General

Last week we posted that it is over 10 years since Debt Relief Orders (DROs) were first introduced in April 2009. This week we have fleshed out the details of who can claim and some of the restrictions that apply.

What is a DRO?

A DRO is a special way of dealing with debts available to those with minimal assets and low income. If an application for a DRO is accepted, you will make payments over a specified period (usually 12 months) after which any remaining debts will be written off.

There are special rules that exclude any debts that were fraudulently obtained, continue to be repayable, and if your circumstances change (for the better) the DRO can be revoked.

To be eligible for a DRO, you must meet these criteria:

• you owe £20,000 or less
• you have less than £50 to spend each month, after paying tax, National Insurance and normal household expenses
• you've lived or worked in England or Wales in the last 3 years
• your assets aren’t worth more than £1000 in total
• you've not had a DRO in the last 6 years

When you can't apply for a DRO

Eligibility may also be affected if you are involved in bankruptcy proceedings or any other formal insolvency procedure. An application for a DRO must be made using an authorised debt adviser. There are also minimal costs you would have to meet when making an application.

There are certain debts that are not covered by a DRO and there are also restrictions on what you can do during the specified DRO period: for example, restrictions on obtaining credit of more than £500 without informing the lender about your DRO. A DRO will usually stay on your credit reference file for 6 years from the date it was granted.

Debt Relief Orders (DROs) were first introduced in April 2019. The DROs assist people who have small levels of assets and insufficient surplus income to deal with debts under £20,000. In a news release published by the Insolvency Service we are told that in the last 10 years, more than 254,000 DROs have been approved for people with debts averaging £9,400.

A DRO normally runs for 12 months after which the debts are written off. There are also restrictions during the DRO period, for example restrictions on getting credit of more than £500 without informing the lender of any outstanding DRO.

Paula Hogarth, DRO Service Debt Advice Centre Manager for StepChange Debt Charity, said:

'DROs are a good solution for people with minimal assets and low income who can’t afford to repay their debts. While it’s important that people get proper debt advice, as different circumstances lend themselves to different debt solutions, those people who are eligible for DROs definitely benefit from the relative speed, simplicity and low cost of setting up the solution, as well as usually becoming debt-free a year later.'

Those affected can apply for a DRO through an authorised debt adviser, from organisations such as Citizens Advice, StepChange and PayPlan, who submit applications on-line to the Official Receiver on their client’s behalf.

HMRC has launched an unannounced crackdown on money laundering regulation non-compliance by estate agents. This clampdown resulted in over 50 visits by HMRC staff to estate agents across England that were suspected of trading without being registered as required under money laundering regulations.

This crackdown includes targeting those who are trading without registering appropriately as well as those who may not be meeting their obligations in line with the money laundering regulations. One of the estate agents visited was fined £215,000.

Commenting on the campaign, John Glen, Economic Secretary to the Treasury, said:

'The vast majority of estate agents play by the rules and help us to crack down on dirty money. But I have zero tolerance for firms prepared to turn a blind eye to the law. Money laundering regulation exists to help protect honest business, so anyone who flaunts the law should know that swift action will be taken.'

HMRC is responsible for supervising a number of business types including Estate Agency Businesses to ensure that they register for anti-money laundering supervision. HMRC supervises more than 11,000 residential and commercial estate agents across the UK. This announcement by HMRC suggests that any estate agency businesses that have fallen through the cracks should ensure that they are properly registered and compliant as a matter urgency.

Under the current scheme, banks and building societies transfer the money held in dormant accounts to a central reclaim fund. The reclaim fund is responsible for managing dormant account money, meeting reclaims and passing on surplus money to various charities for reinvestment in the community. The original account holder retains the rights to repayment upon providing satisfactory proof that the money is theirs. 

The existing dormant accounts scheme came into effect in November 2008. The scheme defines a dormant bank account as an account which has been continually open for at least fifteen years during which time no transactions have been carried out by the account holder or at his or her instruction.

In June 2019, the government has announced plans to expand the dormant asset schemes to include a wider set of financial assets beyond bank and building society accounts. The government appointed four ‘industry champions’ to expand the dormant assets scheme. These experts represented the banking, securities, insurance and pensions, and investment and wealth management sectors.

The industry-led report was published earlier this month and has made a number of recommendations on how to broaden the current scheme. Government ministers will now consider the recommendations in more detail.

There is a free tracing service called ‘mylostaccount’ to find lost bank accounts. The service brings together the three tracing schemes of the British Bankers’ Association (BBA), the Building Societies Association (BSA) and National Savings and Investments (NS&I) into a single website (www.mylostaccount.org.uk) and is free of charge.

The service offers a way for savers to search for their lost accounts by enabling them to complete one form to search the majority of banks and building societies and National Savings & Investments (NS&I). An account may be defined as ‘lost’ if you have not made any withdrawals or deposits for a set period (typically three years in the case of a savings account and one year for a current account) and the bank has not heard that you wish to keep the account open. The monies remain the account holders property but may need to be searched for as a lost account.

The government’s dormant assets scheme allows money in accounts that have been dormant for at least fifteen years to be made available for certain qualifying charitable and community causes. The original account holder retains the rights to repayment of any monies within the scheme after providing satisfactory proof that the money is theirs.

HMRC has issued an updated version of their online guidance on Genuine HMRC contact and recognising phishing emails and texts. The guidance provides a current list of genuine messages from HMRC. This includes email messages, text messages and telephone contacts from HMRC.

The latest updates on the list includes confirmation that HMRC is contacting selected taxpayers by phone in relation to National Minimum Wage or National Living Wage enquiries. Taxpayers will be asked some basic questions about current working, or previous employment experiences and will be given the opportunity to request that their current or previous employer are not informed about the phone call.

HMRC is also sending emails to some businesses that have signed-up to the Making Tax Digital for Business VAT pilot. The email includes a link to a short voluntary questionnaire asking for feedback on the sign-up and submissions process.

Although all these communications are genuine, taxpayers should still be wary of receiving messages that are purported to come from HMRC. Fake email and text messages can appear to be genuine, but clicking on a link from these messages can result in personal information being compromised and the possibility of computer viruses affecting your computer or smartphone.

One recent example of a fraudulent email that appeared to be sent from HMRC stated that a recent submission had been 'successfully received but unfortunately failed HM Revenue & Customs data checks and could not be accepted'. The email went on to request that the recipient use the attached link to correct the submission and send it again. The email looked genuine, but the email address from which the email was sent, looked suspect. Further investigation revealed that this was indeed a scam email but serves as a useful reminder of the continued importance of being vigilant.

Don't open suspect messages or follow links

If you are unsure as to the validity of any message it should not be opened until the sender can be verified. The validity of letters from HMRC can also be checked by contacting HMRC directly by telephone to confirm if a letter is genuine.

As the Brexit date fast approaches, it seems the only thing we can say with any certainty is that uncertainty continues to plague the issue of our leaving the EU. The negotiations on the terms of the UK’s exit from the EU are unresolved and there are three possible outcomes: a delayed Brexit by extending Article 50, a no-deal Brexit or a modified Brexit.

HMRC has published a letter to help businesses prepare for a no-deal Brexit. The letter includes a reminder to ‘Make sure you find out about our EU Exit news as it happens’.

HMRC advises businesses to:

• Register for our email update service at www.gov.uk/hmrc/business-support select ‘business help and education emails’, then ‘EU Exit’.


• Non-VAT registered businesses should also go to www.gov.uk/hmrc/trade-with-the-eu for changes that affect them.

Action point

If the UK leaves the EU without a deal, then UK businesses will be responsible for making customs declarations. Businesses that trade with the EU should ensure they register for a UK Economic Operator Registration and Identification (EORI) number as soon as possible. In the event of a no deal Brexit, this identification number will be required even if the business appoints a customs agent to assist in making customs declarations.

The definition of a finance lease can be difficult to pin down. In legal form a finance lease is just another lease – the legal ownership of the asset lies with the lessor and the lessee only has the right to use the asset.

However, in commercial terms a finance lease is often considered to be an alternative form of ‘purchase’ with a loan of money and with the asset as security. In substance the finance lessee buys the asset with a loan from the finance lessor.

It is important to be able to distinguish what type of lease is in place, i.e. whether the lease is actually an operating lease (usually a type of rental agreement) or whether it is a type of purchase agreement, usually known as a finance lease. There can be important differences between the accounting and tax treatment of different types of leases.

HMRC’s internal manual defines a finance lease as follows:

To put it another way, a finance lease may be viewed as an arrangement under which one person (the lessor) provides the money to buy an asset which is used by another (the lessee) in return for an interest charge. The lessor has security because they own the asset. The terms of the leasing arrangements aim to give the lessor a banker’s interest turn and no more or less – however good or bad the asset proves to be for the end user.

In the Spring Statement 2019, the Chancellor of the Exchequer has announced that the apprenticeship reforms set out in the Autumn Budget 2018 will now be introduced a year early. From 1 April 2019, the co-investment rate for non-levy employers will be cut by a half from 10% to 5%. In addition, from the same date, levy-paying employers will be able to share a greater portion of their levy funds across their supply chains, with the maximum amount rising from 10% to 25%.

The Chancellor also confirmed that the government has commissioned a review of the latest international evidence on the impact of minimum wages, to inform future national living wage policy after 2020.
 

Your Unique Taxpayer Reference (UTR) identifies your tax records at HMRC. The number is also known as your taxpayer number or tax reference number and should be used whenever you contact HMRC, or when you file your tax returns. The UTR is a unique 10 digit code. You are automatically given a UTR when you set yourself up to file Self Assessment tax returns or form a limited company.

If you have mislaid your UTR, you should be able to find the number on previous tax returns and other documents from HMRC, for example, on notices to file a return and payment reminders. You can also find your UTR in your HMRC online account.

If you are still unable to locate your UTR you can call the Self Assessment helpline to request your UTR on 0300 200 3310. The lines are usually open from Monday to Friday: 8am to 8pm, Saturday: 8am to 4pm and Sunday: 9am to 5pm.

If you have mislaid your Corporation Tax UTR, this can be requested online and HMRC will send a copy of the number by post to the company’s registered address.