HMRC Is Shite

HMRC Is Shite
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.

Thursday, 28 March 2013

HMRC Online Closed


Post Easter HMRC are performing their usual IT upgrades, as such the systems will be down.

As per the ICAEW Tax Faculty:

HMRC has published details of when its online services will be unavailable next week. The systems downtime is planned and is needed to process the IT upgrades before the start of the new tax year.
Most online services are expected to close from 06:00 on Thursday 4 April 2013 and open for use by 06:00 on Saturday 6 April 2013.

More details of the times/dates when each online service will be unavailable can be found on the Service availability page of the HMRC website.

The downtime varies between the services, eg online VAT registration will be unavailable from 17:30 on Wednesday 3 April, so it is worth checking the details for the services you plan to use.

The PAYE online service is particularly affected – unsurprisingly, given the need to upgrade for the introduction of Real Time Information (RTI) from 6 April 2013. In particular note that:
  • Following the scheduled upgrade you may experience a delay in receiving your online acknowledgement of PAYE submissions. HMRC asks users not to re-submit returns if they experience a delay in receiving their response message. All acknowledgements will be sent by Tuesday 9 April.
  • HMRC will accept PAYE in real time reports for 2013/14 from 6:00 on 6 April. Any sent earlier than this will be rejected.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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 Phantom Menace


It seems that there are "phantoms" within the machine, or rather that HMRC are issuing P800T forms showing overpayments of tax after taxpayers have already claimed and received repayments.

AccountingWEB have received a number of reports of "phantom P800T" forms being issued.

HMRC said that it had isolated the issue behind the mis-issued refund notices and was working to resolve it:
Most customers’ tax affairs are automatically and correctly worked out by our systems. A minority of customers who are in both SA and PAYE get their affairs worked out by both systems, incorrectly, and we regret the inconvenience this causes them and their agents.” 
According to Tax faculty member Shirley Martin, the issue goes back to 2010:
One of the processes is where NPS should be notified automatically when an SA record is set up/closed down (SAM100090). The process is supposed to set the SA indicator on the NPS record. The purpose of the indicator is to tell NPS that a P800T is not required because the tax will be settled  through SA (PAYE 93032).

The first cases of SA taxpayers getting refunds from NPS were attributed to a reported broken link between SA and NPS.”
HMRC has been aware of the problem for more than two years. Indeed it was reported by a loyal reader on this site in 2011:
"OK what we are experiencing is HMRC issuing unsolicitored P800T tax calculations for 10-11 when a 10-11 SATR has already been lodged! Clients are getting two repayments and some getting refunds when they owe tax "computer says PAYE and SA records not linked". FFS!"
However, the issue has yet to be fixed.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Wednesday, 27 March 2013

VAT Downtime


As per HMRC:

"The VAT Online service will be unavailable between 6am on Thursday 4 April and 6am on Saturday 6 April.

During this period you will not be able to register or deregister for VAT, or to make changes to your registration details, online. Neither will you be able to view your account, arrange a new Direct Debit, or submit a VAT Return.

HMRC apologises for any inconvenience this may cause.

HMRC strongly recommend that if you who need to submit a return by 7 April you do so before 4 April. If that is not possible you can of course submit your return when the system is back up on 6 April and 7 April.

You can make payments even while you are unable to access the VAT Online service. You should make sure that your payment clears to HMRC’s account by 7 April. Remember, this can take up to three working days.

If you pay by Direct Debit you must make sure that your return is submitted by 7 April so that payment can be collected on time.

You will not be penalised if your return or Direct Debit payment is late and this is due to HMRC systems being unavailable during the period before the 7 April due date.

If you try to submit your return before 7 April you should keep a record of any error messages you receive in case of difficulty."

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Tuesday, 26 March 2013

UKBA Abolished


I am gemused to read that the government has just abolished the UKBA.

This is the same UKBA that Lin Homer set up and ran (sorry, I mean grossly mismanged).

On this basis may we assume that the government will also abolish HMRC?

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

RTI Springs A Leak


Oh dear, it seems that HMRC's flagship RTI has just sprung a leak.

As per the ICAEW Tax Faculty:
"We are receiving reports that agents and their clients are experiencing delays in receiving activation codes from HMRC.

HMRC’s guidance sets out the process. The final step is for the client to pass their activation PIN to the agent. However these numbers are only valid for 30 days and expire at the end of that period. If the client does not receive the code and pass it to the agent within that time then the whole process must start again."
Is anyone having problems with this?

If so, please let me know.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Loyalty Bonuses Taxed


Here's an interesting development.

The Telegraph reports that fund investors face paying income tax on "loyalty bonuses" paid by fund supermarkets from next week, after HMRC ruled that the payments are "annual payments" and should therefore be taxed as income, starting in the new tax year - April 6.

Does this set a precedent for HMRC to tax cashbacks/loyalty rewards offered by supermarkets and credit card companies?

HMRC said claims that cashback in other industries could be targeted next were "complete rubbish".

So then, clearly HMRC won't tax cashback schemes ever.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Monday, 25 March 2013

Lin Homer and The DfT - Not Fit For Purpose


My thanks to a loyal reader who prodded me to take a look at Lin Homer's time in the Department for Transport.

Can you guess who was in charge of the DfT when it was described as being "not fit for purpose"?

Yes, that's right, Lin Homer!

As per the Express from October 2012:
"ONE of the key figures in the Department for Transport’s West Coast main line fiasco was the former boss of the UK Border Agency when it itself was described as “not fit for purpose”.

Millionaire mandarin Lin Homer was the Permanent Secretary at the DfT throughout 2011 when details of the new rail franchise business model were being thrashed out.

She was named by Sir Richard Branson last month as one of a handful of officials at the department whom his Virgin Rail team met during 2011 to voice concerns over the bid process.

Those concerns were ignored, said the rail boss whose warnings proved correct last week when the Government U-turned on its decision to award the lucrative franchise to his rival First Group due to an alleged catastrophic business model error.

The mistake is estimated to cost taxpayers £100million and the DfT has now been labelled “not fit for purpose”.
As per the Transport Committee - Eighth Report Cancellation of the InterCity West Coast franchise competition (published 23 January 2013):
"A more direct description of what happened [than that provided by Laidlaw] is that ministers and senior officials were lied to about how the outcome of the franchise competition had been reached. A major unanswered question is why ministers and senior officials were misled about how the SLFs had been calculated, the issue which led directly to the cancellation of the franchise competition. We recommend that the Department explain why this happened, if necessary after decisions have been reached on whether or not to take disciplinary action against particular members of staff. (Paragraph 26)
 
3.  In our view, we cannot categorically rule out the possibility that officials manipulated the outcome of the competition not only to keep First Group in the running for as long as possible, as Mr Laidlaw suggested, but to ensure that First got the contract. We recommend that the DfT find a way of undertaking a full email capture, reporting to someone suitably independent, to help get to the bottom of why DfT staff discriminated against Virgin and in favour of First Group during the ICWC franchise competition. (Paragraph 28)"

Therefore to repeat my question asked this morning:

Why the fark was this useless woman appointed in the first place???????

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Lin Homer - Not Fit For Purpose



In December 2011 the world awoke to the gobsmacking news that Lin Homer was to become CEO of HMRC. I wrote the following at the time, warning about Homer's track record:
"In 2005 Birmingham was declared to be a "banana republic" by the Election Commission.

For why?

Wholesale electoral fraud in the council elections.

The Election Commission ruled that Labour had been responsible for “massive, systematic and organised postal ballot fraud.”

He then made a few choice remarks about the Chief Returning Officer, also the chief executive of the council.

She had "thrown the rule book out of the window”.

To whom did he refer?

Why none other than Lin Homer.

Labour helped her out by making her head of the UK Borders Agency.

This being the very same UKBA that threw the rule book out of the window and relaxed border controls.

Lin, clearly a career minded woman, moved on from there this summer (just before the shit hit the fan) and became Permanent Secretary at the Department of Transport.

Now she moves to HMRC!
"
Fast forward to 2013, and we now see that Parliament may finally be waking up to the fact that Homer is not fit for purpose and that her appointment was farcical.

The cause of this "Damascus Moment" is the appalling performance of the UK Border Agency (UKBA), Homer's proud legacy!

The Commons Home Affairs Committee has said today that it was "astounded" when Homer was appointed to run HMRC.

Newsflash: Had they been on the ball in 2011 they would have seen that everyone else was also "astounded" that this walking disaster area was placed in charge of a failing department (HMRC).

The committee expressed “little confidence” in Homer's ability to "lead" HMRC, following “catastrophic” leadership failures in her previous role at the UK Border Agency.

This is all very well, but her failures were well known at the time!

Why the fark was this woman appointed in the first place?

Homer's legacy from the UKBA has been exposed for all the world to see, the UKBA has a backlog of unresolved asylum cases that will take 24 years to clear. The total backlog of unresolved or disputed immigration cases in the UK was 312,726 at the end of September last year, but it is not possible to be sure if that figure was accurate.

The committee have accused the UKBA and Homer of misleading them for the past six years. As per Economia:
"The status quo, in which catastrophic leadership failure is no obstacle to promotion, is totally unacceptable.

We recommend that in future any failures of this nature should have serious consequences for the individual's career.

The whole episode raises serious concerns about the accountability of the most senior civil servant to parliament. It is shocking that after five years under Lin Homer's leadership an organisation that was described at the beginning of the period as not being fit for purpose should have improved its performance so little.

For six years the committee was misled by UKBA chiefs about the agency’s unacceptable performance.


It appears more like the scene of a Whitehall farce than a government agency operating in the 21st century. No sooner is one backlog closed than four more are discovered.”
So that we are all clear as to exactly what the committee thinks of Homer, here is what they said about her as per the BBC:
"Lin Homer, who was in charge of the Agency for much of the period in question, has repeatedly misled the Committee over the size of the asylum backlog and still refuses to take responsibility for her failings.

It is shocking that after five years under Lin Homer's leadership an organisation that was described at the beginning of the period as being 'not fit for purpose' should have improved its performance so little. 

Given this background, we are astounded that Ms Homer has been promoted to become Chief Executive and Permanent Secretary at Her Majesty's Revenue and Customs and can therefore have little confidence in her ability to lead HMRC at what is a challenging time for that organisation."
I did warn you she was no good, back in 2011!

So, I will repeat my question:

Why the fark was this useless woman appointed in the first place???????

As ever opinions and comments from loyal readers, especially HMRC staff are welcome.

As to the future, will Homer be sacked?

Not yet, the politicians will wait for RTI to fail; as and when that happens she will then be sacked and blamed for that!

A lousy solution, and one that does neither the staff of HMRC nor the taxpayers of the UK any good whatsoever!


Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Sunday, 24 March 2013

Does Homer Face The Sack?



Is this the end for Homer?

Let's see what happens tomorrow.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Friday, 22 March 2013

HMRC's Failed Probes



Tax-News reports that HMRC increased the number of IR35 investigations during the first half of this tax year six-fold. In 2011/12 there were 59 investigations, yet in the first half of 2012/13 there were 193 new investigations.

What has been the result of this increased probing?

Diddly squat!

The increase in investigations into "disguised employment" arose as a result of the recent furore over senior public sector figures being paid through personal services companies, to avoid liability to personal income taxes and national insurance contributions.
Martin Casimir, Managing Director at Bloomsbury Professional, said:
HMRC has been stung into action by a handful of very high profile cases where individuals and employers may not be IR35 compliant. Ordinary contractors and freelancers are now dealing with the fallout.

IR35 is a very problematic piece of legislation as it adds unnecessary complication to the tax system and makes it hard for ordinary contractors to work out their tax bills; It is very easy to fall foul of the legislation. Now ordinary freelancers and contractors have the added complication of HMRC breathing even more closely down the back of their necks.

It is a common misconception that people only use personal service companies to avoid tax. For some individuals with more than one employer or for those working on a temporary basis, registering as a personal service company is a legitimate way to work.

IR35 is a good example of how out-of-date the UK tax system is. It doesn’t take into account the changing face of employment, and assumes that all taxpayers work in the same job for a long period of time.”

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Thursday, 21 March 2013

Where's Osita?


Where is whistleblower Osita Mba?

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Wednesday, 20 March 2013

Auditor Independence - Perceptions Matter


As an ex auditor (both external and internal) and having had some considerable experience of fraud investigations and compliance work, I can state that it is a fundamental requirement in order for an auditor to be able to do his/her job in a professional and credible manner (and for the audit report to have credibility) that he/she and the department that they work for are not only independent but perceived to be independent.

When that independence is undermined by, eg, an unhealthy close relationship with the auditee, or by unhelpful dissemination of information about ongoing audits to third parties, then the auditor can no longer perform his/her function.

My thanks to a loyal reader who pointed me to a recent article in the Guardian that shows that the National Audit Office (NAO) has had its independence severely compromised by the alleged actions of its own boss Amyas Morse.

The Guardian reports that Morse, who set up a judge-led review into the "sweetheart" multimillion-pound tax deals between HMRC and corporations, undermined the whole process by telling Dave Hartnett (when he was still head of HMRC) that the inquiry would find "nothing of substance".

For good measure Morse told his staff that the review by Sir Andrew Park would find no evidence of serious wrongdoing.

In an email marked "private and confidential – please do not pass on to anyone without coming back to me", sent by Hartnett on 15 December 2011 to 10 senior HMRC officials Hartnett wrote that he had held a meeting that afternoon with Morse which was "useful and interesting". 
Hartnett went on: 
"Amyas has been insistent that Andrew Park tackles the cases one at a time. He [Morse] has told me that he has made clear to the NAO that his expectation is that nothing of substance will be found in the review."
Morse apologised for the way that Hartnett's officials had been treated by PAC:
"He [Morse] did not envisage things playing out the way that they have and was sorry for the individuals in HMRC who had been bruised by the actions of the PAC and for the difficulties the department had experienced." 
It is clear from the text that the relationship between NAO and HMRC has become far too cosy; as such the perceived independence of NAO has been severely compromised, which means that NAO can no longer perform its role effectively.

QED!

By the way, does anyone know what has happened to the whistleblower Osita Mba?
Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Happy Budget Day



In keeping with the day, some PCS staff at HMRC are on strike.

Please let me know if this affect service in anyway.

Thanks.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Tuesday, 19 March 2013

HMRC Official RTI Announcement

As per HMRC

Reporting PAYE in real time (Real Time Information or RTI): relaxation of reporting arrangements for small businesses

HM Revenue & Customs (HMRC) recognise that some small employers who pay employees weekly, or more frequently, but only process their payroll monthly may need longer to adapt to reporting PAYE information in real time. HMRC have therefore agreed a relaxation of reporting arrangements for small businesses.

Until 5 October 2013, employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month (5th).

HMRC will continue to work with employer representatives during the summer to assess and understand the impact of RTI on the smallest businesses and consider whether they can make improvements to real time reporting which will address their concerns without compromising the benefits of RTI or the success of the Department for Work & Pension's Universal Credit.
Please see HMRC's guidance on exceptions to reporting PAYE information 'on or before' paying an employee.

Exceptions to reporting PAYE information 'on or before' paying an employee

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Last Minute RTI Changes



HMRC have decided to make some last minute changes to RTI.

Payroll World reports that HMRC is set to announce a Real Time Information (RTI) reporting easement for small businesses with less than 50 employees that pay their staff weekly or more regularly.

The announcement will be made by HMRC later today.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Debt Collection - Release The Hounds



HMRC has increased the amount that it spends on using debt collection agencies to chase up tardy taxpayers, in fact HMRC has more than doubled the amount it spends on debt collection agencies from £5.8M in 2011 to £13.4M in 2012.

Mark Giddens, head of private client services at UHY Hacker Young, is quoted by the FT:
HMRC is under a lot of pressure to increase its tax take, and bringing in professional debt collection agencies to follow up on debts is seen as a cost effective.

The less professional end of the debt collection market has a reputation for being over-zealous and trying to collect the debt no matter what.

On top of this, communication between the different parts of HMRC can occasionally break down, with in-house teams pursuing taxpayers for debts that have already been paid or aren’t owed in the first place. It’s important that HMRC gives debt collection agencies the correct information to work from.” 
Quite so, the "success" or otherwise of farming out debt collection to the private sector depends very much on the quality of the private sector firm used and the validity of the information they are given to work with.

It is also worthwhile remembering that once you have unleashed the hounds, it is sometimes rather difficult to rein them back in.

Please feel free to share your experiences of HMRC's debt collection tactics.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Monday, 18 March 2013

Sharpen Up



Despite the fact that HMRC is closing its Enquiry Centres and forcing people to use the phone to make contact, it seems that its performance wrt call handling is still not up to snuff (this of course is no surprise to loyal readers, as the subject of call handling often features on this site).

Anyhoo PAC have said that HMRC's target of answering 80% of calls within five minutes is "unambitious and woefully inadequate", and would still leave 16 million people waiting longer than five minutes.

Margaret Hodge went so far as to use the word "abysmal".

The industry benchmark is to answer 80% of calls within 20 seconds.

PAC's message to HMRC is that it needs to sharpen up.

You can watch Lin Homer's performance on Breakfast this morning, where she tries to blame "customers" for some call failures, here.

As ever, I am always happy to receive "customer" feedback about problems wrt contacting HMRC.



 Tax does have to be taxing.


Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Friday, 15 March 2013

PCS Brief On Enquiry Centre Closures



My thanks to a loyal reader who sent me the following transcript of PCS's brief (issued today) on the announcement by HMRC of the closure of the Enquiry Centres:
"HMRC approached us to emphasise that they were fully prepared to enter into meaningful dialogue with PCS and ARC on a strictly confidential basis. These talks were to be ahead of any firm decision about the future direction in respect of customers needing enhanced support. We welcomed this offer and dialled into a telecom on 21 Feb in what can only be described as a very bizarre meeting. The heading of the meeting was 'the future of f2f enquiry centres' but when we tried to discuss this we were informed it was now changed to 'customers who need enhanced support'

We made it clear at the meeting what PCS response would be to closures and it was agreed in the spirit of employee relations agreement to hold weekly meetings. HMRC hoped to inform us of timescales at first meeting as well as give details of trials and research undertaken.

These meetings never took place and following cancellation of second scheduled one by HMRC our group secretary deputy and full time officer were invited to a confidential.meeting last week in which they were informed of the plans.
"
It looks as though HMRC were playing games with the unions.

Do bear in mind that HMRC have been planning the demise of the Enquiry Centres for quite some time.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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 Demise of The Enquiry Centres



Given yesterday's announcement by HMRC about the closure of its Enquiry Centres, I had a trawl through the site to look at a couple of earlier articles that I had published about Enquiry Centres.

Sadly, for the 2.5 million visitors to these centres and the 1,300 staff who work in them, the writing has been on the wall, for quite sometime about their demise.

In June 2010 I wrote the following:
"...those who "run" HMRC are determined to reduce the number of opportunities that taxpayers have for face to face discussions with a member of staff.

The Low Incomes Tax Reform Group (LITRG) report that HMRC has cut the opening hours in 58 of its 280 tax enquiry centres, with some now open for just one or two days a week.

They also note that another 117 might suffer cuts as well, as a result of a consultation that is currently underway....


HMRC contend that the staff who work in the enquiry centres facing cuts will be deployed to other duties (eg answering correspondence)..."
In May 2012 I wrote the following:
"My thanks to a loyal, reader who has proffered some friendly advice to taxpayers who are stuck in a call centre phone queue waiting to try to get through to someone.

Hang up and go round to your local enquiry centre!

For why?

HMRC will do nothing about improving call handling times because they know that when the Universal Benefit comes into force many taxpayers will be calling DWP instead, thereby reducing the number of calls to HMRC and improving the KPI's used to monitor HMRC call handling performance.

Therefore I am advised that the least worst option is for taxpayers to go to an enquiry centre, where the phones are free, and basically jump the queues.

No, I don't understand either how calling from an enquiry centre will get you through quicker than calling from your own phone; but that nonetheless is the advice given by my loyal reader.

UPDATE

I am advised that the phones used at enquiry centres have speed dials which jump the queues of people using the normal number, as the programmed speed dial number is not the same as the ones used by taxpayers when ringing from home.

It is believed that this queue jump facility is to minimise the length of time people physically spend in enquiry centres and thus reducing the risk of them "kicking off".

In an aside, I understand that taxpayers who come to an enquiry centre to actually see someone (as opposed to speak to someone on the phone) are still forced onto the phone first at the enquiry centre by a "floorwalker", in order to see if the query can be resolved by phone, thus minimising the number of people who have to make an appointment to actually to see someone at the enquiry centre.

So all you have to do is find a conveniently located enquiry centre, before those that remain are closed down!
"
HMRC claim that the number of visits to Enquiry Centres has fallen (to my simple mind 2.5 million visits still seems a large number!).

The reason for this decline is clear, HMRC have been making it increasingly more difficult for people to actually sit face to face with a member of staff (even if the hapless taxpayer manages to find an Enquiry Centre in their area that is open).

In my opinion the demise of the Enquiry Centres has been deliberately engineered by HMRC.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Thursday, 14 March 2013

HMRC To Close 281 Enquiry Centres



As per Karen Barrett:
"HMRC to close its 281 enquiry centres in 2014. Looks like the system is about to get more confusing!"
As per the BBC the closures will put 1,300 jobs at risk, although HMRC aims to deploy these staff elsewhere.

The centres (currently used by 2.5 million people per annum) will be replaced by a telephone service and home visits (better put the kettle on!), which in theory will save HMRC £13M per annum.

Lin Homer is upbeat, as per the Telegraph:
"HMRC will provide a more modern and accessible service that will target the right support to customers who need it, where and when they want it.” 
Problem solved!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

RTI Savings?



With less than a month to go until the introduction of RTI, HMRC has launched an advertising blitz telling the world how wonderful it will be (they even manage to mention Churchill - the late Prime Minister, not the insurance dog).

In a press release issued Monday HMRC claimed that:
"It will reduce administrative burdens for employers by around £300 million every year."
Errmmm....I'm not entirely sure as to where that £300M figure has been derived from (Homer quoted the same figure in February, but did not validate it)?

I also wonder if the costs to those SME's without payroll functions has been taken into account?

Additionally as I noted in January, companies will need to invest in new payroll software, or update their current systems to comply with RTI; these costs have to be borne by the companies.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Wednesday, 13 March 2013

Is RTI The Panacea That HMRC Claim It Will Be?


My thanks to a loyal reader, who has posted the following comment concerning HMRC's inability to deal with matters "real time".

The reader makes the valid point that the system is incapable of transmitting realt time data between DWP and HMRC.

This clearly has implications for RTI and Universal Credits.

My question to those of you have intimate knowledge of the RTI flagship is, will RTI satisfactorily deal with, resolve and be able to cope with the issues raised by this loyal reader?
"An individual (me) has 2 forms of "income" which consists of a pension following 40yrs employment and a DWP minimum ESA payment of the taxable kind.

A succession of tax codings ends up with notification of 2013/14 to include an "underpayment restriction" amount of -£X, cue rapid query via endless wait on phone!


Pray tell me HMRC says I, what does this amount relate to and how did you arrive at the figure?
HMRC - We don't know what your income is going to be and we have to estimate it.


But says I (and herein lies the RTI scenario bit)


my pension is paid from you as my ex employer through the realms of MyCSP (my civil service pension) and your closest partner agency DWP pay me the reduced ESA, what gives?


HMRC states we don't know what DWP pay you (ESA taxed by HMRC via instructions to MyCSP as DWP can't collect the tax due for whatever reason) until the end of the tax year! Cue incredulity on my part at this stage as besides the fact that HMRC are estimating that which it is possible to calculate, by my calculations I am due to receive an inflation busting increase in my ESA of 14.65%.

So what does all this mean for the taxpayers of the UK?


I don't know what an incorrect tax code costs to put right but multiply it by the number of time my tax code has been "adjusted" in 6 months (7) and you begin to get the picture.


Then there is the "underpayment restriction" which unchallenged would result in a tax-free loan by the taxpayer - me, to HMRC, prior to the subsequent adjustment the following year.


Now, call me a cynic, but do you suppose that the vast majority of these adjustments are one-way and unethical?

So, what does it all mean?

Think carefully with RTI looming.

There is the archaic system of ESA taxed via pension provider - a system of taxation via third party involvement, with all the opportunities for mistakes along the line...

The system is incapable of transmitting real time information from DWP to HMRC.

Even with all the correct information to hand (i.e. its own and DWP data, HMRC is incapable of calculating "the right amount of tax at the right time".

HMRC obtains a positive balance in this area at the expense of the taxpayer, not creative accounting but certainly unethical especially during a reccesion.

What does that mean for the Universal Credit and RTI systems?

Over to you Ken.
"

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance 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.

To find out more, please use this link Solar Tax Investigation Insurance



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.

Click the link to read about: Tax Investigation for Dummies

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"

Tuesday, 12 March 2013

The Tax Fairness Debate Transcript

Tax Fairness

Mr Speaker:
I inform the House that I have selected the amendment in the name of the Prime Minister.
12.44 pm
Chris Leslie (Nottingham East) (Lab/Co-op):
I beg to move,
That this House believes that a mansion tax on properties worth over £2 million, to fund a tax cut for millions of people on middle and low incomes, should be part of a fair tax system; and calls on the Government to bring forward proposals for such a tax at the earliest opportunity.
Let us consider the contrast that now exists as a result of Government decisions. Those who are on low and middle incomes—that is, the vast majority of the British public—have seen their tax credits cut, their child benefits squeezed, their cost of living rise as a result of higher VAT and their wages fall in real terms. However, the richest 1%, including the lucky few who earn £1 million a year, will see an average tax cut of £100,000 in four weeks’ time, and banking executives will not have to pay that annoying bonus tax, all thanks to the Chancellor’s generosity. This is a tale of two societies, with hard-working earners on low and middle incomes paying for the Government’s failure to get the economy growing while the richest elite are being rewarded by the Chancellor with a tax cut worth nearly four times the average annual salary.
Mark Reckless (Rochester and Strood) (Con):
Is it not also a tale of two sides of the House? Will the hon. Gentleman explain why his speech today has proved so popular with Labour Members?
Hon. Members:
Where are they?
Chris Leslie:
The hon. Gentleman really needs to focus on the issue at hand. If he is standing up for the millionaires’ tax cut, he should simply say so. It will take effect in about three weeks’ time, and a number of his constituents will be absolutely astonished that he has voted for an average £100,000 tax cut for millionaires while they have lost their tax credits, found themselves paying more and seen a decline in the quality of public services.
Harriett Baldwin (West Worcestershire) (Con):
I am sure that the massed ranks of the shadow Minister’s colleagues behind him today would like to know whether he will pledge to increase the top rate of tax to 50p in his manifesto.
Chris Leslie:
We certainly voted against the tax cut, and if we were in government now, we would not be cutting that 50p rate to 45p in April. Heaven only knows what other horrors the Government have in store over the next two years. We do not know what kind of situation we are going to inherit in regard to the deficit and to borrowing, so it is impossible to predict the tax situation that we will be faced with, if and when we inherit that position at the next general election.
Mark Reckless
rose—
Chris Leslie:
I want to make some progress. I will give way in a moment.
The divide between the richest and the least well off is getting broader, not narrower, and the situation is getting worse. The Government are cutting taxes for one group this year—the very richest in society—with 13,000 people earning £1 million a year getting a tax cut. That is astonishing. Could any other policy better typify the twisted logic of trickle-down economics than that one?
Caroline Lucas (Brighton, Pavilion) (Green):
I welcome the mansion tax as a step towards equality, but why will not the Opposition go further and tackle the absurdity of our council tax rates still being based on 1991 rates? A house valued at £1 million in 1991 pays only 0.3% of its worth, while a house valued at £40,000 pays 2.4%, which is eight times more. Does the hon. Gentleman agree that that is unfair and should be tackled?
Chris Leslie:
It is important to listen to the Liberal Democrats’ proposal for a mansion tax. They believe that £2 billion could be raised in that way from properties worth £2 million or more to help those on low and middle incomes. In our view, any such revenue should fund the reintroduction of a 10p starting rate of income tax.
I would say to hon. Members, and particularly to Conservative Members who are struggling with the state of the current economic policy, that there are independent authorities and budget watchdogs to correct them when they wrongly assert that growth will not be affected by the cuts and the tax rises and that they are paying down the national debt, but they cannot pull the wool over the eyes of the public, who know what fairness is and who know that the choices made so far have been deeply unfair.
Mr Jim Cunningham (Coventry South) (Lab):
Does my hon. Friend recall that it was the Labour Government who introduced the 10p tax? Does he also think that it would help those in poverty, as well as motorists and the building industry, if there were a cut in VAT?
Chris Leslie:
That is our view. We want to do more to help those on lower and middle incomes, and to ask those privileged and wealthy individuals in society—particularly if they have a property worth £2 million or more—to make a fair contribution. The debate today presents an opportunity and a challenge to Government Members to do the right thing and to back what some of them profess to believe in.
Let me remind Members what our motion says. It asks the House to resolve
“that a mansion tax on properties worth over £2 million, to fund a tax cut for millions of people on middle and low incomes, should be part of a fair tax system; and calls on the Government to bring forward proposals for such a tax at the earliest opportunity.”
That is the extent of the motion. It is very simple and straightforward. Liberal Democrats who are in the Chamber today—for some are actually present—have repeatedly claimed to back a mansion tax. After going along with the Chancellor’s tax cut for millionaires, a failing economic plan, a VAT rise and a trebling of tuition fees, they finally have a chance to vote for something that was in their manifesto.
Chris Leslie:
I will give way to one of them.
Mr Leech:
Does the hon. Gentleman not accept that when they were in government, Labour Members opposed our proposal for a mansion tax? It is all very well for them to come out in support of it in opposition, but they never did so in government.
Chris Leslie:
I shall put to one side the fact that the Liberal Democrats said one thing in opposition—about, for example, tuition fees—and have done completely the opposite in government. The hon. Gentleman should know that circumstances are now getting worse, especially given the millionaires’ tax cut which will take effect in April. We must do something to revive the fairness of the tax system, and that is why I think it important for the Liberal Democrats to stick to their 2010 manifesto pledge to introduce
“a Mansion Tax at a rate of 1 per cent on properties worth over £2 million, paid on the value of the property above that level.”
Jane Ellison (Battersea) (Con):
The hon. Gentleman speaks of fairness. The mansion tax that he proposes would be profoundly unfair on a great many of my constituents who have done nothing more than live in the same house for several decades in an area which, in terms of its property prices, has changed unrecognisably. That applies to many parts of London. I am amazed that London Labour Members do not make similar points. What the hon. Gentleman proposes is akin to a tax on living in London.
Chris Leslie:
If the hon. Lady thinks that everyone in London lives in a £2 million property, she must be almost as out of touch as her party’s Chancellor of the Exchequer. Of course there are ways of introducing a mansion tax that could take account of the specific circumstances in which people are asset-rich and cash-poor, but there would probably be very few such cases. The Liberal Democrats have thought very carefully about that particular proposition.
Gloria De Piero (Ashfield) (Lab):
The public constantly tell us that they hate the infantile, Punch and Judy nature of politics. However, I read in today’s briefing paper from the Liberal Democrats that they will not back us because we have copied them. Is that not exactly the kind of behaviour that turns the public off politics?
Chris Leslie:
My hon. Friend is entirely right. We cannot win. When we oppose the policies advocated by the Liberal Democrats, we are attacked, and when we support those policies, they still attack us. It is difficult to know what to do—but I do know that honour and integrity matter to the Liberal Democrats, which is why I still think that they should join us in the Aye Lobby in a few hours’ time. After all, on 17 February, when asked whether the Liberal Democrats would support this proposition, the Business Secretary said:
“It depends entirely how they phrase it. If it is purely a statement of support for the principle of a mansion tax I’m sure my colleagues would want to support it.”
We look forward to seeing them in the Lobby.
Mr Nick Gibb (Bognor Regis and Littlehampton) (Con):
I am waiting to hear the shadow Minister mention that this Government have taken £2.2 million of the lowest earners out of tax altogether. Does Labour’s support for a mansion tax signal its return to high-tax policies, and a end to the new Labour project so admirably led by Tony Blair and Peter Mandelson, which transformed Labour into an electable party? Are we now seeing signs of a return to the hard left, high-taxing Labour party of the past?
Chris Leslie:
No. The hon. Gentleman is in a coalition with partners, whom he no doubt does not regard as hard lefties, who are advocating the very policy that we recommend in our motion. We took the advice of the Business Secretary, a Liberal Democrat, who said “Table a very simple motion, and we will support it.” According to any objective measure, even the hon. Gentleman can see that we have held back from party-political rhetoric. The motion is very plain and simple, as requested. We have tried to find some common ground. If those 57 Members of Parliament—and perhaps even some Conservatives; who knows?—were to join us in the Lobby tonight, that would make the mansion tax a reality.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC):
We are minded to support wealth taxes, and we therefore welcome the motion, but it is a bit thin on detail. Can the shadow Minister reassure me that farmers will not be dragged into the new tax because of the value of their land, and not necessarily because of the value of their property?
Chris Leslie:
That is an important point. I am glad that we have the hon. Gentleman’s support on this issue. Obviously there is a difference between residential and corporate arrangements, but our motion says that we want the Treasury to bring forward proposals at the earliest possible opportunity. We have seen the proposition set out by the Liberal Democrats and used it as the basis for our motion, but let us see what further options can be drawn together. We think that it would be a good idea, for example, for the Chancellor to commission the Office for Budget Responsibility to present detailed suggestions of ways in which the arrangements might work.
Neil Carmichael:
Will the shadow Minister remind the House exactly what the top rate of income tax was throughout most of the last Labour Government, and give us some insight into to why it was at that level?
Chris Leslie:
After the global financial crisis, we decided to introduce a 50p top rate of income tax so that those earning £150,000 and above would make a fairer contribution to society as a whole. Those people are the wealthiest 1% in society. How astonishing—how absolutely breathtaking—that in last year’s omnishambles of a Budget, the present Chancellor of the Exchequer decided to go for the right-wing trickle-down approach and cut the 50p rate to 45p. I hope that that decision will be reversed in the forthcoming Budget, in respect of which I take it that the hon. Gentleman’s intervention constituted a representation to the Chancellor.
Dame Angela Watkinson (Hornchurch and Upminster) (Con):
Will the shadow Minister remind the House how much was lost to the Treasury during the period of the 50p tax rate, and does he accept that 100% of 45% is more than 50% of 50%?
Chris Leslie:
I am not sure about the hon. Lady’s maths, but we are still within the period of the 50p rate. Of course we want to see the details of what has been happening. However, while the Conservatives have the notion that for those who are very wealthy, the higher tax rates are a deterrent and create avoidance, they do not say the same about the poorest and the middle-income families in the rest of the country. They can pay VAT at 20%; they can pay higher taxes. The hon. Lady takes a view that is taken by so many Conservatives. There is one law for those who are very wealthy, but everyone else must suffer because of the Conservatives’ failure on revenue and borrowing.
Mr Geoffrey Robinson (Coventry North West) (Lab):
Does my hon. Friend not find it strange that the Government do not seem to understand that taxes are an element of economic policy that can be adjusted in line with economic circumstances? During the first period of the Labour Government, the prevailing circumstances meant that there was no case or need for taxes to be increased, by means of a mansion tax or by any other means. When the need appeared after the economic collapse, compounded by the financial crisis, it became clear that we had to do something, and of course the Government did. The trouble with this Government is that they think policies need not to be adjusted in line with circumstances, but they do need adjusting. Does my hon. Friend not agree with that?
Chris Leslie:
I agree. It is instructive to observe the different choices that the different parties are making on this issue. The Conservatives choose to cut taxes for the richest—the millionaires in society—and to increase everyone else’s taxes. The Liberal Democrats have said that they believe in a mansion tax. Indeed, a fortnight ago the Liberal Democrat leader, the Deputy Prime Minister, said:
“Victor Hugo observed that it is near impossible to resist an idea once its time has come. Last week, he was again proved right as calls for a mansion tax, first proposed by the Liberal Democrats in 2009, gathered new momentum…I offer certainty: the mansion tax, or a version of it, will happen…The Conservatives and opponents of fairer taxes have a choice. They can dig their heels in and remain stuck in the past. Or they can join with the Liberal Democrats and the chorus of voices seeking to make our tax system fair.”
Well, here we are today. What more can we do?
The issue is on the table, ready for that momentum to make it happen, so how can the Liberal Democrats resist that idea whose time has come?
Ian Swales (Redcar) (LD):
Is the shadow Minister going to acknowledge measures such as the raising of the tax threshold, the huge cut in pension tax relief and the huge rise in capital gains tax which have taken place under this Government? In a debate entitled “Tax Fairness” is his proposal really the only measure that his party could come up with?
Chris Leslie:
The mansion tax is not our only measure, but is an important one and we think it is necessary. I had thought that the hon. Gentleman supported a mansion tax. It is there on the table and it cannot be put in simpler terms—it is a one-line motion.
Mr David Winnick (Walsall North) (Lab):
Is there not a contrast between the opposition of the Tories, in particular, to a mansion tax and their wholehearted enthusiasm for a bedroom tax? Does that not show the class divide on their side?
Chris Leslie:
Absolutely, and I think that the contrast between the political parties is becoming clear. Let us contrast the Government’s approach where they feel they can get away with levying higher and more punitive costs—the bedroom tax being a classic example—with the enormous windfall that those earning £1 million a year will be getting from the cut to the top rate of income tax in only a few weeks’ time. It is grotesque.
Ms Karen Buck (Westminster North) (Lab):
My hon. Friend may be aware of current estimates that 60% of high-value properties in central London go to overseas buyers, and Conservative MPs, when they are being thoughtful, recognise that that is a serious problem. So he is right to look at the issue of high-value property taxes and getting a balance. Does he agree that there is scope to ensure that the small minority of people who have lived for a long time in areas with escalating property values and who are asset-rich but income-poor can be completely protected within a scheme such as he outlines?
Chris Leslie:
It is entirely possible to design this scheme in a way that deals with those exceptional circumstances—the Liberal Democrats have said so. It is an important question that has to be addressed, and the Deputy Prime Minister answered it in his “Call Clegg” radio slot on London’s Biggest Conversation, which I know is becoming a popular, regular and welcome fixture in the media diary. He said that individuals in such circumstances might be able to defer payments until the house was sold or to “leverage” the value of the property by remortgaging. I am not sure that that strategy provides the complete solution to the conundrum, but I do think that those in the Treasury should turn their minds to how to tackle these rare circumstances. That is why our motion calls on the Government to bring forward proposals for us to consider in more detail.
Mr Rob Wilson (Reading East) (Con):
I have been listening carefully to what the hon. Gentleman has said so far. He seems to have two tax policies that are not yet full commitments, one of which comes from a failed previous Government who brought us to the edge of economic collapse and the other of which comes from the Liberal Democrats. Is that really a great recipe for success on economic policy?
Chris Leslie:
I do not think the hon. Gentleman should be so partisan; he should look at the issues on their merits, as we have tried to do in our motion. We have stripped out all that party political rhetoric and put clearly on the table the proposition, “This House supports the principle of a mansion tax.”
Mr Gibb
rose—
Chris Leslie:
We urge all Members, including the hon. Gentleman to whom I am about to give way, to support that proposition.
Mr Gibb:
Is the hon. Gentleman advocating that a widow with little income who is living in her matrimonial home and is confronted with a £16,000 tax bill take out an equity release scheme mortgage in order to pay it?
Chris Leslie:
That was one of the solutions that the Deputy Prime Minister suggested. I think it is entirely possible to find solutions to deal with those rare circumstances. However, I ask the hon. Gentleman: what is he saying to all of his constituents who, like mine, face having to move out of their properties because of the bedroom tax that his Government are introducing in a few weeks’ time? Many of those people are probably still not aware what charge is going to hit them when the change to housing benefit comes in. He is expecting great upheaval—people having to move house—at one end of the spectrum but when the Deputy Prime Minister comes up with a particular solution his response is, “Oh no, that is entirely unworkable.” We need to get the Treasury and the Office for Budget Responsibility to think about these things in a detailed way.
We had hoped that Government Members would support the motion, but what does the Government amendment say? I urge hon. Members to pick up their Order Paper, turn to the relevant page and just look at the Government amendment—this pantomime amendment, whose logic is contorted. It proposes to delete the whole proposition of a mansion tax and replace it with a pleading defence of the different views held by different parts of the coalition. It would remove the resolve to back a mansion tax and retreat into a messy fudge as a means—I mix my metaphors—of brushing the whole issue under the carpet. It is an amendment that seeks to face both ways yet go nowhere. It is a push-me, pull-you amendment, and the Government should be deeply embarrassed at the drafting, which of course descends, as we can see, into a general attack on the Opposition.
Liberal Democrats need to grow some courage and stand up for themselves, for once. This measure is not just a bygone pledge from their now notorious 2010 manifesto; the Deputy Prime Minister made it the centrepiece of his leadership in the past few weeks. Kicking off the Eastleigh by-election last month, he called for
“taxes on mansions, tax cuts for millions”.
That is what is in our motion. He said:
“The mansion tax is an idea whose time has come.”
He said that opponents of it should
“join with the Liberal Democrats…seeking to make our tax system fair.”
Indeed, others have joined in that chorus.
On this Sunday’s “The Andrew Marr Show” Lord Ashdown said it would be “weird” if the Liberal Democrats did not vote in favour of the tax. The “Sunday Politics” had an interview with the Lib Dem president, the hon. Member for Westmorland and Lonsdale (Tim Farron), in which an interesting exchange took place. Andrew Neil said:
“It’s a simple motion. Will you vote for it?”
The hon. Gentleman said:
“Well, let’s say, I mean, when all’s said and done, that is pretty much Liberal Democrat policy”.
Andrew Neil then asked:
“Well, what part of that motion do you disagree with?”
The hon. Gentleman said, “None of it.”
Nic Dakin (Scunthorpe) (Lab):
Does my hon. Friend agree that the Liberal Democrats are in danger of being highly consistent? Having been against tuition fees they voted for them; having been against a bombshell VAT increase they voted for it; and now they appear to be for a mansion tax but are going to vote against it.
Chris Leslie:
I hope that my hon. Friend is not accusing the Liberal Democrats of consistency in their inconsistency—that would be a step too far.
Caroline Lucas:
The hon. Gentleman is talking about courage, so I wonder how far the official Opposition’s courage will go. Some £4.5 trillion is kept by the top 10% of wealthiest households, so the £2 billion that would be raised by a mansion tax, although welcome, is a tiny amount and would hardly bridge the chasm between the super-rich and the poorest. Given that, would the official Opposition support a genuine wealth tax?
Chris Leslie:
I would be very interested to see the hon. Lady’s proposition, but I do not think it is necessary to go for that general approach that she takes. I say that because there are targeted ways in which we could try to build consensus on a property tax for high-value properties over £2 million and then use the revenue to help the vast majority of lower-income and middle-income families. That is the proposition before us today.
Mr Dennis Skinner (Bolsover) (Lab):
It was interesting to hear the remark by the Green Member of Parliament about the wealth tax and being brave. I looked at the list of candidates who stood at Eastleigh, where I thought it would be wide open for a Green to find a way through, and found that the party did not even put up a candidate—what courage!
Chris Leslie:
We digress slightly, but that is an interesting observation. I did not realise that the Green party had fled from that Eastleigh by-election.
Mr Robinson:
Before we leave the subject of the hapless Liberals and consistency, does my hon. Friend agree that they do show consistency in their inconsistency and in their insincerity—that is the only consistency we can identify?
Chris Leslie:
There is time for those sinners to repent, and I hope that in three hours’ time they will re-examine the motion, seriously consider the outrageous stretch in the amendment, stick with their principles and support the motion. I accept that there is a need to flesh out the details of how the mansion tax arrangement would be designed. We need to commission the Treasury and the OBR to work on those particular details.
Some have suggested building on existing property tax systems, although that is not wholly straightforward. In New York City, apparently, a £2 million property owner can pay about £22,000 of property tax, but Lord Oakeshott, who, as we know, is a leading light in the Liberal Democrat firmament, argues against council tax banding as one way of approaching the question. He says:
“If you just put on one or two council tax bands, you can't make the superrich pay their fair share”.
Some Conservative Members, such as the hon. Member for Bognor Regis and Littlehampton (Mr Gibb), complain that a mansion tax is impractical, that it cannot be done and that it would be an administrative nightmare, but I simply refer them to their own Front Benchers. Unbeknown to most Government Members, Her Majesty’s Treasury is, with very little fanfare, actively talking about the viability of an annual charge on high-value residential properties and launched a consultation document last May entitled, “Ensuring the fair taxation of residential property transactions”. It contains a whole chapter about introducing an annual charge, as the Treasury calls it, as part of the regime to tackle the avoidance of tax on high-value residential properties, albeit for properties enveloped in non-natural person terms—in other words, those owned by a company or by partnerships or investment vehicles.
Let me draw the attention of the House to some sections of that Treasury publication, because it suggests that a mansion tax is entirely feasible. On page 8, it states:
“The aim of the new annual charge is both to deter avoidance and to ensure the owners of high value residential property pay their fair share of tax…The annual charge will be introduced in Finance Bill 2013.”
So, the measure is coming in the forthcoming Finance Bill at the other side of the Budget. The document states:
“The interest to which the charge will apply will be the freehold or leasehold interest”
and that the annual charge will be
“applied separately to the freehold (if valued over £2 million) and the leasehold (if valued over £2 million…)”.
It goes on to state that the value of the property interest is proposed to be the value determined on 1 April 2012 and, interestingly—let us remember that the document comes from the Treasury—states:
“Property valuations for the annual charge will be self-assessed by the persons liable to the charge and submitted to HMRC as part of their annual charge tax return. HMRC will have powers to enquire into returns and also to make assessments so that non-compliance can be effectively challenged… Properties will be re-valued every five years…The valuation required will be an assessment of the ‘market value’”.
It even goes on to give a helpful list of four bands of annual charge on properties worth more than £2 million. The Treasury knows in its heart of hearts—I do not know whether it has shared this with hon. Members—that the concept of a mansion tax has some feasibility.
Huw Irranca-Davies (Ogmore) (Lab):
That is tremendously welcome news, because clearly neither of the Government parties will vote for the amendment. I understand that the amendment suggests that the Liberal Democrats are in favour of the mansion tax but will vote against the motion whereas the Conservatives are definitely against it so will on no account be voting for it. If they are both in favour of the tax, they can just support our motion.
Chris Leslie:
I hope that the scales will fall from their eyes and they will see the light, but I do not know whether they will.
Mr Rob Wilson
rose—
Chris Leslie:
Perhaps the hon. Gentleman is changing his mind because of the weight of my argument.
Mr Wilson:
The hon. Gentleman is being very generous and I thank him for giving way a second time. He might not remember that the Liberal Democrat proposals for a council tax were at one stage for properties worth over £1 million, not £2 million. Is not the concern that a Labour Government, desperate to raise tax, would row back to £1.5 million or £1 million? Can he give a cast-iron guarantee that there would be no rowing backwards from a figure of £2 million?
Chris Leslie:
Absolutely. That is not our proposal, as we think that it is possible to develop a mansion tax proposition for properties worth £2 million and above. We could develop and build on the Treasury’s suggestions for how it might work and we hope also to build on the carefully thought through calculations made by the Liberal Democrats.
Andrew Miller (Ellesmere Port and Neston) (Lab):
Would my hon. Friend like to speculate on why the Government chose not to refer to the Treasury document in their amendment?
Chris Leslie:
Let us be realistic: the amendment was getting rather long-winded, as it is about four or five times the length of the motion. In fact, it looks like a bit of a trashing exercise and does not add to the substance of policy choices before the House. Our view is that the circumstances are very simple.
Mr Jim Cunningham:
My hon. Friend has been very generous in giving way. Does he think that now the Liberal Democrats have been exposed they are probably holding off from voting against our proposals tonight but that when the Government bring forward their proposals, the Liberal Democrats will be in the Lobby with them?
Chris Leslie:
Especially on issues such as the bedroom tax, tax credit cuts and increase in VAT. Of course, let us not forget the tuition fee decisions that the Liberal Democrats have made. That is a matter for them, however. They must account to the electorate and they must go back and explain how they have voted today.
Let me say a little about how we would use the money raised from the mansion tax. Our view is that a fair tax system should include a 10p starting rate of income tax. We support the increases in the personal allowance, but a 10p band would mean a different tax rate for those on middle and lower incomes from that for those on higher incomes, helping the move towards a fairer tax system. Some argue that the 20p rate is adequate, but I believe that a steadier incline moving from zero tax to 10p and from 10p to 20p could be the bedrock of a more progressive tax system, sending out an important signal that tax cuts for working people are a priority.
The 10p starting rate would provide a tax incentive to enter work, especially for those on lower wages. It was a mistake to remove the 10p rate in 2007, even though it enabled the then 22p basic rate to be reduced to 20p, where it stands today. Reintroducing a 10p rate would be the right thing to do and, if the Liberal Democrats are correct that the mansion tax could raise £2 billion, the Chancellor could make that change next week in the Budget.
Just as there is support for a mansion tax from Members on the Government Benches, there is ample support for the return of a 10p starting rate for income tax, although strangely some of those Members have chosen not to take their place in the Chamber today. The hon. Member for Harlow (Robert Halfon) spoke about the 10p rate idea in his recent Adjournment debate, arguing that
“restoring the 10p rate would help the coalition to counter the war cry of its political opponents that it is only interested in cutting taxes for millionaires. It would prove to the public that ‘lower taxes for lower earners’ is not just a soundbite but that it can be a reality…the policy would be popular…it would be a symbol of the Government’s economic mission and…it would help to tackle the desperate stagnation in incomes that Britain has suffered”.—[Official Report, 22 January 2013; Vol. 557, c. 34-38WH.]
That argument was made by a Conservative Member.
Duncan Hames (Chippenham) (LD):
The hon. Gentleman is right that the previous Government were mistaken to scrap the 10p rate, but under this Government the income that would previously have been charged at the 10p rate is now charged at a 0p rate. If he supports the increases in the personal allowance, why is support for those increases totally absent from his motion in a debate on tax fairness?
Chris Leslie:
We wanted to focus on the mansion tax proposition, because the hon. Gentleman’s Business Secretary suggested that we keep the motion simple and that if we did so, the Liberal Democrats would support it. That is what the Business Secretary said. We support the changes to the personal allowance, but in our view it is important to have that graduated step up. People go from the zero rate to the 20p rate and it is important to consider introducing a more graduated step as a work incentive, which is something we ought to have in the system.
Duncan Hames:
Why does the hon. Gentleman think that a 10p tax rate is a greater incentive to go into work than a 0p tax rate?
Chris Leslie:
The hon. Gentleman seems to think it is all or nothing, but we think that a progressive tax system argument needs to be developed. If people move from paying zero tax straight to 20p, there is a cliff edge. We think it is important to consider smoothing the transition to work and making work pay more effectively. That is not part of the motion; it is our preference for what we would do with the revenues from the mansion tax.
Duncan Hames
rose—
Chris Leslie:
I will give way to the hon. Gentleman once more, if he wants to say whether he agrees with the text of our motion—not the flim-flam about the amendment. Does he agree with the text of our motion?
Duncan Hames:
I will be voting for the amendment; it states Liberal Democrat policy, which I support. The hon. Gentleman has accepted that he wants to do something very different from us with his mansion tax, and on that basis I am not happy to support him.
Chris Leslie:
What more can I say? I thought the hon. Gentleman supported the proposition in our motion, but clearly he does not. However cynical and defensive he may feel, Liberal Democrats should at least acknowledge that a principle of fair taxation is at stake today, and that it ought to transcend party differences as we try to create a more just society.
Geraint Davies (Swansea West) (Lab/Co-op):
Does my hon. Friend share my fear that the Liberal Democrats may become an endangered political species? Before 2010, they were very popular in Swansea but following the tuition fees, VAT and deep cuts turnaround, they lost the council. If they do not support the mansion tax, which was part of their manifesto, does he not think there is a real danger that we will never see them again in the political sphere?
Chris Leslie:
It would be a great loss for the House to lose some of the skills and contributions of Liberal Democrat Members. Perhaps at our next Opposition day debate a Liberal Democrat protection order should be on the agenda. They may cling on in a number of ways in different places.
I am surprised that the Liberal Democrats do not support the mansion tax proposition. It is hardly surprising that Conservatives do not support the idea. After all, half of them are in politics to defend the wealth of the wealthiest, and the other half will probably need to declare an interest before they speak on the issue.
Let us consider the mansion tax in relation to the other tax benefits that the richest 1% receive. If the Lib Dem design for a mansion tax were to be enacted, it would just recoup a mere fraction of the money being given away to high net worth individuals in the millionaires’ tax cut from April—the first of too many examples of unfairness. In the last Budget, the Chancellor took the decision to hit pensioners with the so-called granny tax, which is more accurately described as a freeze on the old age personal allowance and has caused widespread disgust, especially because the Government chose to use the money to fund a cut in the higher rate of income tax. That is not fair and it is not right, and it certainly should not be part of the society we want to build. Even Liberal Democrats must know that it is deeply resented across the country, yet the Government continue to clobber lower and middle-income families, whether by freezing the maternity pay of new parents, taking child benefit away in a fiendishly complex tax assessment process or reducing the value of the tax credits on which so many working people rely. They cannot even ensure that the money men pay their fair share, with a bank levy that for two years running has undershot the supposed target of £2.5 billion that the Chancellor claimed it would collect.
On maternity pay, the bedroom tax and the cuts to tax credits, the Government have their priorities all wrong. They are handing a tax cut to millionaires when millions of hard-working families pay more. Voting for the motion is an opportunity, especially for the Liberal Democrats, to tell the Government that they need to rebalance their priorities.
Jim Shannon (Strangford) (DUP):
I thank the hon. Gentleman for introducing an admirable motion. Does he agree that it is not just about tax cuts for millions of people on middle and low incomes, but that it could also be an incentive for first-time buyers to get on to the first rung of the ladder? They do not want to buy a mansion, just a first house. Should the money be used for that too?
Chris Leslie:
The hon. Gentleman makes an important point about finding ways to help those who aspire to own their home. I am certainly interested in discussing options for how that might be achieved, because it is important. It is becoming very difficult for people in those circumstances. They are the home owners that we really need to focus on. It is amazing that so many Government Members want to defend the massive super-wealth of those with properties of £2 million and above. All we want is that they pay their fair share, as the motion states in plain and simple terms. We are giving a timely pre-Budget opportunity for the House to express support for or opposition to a mansion tax as
“part of a fair tax system.”
It could not be more straightforward. The country is crying out for a tax system that focuses on helping the majority of the public and ensures that the wealthiest 1% pay their fair share.
First and foremost, Government Members have a duty to their constituents, who will be astonished if their MP flunks this opportunity to make real change because they are suppressing their principles in a bid to cling on to power.
Mr Gibb
rose—
Mr Speaker:
I do not think the hon. Member for Nottingham East is giving way; he has completed his speech. I call Mr David Gauke.
1.25 pm
The Exchequer Secretary to the Treasury (Mr David Gauke):
I beg to move an amendment, to leave out from “House” to the end of the Question and add:
‘notes that this Coalition Government has cut income tax for 25 million people, taking over 2.2 million low income individuals out of income tax altogether, while at the same time increasing taxes on the wealthy, including raising stamp duty on expensive properties and restricting tax reliefs; further notes that both parts of the Coalition continue to support tax cuts for people on low and middle incomes; notes that the part of the Coalition led by the Deputy Prime Minister also advocates a mansion tax on properties worth more than £2 million, as set out in his party’s manifesto, and the part of the Coalition led by the Prime Minister does not advocate a mansion tax; and further notes that the top rate of income tax will be higher under this Government than under any year of the previous administration and that the rich are now paying a higher percentage of income tax than at any time under the previous administration, demonstrating that it presided over an unfair tax system where the rich paid less and the poor paid more in tax than now, meaning nobody will trust the Opposition’s promises on tax fairness.’.
After listening to the speech of the hon. Member for Nottingham East (Chris Leslie), we might have thought that it was the last Labour Government who increased stamp duty land tax to 7% on residential properties costing £2 million or more. We might have thought it was Labour who introduced a 15% rate of stamp duty for properties owned through a corporate vehicle. We might have thought that it was the last Government who imposed a cap on reliefs, limiting the extent to which the wealthy can drive down their tax rate, and we might have thought it was the last Government who deployed more resources to Her Majesty’s Revenue and Customs to tackle evasion and avoidance, and closed down loopholes such as disguised remuneration that cost the Exchequer nearly £1 billion a year.
We might also have thought that the Labour Government had introduced the 50p rate of income tax in their first Budget, not their 13th. We might have thought it was the Labour Government who had taken more than 2 million low-paid earners out of income tax by raising the personal allowance.
Whatever the differences that may exist on the Government Benches, and there are differences on this matter, one thing is very clear. The Opposition are in no position to lecture the two parties on the Government Benches about how to put in place a fair tax system that provides support to working people and taxes the wealthy effectively.
Alex Cunningham (Stockton North) (Lab):
At Treasury questions, one of the Minister’s colleagues said that the Government are focused on the causes of poverty. Can the Minister tell me how many of his millionaire friends getting a huge tax cut this year are actually pleading poverty?
Mr Gauke:
In the last Budget package we increased taxes on the wealthy—higher rates of stamp duty, closing loopholes and putting a cap on reliefs. That is getting far more money from the wealthiest than a 50p rate that failed to do what income tax is supposed to do, which is raise funds to pay for public services. It did not do that.
Stewart Hosie (Dundee East) (SNP):
One of the reliefs that has been reduced is on 40p tax, which went down from £37,000 to £34,000 and then to £32,000 this year. The Minister has squeezed the genuine middle class—the people earning just over £40,000—not the £400,000 a year middle class. That bit of cynicism will never be forgotten by those people.
Mr Gauke:
I am afraid the hon. Gentleman is wrong. People earning just over £40,000 have seen tax cuts and a reduction in the total amount of income tax they pay, because the personal allowance has increased to more than compensate them. The higher-rate threshold has not increased as it might have done, because higher-rate taxpayers would gain more from the personal allowance than basic rate tax payers. Someone on between £40,000 and £44,000 a year is paying less income tax as a consequence of the Government’s policies than they would have done otherwise.
Geraint Davies:
Will the Minister take this opportunity to confess that the reason why the Treasury predicts less will be generated by the 50p rate in the one year of its operation than the 45p rate is that he knows, as I do, that millionaires can move their money between tax years? As the rate only runs for one year, they will move their money to the lower tax year. He would raise more money if he kept the 50p going. It is a con for his mates.
Mr Gauke:
There are two points. It is correct that the wealthy are often able to move income from one year to another, but the conclusion that HMRC and the Office for Budget Responsibility reached is that even taking into account the forestalling effect, the behavioural consequences of the 50p rate were so significant that it barely raised any revenue. That is the reality. It even takes into account the hon. Gentleman’s point about forestalling. That approach has been confirmed by the OBR. The 50p rate failed.
Anas Sarwar (Glasgow Central) (Lab):
The message that the Government have repeated over and over again is that we are all in this together. Take the example of families in my constituency who live just one mile apart. One has been handed a tax cut as a result of the scrapping of the 50p tax rate. One mile in the other direction families will be handed a food parcel. Does the Minister think that is fair?
Mr Gauke:
Let us look at what was in the last Budget in respect of stamp duty and the cap on reliefs. We could also look at what we have done with regard to capital gains tax. The independent Institute for Fiscal Studies has made it clear that the top 20% are affected most by the fiscal consolidation policies that have been pursued in this Parliament. Those with broadest shoulders are bearing the greatest burden. However, we have an enormous deficit that we have to get down—a deficit that we inherited from the Opposition.
Mel Stride (Central Devon) (Con):
Will my hon. Friend confirm that the highest rate of income tax currently under this Government is higher than was the case in the previous Government’s 13 years, all bar the last couple of weeks?
Mr Gauke:
My hon. Friend is right. The Labour Government were in office for 4,758 days. For all but 36 of those days, the highest rate of income tax was at 40p. Then it moved to 50p. There is a good question to ask the Opposition about why they kept it at 40p for so long. Why did they leave it until the fag-end of their Government, when it was clear that they would not be in government any more? The reason is that the 50p rate, predictably enough, did not do what it was supposed to do. It did not raise revenue, and an income tax that does not raise revenue is not something that a sensible Government would persevere with.
I turn to the mansion tax.
Geraint Davies:
Will the Minister give way?
Mr Gauke:
No. I shall make a little progress, devastating though the hon. Gentleman’s interventions so often are.
We have always been quite clear that the proposed mansion tax is an issue on which the two parties in the coalition have differing views. Our Liberal Democrat colleagues have supported the principle for some time. I am sure that the Under-Secretary of State for Communities and Local Government, my right hon. Friend the Member for Bath (Mr Foster) will make that clear when he winds up the debate. In contrast, Conservative Ministers have very real concerns over such a proposal. We have concerns that a third of the properties in London worth more than £2 million have been in the same ownership for over 10 years, and that a mansion tax could hit asset-rich but potentially income-poor households, a point made by my hon. Friend the Member for Battersea (Jane Ellison).
Dame Angela Watkinson:
My hon. Friend will know that £2 million does not buy a mansion in London, and certainly not in outer London, where I have a number of constituents who moved out from inner London decades ago. Their homes have increased in value beyond their wildest dreams over a very long period, but they are in fact cash-poor, quite often living on a modest pension. The thought of paying very large amounts of tax every year for the privilege of owning a home that they have had for many years would be extremely frightening. Can the Minister think of any practical way that an elderly person in that position could possibly pay that tax?
Mr Gauke:
I noticed that that very point was one that the hon. Member for Nottingham East seemed to struggling with. He seemed to suggest that there were ways in which the Opposition would address that. I am not sure whether that was included in the costings they have produced. There is an issue for the asset-rich, cash-poor which would need to be addressed in the design and would obviously have an impact on the costing.
Sheila Gilmore (Edinburgh East) (Lab):
Would the Minister suggest to people in those circumstances that they might want to take a lodger, just as it has been suggested to my 60-year-old constituent that the answer to the bedroom tax is to take a lodger?
Mr Gauke:
I am not going to debate at length the spare room subsidy, which is an area of public spending constraint that we need to engage in. There is a genuine issue in respect of the asset-rich, cash-poor that the hon. Member for Nottingham East appeared to recognise and which would have to be addressed.
The mansion tax would be administratively burdensome for HMRC to operate, not to mention intrusive for the person having their home inspected. We would have concerns that in Labour’s hands, the starting level for such a tax would not stay at £2 million for very long. What began as a mansion tax would soon become a homes tax. To coin a phrase, it would become a tax for the many, not for the few.
Chris Leslie:
I am surprised the Minister thinks that “the many” own properties worth £2 million and above. I wanted to ask him about the Treasury’s own proposition that residential properties of £2 million and above, albeit owned by a company, should have an annual charge based on a self-assessed valuation, with a banding process. Is he saying that his own policy is administratively burdensome?
Mr Gauke:
Let us be clear. One of the weaknesses in the tax system that we inherited was the fact that people were able to walk around the paying of stamp duty. On very valuable properties, it was all too easy for people to arrange their affairs thorough corporate vehicles and not pay stamp duty. In the last Budget this Government introduced measures that will deal with that enveloping and deal with one of the unfairnesses in our tax system. One of the ways in which we are going to do that, as well as a high stamp duty charge for properties held in corporate vehicles, is to bring in an annual residential property tax. That is focused only on properties worth more than £2 million held by a corporate vehicle. It would apply to only 6,000 properties, we estimate. It is a very narrowly focused policy that will enable us to deal with an area of avoidance that was allowed to carry on for far too long under Labour.
Caroline Lucas:
As a tax that is much harder to evade or avoid, there is the land value tax. That is supported by one half of the coalition and by the OECD and the IMF. The IFS has said that the case for a land value tax is overwhelming because it is much fairer. Given that that is the case, can the Minister explain why his Government will not even do some basic research into it, as my private Member’s Bill requested?
Mr Gauke:
We are left with the same issues of complexity of valuation across the board, and the issues of the asset-rich, cash poor. That is why my part of the coalition is not keen to proceed with that matter, but it is worth pointing out that we are raising more money from property. There is a stamp duty land tax of 7% on residential properties costing £2 million or more, a policy that is easy to administer and will not impact on existing home owners.
On the mansion tax, we have made no secret of the fact that the two parties disagree. If we did not disagree on some things, we would be one party, not two. But in the circumstances that we are in, it has been perfectly possible for two parties to work together in a sensible and mature way and to reach agreement on a host of measures that have made our tax system fairer, easier to understand and competitive. We heard much from the hon. Member for Nottingham East to the effect that we should do more to help low income workers. May I just remind him and House of the progress that we have made in raising the personal allowance? In 2010, someone on £6,500 was paying income tax at 20%. From next month, someone has to earn £9,440 before paying any income tax at all. Our measures on the personal allowance have provided a huge tax cut for millions of people and will take more than 2.2 million of the lowest earners out of income tax altogether. In fact, over the course of this Parliament, someone working full time on the national minimum wage will have seen their income tax bill cut in half.
Let us contrast our record with that of our predecessors. Let us remember that when the right hon. and absent Member for Kirkcaldy and Cowdenbeath (Mr Brown) did his last Budget, rather than cut taxes for the working poor, he increased them. People talk about the scrapping of the 10p rate, but Labour did not scrap it, they doubled it. They turned it into a 20p rate. For example, someone earning £9,000 a year in 2007 would have heard a Labour Chancellor stand up and announce that a Labour Government were going to increase their income tax bill by more than £200. Last year, someone on £9,000 a year would have heard a Conservative Chancellor stand up and announce that a coalition Government were going to take them out of income tax altogether. Our constituents on £9,000 a year will soon be paying no income tax at all, saving more than £500 since the coalition came to power. Labour turned a 10p rate of income tax into a 20p rate. This coalition has turned a 20p rate into a 0p rate.
Mr Russell Brown (Dumfries and Galloway) (Lab):
Will the Minister remind the House what he did in terms of the personal allowance for pensioners? Am I not correct in saying that he froze that?
Mr Gauke:
There is no particularly sensible reason why there should be a different personal allowance for someone who is 64, compared with 65 or 75. It is clearly a simpler and, I believe, fairer system that one personal allowance should apply to everybody. That was never an option available to the Labour party because the main personal allowance for someone under the age of 65 was so low. We have been able to increase it substantially so that one personal allowance can apply to everybody. That is a simpler and fairer way to deal with that issue. At the same time, we have increased pensions, thanks to the triple lock guarantee, by much more than we would have done if we had stuck with the plans that we inherited. Last year, pensioners saw their biggest increase in the state pension.
Mr Gibb:
While my hon. Friend is on the subject of the last Labour Government, he will recall that in 2009-10, the last financial year of the last Labour Government, expenditure exceeded income by £159 billion, equal to 11% of the whole country’s income. Since he has been a Minister at the Treasury, have civil servants explained to him why that was allowed to happen, virtually bankrupting this country?
Mr Gauke:
My hon. Friend makes a very good point. There is no explanation that civil servants can give for that. An explanation and an apology are due from the Opposition, but we await either of those. I think that they persist in the view that there was no structural deficit even before the crash—
Chris Leslie
rose—
Mr Gauke:
If we are to have confirmation that there was a structural deficit before the financial crash, I will happily give way to the hon. Gentleman.
Chris Leslie:
There was certainly a global financial crisis. But can the Minister confirm that under the current Chancellor of the Exchequer, national debt has risen from £811 billion to £1 trillion 111 billion? Is it actually the case that debt has risen by that much? Yes or no?
Mr Gauke:
Debt is the accumulation of deficits. We inherited the largest deficit in our peacetime history, and every measure that we have taken to reduce that deficit the Opposition have opposed, and then they complain that debt is rising. That is the most absurd position. We are criticised for not borrowing enough, and then we are criticised for our debt going up. There is no consistency or credibility in the Opposition’s position, just as there was no credibility or consistency in their treatment of low-paid workers. In government, they raised the rate of income tax; in opposition, they make promises that they will cut it. When we remember the reality, why should those on low incomes ever trust Labour again?
Mr Alan Reid (Argyll and Bute) (LD):
In terms of fairness of taxation, another area where this Government have done a great job is on fuel duty. The fuel duty is now 10p a litre lower on the mainland and 15p a litre lower on islands than it would have been if the Labour party had still been in power. I hope that my hon. Friend will continue that good work and that in the Budget there will be an announcement that the September fuel duty increase inherited from Labour will not go ahead.
Mr Gauke:
I will take that as a Budget representation. It is perhaps worth pointing out that there was a measure that the previous Labour Government had to reduce the deficit, which was substantial increases in fuel duty over the course of this Parliament. That is a measure that we have been able to stop, and quite right too.
Debbie Abrahams (Oldham East and Saddleworth) (Lab):
Will the Minister explain why four out of five people feel that austerity is not working? Is it related to the downgrading of the economy yet again for 2013? Is it the shrinking of the economy in the last quarter of last year by 0.9%? Or is it that the OBR had to call the Prime Minister to task and give him an economics lesson?
Mr Gauke:
This is a difficult time for all major economies, and the UK is no exception. But matters would be much worse if we were to abandon our desire to bring some control to the public finances. We must ensure that there is the political will to deal with the public finances, and that is what this Government will continue to demonstrate. The approach of ignoring the deficit, believing that this is all an issue that can be addressed at some future time, is economically irresponsible and unfair on future generations who will face the bill that they will have to pick up because we failed to address those problems now.
Geraint Davies:
Is this not also about fairness? For instance, while the threshold changes that he has mentioned of £3,000, which deliver a saving of £11.50 a week to taxpayers, cost £9 billion, he will save half a billion pounds from inflicting that £11.50 on people for the empty bedroom tax. With a small amount of the money used to raise the tax threshold, he could have alleviated that for the very poorest. Is not this about values and not inflicting the most hardship on the most poor while giving a bung to the voters?
Mr Gauke:
I take it from what the hon. Gentleman says that rather than raise the personal allowance, he would prefer us to spend more on the welfare bill. If that is the hon. Gentleman’s position, fair enough, but I do not agree. Raising the personal allowance, taking people out of income tax, and making sure that work pays, are all things that a sensible Government should do, and I am delighted that this coalition Government are able to do that.
I come now to the taxation of those on highest incomes, on which we have already touched. The top 1% of taxpayers, those with incomes of over £150,000 a year, will pay more than a quarter of all income tax, while the top 5% of taxpayers, those with income of £68,000 or more, will pay nearly half of income tax. We agree that it is important that we create a tax system that ensures that those who earn the most contribute the most, but it is also important that we create a tax system that works. Among other things, that means a tax system that does not damage our economy by undermining our international competitiveness.
The Government inherited a top rate of tax at 50p, a rate that our predecessors, who this afternoon have painted themselves as the party of taxing the rich more, had put in place for just 36 of their 4,758 days in power. The rate that they left us with was the highest top rate amongst major economies. The last Labour Chancellor had made it clear that it was temporary. It was also very clear that it was having an immediate impact on our competitiveness.
Let me say something that I hope is not controversial: the principal purpose of income tax is to raise revenue. So we commissioned HMRC to analyse just how effective the 50p rate was in raising revenue.
That HMRC report, laid before the House, set out thorough and compelling evidence on the impact of the 50p rate. It showed that the rate was uncompetitive, distortive and inefficient. Not only did it not raise much revenue, but it could even have cost the Exchequer money when the indirect impacts on other taxes were taken into account. This Government were not prepared to maintain a rate of income tax that was both ineffective at raising money and that left us with the highest statutory rate of income tax in the G20, so we acted, in the interests of the country, and the top rate of tax will fall to 45p from April this year. This will see our top rate of tax drop below that of Australia, Germany, Japan and Canada, which will send a signal to businesses taking decisions on investment and location that the UK is a competitive environment.
Rehman Chishti (Gillingham and Rainham) (Con):
Has the Minister seen the KPMG report that states that Britain’s competitiveness is better than that of Switzerland and the United States and that that is a consequence of the measures taken by the Government?
Mr Gauke:
My hon. Friend is absolutely right to raise that point in the context of the changes we have made to our corporate tax system. In 2009 KPMG commissioned a survey of tax professionals, asking them to name the three most competitive countries. The UK was nominated by just 16% of respondents. In 2012 KPMG undertook the same survey and the UK was nominated by 72% of respondents. That is a dramatic change, which we are proud of, and it will help our economy grow. We have also had the courage to reduce the 50p rate, which will help our competitiveness, too.
Andrew George (St Ives) (LD):
One thing we do know is that mansions cannot emigrate if the tax rate goes up. Earlier my hon. Friend the Minister said that the problem with the mansion tax is that it becomes a home tax. Does he agree that the council tax is also a home tax, and may I understand from what he has been saying that the Conservatives are coming round to the Liberal Democrat view that we should consider introducing a local income tax as an alternative for financing local authorities?
Mr Gauke:
No, I think my hon. Friend would be wrong to reach that conclusion from what I have said. There is an interesting debate on the balance between property and income taxes, however, and I note his suggestion in that context.
May I now return to the topic of the 50p rate, as I know the hon. Member for Nottingham East likes to focus on it? The Opposition may think that in this day and age 50p is the least the wealthy should pay in income tax. I want to put to them the question raised earlier by my hon. Friend the Member for West Worcestershire (Harriett Baldwin). In less than four weeks the 50p rate will have gone. The additional rate will be 45p. Will Labour seek to reverse that? I am happy to take an intervention on this point. Will Labour seek to reverse that after the next election?
Chris Leslie:
The Minister is asking the Opposition what is going to happen in two years’ time, but can he tell us what will happen in next week’s Budget?
Mr Gauke:
That is very amusing, but of course I am not going to do so. I am fairly confident, however, that at the next general election the Conservative party will not be advocating a 50p rate of income tax. The hon. Gentleman is calling for a 50p rate of income tax, however. He will not tell us why. He is now saying, “Well, we don’t know what the economic circumstances will be.” That is fair enough, but does he think that his party will make a manifesto commitment at the next general election to introduce a mansions tax? Is that a commitment? I am happy to give way again.
Chris Leslie:
It is very simple: now, in 2013, we can see the deficit rising and getting worse and we can see borrowing increasing, growth flat-lining and living standards falling, and the Minister is asking us to predict what we are going to do in two years’ time. How on earth do we know what other horrors are in next week’s Budget box or, heaven forfend, in the spending review of 26 June? Can he tell us what is in that spending review?
Mr Gauke:
This is starting to get interesting, because we have now learned that the Labour party has moved a motion trying to persuade Liberal Democrats to vote in support of a mansion tax, yet Labour will not confirm whether it thinks a mansion tax is a sensible policy for the next Parliament. The position of the Liberal Democrats is clear and the position of the Conservatives is clear; what is not clear is whether the Labour party do, after all, support a mansion tax. Will it be in its manifesto? That is a perfectly clear question.
Debbie Abrahams
rose—
Mr Gauke:
I will give way to the hon. Lady, and she can tell us whether she thinks that ought to be in the manifesto.
Debbie Abrahams:
The Minister is being very generous in giving way, but I want to ask him what his Government are doing. I tabled a written parliamentary question to his Department asking about the average tax rates for different groups of people, and he may be astounded to know—as I am sure many of my constituents in Oldham will be—that 6% of people on incomes over £10 million pay under 10% income tax. What is he doing to address that inequity?
Mr Gauke:
That is exactly why in the last Budget this Government brought in a cap on reliefs preventing the wealthy from driving down their tax rate to such levels—something the Labour party never did in 13 years in government. I note, however, that I get no answers to my question.
Let us be clear: we hear lots of complaints about the 50p rate being reduced to 45p, but we get no indication as to whether the Labour party would or would not reverse that if they were to win the next election. I can only assume that that is because deep down they know that campaigning on 50p might look good on a leaflet but is lousy for the economy; after all, that seemed to be Labour’s approach when it was in government. We have also learned this afternoon that the Labour party is not committed to a mansion tax in the next Parliament, after all. So what do we have? We have opportunism on the 50p rate and opportunism on the mansion tax.
Mr Gauke:
I am going to press on.
This is what we have seen from the Labour party, therefore: we have a party that increases the tax rates on the low-paid and then lectures a Government who take the low-paid out of income tax; we have a party that is in uproar at our reducing the additional rate of income tax to 45p but that will not promise to reverse it; and we have a party that did little, or nothing, to tax expensive properties more now being converted to a mansion tax for the purposes of this afternoon’s vote for transparently political reasons, but refusing to confirm that it will be their policy at the next election. That is pathetic. It is insincere, it lacks any semblance of credibility, and it deserves to be defeated. I urge my hon. Friends to defeat the motion and support the amendment.

Tax does have to be taxing.

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