Dedicated to the taxpayers of Britain, and the employees of Her Majesty's Revenue and Customs (HMRC), who have to endure the monumental shambles that is HMRC.
It is likely to be a damp squib, as most (if not all) of the headline measures/changes etc have already been leaked. This is without doubt the most leaked budget in history. When I was a lad people would have been flogged for leaking budget details, how times change!
Anyhoo, moving on, I see that Treasury minister David Gauke (who has featured on this site on more than one occasion) has caused a wee bit of a controversy over his desire to hire a young person to work for him at zero pay.
Duties include "administration, basic correspondence, diary
management, fundraising, campaigning and related tasks", as well as "the
opportunity to work one day a week in the Westminster office".
I personally have no issues with internships. However, some of Gauke's fellow ministers (eg Nick Clegg, who also has form wrt interns and hypocrisy) and HMRC do have issues with it.
In fact HMRC in November 2011
threatened the fashion industry with prosecution if it failed to pay
interns the minimum wage. HMRC wrote to fashion houses involved in
London fashion week, warning them they must pay the minimum wage to anyone aged aged 21 and over.
Michelle Wyer, from HMRC, said at the time those not
complying could face a penalty and prosecution, adding:
"Non-payment of
the national minimum wage is not an option."
"Internal documents from Her Majesty's Revenue and Customs show it
believes interns across the employment spectrum to be at "high risk" of
abuse under national minimum wage laws,
and that HMRC has convened a 12-person taskforce to make unannounced
inspections of businesses where interns are being used as workers rather
than just shadowing staff.
The special "dynamic response" unit
will have powers to question managers and sift through accounts until it
is satisfied that no abuse is taking place.
It is the first time intern abuse has been targeted by the HMRC, which is responsible for the enforcement of the minimum wage."
Gauke is attempting to weasel his way round charges of hypocrisy by claiming that it is an advert for "volunteers".
To me it is really very simple, either the government/HMRC allow unpaid internships (in which case Gauke has no problem) or the government/HMRC don't allow unpaid internships (in which case Gauke does have a problem).
Which is it?
Tax does have to be taxing.
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Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.
Last December I wrote about the problems that some employers were having with HMRC fining them for late submissions of P35s; in fact a court case at the time highlighted the fact that HMRC were holding
back their communications with employers, so that the level of fines
imposed would be increased.
'...Thus, HMRC deliberately waits until four months have gone by and
does not issue the first interim penalty notice until, as in this case,
September of the year of default.
By that time a penalty of £400, being four times £100 per month is said to be due.....
..In our judgement there is nothing fair or reasonable about in
setting a computer system so that it does not generate a penalty notice
until four months have gone by..
...It is no function of the State to use the penalty system as a cash generating scheme’.
In this case the tribunal reduced the penalty from £500 to £100.
‘Even if there had been no reasonable excuse [for late filing] the
penalty would have been reduced from £500 to £100 given that HMRC
deliberately desisted from sending out a penalty notice until September
2010, by which time it could demand a penalty of £500....'
This appeal was allowed in full and the penalty dismissed.
Clearly somebody within HMRC is culpable and one wonders at what level the order to ‘set the computer system...’ was given."
The article prompted some lively debate, and one person noted that HMRC had in fact suspended the collection of PAYE penalties.
Several months later and Taxation reports that HMRC have "pledged" to end the controversy, and provide employers with information that is "timely and more efficient".
In fact HMRC, the professional bodies and charities have issued a joint statement on the matter:
"The joint initiative between HM Revenue &
Customs (HMRC), the professional bodies and tax charities*, launched in
late 2011, set a number of service objectives for delivery during 2012.
One of these was to work together to address
concerns about the delay in informing employers that their PAYE
end-of-year returns are late, and therefore subject to penalties.
The background to this issue is that where
employers do not file their annual P35 return by 19 May, they incur
penalties of £100 per 50 (or fewer) employees for every month (or part
month) that their return is late.
In some cases, employers were unaware their
returns were late until they received a first penalty letter in
September covering four months’ worth of accrued penalties.
We can now announce a number of agreed measures to deal with this problem.
To help employers comply with their obligations, HMRC will:
• Change the date when we issue the “Notification
to complete form P35 Employer Annual Return 2011/12” from mid-February
to mid-March 2012, so that employers will receive it much nearer to the
end of the tax year.
• From 28 April 2012, where we believe a 2011/12 P35 remains outstanding, we will issue an “Employer Annual Return Reminder”.
• From 31 May 2012, we will introduce a “P35 Interim Penalty Letter”
which will be issued over a five-day period, so that it reaches
employers within a month of the filing deadline. The letter will state
that the employer has incurred a late return penalty and explain what to
do to avoid it increasing. We have worked together with the
professional bodies on the content of this letter and it has been tested
on employers and payroll agents to make it clear and employer
-focussed.
• Improve the online guidance for submitting P35s online, including
specific advice about the test-in-live service to reduce the number of
employers who believe their test submission is the live submission. The
on-screen messages within the HMRC online product will also make it much
clearer that even when a successful test transmission has been made, a
live transmission is still required. We would encourage those using
commercial payroll software (where the text of test/ live messages may
vary) to sign up for HMRC’s email alert facility to help them avoid this
problem.
• Instruct Employer Helpline staff to tell employers about filing dates
when setting up new employer schemes, to help them avoid a penalty.
• For next year, improve the information on the P35 and the reminders
to include a warning that the first penalty notice will cover 4 months.
Taken together, these measures should help
employers to avoid incurring unnecessary penalties and significantly
reduce the number of cases where penalties in excess of £100 are
charged."
The professional bodies et al are all heartily congratulating themselves about this. As ever, I welcome views, comments and opinions from the coalface (ie HMRC staff and employers).
Tax does have to be taxing.
UK EXPATS: Reduce tax on UK Pensions HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.
TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.
Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.
Loyal readers will be aware that Phil Pavitt (CIO of HMRC) has been somewhat blowing his own/HMRC's trumpet recently about how HMRC has reduced its IT spend.
Some of you (for shame!) have been a tad cynical about the veracity of his boasts. Well it seems that, whilst costs to HMRC may (or may not) have been reduced, the costs to HMRC's "customers" of implementing HMRC's flagship (akin to the Mary Rose) IT development Real Time Information (RTI) have gone up.
HMRC has revised its figures for the financial burden that Real Time Information (RTI) will have on employers. Payroll World reports that there are a number of costs being imposed on employers from having to use the new system:
- There will be a one-off transitional compliance cost (at least £120M) for firms as they begin to submit RTI.
- Offsetting HMRC's estimates of employers' savings (£330M per annum from 2014) from using the new system, will be the costs of the new administrative burdens being placed on employers by HMRC (ie realtime data collection/submissions each time employees are paid). HMRC believe that this will cost £30M per annum.
- Unknown costs of software development (needed to use the new system) which will be passed on to the employers.
This is know as spreading the load, so that HMRC's costs are kept down.
Needless to say, all of the above is based on the assumption that RTI actually works and comes in on time and on budget.
Tax does have to be taxing.
UK EXPATS: Reduce tax on UK Pensions HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.
TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.
Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.
My compliments to Phil Pavitt (Chief Information Officer of HMRC), who is now rather ubiquitous in the media and is currently outshining Lin Homer in the "column inches" devoted to his achievements.
Recently I noted that Pavitt was proudly claiming that he/HMRC had halved HMRC's spending on IT from £1.4BN to £700M in two
years. I was "shocked and appalled" by the reactions from some of the cynics within my loyal readership, who suggested that Pavitt may be telling porkies:
"Those of us who have followed the, erm, spotty career of Phil
"Employment Agency " Pavitt will understand that his relationship with
the truth has always been somewhat difficult..........."
"One suspects most of the 'gains' have come from consolidating software
onto fewer physical boxes and using more 'virtualisation' as this is the
flavour of the month in IT at the moment. However, the fact you are
running a virtualised Windows server on a machine that is also running a
virtualised Unix Server etc does not mean you have any less operating
systems or software to support just less hardware. So Pavitt's claim to
have only one platform is almost certainly being extremely economical
with the truth Since much of the cost is taken up by the former not the
latter I doubt that these 'savings' are going to be around for long as
overtime software license increases will eat into the savings. Virtualisation can create its one issues as shared resources such as
disk, memory and cpu capacity may have to upgraded over time if one of
the systems using the resource has been poorly specified and is
subsequently found to need much more grunt. For example, general upgrade
of CPUs on shared machine can feed directly into the bottom line as
licensing costs of software are often based on CPU Mips. Thus if you
enhance the CPUs on a box because one system or application needs more
processing speed then all the other systems software licenses may also
be hiked regardless of whether they need the extra power or not.
This
is the ticking time bombs Pavitt is leaving for his successors."
Such cynicism has not deflected Pavitt from telling the world about another saving (I assume that this is on top of the £700M IT saving that he was talking about the other day?) that HMRC has made. Apparently, HMRC will save more than £200M by 2017 after renegotiating its Aspire
outsourcing contract with Capgemini.
Aspire covers IT services including desktops, laptops and a
number of tax and credit systems such as online VAT filing. The
contract, which is led by Capgemini and includes some 360 other
suppliers, was renegotiated in January.
It most certainly needed some renegotiation, for as I wrote in February 2012:
""The
Aspire contract between HMRC and Capgemini covers a 13 year period and
was originally valued at £2.8 billion.[49] This contract is a case study
of what is wrong with the present procurement culture. Such a large
contract is too complex to manage. The assessment of costs and benefits
is opaque and it commits too much power and money to a single supplier."
Anyhoo, as well as lowering the cost per unit of IT services, the
renegotiations will give HMRC greater control over the volume of work
going through Aspire, according to the Cabinet Office. HMRC
will also be able to control the Aspire subcontractors directly, which was previously the responsibility of Capgemini.
"No longer do we have a unique SI relationship with Aspire and
Capgemini.
We have introduced
competition at all levels. There's no longer exclusivity between us and
our partners."
HMRC is currently introducing 25,000 new PCs to its offices, and Pavitt
claims that its IT service levels were at 99.93% "our best ever".
Pavitt said:
"We have cut our IT costs, transformed IT and made it sustainable, stabilised our services and reorganised our business processes. We have some way to go still, but we are delivering sustainable change."
So there you have it, everything is wunderbar!
There is no stopping this man!
However, I am always interested to hear from those of you who have to use the systems and have insight into the reality behind the claims made by Pavitt. Let us trust that he does not seek to emulate Icarus and fly to close to the sun.
Tax does have to be taxing.
UK EXPATS: Reduce tax on UK Pensions HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.
TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.
Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.
As I noted on Tuesday, today is the day when Margaret Hodge (Chairman of the Public Accounts Committee) is going to make a speech at Policy Exchange (a think tank) in which she fans the flames of the war between the mandarins in Whitehall and PAC.
I understand that she will call for the Freedom of Information Act to be extended to
companies and other organisations that deliver government services.
Now this would be very useful for those of us with an interest in HMRC, given that a large number of crucial functions (eg IT, printing etc) have been outsourced to the private sector. It would be very interesting for example to learn if contracts with these companies have penalty clauses for when projects are delayed, fall apart or when services fail (eg printing errors etc).
Anyhoo, by way of a taster for today's speech the BBC have provided some extracts:
"Lately, it seems that the Public Accounts Committee has been rattling the cage too much for some.
There are those who say that shows we're doing our job
properly, but there is a real challenge from the civil service on how we
are approaching our work on behalf of Parliament and the taxpayer.
Some have upped
the ante, even asserting that the PAC's activism affronts some
constitutional principle - of which the civil servants consider
themselves custodians. Anonymous briefings suggest that some would even
like to dismantle the committee itself...
But it's our job to blow the whistle and shout loudly when
the evidence before us is that the executive is not doing a good enough
job. That is going to be uncomfortable for both ministers and the civil
service."
Regarding GOD, now Lord O'Donnell, she will say that in a
letter he wrote to her shortly before retiring he:
"..berated me for the way
in which the Public Accounts Committee was seeking to hold the executive
to account.
He was particularly exercised about the hearings we had held
during the autumn involving HM Revenue & Customs investigating how
it had tackled tax disputes with large corporations and specifically the
settlement it had made with Goldman Sachs.
It was as if he had taken on the role of shop steward for aggrieved permanent secretaries.
...old doctrine of accountability isn't
fit for the 21st Century.
It's our job to blow the whistle
and shout loudly when the evidence before us is that the executive is
not doing a good enough job. That is going to be uncomfortable for both
ministers and the civil service.
Rather than responding defensively, the civil service should
embrace the opportunity. It is in all our interests for this to
happen. It will help all of us to deliver better public services with
better value."
Regarding the exchange of letters between Ms Hodge and GOD, Exaro have a copy of Hodge's response:
"Dear Gus, Thank you for your letter of December 20, which I now understand has been widely circulated across the civil service.
I was rather surprised by your criticisms about the way the public
accounts committee conducted our inquiry into HMRC’s handling of tax
disputes with large corporations. As you are aware, £25 billion is
outstanding in unresolved tax bills and the role of HMRC governance is
critical in explaining why this substantial sum remains unresolved.
As a direct result of the committee’s inquiry, major systematic
failures in the governance of HMRC and the way it handles tax disputes
with large companies were uncovered. In several of the largest
settlements examined by the National Audit Office, the department did
not comply with its own procedures, and the same senior officials were
involved both in negotiating and in approving deals, which is simply
inappropriate.
In the case we looked at, Goldman Sachs, there were
extremely serious questions about the role played by the permanent
secretary for tax [Dave Hartnett], whether appropriate legal advice was
sought and acted upon, and the veracity of the evidence he gave to the
Treasury select committee.
The committee was very disappointed by the failure of senior
officials to assist us actively and answer our questions in a spirit of
openness and transparency. Some of the evidence given to, and seen by,
the committee was, at best, inconsistent and, at worst, misleading.
First, there was a clear discrepancy between Dave Hartnett’s
statement to the Treasury select committee on September 12, 2011 that “I
know nothing of Goldman’s tax affairs… I do not deal with Goldman’s tax
affairs,” and the internal minute of the meeting that took place in
Anthony Inglese’s office on December 8, 2010, which referred to “a deal
on which DH had ‘shaken hands’ with GS” to settle an outstanding tax
dispute.
Second, at our hearing on October 17, 2011 Mr Hartnett told us that
he had informed Mr Inglese, as HMRC’s most senior lawyer, that there had
been a mistake with the Goldman’s settlement on Monday November 22,
2010 – the day the mistake was identified – or “very soon after”. At our
subsequent hearing on November 7, 2011, Mr Inglese told us that Mr
Hartnett had not informed him of the mistake until December 7, 2010,
more than two weeks after the deal had been done on November 19, 2010.
Third, at our hearing on October 12, 2011, Mr Hartnett said that no
disciplinary action had been taken against anybody as a result of the
mistake. However, at our hearing of November 7, 2011, he said that “the
error was taken into account in someone’s annual appraisal… It affected
their non-consolidated pay, because there was no pay rise that year.”
These are serious concerns that should be addressed by the cabinet
secretary. However, in this case, you told us your powers were limited
because HMRC is a non-ministerial department. I would be grateful if you
would set out how, in these circumstances, senior officials are held to
account in carrying out their duties with “honesty and integrity”.
Your letter also makes various points about constitutional matters.
Over recent times, Parliament’s role in holding the executive to account
has strengthened. The public’s expectations in relation to transparency
and accountability are greater, and this is reflected in the way select
committees approach their work.
As a result, there have been useful
developments in conventional practice that have improved accountability
and public understanding. For example, on a number of occasions in
recent years (such as with Sir John Gieve on the disclaimer of the Home
Office accounts, Catherine Bell on government support for MG Rover and,
very recently, Dame Helen Ghosh on the Rural Payments Agency) the
committee’s inquiries have been materially assisted by the attendance as
a witness of the department’s former accounting officer who had held
responsibility and knowledge at the time of the matters under
discussion. While such occasions are infrequent, I have no doubt that
they have enriched the committee’s understanding and helped us to serve
the public better.
If we accepted all conventional past practices we could not respond
to expectations of the present. The civil service will merely be seen as
having things to hide if it follows the outdated and defensive path of
action you propose. Furthermore, past conventions would not help us in
holding properly to account departments that do not have ministerial
oversight. I hope you would agree that the lack of ministerial oversight
makes parliamentary oversight even more important.
I have worked in many government departments and have the highest
regard for the civil service. I have seen at first hand the commitment
of civil servants, and, if you read all the PAC reports, you will see
that we warmly acknowledge success and good practice. However, I believe
it is the duty of the committee to pursue fearlessly the public and
taxpayers’ interest whenever and wherever we deem it necessary.
You also raise concerns about our questioning of Mr Inglese. In
taking evidence from Mr Inglese, our aim was simply to get to the bottom
of a settlement that he himself is on record as suggesting may be
“unconscionable”. His advice was at the heart of understanding the truth
to a particularly tangled and unacceptable story. Requiring a witness
to swear an oath should indeed be a rare step, taken only in exceptional
circumstances. I am surprised that you are not more concerned about the
circumstances that made it necessary on this occasion.
Finally, in your successful time as cabinet secretary and head of the
civil service you have dedicated a considerable part of your tenure in
trying to deepen its capacity – an enterprise in which the PAC has been
an ally. Now you have moved on and I wish you well. I look forward to my
committee working constructively with all those who succeed you and all
those called to give evidence in the future.
Yours sincerely Rt Hon Margaret Hodge MP Chair of the Committee"
A well written and scathing response to GOD (BTW, Goldman Sachs rather hit the headlines yesterday courtesy of Greg Smith).
The key to the problem of oversight and accountability, is that HMRC is non ministerial department. However, the risk of placing it in the hands of a minister is that it becomes more politicised than it is already; when in fact it should be (at its "simplest") a non partisan bureaucracy that collects taxes in the most cost effective and efficient manner possible.
Tax does have to be taxing.
UK EXPATS: Reduce tax on UK Pensions HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.
TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.
Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.
The Guardian recently published an article about a mix up emanating from HMRC, which caused HMRC to fine the deceased mother of one of its journalists for the deceased failing to send in her self assessment on time.
Seemingly HMRC knew full well that she had died because it did not send its penalty demand to her house, but to her son at his home address.
Quote:
"As power of attorney for Mrs B Levene, Deceased".
Power of attorney
ceases on the death of the person who grants the power, the bank accounts
are frozen to protect the beneficiaries of her estate and the executors
of the estate take over. They cannot act, however, until probate is
completed.
HMRC, when contacted by the journalist, said:
"We are extremely sorry for the errors in this
case and the distress these have caused.
These should not have happened
and resulted from human error.
There is no question of a penalty being
payable and we are writing with a full explanation and apology."
HMRC added that it was in the
process of reviewing how to improve its service to the bereaved.
Tax does have to be taxing.
UK EXPATS: Reduce tax on UK Pensions HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.
TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.
Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.
Now here's an interesting thing, last year's public drubbing of "Jack" Hartnett and HMRC's General Council Anthony Inglese (who was forced to take an oath) by the Public Accounts Committee (PAC) over HMRC's handling of the Vampire Squid and Vodafone has not gone down well with the civil service.
"When it comes to self loathing, no one and nothing does it better than
politicians and the State; especially when they viciously turn on one of
their own departments.
Therefore it should come as no surprise whatever to read the "public damnation" of HMRC by the Public Accounts Committee
."
Anyhoo, senior mandarins are less than gemused and have, according to Exaro, "declared war" on MPs over the
constitutional implications of civil servants being treated in this manner.
Such is the anger felt by the mandarins that GOD himself (the recently retired Gus O'Donnell) wrote to Margaret Hodge (Chairman of PAC), at the end of last year before he was elevated to the Lords, to tell her that civil servants should not be
accountable to Parliament and are only accountable to ministers.
In the letter to Hodge GOD accused PAC of using the hearings as a “theatrical exercise in public
humiliation”, adding “praise certainly can be a more effective tool for
change than blame.”
Hodge is making a speech this Thursday in which she is expected to reveal the contents of a dossier of anonymous,
highly critical comments from civil servants and government lawyers who
object to PAC's conduct.
At the very centre of the storm is the treatment of HMRC's Hartnett and Inglese.
Hodge is quoted:
"I would agree
that Whitehall seems to have declared war on Parliament.”
Aside from Thursday's speech by Hodge, which will stir things up, PAC is adding further fuel to the fire with its ongoing examination of
contracts that allow senior civil servants to avoid tax.
This "war" between mandarins and Parliament will of course do nothing to help HMRC improve its service or internal moral; as its failings/improvements will be used as a political football by both sides.
Tax does have to be taxing.
UK EXPATS: Reduce tax on UK Pensions HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.
TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.
Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.
Child tax credits continue to cause confusion, not just for the recipients but also for HMRC.
The Telegraph reports that HMRC sent out letters last month to recipients of child tax credits, stating that the maximum income for a family to be eligible for the
benefit will be £26K as from April 6. The letters warned that child tax credit
would end for families with income above £26K, unless they got in touch with the HMRC:
"For Child Tax Credit the income limit is £26,000 for both single
and joint households."
Whilst this is correct for a household with one child, it is not correct for households with more than one child; families with two children will be
entitled to credits, if their annual income is less than around £32,200.
HMRC have admitted that the letters were not that clear, and are quoted:
"We accept that a recent letter sent out to some tax
credits claimants was not as clear as it could have been.
TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.
Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.
