TAX/HMRC Issues Joint Independent Audit Committee 26 September 2014 - - PowerPoint PPT Presentation

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TAX/HMRC Issues

Joint Independent Audit Committee 26 September 2014

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Contents

• Background
• Developing the Knowledge Base
• Issues
• Police Reform and Social Responsibility Act 2011
• Tax Consequences of Government Policies and

Initiatives

• Conversions/Workforce Modernisation
• Collaboration
• Opportunities
• The Future

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Background

• Main areas of activity

– PAYE – VAT

• Tax issues may not appear to present an opportunity or

threat to frontline policing but ……….this incorrect

• HMRC have increasingly turned their attention to

Policing to look at assessment opportunities

• Humberside Police has been active at a local and

national level in addressing this issue

• This presentation identifies some of current

topics/issues

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Developing the Knowledge Base

• Improving the knowledge base is seen as a key

issue – what have we done?

– BDO have been appointed as the single professional Tax advisor to the 4 Y&tH forces. – A Y&tH VAT Practitioners Group has been established with links with the Metropolitan Police. – The CIPFA Police Tax Forum has been rejuvenated – The ACPO Finance and Resources Business Area has created a VAT and other Taxes Portfolio – The Force Head of Finance is a member of the Forum and the Portfolio Holder

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Developing the Knowledge Base

– A National Police VAT Practitioners Group has been established. – VAT Training for legal, finance, catering, procurement and range of other disciplines across the 4 Y&tH Forces has been arranged and hosted by Humberside Police – Training has been CPD accredited – Efforts are being made to increase awareness amongst staff of tax issues

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Issues and Opportunities

• Issues

– Police Reform and Social Responsibility Act 2011 – Tax consequences of Government policies and initiatives – Tax and penalty costs – Advisory fees

• Opportunities

– VAT

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Police Reform and Social Responsibility Act 2011

• PAYE

– PAYE registrations – Existing PAYE registration retained for Force – Transfer restricted to PCC staff – New Payroll arrangements w.e.f. 1/4/2014

• VAT

– VAT registration (group registration) – Legislative change to allow Chief Constables to recover VAT

• Corporation Tax

– Legislative change to exclude Chief Constables from Corporation Tax

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Tax consequences of Government policies and initiatives

• Government Initiatives and unintended

consequences

– Conversions/Workforce Modernisation – Collaboration

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Conversions/Workforce Modernisation

• Nationally Forces’ had actively encouraged Police Officers many of whom retire in

their early fifties to take up civilian posts where their Policing skills were particularly germane e.g. Investigation Officers, through the Business Work Force Modernisation (BWFM) programme.

• Legislation in 2006 meant anyone who retired and drew their pension between

the age of 50 and 55, but returned to work for the same employer within a given period would have their pension and any lump sum payment subject to a 40% “Unauthorised Payment Deduction”.

• In addition to the deduction from the pension and lump sum the employer could

also suffer a 40% charge ‐ lump sums are usually paid tax free.

• An Unauthorised Payment Charge is not technically a Tax e.g. it cannot be reduced

by personal allowances etc.

• By the time the issue was identified many officers had taken up civilian roles after

drawing their lump sums and pensions and could now face hefty tax bills as a result.

• HMRC had allegedly not envisaged that the legislation would capture the BWFM

programme

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Unauthorized Payment Charges

• 12 Humberside employees have been identified as falling into the

Unauthorized Payment category.

• Humberside, supported by BDO have led in co‐ordinating efforts nationally

to address this issue with HMRC

• Concessions have been secured e.g. HMRC has recognised that the point

at which funds cleared a Force’s Bank Account was the point of payment for the lump sums. This recognition removed nationally, at a stroke the vast majority of “lump sum payments” from the 40% charge.

• Humberside also introduced and HMRC have acknowledged the possibility
• f “Offset” i.e. Unauthorised Payments due should be reduced by Tax

already paid by the individual as a result of receiving their pension which remained subject to Pay As You Earn taxation. In some case individuals will have suffered PAYE at 40% resulting in a nil loss/gain with those taxed at a lower percentage only liable for the balance

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Collaborative Working

• BDO prepared an overview on Regional

Collaboration and HMRC have confirmed compliance arrangements.

• This has informed the National Policing Air

Service (NPAS), hosted by the WYOPCC and Force and will underpin future Y&tH Collaborations.

• The learning is also being applied in respect of

the Joint Vehicle Workshop with Humberside Fire and Rescue Service.

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Collaborative Working Dual Workplace

• Collaborative working often involves the sharing of facilities

and staff with colleagues undertaking travel, accommodation, etc for which they receive reimbursement

• r payment.
• HMRC are showing interest in the taxation of travel and

specifically the treatment of “ordinary commuting.”

• Ordinary commuting may be defined as home to work

travel.

• Recent HMRC guidance clearly identifies that individuals

may have more than one permanent workplace.

• The payment of travel and associated costs for ordinary

commuting are taxable and attract employee and employer National Insurance charges levied.

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Collaborative Working Dual Workplace

• Locally, regionally and nationally colleagues are being asked to work

across many workplaces.

• Individuals receiving gross payment dating back several years are

also unlikely to welcome a significant back dated Tax and National Insurance charge.

• In addition to the potential challenge by HMRC, the Police

Federation and Trade Unions could take the view that the Tax Liability should be met by the employer.

• It is understood that one of the workforce representation groups

recently suffered a Tax/NI charge in excess of £1.4m relating to Dual Workplace following a HMRC review.

• ACPO are presently considering Home Office guidance on this issue
• HMRC have indicated towards the end of 2014/15 they will

undertake a “deep dive” into two forces which may inform subsequent detailed review of others.

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Opportunities

• VAT
• VAT treatment on charges to insurance companies for

reports

• VAT treatment of the sale of recovered vehicles at

auction

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The Future

• Taxation in general is not strength within policing.
• As funding to policing is reduced the effective tax

planning is essential.

• As Forces increasingly look to collaboration, agile

working etc. and potentially increasing employee expectation in return for undertaking considerably extra travel, time away from home etc. it is important to have an understanding of the personal tax implications for them.

• Efforts to raise awareness in Force will continue.
• The Force and the OPCC will be proactive and maintain

active involvement in appropriate networks.