The Economics of The Madhouse

The internal chaos within HMRC over restructuring and job cuts seems to be affecting not just the efficiency of HMRC, wrt answering taxpayers queries and processing claims etc, but also HMRC's ability/desire to collect tax revenues.

It seems that, as a result of a shortage of tax collectors, the taxman is not chasing tax debts of up to £20K.

Over the last year the number of tax collectors has fallen from 8,700 to 8,000. As a result of Gordon Brown's "efficiency" drive there is no money available to hire replacements.

Therefore HMRC are "cutting their cloth to suit their budget", and focusing their resources on collecting only the larger tax debts.

Mark Serwotka, leader of the Public and Commercial Services union that represents tax staff, questions the costs and benefits of the "efficiency" measures introduced by Brown. He is quoted as saying:

"This really is the economics of the madhouse. It is ludicrous that tax that could fund vital public services is going unpaid because of arbitrary targets to slash jobs. The priority of HMRC and the Government should be ensuring the integrity of the tax system and that everyone pays their fair share."

A memo from senior managers in HMRC's debt management office details how tax collectors are prioritising debts of over £20K on income and corporation tax, and £15K on VAT and PAYE underpayments.

The HMRC document states:

"We are aiming to reach a stage where all debts over £10k are actioned, without delay."

The reality, according to sources talking to Financial Mail, is that this is unlikely to happen in the foreseeable future. HMRC sources have told journalists that any debt of less than £20K was not being pursued.

HMRC dispute the leaks and state:

"HMRC continues to pursue all debts and collects tax as it has always done."

Well, they would say that wouldn't they?

I would draw HMRC's attention to this comment, that was made here a few days ago:

"I've been in HMRC over 20 years and have never known it as bad as it is now. Thankfully, I'm getting out.

The new CIS system is an absolute shambles and we have been told not to chase outstanding employers returns because they are classified as low priority.

In addition, we have been instructed to not bother putting any cases into court with a monetary value of less than £3000."

The questions that Brown and his sidekick Darling need to ask themselves are these:

1 Is the restructuring improving the efficiency and effectiveness of HMRC?

2 Is HMRC a worldclass organisation fit for the 21st century?

Tax does have to be taxing.

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The Nearly Man

Why is Dave Hartnett still only "acting" head of HMRC?

Do Gordon Brown and his sidekick, Alistair Darling, not think that Hartnett is up to the job?

Are they looking for someone else to fill the role?

Are they waiting for Hartnett to kiss arse, a certain number of times, before they remove the word "acting"?

Tax does have to be taxing.

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HMRC's Magic Carousel

Now, as we all know, HMRC being a tool of the state is "honour" bound to treat everyone in exactly the same way and not be discriminatory.

The cynics amongst you might argue that HMRC achieves this by treating everyone equally badly. However, it would seem that some are treated more badly than others.

VAT traders have accused HM Revenue & Customs (HMRC)of discrimination, as a result of HMRC's attempts to reduce the costs of the fallout from the carousel fraud scam.

The traders say that despite complying with new regulations, HMRC is delaying repayment of hundreds of millions of pounds due to them from VAT rebates.

Peter Carnall, owner of Eurostar Global, believes that he is being "treated like a criminal" by HMRC.

He is quoted as saying:

"They have forced Eurostar to be without finance and to have extensive problems because of their actions. They haven't paid us a penny."

Mr Carnall has been trying to reclaim £114,000 from HMRC for nearly a year, without success.

"Nearly 12 months after it started trading Eurostar is still without any money which HMRC commissioners are arguably illegally holding."

Martin O'Neil, a senior consultant with Vantis Tax, business advisers that are handling more than 20 delayed payment cases, says:

"We know that fraud exists but it doesn't follow that everybody should be tarred with the same brush."

Carousel fraud has occurred where fraudsters have obtained VAT registrations to buy items VAT free from other EU states before selling them at VAT inclusive prices, they then disappear before HMRC can claim the VAT.

HMRC has decided to use the "one size fits all" approach, and work on the assumption that all VAT registrants are criminals until proven otherwise. This of course goes aginst the basic concept of English law, "innocent until proven guilty".

As such HMRC have slowed down VAT registrations and introduced the "reverse charging mechanism" for the sales of mobile phones and computer chips (where the carousel fraud occurs). Under this mechanism the customer is responsible for paying VAT first, before the trader makes a claim.

A VAT Tribunal recently ruled in favour of Livewire Telecom, over a £2M VAT claim, prompting hopes of a speeding up of payments by HMRC.

However, these hopes have been without foundation. HMRC will appeal against the decision and states that:

"We have had no complaints about delays."

HMRC in denial as ever!

Tax does have to be taxing.

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The Politicisation of HMRC

A few weeks ago HMRC sent 150 of its "finest" in to one large listed UK company. This was revealed by "acting" HMRC Chairman Dave Hartnett, during a Q&A session with the Public Accounts Committee about corporation tax issues.

He stated:

"When I meet the chairman of a public company it is to look him straight in the eye to explain why and how we are conducting an investigation. That is why I told the chairman of a public company not many weeks ago that we are putting 150 tax inspectors into his company."

Hartnett went on to say that this investigation was one of "half a dozen" that he had become personally involved in over the past two years. However, the "flash mobbing" of one company with 150 inspectors is a significant political step on the part of HMRC.

Hartnett said that HMRC was encountering new and aggressive avoidance techniques. He explained that there were advisers who were designing bespoke, niche avoidance schemes to business, and that a pattern was emerging where companies would move brands into an offshore company and then pay for the use of the brand in order to avoid tax.

Now here is where I have a problem with the attitude of Hartnett, HMRC and the government.

There is nothing wrong with tax avoidance!

When I was being taught the basics of tax, back in the mid 1980's, our lecturer made sure that we clearly understood the difference between tax evasion and tax avoidance.

- Evasion, eg under declaring or hiding revenue, is illegal

- Avoidance, eg making use of your legitimate allowances, is legal

The fact that Hartnett and his political masters seek to blur that very clear distinction, in their efforts to politicise HMRC, fills me with loathing and contempt.

HMRC's role is to collect tax in the most efficient and cost effective manner possible, it is not here to pass commentary on the legitimate efforts of people to avoid paying tax.

Unfortunately, those running HMRC are now kowtowing to Brown and his ilk, and their poltical agenda, in the hope of receiving rewards such as gongs and defined benefit pension schemes.

A politicised HMRC, ie one that has become the tool of the state, is something that is to resisted at all costs.

Simplify the tax system, and the costs of running HMRC and time and effort expended by people in trying to reduce their tax bills will fall.

Tax does have to be taxing.

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HMRC Buys Stolen Goods

Some rather interesting news emerged over the weekend, about HMRC buying a series of CDs containing the personal details (eg bank accounts) of a large number of British citizens.

Could this be the missing CDs that HMRC lost last year, containing the details of 25 million child benefit claimants?

Errrmmm......No.

These CDs apparently contain the details of a large number of wealthy people who hold bank accounts in Liechtenstein.

HMRC are so keen to track down every penny of tax, that they believe is owed to them, that they have now stooped to paying off nefarious characters in order to obtain information about suspected tax evaders.

HM Revenue & Customs paid £100K to Heinrich Kieber, for data that it will use to launch investigations of up to 100 British citizens who have accounts at Liechtenstein's biggest bank (LGT).

Now, you may well ask, how did Herr Kieber obtain this data?

Well, he seems to have nicked it.

In 2004 he was convicted of fraud for stealing sensitive information from his employer, LGT, the biggest bank in Liechtenstein, which is controlled by the principality's royal family.

Nice doing business with you Herr Kieber!

Maybe someone should remind HMRC that it is an offence to knowingly handle stolen goods?

Now that these CDs are in the hands of HMRC, given their lamentable track record with regard to information security, can we expect these CDs to be "lost" and then appear on the open market again for purchase at the highest price?

Of course HMRC would argue that none of this subterfuge, unpleasant dealings and costs (in terms of time, money and effort) would have to be undertaken if people didn't go to such extraordinary lengths to evade tax.

That in itself is true, up to a point. However, one of the prime motivations for tax evasion is the complexity of the tax system.

Simplify the tax system to resolve this problem, and cut the costs of collecting tax:

- increase the personal allowances to around £10K
- introduce a flat rate of tax of around 20%
- abolish all other perverse taxes such as; stamp duty, CGT, IHT, NI etc
- increase the rate of VAT to make up the shortfall

Do the above, and there will be a dramatic reduction in the amount of time, effort and money expended by both taxpayers and HMRC in trying to wade their way through the tax system.

Tax does have to be taxing.

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Rearranging The Deckchairs on The Titanic II

Further to my earlier article about HMRC "celebrating Gay Lesbian and transgender month" (albeit with a "secret" co-ordinator); it seems that, despite all the fanfare with which HMRC claim to be "right on" wrt gay and lesbian issues etc, reality falls somewhat short of the spin.

I received this email from a lady today, who is far from happy with HMRC's heavy handed treatment of her and her partner.

"Dear Ken

Re 'celebrating Gay Lesbian and transgender month with various events.'

The 'event' it should start with is writing off the tax credit overpayments of its LGBT 'customers' who have had their honesty in declaring a same-sex partner (as required under the Civil Partnership act 2004) rewarded by demands for thousands of pounds back, apparently representing credits overpaid on their sole awards now that their living arrangements are differently viewed, and their partners recognised in law.

My own honesty in advising HMRC of this on 5th December 2005 - the moment I was supposed to - was to receive a (2005) Christmas present of an overpayment bill for £5880 which I have been fighting ever since, with the help of www.taxCC.org.

Not only that, but HMRC - with my details before them - insisted in repeatedly referring to my partner as male, despite her very gender-specific first name. They also referred to our living together as a 'household breakdown'. Very enlightened, LGBT-aware treatment that!

These heterosexist assumptions and hurtful description of our supposedly 'changed circumstances' persisted without apology until January 2007, when - after being instructed by the Adjudicator to do so - HMRC eventually grudgingly gave one.

The letter glibly states: 'Let me assure you that we take the human rights and the equality of our staff and customers very seriously. HMRC has just been placed in the top 100 of the workplace equality index (WEI) of Stonewall, the organisation that promotes equality for lesbians, gay men and bisexual people (LGB)'.

So that makes it alright then?

'Tax does have to be discriminatory'".

Tax does have to be taxing.

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Every Cloud Has a Silver Lining

Although the humble British taxpayers are bowing under the weight and complexity of the ever burgeoning tax legislation that the government and HMRC are piling upon them, it is reassuring to know that at least one group of people are very happy for the ever growing complexity, confusion and bureaucracy of the Britsih tax system.

These happy people are those who provide tax advice, for a nice fat fee.

BDO Stoy Hayward, for example, saw their revenue growth by 10%, to £159.8M in the first half of the firm's financial year.

For why?

Jeremy Newman, BDO managing partner, said BDO's fastest growing business line was its tax advisory unit.

This growth has been helped in no small part by the government's plans to change capital gains and non-domiciled tax regimes, which needless to say has generated bucket loads more work.

Quote:

"Our service to clients has been enhanced by the acquisition of the respected specialist tax advisory firm Chiltern, which accounted for 2 per cent or £3.16M of total revenue since we acquired the firm in mid-October 2007. This has enhanced our already excellent tax expertise and service proposition."

As the old saying goes:

"Every cloud has a silver lining".

Considering all the time, effort and money that is wasted by both the state and the taxpayers in trying to wade their way through and manage our absurdly complex tax rules and regulations wouldn't it be a good idea to simplify it all?

Yes it would.

Unfortunately Gordon Brown is not a "simple man".

Cheers to the tax advisers, who are on to a very nice little earner!

Tax does have to be taxing.

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Rearranging The Deckchairs on The Titanic

I am advised that HMRC is "celebrating Gay Lesbian and transgender month" with various events.

What has this got to do with improving the efficiency and cost effectiveness of tax collection?

I am also advised that, according to the article on the HMRC Intranet, the HMRC Gay Lesbian and Transgender co-ordinator does not want to be identified.

Doesn't that kind of negate his/her ability to co-ordinate the events?

Is this an effective use of taxpayers' money?

Tax does have to be taxing.

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HMRC Continues To Reward Failure

It seems that HMRC hasn't quite grasped the concept of performance related pay and bonuses.

In theory, rewards and bonuses should only be granted for above average performance. However, HMRC in wake of its ever burgeoning list of fiascos (eg datagate and systems crashes) has decided to grant its staff another series of undeserved bonuses (courtesy of the taxpayer).

Performance related payouts in HMRC have more than doubled in the last two years.

Michael Fallon MP, chairman of the Commons Treasury sub-committee, is not impressed and noted that the payments were "rewards for failure".

The bonuses for the current financial year are estimated by HMRC to amount to £23.1M, which is 22% up on £18.9M (in 2005-6, bonuses were £11M)

Approximately £2.2M of the 2007-8 bonuses will be shared between just a few hundred senior officials.

All of this is rather embarrassing for HMRC, they should have learned their lesson in January 2008 when their bonus payments for last year were trashed on this site.

Evidently HMRC never learn!

Tax does have to be taxing.

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Big Brother - HMRC's Licence To Bug

Orwell's view of the totalitarian state that monitors our every spoken word, written word and action came closer to reality last week, when our good old friends in HMRC were granted the right to bug our phones and intercept our email if they suspect us of tax fraud.

HMRC, on top of its power to arrest people, can now intercept phone calls, emails and letters, as well as bug residential premises and private vehicles.

HMRC see nothing to be alarmed about, as they calmly state:

"Customs officers have always had these powers because of their criminal investigations into drugs and guns.

Now they will be granted across the board. We could use it purely in tax matters. Tax offences are quite often combined with other forms of criminality."

HMRC promise that all surveillance will be conducted in compliance with the Regulation of Investigatory Powers Act and the Wilson Doctrine (which we know was brazenly flouted with the revelations that police have been bugging protected conversations between suspects, MPs and their lawyers).

HMRC will also be subject to checks by the Office of Surveillance Commissioners and the Interception of Communication Commissioners Office.

Therefore, why should we be worried by this development?

Here's why you need to be very worried:

1 The Wilson doctrine, as already stated, has been breached.

2 HMRC will not need to seek external authorisation for any of its surveillance activities.

3 HMRC has not drawn up any code of conduct for how it will use its "exciting" new powers.

4 In 2005 explicit assurances were given that the merger of the Inland Revenue and Customs and Excise would not give rise to an alignment of powers. These assurances have been broken.

5 HMRC will act as judge, jury and executioner. Due process, as required for other aspects of law enforcement by other organs of the state, will not be followed.

6 HMRC is massively incompetent (eg datagate, tax credits etc), they cannot be trusted with such powers.

7 There is no evidence to support the need for extending HMRC's already excessive powers.

Am I alone in finding that thought of HMRC being given such powers to be more than a little worrying?

How can we trust the government, or HMRC, not to misuse these new powers?

I would note that they can bug anyone, on the slightest suspicion of tax fraud/evasion. HMRC will be the judge as to what constitutes reasonable "suspicion".

Given that, under Gordon Brown, HMRC is being used as a tool of the state to impose its political will (eg the erosion of the right to avoid paying tax) there is a very clear and present danger to our liberties with this extension of HMRC powers.

Harry Travers, partner at law firm BCL Burton Copeland, is far from impressed. He is quoted on AccountingWeb:

"It seems clear to me that HMRC used the merger to push for greater powers.

There is no evidence that bugging powers are needed in relation to direct tax fraud, and HMRC did not even attempt to provide any."

I would also remind you that some Customs and Excise prosecutions have collapsed in recent years, due to the abuse by officers of their powers.

The prosecution for Operation Venison, which led to accusations of VAT fraud for five Manchester businessmen three years ago, fell through due to "muddle, incompetence and lack of frankness" said Mr Justice Crane.

Can HMRC be trusted not to misuse these powers?

No, they can't!

Every email, conversation and phone call by anyone can now be listened to by HMRC (ie the state).

This is wrong.

It is now necessary for the public to take a stand against the state, and to ensure that these powers are revoked at the earliest opportunity.

In the short term I recommend that people equip themselves with anti bugging devices, and ensure that their emails are encrypted.

Tax does have to be taxing.

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HMRC Ambition

HMRC are to be congratulated for their skills in finding new ways to waste our money.

The good people of HMRC have spent £1.5M, in a series of "brainstorming away days" for 450 of HMRC's "finest" brains, to create a slogan for HMRC.

Guess what earth shattering result they came up with?


"HMRC Ambition"


Don't like that very much?

Worried that it may not be worth £1.5M?

Well try these for size, these are the rejected ideas:

-a "pink and fluffy" logo spelling out "Thank You" to those who paid their taxes

-a steel-grey "Elite Enforcement" warning tax evaders they would be "hunted down".

"Hunted down"?

What have these people been smoking?

An HMRC spokesman said:

"If you improve the quality and leadership in the department it benefits everyone from people who claim tax credits to the Government."

I agree, unfortunately this is not an example of an improvement in quality or leadership.

Money well spent!

Tax does have to be taxing.

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HMRC Goes Digital

It is reassuring to learn that HMRC are keen to use "cutting edge" technology in their fight against fraud.

HMRC have awarded a £60M 15 year contract to Airwave, to provide its law enforcement teams with digital communications.

The department's enforcement arm is charged with investigating and detecting crimes involving tax fraud, smuggling and related issues. The network will involve 4,000 devices and a central control room.

Stephen Walton, HMRC's manager for the project, is quoted:

"Security was always going to be a major factor when it came to choosing our radio network.

We were also keen to have a network that could provide coverage across as wide an area as possible."

Nice to see that security is a major concern of HMRC.

Now remind me again, were those missing data discs encrypted?

How did they send those data discs?

The digital system will also allow HMRC officers to communicate with police, the fire service and port authorities.

Airwave says its network provides coverage of 99% of Great Britain.

However, there is one small problem with this new system.

Computing reported in 2006 that the network will last only a few hours in the event of a mains power blackout caused by accidents, freak weather or terrorist attacks.

Not so "cutting edge" after all then!

Tax does have to be taxing.

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The Gravy Plane

In the grey depressing days of early February, how the cockles of my heart were truly warmed to learn that HMRC staff have had almost 1,400 overseas trips at taxpayers' expense over the course of five months.

HM Revenue & Customs staff have visited over 60 countries, including Jamaica, Japan and Malaysia.

The trips, between November 2006 and March 2007, cost us the taxpayers nearly £2M.

HMRC staff made 335 trips to Belgium, 403 trips to France, 90 to the Netherlands, 61 to Ireland, and 31 to Spain.

Other countries on the world tour list included; Vietnam, Uzbekistan, Kazakhstan, Venezuela, New Zealand and the south Pacific island nation of Vanuatu.

HMRC said:

"We make essential trips abroad to enable us to carry out our roles investigating and combating global issues such as drug trade, fraud, organised crime and counterfeit goods.

We also play a leading role in promoting best practice within the international tax community."

Best practice should include not wasting taxpayers' money on jolly foreign junkets!

I would also venture to suggest that HMRC time and effort would be better spent in the UK, sorting out the shambles that is our tax and benefit system.

Tax does have to be taxing.

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Taxman Defrauds Taxman

Craig Gordon has gone on trial in Edinburgh, he is charged with defrauding HM Revenue and Customs out of more than £190K.

Craig Gordon, who denies the charge, used to work for HMRC at the Lothians 2 Area office in Broomhouse Drive between 2003 and 2004.

It is alleged that he set up a company named Capital Tax Services to receive the money, opened a bank account under a false name, and created false income tax repayment claims and processed them for repayment.

He is alleged to have obtained £190,448.20 by the fraud.

Gordon has lodged a special defence of incrimination, claiming that several other people were responsible for the acts not him.

This should be very interesting!

Tax does have to be taxing.

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Late Again!

Oh dear, HM Revenue & Customs has missed another deadline.

The Times reports that:

"The November 2007 Child Benefit publication will not be published on February 12. This is due to technical difficulties."

How absolutely pathetic!

Tax does have to be taxing.

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HMRC Talks Bollocks

You will doubtless all recall the recent furore over the news that certain "special" people (eg MPs and celebs) are forbidden from filing their tax returns online, because HMRC believe that they deserve greater security?

In other words, HMRC don't believe that their online filing system is secure.

Needless to say, HMRC don't quite agree with that interpretation (as it totally undermines the credibility - not that it has any - of their online filing system).

As such, they recently issued the following announcement

"HMRC Online Services - secure and safe to use

Some newspapers and broadcast media have claimed that that HMRC's online filing systems are not secure because Members of Parliament and a small number of other taxpayers cannot use the Self Assessment service.

This is completely untrue. A small minority of taxpayers, including MPs, cannot currently use online services because the additional internal safeguards on their records mean that their taxpayer reference numbers are not recognised on the authentication system.

This therefore has nothing to do with the security of our online services. HMRC online services use the highest levels of encryption generally available and authentication processes similar to online banks.

HMRC is continuing to explore ways to extend online filing to all taxpayers.

Almost 3 million Self Assessment taxpayers have used SA online to file their return safely and securely."

So that's alright then, isn't it?

Errrmmmm...no, not quite!

When they say "HMRC online services use the highest levels of encryption generally available and authentication processes similar to online banks" they are talking bollocks.

As we all know, banks (eg Barclays) are in fact rolling out authentication terminals to be used at home for all of their online account customers.

For why?

Banks know that simple password/username security systems are not actually that secure; and can be/have been breached.

Meanwhile, the good old boys in the HMRC bunker continue to insist that a username/password system (not even random character password) is safe. They have no stated intention of upgrading it.

Complete bollocks!

Tax does have to be taxing.

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Tax Does Have To Be Taxing II

Commiserations to Adam hart-Davis, who has been booted out of any future HMRC advertising campaigns.

It seems that the recent comments by Mr Hart-Davis about wishing that the tax system was simpler, and describing VAT as "absurdly complicated", has not gone down well with HMRC.

Mr Hart-Davis, for good measure, then called for a flat rate tax and said that the merger of the Inland Revenue and Customs & Excise in 2005 was a mistake. His rationale being that the two departments were too large to "slam together".

HMRC hit back and said:

"We will not be using Mr Hart-Davis in any self-assessment advertising campaigns in the future."

I guess they won't be approaching me to front their future campaigns?

Tax does have to be taxing.

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Vague Ambiguity

As with all matters legal and financial, the devil is in the detail.

No one is better at playing this game than HMRC.

Take, for instance, the draft legislation issued by HM Revenue & Customs (HMRC) to claw back some of the £500M lost to income shifting every year.

This follows a pre-Budget report clamp-down on income shifting that came after the government lost the Arctic Systems case in the House of Lords in July 2007. In the draft legislation, income shifting between spouses is prohibited along with long-term partners, same sex partners and unmarried couples.

Neil MacGillivray, head of technical support at James Hay, recently stated that the draft was vague and ambiguous.

However, the wide legislation, being revised by a consultation, has thrown up a number of unanswered questions according to MacGillivray.

Quote:

"It makes you wonder what they are going to ask on your tax return. If you consider yourself in a long-term friendship, does this count as a long-term relationship?

The consultation is very ambiguous and it is widely drafted to the point of vague."

HMRC has offered no time guide as to what counts as a long-term relationship, nor what constituted a same-sex relationship.

MacGillivray noted:

"If you consider yourself in any type of relationship then you could be affected by the draft, including people at the same address or housemates. As it is at the consultation stage I am sure these issues will be raised."

As with all taxes, the more complex you make them the more people spend time and effort trying to avoid them, which in turn prompts HMRC to issue more rules and regulations thus adding to the complexity.

HMRC's other weapon is that of drafting vague legislation, which gives them the flexibility to challenge taxpayers' legitimate attempts to avoid tax. Thus stacking the odds in HMRC's favour.

Wouldn't it be better for everyone, and less costly, if the tax system were simplified?

The trouble is, simplification is not Gordon Brown's thing!


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Postal Security

Despite attempts by HMRC to try to portray last year's datagate fiasco as one of a small number of "one off" cock ups (a contradiction in terms of course), HMRC face claims that it was in "chaos" even before it lost 25 million personal records.

The Government recently confirmed that several hundred jobs were axed at the Washington office of HMRC (that's where the information was lost) since 2005, and 179 staff in the North-East have been dismissed in the past three years.

In order to make up for the shortfall in staff, HMRC have paid private postal contractors £226M to handle the organisation's mail since 2005.

On top of this, HMRC have hired consultant PricewaterhouseCoopers to review HMRC's data handling. However, the government will not tell anyone how much this consultation is costing the British taxpayer; seemingly they regard it as "commercially confidential".

How very inconvenient!

As the Chief executive of the TaxPayers' Alliance, Matthew Elliott, succinctly put it a fortnight ago:

"HMRC has clearly been operating in a state of chaos, apparently staggering from one mistake to another.

Given this sorry tale of mismanagement, poor morale and shoddy data practices, it is no wonder that they ended up making such a disastrous error.

With such systemic failings, they were an accident waiting to happen. Taxpayers have a right to expect their money is spent competently and their information is protected – HMRC has failed on both counts."

Newcastle Central Labour MP Jim Cousins, is also not impressed with HMRC:

"The pressure from outsourcing to private contractors and to reduce the number of staff – and they are ahead of schedule in their job cuts – I think has produced a chaotic situation."

Hexham Conservative MP Peter Atkinson recently warned that the cost benefits of cutting jobs and outsourcing don't seem to have taken account of the security risks:

"I have no objection to outsourcing postal and courier services, but if they are going to have an outsourced service, they should at least make sure it is a secure service."

You pay peanuts, you get monkeys!

Tax does have to be taxing.

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A Legacy of Failure and Fraud

When Gordon Brown is unceremoniously removed from office, at some unspecified date in the future, his lasting legacy that people will remember him by will be the fraud and errors that besmirch the HMRC tax credit system.

The Commons Public Accounts Committee reports today that fraud and error in the tax credit system is costing the taxpayer £1BN per annum.

Yet it seems that HMRC is standing idly by, and not lifting a finger to try to address the systems failings.

The committee says that, despite repeated criticism of the tax credits, HMRC has not yet put any targets in place to bring the level of fraud down.

Edward Leigh sums up the committee's contempt for HMRC:

"The tax credits situation is as serious as ever. HMRC's attempts to bring the system under any measure of control have so far not been crowned with conspicuous success."

Since 2003 £65BN has been paid in tax credits; of this, £6BN was overpaid in the first three years. At the end of 2007 HMRC had recouped £2BN of the overpayment, but written off £700m. It seems that £1.6BN of the £3.3BN outstanding will not be recovered.

To add to HMRC's catalogue of incompetence, the report notes that an estimated £135M a year has not been collected in income tax from 420,000 small pensions.

Brown must be feeling very proud of himself at the moment!

Tax does have to be taxing.

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Security Issues

There is an interesting comment that has been posted on Youtube, relating to outsourced processing activities allegedly being carried out by Fujitsu in Liverpool for HMRC.

The post, if it is true, alleges some pretty serious security shortcomings wrt the processing of tax credit forms.

Here is the comment in full, I have not corrected the grammar or spelling:

"It isnt HMRC but Fujitsu Services currently have the contract for supplying IT services to HMRC that is at fault. In netherton(liverpool) where they process tax credit forms & CIS forms the managers there employ users to key this data into their system without even security checks & people who claim newtax credit have their details sent over email by IT staff without any security enabled, plus peoples details are recorded on CD-roms and left lying around in unlocked cupboards

Also there was newtax claiments details internally copied by users but breaches like this are never highlighted to HMRC and covered up! HMRC should be made aware of the sloppy practices of Fujitsu services and if they renew the contract with them, it will cost them dearly both in money and security.
Be aware Mr Gordan Brown!"

Does anyone have any more information about this?

Please get in touch if you do.

Thanks.

Tax does have to be taxing.

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Tax Does Have To Be Taxing

Adam Hart-Davis, who fronted adverts for HMRC using the slogan "Tax doesn't have to be taxing", has realised that this message may in fact be slightly misleading.

In a Radio Five Live interview he said:

"I wish tax was simpler".

During the interview he said that the system is too complex, especially for the self-employed; and noted that a flat rate of tax would be easier, and bring in more revenue.

Mr Hart-Davis then went on to analyse the root cause of the problems within HMRC. This being the decision by Gordon Brown to merge Customs & Excise and the Inland Revenue into a single department.

In Mr Hart-Davis's view this was a great mistake.

I concur, the merger has been mishandled and the tax system is far too complex.

All of these truths are self evident to the taxpayers, and the staff (who also pay taxes) working at HMRC.

Unfortunately, Brown and his associates don't admit to mistakes. Therefore as long as we are burdened with a Brown government, there will be no significant attempts to improve matters.

Under the son of the Manse, tax does have to be taxing.

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HMRC Highly Commended

Congratulations to HMRC for being highly commended on 22nd January 2008.

For what?

Why, for their Tax Self Assessment Online system of course!

Don't believe me?

Go to
The awards are the UK's highest level commendation for the best e-Government and technology-driven services- services which, through innovative online delivery or IT implementation, have positively transformed the lives of citizens, local communities, business and stakeholder groups.

Here you can see why HMRC was highly commended:

"HMRC Self Assessment Online is a tremendous success for eGovernment and HMRC in particular. This year Self Assessment surpassed unprecedented demand with an improved customer experience.

HMRC successfully managed an overall 45% year-on-year uplift in online self assessment filings and an increase of almost 100% over the peak period up to 31st January 2007. This remarkable increase verified the confidence of taxpayers in the security, availability, speed, accuracy and efficiency of processing over paper-based filing."

Remember folks, we the taxpayers are confident in the speed, security and efficiency of this system.

Are they taking the piss?

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The Great Crash - Epilogue

Yesterday's all too predictable and humiliating crash of the HMRC online tax filing system, aside from seriously pissing people off, and causing an inordinate amount of extra work and stress as people tried repeatedly to file their returns online, has left a "little bit of chaos" in its wake.

The media have happily swallowed HMRC's oringinal line that an extra day's grace has been granted to those who couldn't file yesterday, and that they have until midnight tonight to file without incurring a late filing penalty.

All well and good, except for one minor legal point spotted by Keith Gordon, a barrister.

The original HMRC statement, on the working part of their site, said this:

"HMRC takes any disruption of service very seriously and to reflect this no-one who files electronically or by paper by midnight Friday 1 February 2008 will face a penalty."

Mr Gordon points out that this is no concession at all, as it is the normal position.

He is quoted by Accountingweb as follows:

"Steeden v Carver suggests that anyone filing up to 24 hours late will escape the penalty in any event. The only risk in filing late is that HMRC have an extra 3 months to open an enquiry."

He adds:

"Do HMRC really mean to say that the deadline is now deemed to be 1 February?

In which case, that means that one can file electronically up until midnight on Saturday (to avoid a penalty) and (as before) by paper until the tax offices open on Monday morning?

Will HMRC reflect this in ensuring that such returns are still subject to an enquiry window which closes on 31 January next?"

This may seem a petty point to non lawyers and non tax experts, but it is "finer points" of the law such as this that can cause major problems in the future for people and companies.

Rather interestingly HMRC have now changed their "assurance/apology notice" to read:

"HMRC takes any disruption of service very seriously and to reflect this everyone who files electronically or by paper by midnight Friday 1 February will be treated as having filed on time."

Hmmm...it would be nice if HMRC could get things right first time.

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