To hear an MP talk about a level playing field for tax liabilities would jolt even the most drug-induced small business owner awake. But that is exactly what happened this week. Whether it will be acted upon in the years to come remains to be seen, but a series of corporation tax avoidance schemes has got everybody in the tax ballpark and on HMRC´s radar.
The latest scandal to hit the headlines is news that Prince Charles is avoiding paying corporation tax and capital gains tax on his 131,000-acre royal estate. You might expect large international corporations to avoid paying UK tax, but our very own heir to the throne is a bit of spine-chiller.
Mp´s have accused the Treasury of turning a blind eye to the Duchy´s considerable earnings – reportedly somewhere in the region of £19 million. The UK´s future King however only paid a fraction of that sum in income tax and VAT. Labour MP Margaret Hodge commented that the Duchy “enjoys an exemption from paying tax even though it engages in a range of commercial activities.” It is deemed that Charles has an unfair advantage over commercial rivals who are required by law to pay corporation and capital gains tax.
Corporation tax reforms
The Treasury however seem to be in favour of multi-million pound corporations whilst belittling small businesses. In the March 2013 budget George Osborne announced Corporation Tax will be cut to 20 per cent by 2015 – the same percentage of earnings small businesses have to pay.
Add to that the tax loopholes which allow international corporations such as Apple, Google, Starbucks and Facebook to smuggle revenue into offshore bank accounts to avoid paying taxes in the UK. The latest scandal involves a handful of energy companies who despite raising fuel prices by up to 8% have siphoned over £100m into offshore accounts which are not taxable in the UK.
Before the UK can find a level playing field to ensure that major companies pay their fair share of corporation tax and capital gains tax is to introduce a genuinely fair and neutral tax code that taxes companies evenly based on their profit margins. At present the Tory government is looking into this, but nothing has been acted upon yet.
HMRC clamp down
HMRC is under scrutiny that it is failing to bring to justice tax evaders and has been given more powers to filter out the tax criminals – yet the new powers target struggling UK businesses rather than overseas companies. HMRC can now demand debit and credit card information from UK businesses they suspect are not paying their dues and access information that records the number and value of transactions that can be cross-checked against information that has been declared on the company´s Self Assessment Tax Return form.
The type of businesses that are particularly being scrutinized include restaurants, shops, petrol stations, hotels and other businesses that handle cash sums and card transactions. Companies considered to be committing a fraud or even if you fill your Self Assessment Tax Return out incorrectly you are liable to at least £100 fine.
To avoid incurring hefty fines contact Taxaccolega, accountant in London, on 08000 235 234 or email firstname.lastname@example.org and speak to one of our knowledgeable team for help and advice about saving money on your corporation tax liabilities.