HMRC Policy Illegal

BAT has won its challenge to HMRC over its policy of taxing dividend payments from foreign subsidiaries. The policy is illegal under European law, because the UK does not tax similar payments from domestic companies.

HMRC may well appeal against this verdict, as this ruling might cost it £5BN.

Tax does have to be taxing.

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

Cost Control?

Poor old Stephen Timms (Treasury minister) is having a rather rough week this week, having first signed off on the secret VAT increase he now has been forced to admit to parliament that HMRC has no accurate cost estimates over the 25 major IT projects that they are running.

Best guess estimates are that these projects are costing the taxpayer at least £197M, small money compared with the billions that the government has risked on bailing out various banks etc.

In a parliamentary written answer Timms said:

"Many of our IT projects are at an early stage in their development lifecycle, and detailed technical solutions and IT supplier costs are yet to be established.

The figures shown below are therefore estimates and remain subject to revision, finalisation and formal investment approval."

That's all very well, but other departments have managed to provide more accurate estimates for their IT projects, and the private sector obtains cost estimates and project specifications before going ahead with projects.

Why can't HMRC?

Tax does have to be taxing.

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

The Secret VAT Increase - Darling Tells a Porky?

In an emergency Commons debate on the pre-Budget today, Chancellor Alistair Darling said that Stephen Timms', the financial secretary to the Treasury, name had ended up on the web document outlining the 18.5% VAT rate by mistake.

Darling claimed Timms had not seen it, or authorised it.

Ahem!

The Guardian says that the web document contained Timms' signature.

Is Darling saying that Timms signs documents that he doesn't read?

Tax does have to be taxing.

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

The Secret VAT Increase

Gordon "Smiler" Brown and his Darling Chancellor were somewhat humiliated yesterday, when it emerged that they had been planning to increase VAT to 18.5% in 2011.

This embarrassing plan was revealed when a document signed by Stephen Timms, a junior Treasury Minister, was published on a government website. The hard copy version, also signed by Timms, shows no VAT rate of 18.5%.

The web version has now been removed.

Now here is where the politicians seek to cover their shame. Treasury minister Angela Eagle said that the publication had been:

"..a pure administrative error on the part of HM Revenue and Customs.

For anyone to think it is anything else is complete scaremongering and opportunism of the worst sort."

HMRC stated (as per the Guardian) that the VAT increase had been a fully worked-up option, that had been ditched at the last moment in favour of the 45% tax rate on those earning more than £150,000.

I am of the view that the buck should stop with the people who claim to be in charge of HMRC. Given that these plans were discussed at Treasury level, and signed off by a Treasury Minister, then the responsibility for the dissemination of the "correct" plans lies with the Treasury.

This is not an HMRC cock up, but a Treasury cock up; for Eagle and her colleagues to "rat out" HMRC in this way is a pretty lousy trick. However, many politicians are pretty lousy anyway.

Doubtless some poor sap in HMRC will be ritually sacrificed to protect the "honour" of the Treasury.

Tax does have to be taxing.

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

Breach of Confidentiality?

HMRC have caused a wee upset amongst the accountancy profession, when it was revealed that names of some taxpayers who failed to declare offshore banks accounts have been passed on to an independent research agency.

What happened to the concept of confidentiality and data protection?

HMRC have sent letters to some of those who came forward during last year's partial amnesty on undeclared offshore accounts. The letters say that names and telephone numbers will be passed on, unless the recipients opt out.

Would it not have been better to ask people to opt in instead?

That being said, the idea behind the research is laudable enough in that it aims to gain an understanding of customers' experience of the offshore disclosure facility.

Sadly the opt out method used by HMRC to "understand the customer's experience" is crass, and may also be a criminal offence under the 2005 Commissioners for Revenue and Customs Act. HMRC guidance says information can be passed on with consent, the Data Protection Act says consent should be "a positive indication of the wishes of the data subject".

HMRC deny it breaches the act and notes that there are strict safeguards, as the research company has been subject to rigorous security checks.

However, I would say, as a general rule of thumb that people like to be asked first before being "volunteered" for eg surveys, organ donor schemes etc.

Tax does have to be taxing.

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

Poverty

"Tax Credit Casualties"
MEDIA RELEASE FOR IMMEDIATE USE

19 November 2008
Tax Credit Casualties Addressing Child Poverty
The Joseph Rowntree Foundation recently published a report stating that child poverty costs at least £25billion each year in losses to the Exchequer and in reduced GDP.

Thanks to the intervention of Tax Credit Casualties, just the last 33 cases they have progressed to write-off have saved those claimants £152,900 – which in turn has saved the Exchequer, as every pound saved for claimants by Tax Credit Casualties helps to reduce child poverty.

Paula Dean, Tax Credit Casualties' award-winning case worker, said: 'We will continue to help claimants fight cases where they believe overpayments were caused by HMRC's errors and we will continue to fight for an amnesty on all such overpayments. It is not in the best interest of our society to seek to recover these overpayments when recovery means children will suffer poverty. And from the work of the Joseph Rowntree Foundation it is clearly not in the interest of the public purse to push these families back into poverty.'

Tax Credit Casualties work to address child poverty by helping the victims of tax credit overpayments know their rights, and fight recovery of overpayments which are not the claimants' fault. The errors are often caused by software problems, HMRC operator error and faults inherent to the tax credit system itself. Our work helps families on low incomes having to choose between putting food on the table or shoes on their children’s feet, by repaying a debt they didn’t cause and are not responsible for.

Paula also said: "We encourage anyone else who finds themselves in this or a similar situation with tax credits to contact us via our website address which is www.TaxCC.org"

For further information contact:
Sarah McCall
National Coordinator
07947439959 (out of hours included)

Note to editors: Full details of the Joseph Rowntree Foundation's report can be found at http://www.jrf.org.uk/pressroom/releases/231008.asp
Tax Credit Casualties
www.TaxCC.org

Tax does have to be taxing.

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

HMRC's New Flowchart

Accounting Web reports that HMRC have designed a flowchart to help agents identify whether or not "reasonable excuse" for late filing will apply to individual cases.

Excellent!

In the event that the agents cannot understand the flowchart, or need more help with it, agents are advised to contact HMRC Agent Priority Lines.

However, there is one small problem.

Can you guess what that is?

Yes, that's right HMRC's agent advisers at present do not have knowledge or access to the same flowchart.

Errmmm...why not?

Seemingly, according to Accounting Web, the Priority Line will offer "tea an sympathy".

Two lumps please!

Tax does have to be taxing.

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

Repayment Delays Hurt Businesses

Andrew Lloyd, a Baker Tilly tax partner, has stated that 46% of claims handled by their Liverpool office for tax refunds were affected by delays.

He is quoted in the Liverpool Echo:

"In some cases, HMRC offices are honest enough to say that the delays reflect a resource issue.

In other situations, we are almost at the stage of HMRC promising the 'cheque is in the post' with the worst-affected refunds outstanding for many months for no good reason.

It's apparent that tax refunds arising from online filing of returns, where the claimant has provided bank details, are dealt with more quickly than paper-based filings and cheque refunds.

With businesses and individuals feeling the financial squeeze, it's inexcusable if HMRC are hanging on to tax refunds longer than they ought to."

An HMRC spokesman is also quoted:

"We never delay repayments without good reason.

Repayments claimed online are inevitably processed more quickly than those requiring clerical processing but the vast majority of self-assessment claims are being processed as normal."

It seems that the taxpayer is faced with a catch 22 situation, online filing may result in faster repayment of refunds. However, the online system is not yet working well enough for people to feel confident in using it.

Tax does have to be taxing.

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

Security Petition

Those of you who believe that HMRC security should remain "in house", and not privatised, may find the following online petition to be of interest.

We the undersigned petition the Prime Minister to Stop plans for the Privatisation of Security within HMRC.

Tax does have to be taxing.

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

Misleading

It seems that HMRC became a wee bit over enthusiastic when it executed search warrants for Mercury tax Group, a tax consultancy in Leeds, in 2007.

The High Court has ruled that the warrants were unlawful.

Mercury Tax Group and its managing director, Neil Masters, won a ruling that HMRC failed fully to disclose material relevant to its suspicion that a tax avoidance scheme operated by the company was dishonest.

Mr Justice Underhill said Leeds Crown Court was "misled" into granting the warrants.

He stated that it was a borderline case for the deployment of the "nuclear weapon" of search warrants on not just business premises but the private homes of individuals.

Adding that HMRC was under a duty to put its case "with scrupulous accuracy and in such a way that the judge was able to made a fair assessment of the grounds for suspicion being put forward.

That did not occur."

In the tax year 2002-03 Mercury operated a tax avoidance scheme on behalf of around 23 clients. HMRC began investigating in 2004, in November 2007 it executed search warrants at three Mercury offices, Mr Masters' home and the homes and several office addresses of 22 of the clients.

In its judicial review challenge, Mercury noted that it had already supplied all the documents required by HMRC, who said its requests for information had been satisfied in full. It sought the return of all documents seized in the searches of its premises.

Tax does have to be taxing.

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

New Head of HR

Accountancy Age reports that Mike Clasper (one of the "committee of three" running HMRC) is to recruit a new head of HR for HMRC.

As noted, the job spec requires the new HR head to inspire the thousands of demoralised staff whilst making a few thousand redundant.

Any takers?

Tax does have to be taxing.

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

Hat Tip

A hat tip to Blevins Franks for recently mentioning this site on their blog.

Tax does have to be taxing.

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

Fragmented

The National Audit Office published a report last week that stated:

"The fragmented nature of the customs regime within the department, a lack of accountability and incomplete management information has hindered effective oversight of its performance and risk management."

The merger of Customs and Revenue has damaged both departments, yet produced very few positive outcomes.

Tax does have to be taxing.

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

Interest Rates

Now that the banks have succumbed to pressure from Alistair Darling to cut their loan rates, in response to the 1.5% cut in rates by the Bank of England last week, when will HMRC cut their rates?

Currently HMRC charges 6.5% on overdue tax.

Tax does have to be taxing.

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

Failing Memory?

The House of Commons Treasury Sub-committee put the boot into HMRC last week, over the £88K payoff to Stuart Cruickshank (the ex CFO of HMRC).

The sum is believed to include costs for Cruickshank's legal advice and "outplacement counselling".

Cruickshank took the role in December 2006, and left in March 2008.

At the time of the announcement about his departure HMRC were reluctant to talk about how much his severance pay would be.

Now that it is out in the open, MP's are puzzled.

George Mudie MP said:

"If we are paying somebody £88K to break their contract ... they should be paying us."

Dave Hartnett told the committee that Cruickshank had not necessarily wanted to go "at that time".

How odd that, at the time, HMRC told The Times:

"Stuart Cruickshank, the Revenue claims, was on a 'standard Civil Service fixed-term appointment contract' and was always expected to leave".

Hartnett appears to have forgotten this.

Anyhoo, he has agreed to provide further details of the payout.

But added:

"We needed a chief finance officer committed to HMRC."

Odd to imply Cruickshank wasn't committed, given the article in The Gasette Autumn 2007 that I referred to in January 2008:

"The really odd thing is that reading page 12 of The Gasette (The magazine for government finance professionals) Autumn 2007, I get the distinct impression that Cruickshank, and indeed The Gasette, thought that he would be around for longer than a year".

Tax does have to be taxing.

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

Shades of Nelson

Dave "Nearly Man" Hartnett evoked memories of Nelson's "I see no ships" during a recent "guest" appearance at a discussion in the House of Commons.

Despite the fact that nearly 15,000 staff have resigned from HMRC since the merger in 2005 (3,000 ahead of HMRC's target), Hartnett (now permanent secretary for tax at HMRC) said he was not aware of any forced redundancies.

"There have been no compulsory redundancies that I'm aware of in the last few years."

There are of course many ways to make someone resign, as Hartnett knows, without having to fire them.

Ironically, despite this mass exodus, HMRC's operating costs are up by £192M.

Jim Cousins MP, like many others, is somewhat baffled by this contradiction.

Hartnett, whne questioned about it, said that there were "any number of reasons" (ie he didn't know) for the cost problems "to do with the running costs of IT systems and child benefits".

Hartnett may well have evoked memories of Nelson, but he and the other two on the "committee of three" who claim to now be in charge of HMRC are most certainly not modern day versions of Nelson.

Tax does have to be taxing.

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

Discipline

Parliamentary answers reveal that 192 officials from HMRC were disciplined or dismissed "for alleged breaches of data protection requirements and inappropriate use of personal or sensitive data" in the past year.

None of the dismissals at HMRC were related to last year's Datagate scandal, when the personal data records of 25 million people were lost.

Tax does have to be taxing.

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

SDLT

HMRC is doing its best to encourage people to file their tax returns online. In fact HMRC are targeting all strata of society, including solicitors and conveyancers.

Now, given the fact that house sales have fallen through the floor, you would have thought that filing property transactions online would have been a relatively simple task?

You would have thought that, wouldn't you?

Sadly no!

File a transaction via paper, and the SDLT (Stamp Duty Land Transaction) certificate takes around 6-8 weeks to be issued.

Surely online filing is faster?

No!

This from the SDLT help desk:

"HMRC systems are currently responding slowly to all SDLT e-submissions.

If your submission does not complete, return to the form later and to click the 'Check Progress' button.

We advise you to refrain from submitting further returns until we have an update from HMRC, unless the return needs to be made today, in which case by attempting to submit you will have an audit trail to prove you attempted the submission.

HMRC are aware of the issue..."

Tax does have to be taxing.

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

Datagate II - The Sequel

Another year, another IT scandal.

This time screw up, relating to the loss of a memory stick containing passwords to a government site via which people can pay parking fines and fill in tax returns, has been blamed on a private contractor (Atos Origin).

All very well, but it is the government that vets, approves and hires these firms.

Anyhoo, the extra icing on the cake is that Gordon "Smiler" Brown has admitted that the government cannot promise the safety of personal data entrusted by the public.

This coming from a government that wants to issue compulsory id cards, build a DNA database, place our medical records online and force us all to submit tax returns online.

Hardly reassuring is it?

There is some good news, the memory stick has been found...outside of the Orbital Pub in Cannock.

Tax does have to be taxing.

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