The Hotline

As noted earlier on this site, today is D Day for tax credit claimants to confirm the details of their income for 2007-08. Failure to do so by this deadline will result in their tax credits being cancelled, and overpayments reclaimed.

Now, as is human nature, people leave things to the last minute (entirely predictable) and are calling the HMRC "hotline" to confirm their details in a last minute rush.

All well and good, except for one small problem...they can't get through!

Poor old HMRC, despite knowing full well that the run up to deadlines always produces a spike in calls, just couldn't get its act together to run an efficient and useful hotline service.

Rather similar, I think, to the online filing debacle when the HMRC system crashed because of a "massive" spike of 6,000 (yes, 6,000) hits in one day!

HMRC insist that the hotline is still working, and anyone having trouble phoning in their claim should keep on trying.

I guess it didn't help that HMRC had not planned ahead for the holiday season, as evidenced by their derisory offer of £100 (what does that buy you these days?) to staff to forgo their holidays to man their tax credit desks.

All in all pretty pathetic!

As I have said before, all this time trouble and expense can be eliminated at the stroke of a pen by abolishing tax credits and increasing personal allowances to around £10K-£12K.

That of course will never happen, as long as we have our "popular" Prime Minister in orifice.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

A Series of Fuck Ups

Accounting Web published this summary of recent fuck ups by HMRC, as witnessed front line by real people trying to work with the mess that is HMRC.

Here is the piece in full:

"VAT – part of the overhaul?

Gavin reports that after HMRC updated the online vat registration yesterday it decided to wipe any un-submitted application as of 22/7/2008. This was confirmed by helpline staff he called this morning.

He says that he "was a bit disappointed as I will have to enter all the data again. There was no warning on the log in screen to the system so I am not sure how I was supposed to know this was happening."

Tax refunds – new system, new delays?

Following HMRC's recent announcement that no tax refunds would be paid unless full bank details are included on the SA return, accountants might have expected that the refund would be forthcoming if all the details were complete. Not so it seems...

Lee reports that if you submit a client's 2007/2008 Tax Return online that shows a refund and the taxpayer is dealt with by the Chapel Wharf Expat team, the tax refund will not automatically be paid to the client's bank account. Apparently a new policy in place for 2007/2008 means that staff are instructed to manually check/issue the tax refund into the clients bank account.

He says that having submitted a client's Tax Return online on 21 July 2008, he questioned how long his client would have to wait and was informed that they are currently up to the end of June submissions. There is already a three week delay and we have not got to the busiest time of the year!

One team member indicated this morning that agents could write to HMRC to complain and gave an address in Bristol (The Repayment Security Team, AASNIU, HMRC, 101 Victoria Street, Bristol, BS1 6BG).

Says Lee: "This quite appalling state of affairs. Agents have not been told and we have angry clients whose money is being loaned to the Chancellor."

Agent authorisation, again

Peter wrote into Any Answers pointing out a range of problems, including

The database the Tax Office uses is different to the database the Online Agent Authorisation system uses.

The letter sent to my clients which has the code doesn't get posted until after HMRC send me a letter warning me that the code is about to expire. HMRC leave post in warehouses for three weeks before sending letters.

When I complained about this to HMRC they said the system works because the client gets the code before it expires! I pointed out to them that their concept of working is different to mine. I have been unable to effectively act for my clients while HMRC leave the letters in a warehouse.

He adds: Does anyone know why HMRC spell Middlesbrough incorrectly on the website? I was told they would correct it about four years ago but it is still wrong.

IT gremlins again: Self Assessment records mixed up

Earlier in the year agents details were mixed up, latest reports indicate that it might be prudent to double check your client SA records. Various members report names and addresses being mixed up.

****

The National Audit Office, in its latest report on HMRC's transformation programme remains remarkably upbeat with HMRC's IT performance.

Accountingweb's IT editor John Stokdyk finds this perplexing: He writes, "Taken at face value, the NAO report makes little allowance for the risks posed to the transformation programme by the stresses and strains already facing the department's current IT systems and change managers."..."

Bottom line, HMRC is in a farking mess!

Given that the above problems are being experienced by trained accounting professionals, one can only wonder at the problems being experienced by non accountants who don't know/understand the rules or the way round the "system".

Our "beloved" Prime Minister, who cobbled together the Revenue and Customs into the monstrosity known as HMRC is personally responsible for this. The only way out of this mess is for him to be removed from orifice ASAP, and for a complete restructuring (not Brown's badly thought through restructuring) or indeed demerger of HMRC.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

The Bullys From HMRC

Yesterday one of the visitors to this site posted the following comment on two of my recent articles:

"I work for HMRC in one of their contact centres so would like to clear up a little myth surrounding overpayments relating to Tax Credits, if I may. The overpayments that are constantly mentioned are as a direct result of taxpayers not notifying HMRC of their change of circumstances, not an error by HMRC.

If a taxpayer does not inform the HMRC that they have had a pay rise or that the costs of their childcare has decreased or stopped altogether, how the hell are we meant to know?

Every single person who receives Tax Credits is sent a notice instructing them to notify HMRC if certain circumstances change.

If the claimant fails to do so, it is not HMRC's fault that they have been overpaid."

I have to say I have a degree of sympathy for the HMRC staff who have to endure the "stupidity" of the general public, many of the public don't fill in the forms on time/correctly or understand even the rudimentary basics of the tax system.

However, let us not forget that were it not for the monumental arrogance and love of complexity that Brown has for all things we would never have had this monumentally complicated and unwieldy tax credit system foisted on us in the first place.

It is this system that, aside from humiliating people by making them "beg" for state handouts, has forced a whole tranche of people into direct bureaucratic contact with HMRC who have no clue about form filling or basic bureaucratic administration.

This problem (bureaucratic, cost and dignity) could be resolved at the stroke of a pen, by simply abolishing tax credits and increasing personal allowances to a more sensible level of around £10K-£12K.

Unfortunately, as long as Brown is PM, this is not going to happen. The tax credit system is a monument to his arrogance and disdain for ordinary people.

That being said there is another problem with tax credits, namely HMRC's administration of them.

Confidential tapes and internal documents have exposed bullying and bungling in the tax credit scheme that will cost us £2.8BN.

Over 1.5M people have been told that they were overpaid tax credits and should now give back the money. HMRC have spread the lie that it was their own fault (funny how the comment I referred to above was posted twice, just at the same time that this story has come to light!) and informed some victims they had no right of appeal.

The reality you see is somewhat different, using evidence from HMRC's own case files victims of HMRC bullying have proven that HMRC errors are to blame.

It would seem that HMRC offices are in disarray, random errors are infecting claimants' computer files, and HMRC officials are lying to claimants about their right of appeal.

The cost of this shambles is £2.8BN, which HMRC will write off; why not, it's only our money?

Amongst the screw ups uncovered are the following:

• HMRC computer routinely wiped out claimants' salaries, thus triggering overpayments.



• Duplicate rogue files caused errors and sent out multiple awards.



• Victims were sent letters claiming they had "no right of appeal" when they were pursued for overpayments caused by official error.

The tax credit system, that Brown claims is meant to lift people out of poverty does nothing of the sort. It is designed to subjugate people, and make them dependent on the state.

It is an abomination!

It must be abolished now!

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

We're All Going on a Summer Holiday - Not!

Whilst our "respected" MPs take a "well earned" summer break of several months, spare a thought for those working in HMRC who had hoped to be able to a take fortnight or so off this summer.

It would seem that, because of the massive amount of work generated by the current tax credit TV campaign, staff at HMRC centres across the country are overwhelmed and are being asked/paid to not take a summer break.

July is the deadline for tax credit renewals, as the current TV campaign has drummed into the heads of all of those hapless individuals who are forced to become involved with the tax credits system.

The backlog of claims is now so great, that HMRC "managers" are offering the 5000 HMRC employees involved with tax credits £100 to not take a summer break. I can't see that £100 would persuade many to give up their summer holiday.

Management claim that they need just 100 staff to give up their holiday's. However, staff say that the situation has been caused by the job cuts and that it will simply get worse.

Peter Lockhart, of the civil service union PCS, is quoted in the Express:

"This is a symptom of a lack of staff and highlights the madness of continuing with a programme of cuts."

An HMRC spokesman said:

"Demand for our phone service is higher than usual due to the successful marketing campaign. In order to meet this increased demand we have offered a £100 incentive to some staff to defer their leave."

This of course, if the media campaign had been properly planned, could have been predicted. As such, a well run organisation would have ensured that they had sufficient staff on hand during the holiday season to meet demand.

This of course is not a well run organisation, this is HMRC!

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Morale At Low Ebb - No Surprises There Then

The National Audit Office (NAO) report the unsurprising fact that staff morale at HMRC is at "a low ebb", because of ongoing change programmes.

HMRC will spend £2.7BN over the next three years to provide a more efficient, customer focused organisation. The NAO report that 18 months into the programme, HMRC had spent £851M, and achieved estimated benefits of £2.4BN.

However, it warned:

"In any change programme, staff satisfaction might be expected to decline and recent surveys indicate morale remains at a low ebb.

The department needs to more actively demonstrate the benefits to its staff and manage the expectations of customers as many of the improvements for them are scheduled for 2011 and beyond."

NAO chief Tim Burr said:

"This is an ambitious programme of change with the potential to provide significant benefits in terms of tax yield and improvements for the department's customers.

To succeed, the department must determine what it expects the programme to achieve with the resources available."

Sounds to me rather like shutting the stable door after the horse as bolted, as the objectives of the programme should have been identified before initiating it.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

The Sweet Smell of Bullshit - Hardware Fault

Those of you who got stuck in the IT "snafu" with HMRC's online filing system, when trying to file your tax returns online on 31 January this year, may be interested to know what the cause of the systems crash was.

Contrary to earlier stories spread by Dave Hartnett that the crash was down to hacking and other nefarious issues, the real cause is far more mundane.

It was a hardware fault that caused 15,000 people to be unable to file their tax returns.

Quite what the nature of the hardware fault was remains a mystery, as HMRC has not disclosed the exact nature of the fault.

Which is rather odd really, given the fact that they work for us. Don't the taxpayers have the right to know what the problem is, given that we are paying for this "service"?

Is "service" a wee bit of an exagerration?

Tim Burr, National Audit Office Comptroller wrote in his report on HMRC's 2007 to 2008 accounts:

"The department secured assurances from its supplier that the online service could be supported at the expected volumes at the peak period.

However, on the day the hardware problem meant that the level of customer attempts to use the online service could not be supported."

Capgemini supplies IT to HMRC under the "popular" with HMRC's staff Aspire contract, which allegedly aims to overhaul technology and reduce running costs.

HMRC and Capgemini are quoted in Computerworld UK:

"The technical issues were caused by a hardware problem which was triggered by a spike in logins. Our systems had been thoroughly capacity tested but this hardware problem meant that we did not manage the January 31 peak as well as we would have liked."

Bollocks!

The "spike" was puny in terms of professional well run IT systems. Had they really tested it properly, and designed it well, this would not have happened.

Complete Bullshit!

The hardware was replaced in February.

Why did "nearly man" Hartnett tell the world that the crash was down to hackers, given that the real reason must have been known at the time?

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

IT Is Not Our Business - PAYE Cock Up

Oh dear, poor old HMRC they really can't seem to get the hang of this modern IT malarkey can they?

The much vaunted launch of the HMRC computer system intended to handle all Pay As You Earn, or Paye, tax claims has been suspended because of fears it will not be able to cope.

Well done lads!

Seemingly HMRC are worried that the Paye system, scheduled to go live in October of this year, is not ready to oversee the collection of taxes from about 31 million people.

The recent Poynter Review into HMRC data handling noted that duplication of information in HMRC's 650-plus systems increased the risk of data loss.

Over 650 IT systems!

Are they taking the piss?

Who the hell is in charge of IT strategy?

Bernadette Kenny, director general of personal tax at HMRC, issued a statement on the matter:

"Ensuring that our customers are properly served by our Paye services is of paramount importance to us, but we will not go ahead with implementing the new system until it is completely ready."

Errmmm...why is the DG of Personal Tax issuing a statement about IT issues?

This surely is a matter for the IT Director, to issue a statement about. The DG of Personal Tax will know fark all about IT systems!

HMRC has spent £552M on IT transformation between 2006 and March 2008.

Money down the toilet by the looks of it!

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Footing The Bill

The long a fruitless search last year, by the Metropolitan Police, for the missing data discs costs £473K.

It should of course come as no surprise to learn that the bill is to be paid for by the taxpayer.

Financial minister Jane Kennedy, in a written answer to Parliament, revealed the costs. The Met has said that it will try to recover the full costs from HMRC (who in turn will bill us).

Seemingly this was the most expensive lost-property inquiry ever in the UK.

Maybe Paul Gray, chairman of HMRC at the time the discs went missing, could be asked to make a contribution to the costs from his payout of £137,591 and his pension pot?

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

The Dangers of Straightjackets

John Whiting, spokesman for the Chartered Institute of Taxation, recently spoke out against HMRC's myopic revenue neutral "straitjacket" rule. He urged HMRC to grasp the point that reform may cost money in the short term, but lead to savings in the long term

In other words, Mr Whiting was asking HMRC to enter the real world and think strategically.

"The tax authorities have got to get rid of this 'revenue neutral' straitjacket.

The starting point seems to be that reforms have to be revenue neutral. Businesses understand that you have to invest to make money and perhaps the government should take the same view.

You can't have a tax system where you're handing out cash willy-nilly, but you must also spend a pound to raise a pound sometimes."

He added:

"If I spend a pound to raise 90p and also cut 10p in admin costs then I would also see that as revenue neutral. More attention needs to be given to the admin costs of taxpayers."

Fair point!

The question is, can HMRC see beyond the short term and beyond the 2010 election when Labour will be kicked out of orifice?

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Something For The Weekend

HMRC wants to restrict taxpayers' rights of appeal.

Nichola Ross Martin has written an excellent piece that looks at the problem, and what we can do about it.

It is worth reading and pondering over the coming weekend.

See AccountingWeb

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Website Confusion

IT issues don't appear to be HMRC's forte.

The ICAEW tax faculty recently pointed out that an item which appeared on HMRC's website about non-resident landlords, saying that replacement forms and notes are available to download, is misleading.

There are actually no new forms or guidance appearing on the site.

The faculty says:

"As far as we can see, there no new material has been made available.

Unhelpfully the link just goes to the Non-resident Landlords Scheme webpage, without saying what exactly has changed.

And the forms on this page don't seem to have changed at all, and are still the ones dated July 2006."

Wake up lads!

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Rewarding Failure - Bonus Season at HMRC

Oh the joys of the bonus season, when you are rewarded for your success and for meeting your KPI's.

Well that's the theory.

However, in reality there are some organisations that are more than happy to reward failure.

Aside from our "respected" financial institutions that mis-sell insurance, endowments, pensions, loans, sub prime debt etc there is another organ that is happy to reward failure.

Can you guess which one that is?

Yes, that's right, our old chums at HMRC.

Those running the organ of the state that lost 25 million data records, leaves months of post unopened and has screwed up the tax credit system have still been given bonuses.

The Treasury has paid out £3.1M to top civil servants and £19M to staff at HMRC.

The rewards have been agreed by the Cabinet Office, as part of a package to encourage the most senior civil servants to meet government targets set by the Treasury.

Well done lads!

Well deserved!

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

A Farking Mess!

Poor old HMRC and wee Gordon "Smiler" Brown, they just can't seem to get anything right at the moment. One of wee Gordie's "flagship" schemes, the "respected" tax credit scheme, has taken another well deserved battering.

The National Audit Office (NAO) has lambasted the scheme, noting that it is losing over £1.5BN a year as a result of overpayments and fraudulent claims.

To add insult to injury, Tim Burr (head of the NAO) has refused to sign off the annual accounts of HMRC because of its appalling mistakes and cock ups.

How embarrassing for an organisation that expects its "customers" to have perfect records!

Brown's lackeys in parliament were quick to dismiss this as....errmmmm......."teething troubles".

Are they taking the piss here?

Some "teething troubles", when up to £1.54BN (that's over 8% of the total) of tax credit payments were wasted because of error and fraud during the 2006-07 financial year.

As at March this year, £4.3BN remained to be recovered from claimants.

Jane Kennedy, the Financial Secretary to the Treasury, said that HMRC had been given until 2011 to cut the level of error and fraud to 5% (it currently stands at 7.6%)

Is she taking the piss?

-5% is way too lax a target

-2011 is hardly a stretching deadline

Pathetic by anyone's standards!

Dump these time wasting, money wasting and shoddily administered credits; increase the personal allowances instead.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Farking Stupid!

My sympathies with the employee of HMRC who posted this comment, about call centre problems, 3 days ago on Audio Talk.

"What fucking next. I work for H Em Arse Sea.

'This is our busiest year so far......................' , 'The calls continue to increase.....................'

The corporate brain cell hasn't been able to figure the fucker out. If you put so much pressure on people to reduce call handling times, some people will inevitably hang up on people to make the calls shorter. So, it follows that these people will call back again and again, and again. There are so many calls on the network that shouldn't be there. Dohhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh!!!!

How fucking stupid can people be??

They talk about us as a business. I'm sorry but businesses have to be much more effective than this.

Oh well........................... "

Rather interestingly the original post has since been removed from the board.

I wonder why?

Lucky I spotted it in time.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Tripping With HMRC

I was heartened and amused when I first read the headline about HMRC taking trips, I naively thought that there exists an element within HMRC that is a little bit rebellious and free spirited.

However, I was brought back to earth speedily with a bump when I realised that this story was in fact about travel expenses.

Ho hum!

Anyhoo, it seems that HMRC managed to run up a bill last year (at our expense) of more than £1.7M on trips abroad.

£1,751,257 was spent on flights, accommodation, and meals for overseas visits during the 2007/08 financial year. However, the actual spend will be significantly higher because HMRC (and this bit is the real killer) claims that it could not supply details of hotel bills for the first three months.

Funny how the humble taxpayer, when asked to justify expense write offs etc, is expected to have every single invoice and bill to hand though isn't it?

Treasury Minister Jane Kennedy also said that facts on where officials travelled could not be disclosed, for "policy and operational reasons".

Bullshit!

Similar details have been released previously.

One rule for HMRC, another for the taxpayer!

Covert footage of HMRC on a recent trip to Amsterdam



Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Blunders R Us

Malcolm Hurlston, chairman of the Employee Share Ownership Centre, is none too impressed with HMRC. He is of the view that blunders by HMRC have resulted in a sharp fall in the value of share options made by small firms under the terms of the Enterprise Management Initiative (EMI) scheme.

Mr Hurlston pulls no punches, and accuses HMRC of a "botched statistical analysis".

The initial value of options granted during 2005-06 has been reduced from £430M to £280M with the average value cut from £16K to £10K per employee.

A review of the methods used in calculating the value of the options has identified a number of blunders in EMI and other schemes, including company and discretionary share option schemes where the value of 2004-05 options was reduced from £760M to £600M and from £760M to £590M in 2005-06.

The tax system is stifling Britain's enterprise culture.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Draconian Penalties

Take heed fellow taxpayers, those of you who are late filing returns or paying your tax demands may well face draconian tax-geared penalties under recent proposals put forward by HMRC.

The penalties for late filing might start after six months, potentially rising to 100% of the tax bill after a year in cases where taxpayers had deliberately failed to file returns.

Needless to say, these proposal have not gone down well with those who deal with HMRC on a daily basis. John Whiting of PwC said that he objected "very strongly" to tax-based penalties for late returns.

For why?

Aha, you see dear readers there is an additional charge..taxpayers will also be charged interest based on the amount of tax due.

A double whammy!

Why so greedy HMRC?

As I have said before the government is broke, it desperately needs as much extra revenue as possible to fund its ill thought out spending programmes and pay for its out of control consultancy fees.

On top of the fines mentioned above for late returns, taxpayers also face penalties for late payment that could rise to 10-30% of the unpaid tax after a year.

Roy Maugham of UHY Hacker Young called the proposed "draconian".

Chas Roy-Chowdhury of the Association of Chartered Certified Accountants also noted that HMRC is applying one rule for itself, but another for the taxpayer. He said the "huge disparity" in interest rates charged on overdue tax and paid to taxpayers owed repayments was unjustified.

"When taxpayers make a mistake they are penalised. There needs to be an understanding that when [the Revenue] makes a mistake they are equally penalised."

HMRC claim that the differential is needed to discourage taxpayers from depositing money with the Revenue, in order to obtain a higher rate of return than was available commercially. Nice idea, but the rate discrepancy doesn't have to be so much to do that.

Why not simply charge and offer the same interest rate (eg LIBOR plus 1%) for late returns and overpayments?

HMRC are trying to have their cake and eat it.

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Dead Wood

The Tories recently revealed their plans for removing the dead wood, and there is a lot of it, from the UK tax system during a lecture at the ICAEW headquarters in Moorgate.

Lord Howe together with George Osborne addressed an audience of the profession's leading tax figures, and explained how a Tory government would make the UK's tax framework simpler.

Lord Howe's report "Making Taxes Simpler", proposes that an Office of Tax Simplification would be set up to examine the existing tax code and make proposals.

A cross party committee would scrutinise government initiatives and proposals, and any changes to tax law would be flagged up to the public no later than the pre Budget report

However, he warned:

"It's going to be a very long haul."

George Osborne noted that "this complex and unwieldy piece of legislation provides a perfect lesson in how not to make tax policy."

It is at least a start that the opposition recognise that the tax system has become far too complex for both the taxpayers to understand, and for HMRC to administer (even if they were up to strength).

However, we are stuck with two more years of Brown. The future, for the medium term, is very bleak indeed for both the taxpayers and those who work in HMRC (who are also taxpayers as well).

As I have noted before, the most effective method of simplifying the tax system is to:

- cut out erroneous taxes such as CGT and IHT
- increase personal allowances to around £10K
- levy one rate of tax at 20%
- make up the shortfall in revenues via VAT

Bada Bing
Bada Bong!

Tax does have to be taxing.

The New Statesman, Britain's leading political magazine is delighted to announce that HMRC Is Shite has been nominated for a New Media Award in the category of Campaign For Change. The campaign for change award will go to the individual or organisation that has most effectively influenced opinions and behaviour through the use of new media technology. The winner of this award will champion a cause and provide information and tools to instigate change.

The full press release can be downloaded here.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Failure - HMRC Cocks It Up

Taxation recently published a rather sorry tale about HMRC failing to take action to stop a VAT fraud which in the end caused a company to go bust.

The case is Green v Walkling [2007] EWHC 2046 (Ch).

One of the defendants was Mr Walkling. From 1997 to 2001 he was responsible for the sales at Mobility Now Ltd, which specialised in bathing products for people with mobility problems.

In 2001 he was contacted by Mr Moate who had purchased the assets of Mobility Now from the administrator, and he asked Mr Walkling if he would run the business through a company called Ortega Ltd. The shares of Ortega were owned by an American company.

In August 2002 Mr Moate asked Mr Walkling if he would become a director of Ortega, Mr Walkling accepted.

Towards the end of 2003 Mr Walkling became suspicious that Ortega might be involved in a VAT fraud. So he investigated and discovered that Mr Moate was involved in a dishonest scheme.

Ortega was inflating the inputs on the company's VAT return so that claims for repayment of VAT were being presented for some £30,000 to £80,000 a quarter, instead of the normal level which was in region of only £6,000 to £9,000 a quarter.

The repayments received were credited directly to Ortega's bank account. However, as soon as the credit appeared in Ortega's bank account the amount of the credit was withdrawn by cheque. The bank statements then were "doctored" to conceal both transactions.

Mr Walkling estimated that the total amount of money obtained in this way was in the region of £1.3 million.

Mr Walkling's solicitor advised on the money laundering implications and recommended that he, the solicitor, report it. On 13 January HMRC were informed.



Two officers went to Ortega's offices the following day and took copies of documents.

Problem solved???

Not quite!

Read what the judge said:

"Despite repeated approaches the cavalry never did arrive.

Despite being reminded of the increasing urgency of an intervention by them, it became apparent in March that no one at HMRC had yet read the file and the matter was being transferred to Ipswich; in late March it was reported that someone had read the file and was now 'very interested'; and in May that the HMRC 'wanted to make an arrest, but would like to do it in a subtle manner'.

By June they indicated that they were 'under resourced' and there was some doubt whether they would in fact undertake an arrest but wanted to meet Mr Walkling.

Although Mr Walkling agreed to a meeting it seems that HMRC did not commit to a date for the meeting. In the result, HMRC never managed to take any active step at all and Mr Moate and his wife took the opportunity to disappear along with the whole of the proceeds of the fraud."

Well done HMRC!

Here's what the judge thinks about HMRC:

"The latter had the whole case put to them on a plate together with all relevant documentary proof by Mr Walkling; they could have arrived and arrested the villain with minimal additional investigation and, had they done so, probably would have recovered a substantial amount of the money of which they had been defrauded.

Had they arrived in good time prior to completion of the sale of Ortega's business, Mr Moate would also have been prevented from misappropriating the sum of £443,000, the subject of this litigation. Instead, he and his wife have been allowed to evade justice and live comfortably probably in another jurisdiction on the proceeds of their crime.

Mr Walkling got not a penny piece by way of advantage out of the affair and never expected to. Instead he suffered the anguish of waiting in vain, while the problems unfolded and developed, for the arrival of the HMRC who never came; he has also suffered ill health, redundancy and unemployment, much of which might have been avoided, had there been an earlier intervention; he has also, as a result of these proceedings hanging over him, suffered the worry over the last couple of years at the potential prospect of financial ruin.

If an order were made against him, the most likely financial consequence is that he would enter into retirement with the loss of his home. On the other hand, were an order to be made against him, there would be substantial financial benefit to the creditors – the most substantial of whom, I note, is the self-same HMRC whose default made a highly significant contribution to the adverse consequences set out above.

I will not make an order which would permit such a grossly unjust result to occur. The application by the liquidator herein must therefore fail."

Mr Walkling faced possible financial ruin for being honest with HMRC, and trying to do his best.

The real irony here is that HMRC claimed that it didn't have the resources to catch the crook, even though the evidence was given to them on a plate. However, HMRC did manage to find the resources to fund the liquidator to pursue Mr Walkling through the courts.

There's justice for you, the HMRC way!

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Spleen Vented

There can be nothing more wrathful than the scorn of a tax expert being vented on the tax system, and the organ of the state that is meant to manage the tax system.

Mark Lee, a past Chairman of the ICAEW Tax Faculty, has publicly vented his spleen on the tax system and HMRC by revealing that his frustrations with the tax system led him to move away from giving tax advice two years ago, despite having reached the top of his profession.

In a "Comment" article in Taxation magazine, Lee, a Fellow of both of the Institute of Chartered Accountants and of the Chartered Institute of Taxation, goes on to say:

"The ever increasing complexity of our tax system has caused inequalities and inconsistencies and this is not helped by the 'doublespeak' of politicians and civil servants with regards to our tax system.

Combine this with the prospect of increased powers for HMRC without adequate safeguards for taxpayers and things become very worrying indeed."

Exactly!

We are sleep walking into a situation where a very badly run organisation, with little or no effective oversight, will have unprecedented powers that can be used against us.

Ar we going to just roll over an allow this to happen?

Tax does have to be taxing.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Consultations and The New Charter

HMRC is still formulating a "new" tax payers' charter, despite the fact that there was one in existence a few years ago but withdrew it.

The IR167 Charter for Inland Revenue Taxpayers was withdrawn on 23 June 2003, and replaced by 'Customer Service Standards' which were of little use to man or beast.

However, HMRC has stated that it has now launched a consultation on its proposals (which is giving me a feeling of a kind of deja vu, as they announced this idea back in January 2008), together with two other consultation documents on modernising tax administration.

The charter will, in theory, articulate in plain language the rights and obligations of customers when dealing with HMRC.

Responses received will help form the basis of a draft charter, which will be the subject of further consultation later this year.

The second consultation examines why taxpayers fail to file their tax returns, or pay the tax they owe, on time.

The third consultation examines harmonising and simplifying the rules on interest charged by HMRC both on tax paid late and on\interest paid by HMRC on overpayments.

The three consultation documents can be accessed on the HMRC website (click the "current consultations" option).

The deadline for submitting comments on all three consultations is 11 September 2008.

Make your opinion heard!

Tax does have to be taxing.

The New Statesman, Britain's leading political magazine is delighted to announce that HMRC Is Shite has been nominated for a New Media Award in the category of Campaign For Change. The campaign for change award will go to the individual or organisation that has most effectively influenced opinions and behaviour through the use of new media technology. The winner of this award will champion a cause and provide information and tools to instigate change.

The full press release can be downloaded here.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

US To The Rescue

HMRC has admitted that it needs help from the US.

HMRC will hand over sensitive trade data to its American counterpart in return for access to a state-of-the-art fraud detection system, which is too expensive for HMRC to build itself.

HMRC has admitted that its techniques for analysing trade-based money laundering are sub-standard, and that it is necessary to use the US system in order "for HMRC to be effective".

American Immigration and Customs Enforcement (ICE) is ready to grant HMRC access to Dartts (Data Analysis and Research for Trade Transparency System), its anti-fraud system, in return for the "regular exchanging of trade data with them on UK-US import-export declarations".

Dartts searches for trade anomalies and financial irregularities, which could indicate money laundering, customs fraud, smuggling or tax evasion.

HMRC have also admitted that it "would need somewhere to hold large amounts of data and more analysts to process the data, which would be a difficult decision in the current climate".

Is it altogether wise to hand over so much data to the US authorities, given their propensity for arresting British businessmen who visit the US?

Tax does have to be taxing.

The New Statesman, Britain's leading political magazine is delighted to announce that HMRC Is Shite has been nominated for a New Media Award in the category of Campaign For Change. The campaign for change award will go to the individual or organisation that has most effectively influenced opinions and behaviour through the use of new media technology. The winner of this award will champion a cause and provide information and tools to instigate change.

The full press release can be downloaded here.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Any Time, Any Place, Anywhere

Tax advisers and opposition MPs believe that safeguards for human rights under the finance bill are still inadequate, despite attempts to amend the bill in June. They fear that the sweeping new powers for tax inspectors to inspect business premises and records could be used in a draconian way against businesses.

David Furst, Institute of Chartered Accountants in England and Wales (ICAEW) president, has warned that individual officers could use the new powers "in a way which is inappropriate and un¬acceptable".

John Whiting of the Chartered Institute of Taxation said the HMRC's powers to gain access to premises could be compared with an old advertising slogan for Martini: "Any time, any place, anywhere".

You have been warned!

Tax does have to be taxing.

The New Statesman, Britain's leading political magazine is delighted to announce that HMRC Is Shite has been nominated for a New Media Award in the category of Campaign For Change. The campaign for change award will go to the individual or organisation that has most effectively influenced opinions and behaviour through the use of new media technology. The winner of this award will champion a cause and provide information and tools to instigate change.

The full press release can be downloaded here.

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"