Tax help for flood victims
In storm-ravaged communities across the UK, HMRC are offering a degree of practical tax help and advice, explains Donald Drysdale.
Happy New Year
It seems appropriate to begin this article by wishing you a Happy New Year. Having done so, I’ll focus on the sad plight of many for whom the start of 2016 is proving profoundly difficult.
A wild winter
Only a few months ago, in September 2015, the Met Office sought help from members of the general public on social media in drawing up an alphabetical list of twenty-one names to be used for major UK storms in winter 2015/16. In case you question my counting, the initials Q, U, X, Y and Z have been avoided.
This pilot project aims to raise public awareness of approaching severe weather conditions and thus ensure greater public safety. When the names were announced in late October, few of us guessed that six of them would be used by Hogmanay. Nevertheless, six severe weather systems have struck the UK in as many weeks.
Storms Abigail, Barney and Clodagh arrived in late November, causing widespread damage. Then storms Desmond, Eva and Frank brought further misery in December. These meteorological events wreaked havoc in many areas - especially in northern England, Scotland and Northern Ireland. Parts of Cumbria, Lancashire, Dumfries, York, Ballater and Peebles have experienced utter devastation. In the meantime, few other areas in the UK were spared gale force winds and torrential rain.
Immediate tax help for those affected
Tax may not be uppermost in the minds of those hardest hit. Nonetheless, HMRC have set up a dedicated telephone helpline intended for anyone affected by the severe weather and flooding. It aims to offer practical help and advice on a wide range of tax problems they may face.
The helpline is on 0800 904 7900, and is in addition to other HMRC telephone contact numbers. Opening hours are Monday to Friday, 8:00 am to 8:00 pm, and Saturday and Sunday, 8:00 am to 4:00 pm, excluding bank holidays. It remains to be seen whether HMRC will prove any better than usual at answering calls to this helpline.
HMRC have announced that they will agree instalment arrangements where taxpayers are unable to pay as a result of the floods, and they will suspend debt collection proceedings for those affected. This sounds helpful, but it should be noted that interest on unpaid tax may still accrue on the amount owed - except where HMRC agree not to charge interest on account of a matter designated as a national disaster or emergency.
HMRC have also stated that they will agree a practical approach when individuals and businesses have lost vital records to the floods. This sounds comforting, but practitioners know only too well how hard it is to negotiate clients’ tax liabilities in the absence of adequate records. So every possible effort should still be made to retrieve and reconstruct the actual records.
HMRC have also undertaken to cancel penalties when the taxpayer has missed a statutory deadline. This could be of particular importance at this time of year, when the 31 January personal tax return deadline is drawing near. Of course the safeguard of ‘reasonable excuse’ may already protect the taxpayer from a penalty in the case of a late submission. Even where events arising from the severe weather or flooding provide a reasonable excuse, it’s important to remember that the protection from a penalty ceases unless the failure is made good without undue delay after the reasonable excuse has ceased.
While in some cases the late submission of a tax return may involve little immediate risk other than a £100 penalty, the prompt submission of other returns may be more crucial. For example, a substantial income tax saving arising from a change of accounting date may depend upon HMRC being notified of the change by 31 January. It would be prudent not to miss such a deadline.
National disasters or emergencies
Following extensive flooding in many areas of England, Wales and Northern Ireland in June and July 2007, Finance Act 2008 gave the Treasury power to issue orders designating particular disasters or emergencies as being of national significance.
Where HMRC agree that tax may be deferred by reason of circumstances arising as a result of an event which has been so designated by Treasury order, no interest or surcharge arises on the sum due while so designated.
This Treasury power has been used only once, to designate the floods in June and July 2007. It is to be hoped that it will be used again to designate the floods that have occurred within the past few weeks, but there is no certainty that this will happen.
Impacts on practitioners
It is tempting to suggest that individuals and businesses affected by the floods should simply rely on the services of professional accountants to deal with the tax problems arising. This may be the answer in many cases, but practitioners will face added problems where clients are unable to provide records that have been lost or destroyed.
In some instances practitioners may have suffered flood damage in their own premises, with consequent loss of client records. In such circumstances they should make contact with their agent account manager at HMRC to find out what special help may be available. They would also be wise to report the loss of any client records to their professional indemnity insurers.
If, for whatever reason, the severe weather and flooding results in an increase in the level of HMRC’s enquiries into the affairs of a practitioner’s clients, appropriate claims should be made under any fee protection insurance that exists.
On a broader topic, there is much political debate about the sums which the government should allocate to improving flood defences. There are also concerns about the number of new homes and planned housing developments on flood plains and other areas at significant risk of flooding. An increasing number of householders are finding themselves unable to insure they homes against flood risks.
Government funding of improved flood and coastal defences seems essential. Businesses may be able to do more, and those that contribute to approved schemes are able to deduct their contributions in computing their taxable profits for income tax or corporation tax purposes. There have also been calls for the scope of flood defence tax relief to be extended to contributions by individuals.
Article supplied by Taxing Words Ltd