registered at other addresses, then this will be investigated.
The most significant changes include greater powers to query information and request supporting evidence, more robust checks on company names and the ability to remove factually inaccurate information.
In future, companies will not be able to use a PO Box as their registered office address and must have an appropriate address at all times.
Companies House has written to a few thousand companies telling them to change their addresses as they are currently using PO Box numbers.
All companies will also have to supply a registered email address although this will not be published.
There will also be a requirement for subscribers to confirm they are forming a company for a lawful purpose when they incorporate, and for a company to confirm its intended future activities will be lawful on its confirmation statement.
In terms of powers to target criminal abuse of the register, Companies House will also be able to share information more proactively with other government departments, including HMRC, and law enforcement agencies.
Some of the fees for sharing the information with law enforcement have been removed and Companies House is already sharing trust data from the register of overseas entities with other departments, which is proving to be a ‘really rich resource of data especially for HMRC’.
This means that Companies House will be able to ‘share data to help disrupt economic crime. We will be much more proactive and will help UK’s drive to tackle economic crime. We have received funding to increase capabilities in this area and have hired more investigators’.
The new powers to investigate entries are similar to powers for monitoring the Register of Overseas Entities.
There will also be new criminal offences and civil penalties for failure to comply with the rules.
Companies House CEO Louise Smyth said: ‘These new and enhanced powers are the most significant change for Companies House in our 180-year history.
‘We’ve known for some time that criminals have misused UK companies to commit fraud, money laundering and other forms of economic crime.
‘As we start to crack down on abuse of the register, we are prioritising cases where people’s names and addresses have been used without their consent. It will now be much quicker and easier to report and remove personal information that has been misused. This will make a real difference to individuals.’
From 1 May 2024, Companies House will also increase fees to take new future expenditure into account, as well as making sure costs are recovered from existing expenditure.
This is the first phase of measures to improve corporate transparency, with further legislation required to enforce new reporting rules for smaller businesses with the introduction of mandatory profit and loss accounts, and end of abridged accounts, , and the new failure to prevent fraud offence.
Vincent Billings, partner in the corporate and commercial team at SA Law, said: ‘The aim is to create better transparency and remove the presence of so-called ‘Mickey Mouse’ companies. But this is a source of anxiety for many company directors, who are worried about being caught in a position where they have failed to comply with the new laws.
‘There are other major changes to be expected later down the line – including a new ‘failure to prevent fraud’ offence, which means directors could be held liable for failing to prevent fraud committed by a member of staff, or a business or individual they’re associated with.
‘With consequences including financial penalties and potentially even prison sentences, it is vital directors are up to speed with the changes and seek appropriate advice if they’re unsure about anything.’
The new rules are meant to crack down on kleptocrats, criminals and terrorists who abuse the current open economy.
Business minister Kevin Hollinrake said: ‘Companies House now has the tools to take a much harder line on criminals who take advantage of the UK’s open economy and can now ensure the reputation of our businesses is not tarnished by the UK playing host to the world’s scammers.
‘The new reforms provide further protection to the public from companies fraudulently using their address and will begin to remove the smoke and mirrors around companies hiding behind false information.’
- Published in Fraud
HMRC to replace Government Gateway accounts with One Login
The government is investing £305m in a single login system for taxpayers and agents using online services such as HMRC with the launch of GOV.UK One Login
The new login service has two factor authentication and will be rolled out across all government web services to replace Government Gateway accounts over the next three years.
The project is being led by the Cabinet Office with HMRC one of the first government departments planning to roll out the service.
In future, users will only need a single login to access all central government services, rather than remembering multiple accounts and passwords. Gradually, over time, One Login will replace all existing login and identity checking platforms across central government. Government Gateway is over 20 years old and was first introduced in January 2001.
The Cabinet Office said: ‘The GOV.UK One Login programme as a whole has a cost of £305m, which includes development, implementation, running the system and support for users and services. This is over a three-year period and will see up to 145 services from across government join by March 2025’.
In a bid to prevent fraud, One Login includes two factor authentication, which requires users to set up their account with a code used in addition to the password, for secure logging in.
When a user proves their identity using GOV.UK One Login, there will be sophisticated counter-fraud measures in place to ensure they are who they say they are.
GOV.UK One Login will improve digital inclusion by offering multiple ways for people to prove their identity – including those without photo documentation (like a passport or driving licence) – and access government services online, the Cabinet Office confirmed.
As the rollout is expected to be completed within a year, there will be pressure to transfer millions of Government Gateway individual users to the system.
In a statement, HMRC said: ‘From Spring 2024, HMRC will begin to invite individual customers without existing HMRC online sign-in details to create a GOV.UK One Login account. There will then be a gradual migration of existing Government Gateway customers starting with very small and controlled numbers.
‘HMRC is still in the private testing stage, so precise dates are yet to be confirmed.
‘Initially, only a small number of users will be able to access HMRC services through GOV.UK One Login, with volumes building gradually over time. There will be no sudden switch-off of the Government Gateway service.
‘This measured approach is designed to ensure a high-quality experience for users.’
It is important to note that HMRC will contact individual taxpayers to advise them to migrate.
HMRC stressed: ‘Existing Government Gateway users will be informed when they need to create a GOV.UK One Login account to replace their Government Gateway – they don’t need to contact HMRC.’
‘It will not happen for everyone at the same time, and you do not need to do anything unless we ask you to.
‘You do not need to do anything differently to access HMRC online services, until we prompt you to.’
The scheme is projected to deliver at least £700m of benefits by April 2026, the Cabinet Office said.
This spring, users new to HMRC will have to set up a new GOV.UK One Login. Later in the year, all users returning to HMRC services will be directed to use One Login, rather than Government Gateway.
Agents will continue to use Government Gateway to access their services for the time being and HMRC has not yet finalised details of how the agent rollout will work and the timetable.
Once the system is fully operational, the full range of HMRC and wider government services will be available online through the single login, including income tax, student loans, and Universal Credit, which are currently available through Government Gateway.
At the moment, there is simply a list of links to other pages on gov.uk sites, including find a grant, apprenticeship assessment service and basic DBS checks.
HMRC has issued initial guidance on the new login, stating that ‘GOV.UK One Login is a new way of signing in to government services. It provides a simple way for you to sign in and prove your identity using an email address and password’.
Over time it will replace all other sign in routes including Government Gateway that many customers and businesses currently use.
Going forward, anyone accessing government services online, including HMRC, will automatically be asked to create a GOV.UK One Login.
The One Login service will have to be used by accountants and tax agents although full details of how these accounts will interact with client accounts has not been published.
HMRC confirmed: ‘If you’re a tax agent, or an organisation with a business tax account, you will continue to use Government Gateway until you’re asked to create a GOV.UK One Login.’
There is a new authorisation and identity verification process to sign up to the One Login, which means you will need to have some identification documents such as a passport or driving licence to complete the application.
Users will have to input an email address and include the preferred method to get security codes, either via a mobile number or an authenticator app.
Once you start the registration process, HMRC first checks your email address by sending a six-digit security code to verify the email.
Once an account is created, the system will send security codes to verify identity via text message or authenticator app for mobiles, tablets or computers. Then users can access their account via https://www.gov.uk/account
- Published in HMRC
Warning not to pay tax late due to 7.75% interest rate
Taxpayers are being warned to pay any tax due by the 31 January deadline as HMRC interest rates hit their highest rate for more than 20 years
The interest for not paying self assessment tax on time has been charged at 7.75% since last August and penalties accumulate for late payment.
The self assessment tax deadline is rapidly approaching and if any outstanding assessments are not paid by 31 January charges can quickly mount up, warn accountants at Blick Rothenburg.
Through 2023 the late payment charge increased from 6% on 6 January to a high of 7.75% on 22 August 2023.
In April 2020 the late payment interest rate was just 2.60% then went up to 2.75% in January 2022 when the Bank of England raised the base rate. There were a further eight increases in 2022 to 5.50%.
January 2023 saw a further increase to 6%, with five increases last year to the current high of 7.75%. This is the highest rate since it was 7.5% in May 2001.
Stefanie Tremain, tax partner at Blick Rothenberg said: ‘If any tax due by 31 January 2024 is not paid in time, HMRC will charge interest. Currently at a rate of 7.75% per annum, from the due date to the date of payment.
‘In addition, a 5% penalty will be charged if the 2022-23 balancing payment is not paid within 30 days of the due date, with an additional 5% penalty charged if the tax remains outstanding after six months and 12 months.’
Tremain advised that taxpayers should ‘consider making an estimated payment’ to avoid additional charges, even if it is not exactly correct at the time.
Filing a return after midnight on 31 January will result in a penalty of £100, then after three months a £10 a day penalty kicks in until the payment is made. This can go up to a maximum of £900.
Tremain said: ‘If your tax return remains outstanding after six months, a tax geared penalty will be charged at the rate of £300, or 5% of your overall tax liability if that is higher.
‘If your return is over 12 months late, another £300 (or 5% of the overall tax liability if greater) penalty will be charged.’
However, there are some excuses HMRC consider to be reasonable for filing late. These include a relative passing away close to the deadline, you were in hospital or had a life-threatening illness, your computer broke, HMRC services were down and lastly, a fire, theft or flood stopped you from being able to complete the return.
Amendments to a tax return can be made to a tax return up to 12 months from 31 January 2024, although you will be charged interest if it was underpaid.
Tremain said: ‘You could, however, amend your return if you realise you have missed a relief you are entitled to, such as relief for Gift Aid donations or pension contributions, which means you may be due a tax refund.’
A Time to Pay arrangement can be set up if individuals are struggling to pay their bills but ‘such arrangements are specific to each taxpayer and will depend on your own individual position as to whether HMRC agree to a Time to Pay and, if they do agree, what the terms will be,’ Tremain added.
- Published in Self Assessment
3.8m self assessment tax returns still to be filed
One in four taxpayers still have to file their annual tax return or face a £100 penalty with only one week to go until the self assessment deadline
HMRC has warned that 3.8m people still have to file their tax return by 31 January, up on last year’s figure of 3.4m at the same date. An estimated 12.1m taxpayers have to file under self assessment rules, and so far 8.3m have filed online for the 2022-23 tax year.
It is important to file by the deadline or face an automatic £100 penalty, which was paid by an estimated 2.7m taxpayers last year.
Dawn Register, head of tax dispute resolution at BDO said: ‘There could be tens of thousands of people who will have been drawn into the self assessment tax net for the first time in the 2022-23 tax year. Many may be unaware of their obligations to file a tax return before 31 January 2024 and could run the risk of penalties.
‘These new filers could include parents claiming child benefit whose salaries crossed the £50,000 threshold for the first time in the 2022-23 tax year and who will have to repay some or all of their benefit through the high income child benefit charge.
‘They might be higher earners whose salaries topped £100,000 or pensioners who earned more than their savings allowance because of rising interest rates. Alternatively, they could be working people whose side hustle earnings were above £1,000 during the tax year.’
Due to pressure on HMRC phone lines, the availability of call agents has been reduced and only complex enquiries will be dealt with over the phone. All other enquiries will be directed to HMRC’s online services.
Myrtle Lloyd, HMRC’s director general for customer services, said: ‘If you are a self assessment taxpayer, now is the time to take action and get your return done. People can familiarise themselves with the process by checking out HMRC’s online resources on gov.uk.’
For anyone unable to pay outstanding tax in full, it is possible to set up a time to pay arrangement online, without speaking to HMRC, if less than £30,000 is owed.
When completing a return, it is important to ensure bank account details are included, so that if HMRC needs to make a repayment, they can do so quickly and securely without needing to issue a cheque.
The penalties for late tax returns are:
• an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time;
• after three months, additional daily penalties of £10 per day, up to a maximum of £900;
• after six months, a further penalty of 5% of the tax due or £300, whichever is greater;
• after 12 months, another 5% or £300 charge, whichever is greater.
HMRC will consider a taxpayer’s reasons for not being able to meet the deadline. Those who provide a reasonable excuse may avoid a penalty.
There are also additional penalties for paying outstanding tax late. These are 5% of that unpaid at 30 days, six months and 12 months. Interest will also be charged on any tax paid late.
It is important to let HMRC know of any changes to personal details or circumstances, such as a new address or name, or if you have stopped being self-employed or your business has closed.
Anyone who thinks they no longer need to complete a self assessment tax return for the 2022 to 2023 tax year, should tell HMRC – so that they can issue a withdrawal notice – before the deadline on 31 January 2024 to avoid any penalties.
Customers need to be aware of the risk of falling victim to scams and should never share their HMRC login details with anyone, including a tax agent, if they have one.
- Published in Self Assessment
HMRC stops sending self assessment repayment letters
HMRC will no longer send out letters in the post advising taxpayers of self assessment repayment notifications, claiming they simply caused confusion
The change was announced on 7 December and came into effect immediately affecting notifications about all Bacs self assessment repayments.
This will affect tax advisers and individual taxpayers. Instead of a letter, HMRC will send out a digital confirmation although this will not start immediately as the IT system has to be updated to handle the change.
In an update to accountants and tax advisers, HMRC said: ‘We’re changing how we let you and your clients know we’ve issued a SA Bacs electronic repayment. There is no change to the repayment process itself, so customers will still receive any monies owed to them through their bank as normal.
‘We’ll no longer send a letter informing you or your client of an SA repayment. We often find these letters arrive after the repayment has been made leading to confusion and increased contact from customers.
‘We are making improvements to our IT systems in relation to SA repayments, so we are also temporarily pausing digital notifications from 7 December 2023 while we do this. We’ll let you know when these notifications are reinstated.’
HMRC has clearly judged that the volume of calls about repayment issues is too high and sees this as an area where it can reduce costs. The end of letter communications should reduce pressure on limited resources in call centres, while also saving on the cost of producing letters and postage.
Accountants and individual taxpayers will still be able to view repayment transactions through HMRC online services. The information will be available in agents accounts, where agents can review transactions for their clients. Individuals will be able to access their HMRC online account to review any transactions and can also sign up to receive digital notifications, although this service is currently suspended.
The end of repayment letters was announced at the same time as HMRC seriously curtailed the use of self assessment helplines in the run-up to the tax return season. This will see HMRC call handlers only dealing with the most complex enquiries, while all callers will be met with a message stating that the majority of queries can be handled online on HMRC’s website. They will also be sent a text message, if they have called on a mobile, advising them where to find the information requested.
The reduction in helplines will also hit accountants, with the agents dedicated line handling only the most complex queries during the self assessment season, while HMRC call handlers will not deal with any PAYE-related questions until February.
Accountancy bodies criticised the move, pointing to a major resource issue at HMRC, which has seen a number of service cuts in recent months.
John Barnett, chair of CIOT’s technical policy and oversight committee said: ‘We are concerned that in practice many of their customers will be unable to navigate HMRC’s digital services and will simply give up.
‘Previous trials to limit calls to complex queries, or diverting people to online services, have proven either troublesome or inconclusive.’
- Published in HMRC, Self Assessment
Selling an unwanted Christmas jumper? Watch out for tax trap
Digital platforms like eBay, Vinted and Airbnb will have to report seller data to HMRC from January giving the tax authority access to unparalleled information, warns Miruna Constantin, tax manager at RSM
Are you one of the millions of UK individuals selling second hand clothes on digital platforms? Whether you’ve been caught by the Marie Kondo urge to declutter and detoxify your wardrobe, or have a side hustle on platforms such as Vinted, Vestiaire Collective, eBay or Etsy, HMRC will be keen to find out more about potential untaxed income.
Vinted has over 8m registered sellers in the UK with some users claiming they have turned selling second hand clothing into a full-time job and thanks to new information powers HMRC will start to know about that income.
From 1 January 2024, digital platforms will have to start collecting seller data and pass that over to HMRC to match against taxpayers’ records to make sure people report the right information on their tax returns.
The measures also impact those renting out properties on Airbnb (among other platforms) or people selling their services online, and these platforms have been warned to brace themselves against landing in hot waters with HMRC.
The first reporting deadline for online platforms will be 31 January 2025 and to meet these requirements they will need to implement new ways of collecting seller information so that HMRC can match and verify it against taxpayers’ records to make sure individuals are correctly reporting their income on their tax returns.
There will be hefty fines and penalties for failing to submit reports or submitting ‘inaccurate, incomplete, unverified sellers’ records’ so the platforms will be incentivised to ensure they meet their reporting obligations.
If you are an occasional seller receiving no more than £1,700 for fewer than 30 sales in a reporting period, your information is not required to be provided to HMRC. However, that doesn’t mean you do not have any tax reporting obligations.
Depending on whether you have a profit-seeking motive (for example, some online platform users buy premium items from outlets and then sell them at a profit online), the number of transactions you make, or the nature of the assets you sell, your little side hustle might be seen as trading.
In this case a self-assessment tax return will need to be filed with HMRC and income tax and National Insurance contributions paid accordingly. If you make sales of £1,000 or more in a year, you will need to consider whether a tax return is required.
The good news is the information collected by platforms must be shared with HMRC as well as with sellers, which should help taxpayers get their affairs right. It could however bring a whole new raft of unaware individuals within HMRC’s reach and could make some taxpayers think twice about their wardrobe spring clean.
Considering the fast approaching deadline, digital platforms need to be ready to start collecting information in the New Year, but HMRC should also take steps to ensure that sellers are aware of the potential tax implications they may face and educate them appropriately.
- Published in HMRC
HMRC slashes access to helplines for seven weeks
In the busiest period of the tax year, HMRC plans to significantly reduce access to the self assessment helpline, prioritising only complex queries from Monday
Without prior warning, HMRC has confirmed that from 11 December until 31 January, it will redirect the majority of callers to the self assessment helpline to online services, telling taxpayers to find their own answers to queries about tax returns.
HMRC said that call centre advisers will focus on answering ‘priority queries’, described as ‘those that cannot be easily dealt with online’, as well as supporting the small minority of callers who require extra support or cannot use online services.
However, HMRC has not explained how these priority calls will be ranked and dealt with during this period.
The sudden announcement, with only four days’ notice, follows the abrupt three-month closure of HMRC helplines over the summer and the decision that helplines would be cut by 30% by the end of 2024 to allow staff to be reallocated to jobs in other parts of HMRC.
In the same period last year, HMRC received 1.2 million calls, more than one fifth of the total calls received in the 12-month period.
The service reduction will also affect accountants and tax advisers who will be told to use online services rather than relying on the agent dedicated line to resolve problems.
HMRC said: ‘Agents who call the ADL and whose queries are not specifically related to SA filing, payments or repayments, including agents with multiple client queries, will be redirected to alternative channels or asked to call back in February.
‘During SA peak, ADL will not be dealing with any PAYE-related calls, however we know that many queries can be resolved quickly and easily online. We encourage agents to consider using tools such as the ‘Income Record Viewer’ or the Where’s my reply tool before contacting us.’
The decision has been heavily criticised by accountants and tax advisers.
John Barnett, chair of CIOT’s technical policy and oversight committee, said: ‘Reducing access to HMRC’s self-assessment helpline is misguided.
‘While we understand HMRC’s desire to prioritise where it puts its limited resources, we are concerned that in practice many of their customers will be unable to navigate HMRC’s digital services, and will simply give up.
‘Previous trials to limit calls to complex queries, or diverting people to online services, have proven either troublesome or inconclusive.’
Glenn Collins, head of strategic and technical engagement at ACCA, described HMRC’s service as ‘unacceptably poor’.
‘The dramatically reduced service will be a worry for taxpayers and financial professionals alike,’ said Collins. ‘At a time when queries around self assessment go up significantly, this move by HMRC once again demonstrates it lacks the proper resources that it desperately needs.
‘ACCA has repeatedly called on the UK government to make significant improvements to the HMRC services, including the availability of HMRC agents to resolve basic issues which is currently not being achieved using the current HMRC online services.
‘We stand by our previous statement whereby we referred to HMRC as having unacceptably poor service. The difficulties experienced by accountants in working with HMRC cannot be overstated, and the reduced service offered by the helplines will surely only further exacerbate poor service levels and cause more frustrations at one of the busiest times of the year.’
The influential Treasury Committee was also critical of the decision, particularly the lack of notice about the service reduction.
Chair of the Treasury Committee, Harriett Baldwin, said: ‘Giving the public less than two working days’ notice of a significant reduction in service, while the deadline for self assessment returns looms, is yet another alarming development for an increasingly pressured government service. I have written to the CEO of HMRC in order to get much-needed answers about what this means for taxpayers.’
HMRC rejects any criticism of the downgrade to helplines and CEO Jim Harra told MPs on the Treasury Committee that the tax authority is fully committed to a move to a digital only approach.
It is convinced that many of the calls to the helpline are for trivial requests and said that ‘around two-thirds of calls to the SA helpline can be resolved far quicker through HMRC’s online services. To make all SA callers aware of the department’s extensive online services, recorded messages supported by SMS texts will be used’.
However, recent figures show that nearly one in five taxpayers were not satisfied with HMRC’s online services and it is difficult to resolve complex queries online. HMRC said that most calls are about basic questions which can easily be resolved online, such as updating personal information, chasing on the progress of a registration and checking a Unique Taxpayer Reference number.
Angela MacDonald, HMRC’s deputy chief executive, said: ’This is a busy time for customers who want to get their taxes sorted. We want to help customers resolve any issues in the quickest and easiest way, which is often through our online services.
‘The vast majority of self assessment customers file their returns digitally, so we’re helping them make the next step to resolving simpler queries through our online services.
‘Our expert advisers will be there to help people with urgent and more complicated queries as well as helping the small number who are unable to access our online services.’
Services on the Agent Dedicated Line will replicate the self assessment offer, with agents also being directed to our digital services for suitable queries.
HMRC is transitioning to a digital-first approach and said it was ‘continuing to improve and expand its online services, increasing their capabilities and ease of use so they become the default option for customers’.
Taxpayers who need support to complete their return for the 2022 to 2023 tax year ahead of the deadline on 31 January 2024 have been told to go to HMRC’s online support. More than 97% of self assessment taxpayers file their tax returns online.
- Published in HMRC
Ofcom tightens guidance on tackling online fraud
Online fraud accounts for 40% of all crimes reported in England and Wales, with the majority of incidents happening online
Ofcom found that nine out of 10 adults in the UK think they have come across content connected with a scam and 25% admitted to losing money as a result. Many victims said it not only impacted their wallets but also their mental health.
As the online safety regulator, Ofcom has issued a revised Code of Practice to support the Online Safety Act that was passed last month.
The online safety rules ‘make it harder for fraudsters to operate online’ by making online service providers assess the risks of the user being harmed while using their platforms.
With the rate technology is advancing fraudsters are always adapting with the advancements, implementing social media and artificial intelligence (AI) to scam victims into sharing personal details, such as bank account details and addresses.
Under the new guidance, Ofcom has suggested measures for larger service providers that attract a greater level of risk, including the implementation of an automatic keyword search, employing an expert reporting system to contact regulators and law enforcement more easily, and installing a verification system for users.
They should also have to name an accountable person as a user, provide extensive training to content teams to recognise illegal activities, introduce a method of easy reporting for users and safety test recommended content.
The main attention is focused on protecting children against scams. Dame Melanie Dawes, Ofcom’s chief executive said: ‘Regulation is here, and we’re wasting no time in setting out how we expect tech firms to protect people from illegal harm online, while upholding freedom of expression. Children have told us about the dangers they face, and we’re determined to create a safer life online for young people in particular.’
Ofcom are planning on publishing a consultation on online fraud in January.
Michelle Donelan, science, innovation and technology secretary said: ‘Before the Bill became law, we worked with Ofcom to make sure they could act swiftly to tackle the most harmful illegal content first. By working with companies to set out how they can comply with these duties, the first of their kind anywhere in the world, the process of implementation starts today.’
- Published in Fraud
Paper VAT registrations end on 13 November
HMRC will be scrapping paper VAT registrations and mandating online only sign-ups next week
The new rules will come into effect from 13 November as part of HMRC’s Making Tax Digital (MTD) strategy.
Taxpayers will have to register for VAT through the online VAT Registration Service using their Government Gateway account. However, some types of business will not be able to use the service as the online service still needs to be expanded to cover businesses joining the agricultural flat rate scheme, overseas partnerships and entities without a unique tax reference (UTR) number.
It is important to note that if a taxpayer has a particular exemption, they will have to contact HMRC by phone to request a paper form which will then be posted to them for completion. Paper applications take up to 40 days to process.
Taxpayers will have to ask for a VAT1 form to get online exemption by calling the VAT Helpline on 0300 200 3700 and ‘they will have to justify why they are unable to register online’, HMRC said.
While 95% of firms are already registering for VAT online, next week’s change could be daunting for the 5% that have not completed it this way before.
Mariana Príncipe, head of VAT compliance at Ryan, said: ‘There are three key advantages to digital-only VAT registrations that will benefit both HMRC and businesses, including faster turnarounds for VAT numbers as there should be less of a wait to get VAT numbers, a reduction in the amount of paperwork and it will be a more secure process.
‘VAT registration in the UK requires highly sensitive information, including the passport details of the legal representative and the trade register. This information could be intercepted if sent by post, and emails can also be hacked easily. By completing the registration through HMRC’s secure online portal, the risk of private information falling into the wrong hands is reduced significantly.’
The move is part of HMRC’s plan to move all tax transactions online to cut costs and reduce use of call centre advisers by 30% by the end of 2024.
HMRC told stakeholders: ‘Supporting our customers is a priority for us and online applications for VAT registrations aligns with our ambition to increase the use of digital channels.
‘For customers that are unable to access and use our digital channels, we’ll always provide a service to meet their needs. We continue to offer support through non digital channels such as via telephone, including our extra support service.’
With the push to digital filing and reduction in phone support, HMRC will have to invest heavily in existing IT systems to ensure they can be used for specialist services.
Príncipe added: ‘HMRC is making fantastic strides on its MTD strategy, especially compared to other European countries. In Spain, for example, to perform a VAT registration, it still requires an individual to book a meeting at a tax office and physically bring in the paperwork.
‘Coming up next, all eyes should be on the Form VAT652. This is the form that you have to complete if you are making a correction to your VAT return. At the moment, you can complete this form online or via a paper form, but I am sure it won’t be long before the paper option will be removed.’
- Published in VAT
Hike in directors trying to avoid tax debt by dissolving business
Directors trying to dissolve their own companies to avoid paying debts and tax bills have seen a threefold increase in objections by creditors in the past two years
The number of objections to company strike offs at Companies House was 590,063 in 2022/23, more than double the figure just two years ago when there were 203,613 rejections in 2020/21. In the last year alone there has been a 30% increase to 452,209 in 2021/22, found analysis by Price Bailey.
This shows the spike in companies requesting dissolution when they have unpaid tax bills or bounce back loans issued during the pandemic, which means they are not eligible to stop trading.
The number of strike off applications has barely changed over the past year, and increased by just 18% over the last two years, from 280,086 in 2020/21 to 330,644 in 2022/23, indicating that a much higher proportion of strike off applications are from company directors with outstanding debts.
Directors should only apply to have their companies struck off the register if they have no outstanding liabilities, such as unpaid taxes owed to HMRC, Covid-related loans or money owed to staff or suppliers.
Directors who try to have their companies dissolved without settling their debts are risking severe penalties and criminal sanctions.
William Wilson, partner at Price Bailey, said: ‘These are essentially insolvencies by the back door. A company must be solvent with no outstanding debts for the voluntary strike off process to go smoothly.
‘The surge in creditors objecting to strike offs means that directors are trying to close their companies down and walk away from unpaid debts.
‘Directors are taking huge risks by going down this path. In many cases these companies will have received bounce back loans, which may have been misused to finance the day-to-day living of directors.
‘Directors could be personally liable for the bounce back loan if misconduct is proved. HMRC can also shift liability for tax debts onto directors if they don’t adhere to their legal responsibilities.’
The rising amount of fraud from bounce back loans means that company directors are likely to be scrutinised much more closely.
He added: ‘The government has been clamping down on misconduct by directors in receipt of bounce back loans, including against directors who dissolve companies without paying off the loans. If any evidence of fraud or misconduct emerges directors can be disqualified for up to 15 years or face a prison sentence.’
Price Bailey warned that directors who pay the objecting creditor and resume the strike off process would be guilty of making a preference payment if other creditors are unpaid, which would also be a serious breach of their legal responsibilities.
William added: ‘Directors who pay a creditor in preference to others may face sanctions for wrongful or fraudulent trading. Directors could then face personal liability for company debts, disqualification or even prosecution.’
A director whose attempt to dissolve their company has been blocked should undertake a formal insolvency process known as a creditors’ voluntary liquidation (CVL). During a CVL an insolvency practitioner will be appointed. Any assets in the company will be liquidated and distributed to outstanding creditors on a proportional basis and remaining debts written off.
Wilson added: ‘A CVL will likely be the best option for most of these companies. It ensures that creditors are dealt with equitably, legal obligations fully met and, crucially, directors cannot be held personally liable for any debts for which they have not provided personal guarantees.’
- Published in Uncategorized