OBR Predicts Failure

The Office For Budget Responsibility (OBR) seems to be unimpressed with government/HMRC attempts to close the "tax gap", and government/HMRC bluster about tackling avoidance (perfectly legal) and evasion (illegal).

In short they have dismissed the bluster, and have ignored it.

Page 99 of the OBR November 2010 report states the following:

"Forecasts for tax receipts do not generally include any explicit assumptions about changes in the level of tax compliance. For most taxes, an implicit level of compliance will be reflected in the current level of receipts. In most of the tax models, the current level of receipts will be projected forward using the most appropriate set of economic determinants. Effectively we are assuming that the level of compliance remains constant as a proportion of overall tax revenues. The one
exception is the VAT forecast, where the forecast explicitly projects a VAT gap, the difference between the theoretical tax liability and actual receipts.

HMRC published a document in September on Measuring Tax Gaps 2010 which indicates that the tax gap for HMRC taxes (the difference between tax collected and tax that should be collected) has been close to £40 billion in recent years.a Specific factors such as Missing Trader Intra-Community (MTIC) fraud and a rise in VAT debts during the economic downturn have affected compliance in particular years, but in general the tax gap has been broadly stable. This was achieved against a 2007 HMRC Spending Review settlement of a 4.9 per cent real reduction per year.

The Spending Review 2010 settlement for HMRC included overall resource savings of 15 per cent. This assumed 25 per cent efficiency savings and a £900 million investment to address the tax gap and tackle tax avoidance and evasion. This included measures to increase criminal prosecutions, tackle offshore evasion, extend HMRC’s coverage of high risk areas and the greater use of debt collection agencies.

Inevitably there are always large uncertainties about the effects of both the efficiency savings and additional investment. As a result, we have not included the impact from either factor in the November forecast. If improvements in tax compliance do occur, receipts outturns would come in above what was implied by the economic determinants. At this point they would then be incorporated into the tax forecast. The same would apply in reverse if HMRC savings led to a loss of compliance yield for any tax."

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Gone Phishing II

Earlier this month a loyal reader sent me a link to an article about a potential security flaw within the HMRC website, that may allow phishers to harvest personal information from the unwary user.

It transpires that there is another, similar, security flaw within the HMRC site. Concept Business System explain the issues here.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Something For The Weekend

A loyal reader writes to me setting the following challenge, I assume it to be tongue in cheek, for other loyal readers:

"I challenge anyone to ring the West Yorkshire & Craven HMRC number (their office is in Nottingham and the phone number is a Lincoln one) and get through in less than 3 days."

I assume it can't really be as bad as that?

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

More Cock Ups?

The Telegraph reports that there may be some more cock ups in the tax system, as a result of "issues" in HMRC.

The paper quotes Richard Mannion, a director of Smith & Williamson:

"The first problem concerns HMRC asking for tax repayments to be sent back and the second relates to online requests sent by taxpayers under the self assessment system which seem to have been lost by HMRC’s computer system.

In short, it appears that the tax authorities did not include the employee benefits as shown on forms P11D when working out if people had paid the correct amount of tax for 2009/10 and so under-estimated individuals' tax liabilities. Consequently thousands of people who got a refund just a short while ago could now get a tax demand to the tune of several hundred pounds or more."

With regard to the first issue, it is of course correct that if there has been an error wrt the repayment of tax then HMRC should reclaim it. However, human nature being what it is, it is highly likely that any monies paid back to taxpayers will have been spent.

HMRC, quite correctly, point out that this is the way the system works; ie where the benefit is new in 2009/10 the first HMRC knows about it is when the P11D is sent to them by the employer by July 2010. The issue should normally be "coded out" if less than £2K, and therefore no monies will be reclaimed in the form "hard cash".

However, the Telegraph (cynically?) notes that HMRC made similar statements, playing down the scale of its PAYE errors in August, before admitting to the massive scale of the problem.

These "reconciling" errors may well be more numerous than HMRC are admitting.

Mr Mannion then goes on to highlight another issue:

"The second issue concerns online requests for repayment or for the reduction of tax payments on account, sent by taxpayers to HMRC during the six weeks between October 1 and November 15 this year. It appears that any online requests for help of this type have been lost and not acted upon by HRMC.

Although the problem has now been fixed, anyone who falls into this category should get back in touch with HMRC and reissue their request. This applies even though you may have had a receipt from the tax authorities saying they got your request.

There could be thousands of people up and down the country who think they have successfully communicated their request to HMRC but in reality they will just have to do it again."

HMRC are of the view that this only a affects a few people.

Time, for both of these issues, will tell!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Whither Kenny? III

Loyal readers will doubtless recall the "resignation" (or was it really sacking?) of Bernadette Kenny (Director General of Personal Tax) that was featured on this site in early November.

Well now, it seems that this story hasn't quite ended yet.

The FT reports that, "oddly enough", Kenny will not be leaving her post empty handed (even though she allegedly "resigned" of her own free will).

Kenny will, as from February 2011, start to draw down her HMRC £50K per annum pension (six years earlier than she would have normally been entitled to - worth an extra £300K to her).

My goodness, what a generous and decent employer HMRC is...if, that is, you are in the upper echelons of HMRC and know where the bodies are buried!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Service Standards Fall

The ICAEW has published the results of its survey into its members' views of HMRC's Customer Service Standards (conducted between May and July of this year).

The survey indicates that standards are falling.

Quote:

"We are extremely concerned that overall service standards seem to continue to fall."

Key issues being:

HMRC acknowledges that tax agents are an essential part of the UK tax system. Agents need to be able to communicate with HMRC easily, efficiently and reliably. However, overall service standards have fallen steadily as HMRC continues to seek to reduce its costs and improve its efficiency.

ICAEW questions whether HMRC can meet its aspiration to 'provide an increasingly efficient and high quality service' while reducing staff numbers: the evidence from the ICAEW survey and elsewhere reinforces ICAEW's concerns.

HMRC should concentrate resources on:

- better trained staff
- nominated staff having ownership of problems
- email access to HMRC.

Communication with HMRC is one of the biggest problems for agents. It is difficult to get through on the telephone, the people answering the phones have insufficient knowledge to be able to resolve queries, promised call backs do not happen and letters remain unanswered.

In 2010, 71% (2009, 63%; 2007, 55%) of respondents reported in at least five of the last ten calls to HMRC, they needed to have further contact in order to resolve the enquiry.

In 2010 61% (2009, 50%; 2007, not asked) of respondents felt that the level of
knowledge of HMRC knowledge staff was rarely or never sufficient to answer an enquiry.

34% of VAT queries took longer than three months (2009,21%; 2007, 20%) to receive a full reply.

etc...

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

There Is Nothing Like a Dame

I see that the Sun reports that those running HMRC do not believe in stinting themselves, even if the country has a £4.8 Trillion debt.

Dame Lesley Strathie (CEO of HMRC) apparently travelled by rail to Darlington (first class) in April, at a cost to the taxpayer of £371.67. On top of this was a taxi fare of £82.25.

Why was she going there in the first place?

Oh, to attend an event "celebrating success"!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Avoidance - Definiton Subject To Political Nuance

Oh dear, don't you just "love" politicians and the way that they twist things to suit their mood?

David Gauke, the Exchequer secretary to the Treasury, gave a speech on Wednesday at the annual ICAEW Hardman Memorial Lecture.

Gauke said that he knew that tax advisers often got frustrated with people conflating legitimate tax planning, avoidance and evasion. However, he said that the government was looking to clamp down on avoidance and would use the "bonfire of the the tax reliefs" (my words, not his) as a means to that end.

He tried to mollify his audience by saying that the government is really only trying to target instances where reliefs and exemptions are used in a "highly artificial way".

He would say that, wouldn't he?

However, as per Accountancy Age:

"There's also times when it's perfectly clear what the law intends - where reliefs and exemptions are then used in a highly artificial way.

In these instances, people use their resources - and their talents - to twist the law and create results that everyone knows are simply too good to be true."

Dare I say that as the law is made by parliament, theoretically on the basis of advice by HMRC, that it is up to the politicians to create legislation that is clear and not open to being "twisted"?

Sadly, most especially as there is a £4.8 Trillion debt, the law will be interpreted by HMRC and the politicians in the way that suits their purposes best. This is why (despite whining from Gauke et al) taxpayers need tax advisers to use their skills, talents and resources to their very best.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Gone Phishing

My thanks to a loyal reader who sent me a link to an article about a potential security flaw within the HMRC website, that may allow phishers to harvest personal information from the unwary user.

Here is a summary of the issue from Concept Business Systems (who also put together the video above):

Summary:
A potentially dangerous cross site scripting vulnerability has been discovered on Her Majesty's Customs & Excise web site.

Description:
This exploit allows anyone to alter content shown on the HMRC.gov.uk search site.

As we've shown below, it's possible to change any part of the site. If exploited, a fraudster could potentially gain access to user accounts by forwarding a malicious link by email, web forum or chat message. HMRC are a prime target for phishing scams, but success rates are limited for a number of reasons. The main problem fraudsters face is trying to convince their victims that the site (and email) is genuine. Quite often, it's simple grammatical / spelling mistakes which give the game away. Unfortunately, some scams are very well executed and can fool even the most careful users.

All phishing scams are dangerous, but this is no ordinary phishing scam and it stands out for a two reasons.

1. It's a very high profile site.
2. The fraudster no longer needs to clone the site, these changes can be made to the genuine site... thus hiding the scam behind the correct URL (www.hmrc.gov.uk) and giving the user a false sense of security.

In the video below, we've altered the content and replaced it with a message asking the user to login in order to perform a tailored search. This message and the form beneath are fake; created purely to collect your username & password. These details are not sent to HMRC's server and are therefore not covered by their SSL certificate (the padlock symbol). Instead, they are forwarded to an address of the hackers choice.

With phishing scams & identity theft a real cause for concern, this needs to be resolved as a matter of urgency.

If you suspect you've been a victim of such a scam, it's absolutely vital that you change your password as soon as possible, particularly if you're an agent acting on behalf of other clients.

Also, email security.custcon@hmrc.gsi.gov.uk This e-mail address is being protected from spambots. You need JavaScript enabled to view it.

DO NOT disclose any personal details in your email... simply outline the type of information you disclosed and to whom.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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 Trouble With Computers - Keying Errors

My thanks to a loyal reader who has advised me of a problem that his father in law (a pensioner) has experienced with HMRC.

His father in law recently received a hefty demand for underpaid tax on his pension income. He phoned HMRC, and had a conversation with a very helpful officer.

It seems that, on investigation by the officer, the person who entered the figures onto HMRC's computer from the paper return had added the tax deducted to the gross amount of the pension; the liability had then been calculated on that figure.

Now, there may be some who say that this problem could have been avoided if the taxpayer had not used "old fashioned" paper but filed his return online.

Three points to counter this argument:

1 Not everyone is connected to the net, nor computer savvy.

2 People have the right to submit paper returns.

3 The taxpayer, in this particular case, did initially try to file online. However, HMRC's system was not working at the time and so rather than waste any further time he filed a paper return.

The question is, how many other paper returns (especially those of taxpayers who may not be so tax "savvy") have had keying errors such as this which have not been spotted/flagged by the taxpayer?

Computers are only as good as the people who programme them and key in the data.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

A Political F*ck Up!

The Scotsman reports the following wrt money spent by the Scottish executive on a tax system that it has never used:

"MILLIONS of pounds from Scotland's budget were paid to HM Revenue and Customs to set up a tax system which was never used, it has emerged.

As a result of technology changes at HMRC, a Scottish government will have to fork out millions more if it wants to charge a different rate of tax.

The Scottish Parliament has never made use of its powers to vary the basic rate of income tax by 3p in the pound.

Sources say under an agreement which expired in 2007, the previous Scottish Executive paid HMRC £12 million to set up the necessary systems to identify Scottish taxpayers and a further £50,000 a year to maintain the project.

The current Scottish Government did not renew the agreement when it came to power in 2007 because it did not plan to use the powers.

Within the next few weeks, the UK Government is expected to publish the Scotland Bill, implementing proposals by the Calman commission to give Holyrood wider tax powers.

In the meantime, sources say there have been "significant changes to HMRC's IT platforms" which mean the Scottish Government would have to pay for completely new systems to identify Scottish taxpayers...."

Let's face it, politicians really do know f*ck things up and waste our money!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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 Write Off

HMRC have confirmed that it will write off the tax debts of 1.9M cases from tax year 2006/7 (approximately £500M).

For why?

HMRC are of the view that it will be unlikely to be able to collect the money owed before April 2011. At this point the tax debt becomes time barred, as tax underpayments have to be reclaimed within 4 years of the relevant tax year.

These debts have arisen because of errors on the PAYE codes.

Citywire reports that Dame Lesley Strathie will formally confirm this at the Commons Public Accounts Committee this week.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Pension Problems

It would seem, from the feedback that I have received yesterday about my article on HMRC's bouncing cheques, that some HMRC cheques have indeed bounced.

This of course is a problem that affects some of HMRC's "customers". However, HMRC is an organisation that believes in treating people equally. As such, it should come as no surprise to learn that some of HMRC's staff/ex staff may also be facing money problems caused by an administrative blunder.

A loyal reader (ex HMRC) has informed me of the following:

"I transferred to the Official Receiver's office in November 2007, after working for HMRC since 1999 (Formerly Inland Revenue).

I have, after contacting DWP, discovered that my HMRC pension has disappeared, and that I never contributed to one; yet I had pensionable funds deducted since 1999."

He has since contacted DWP, and they have confirmed the error lies with HMRC.

How many other staff that have left HMRC experienced this problem?

Maybe those who still work for HMRC should also check their pension pots, to make sure that they are properly accounted for?

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Bouncy Bouncy

My thanks to a loyal reader who advises me that there may be a problem with HMRC bouncing some taxpayers' PAYE repayment cheques.

It seems, if this information is correct, that these cheques have been bounced because there was insufficient funds in the particular HMRC bank account on which they were drawn.

I would be grateful to receive more details about this eg; amounts involved, number of cheques bounced etc.

Thanks.

I assume that, if this is true, then it is most likely due to an administrative error (eg cheques being drawn on the wrong account) rather than a shortage of cash.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Panorama

Those of you who missed Monday night's Panorama programme, "Are You Paying Too Much Tax?", can watch it here:

Panorama

"With millions of people waiting to see if they are winners or losers in the fallout from the recent tax code realignment, Panorama reveals the situation inside HM Revenue and Customs.

Insiders say the much-vaunted new computer system is making a bad situation worse, with billions in tax owed to the revenue having to be written off because of mistakes. Reporter Adam Shaw takes tax experts on the road to check people's tax codes, and hears first-hand from angry tax payers and from whistleblowers inside HMRC who complain that mismanagement, waste and staff shortages mean they're providing a poor service to taxpayers across the country."

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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 Top 100 Suppliers

Kable have published a list of HMRC's top 100 suppliers during the financial year 2009/10.

In total HMRC spent £1.8BN on suppliers, of this £0.8BN went on the Aspire IT contract and £0.3BN went to the property company Mapeley (who have been featured on this site before - see tag below).

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Treasury Inquiry

My thanks to the loyal reader who sent me this link to the Treasury Sub-Committee call for evidence to be submitted to their inquiry into HMRC.

In my view, this is an ideal opportunity for HMRC staff to put their case across and have their voices heard.

Source: Sub-Committe Inquiry Into HMRC
"The operation of HMRC has come under close scrutiny in the last few months as a result of the most recent round of PAYE reconciliations. The Department is subject to a significant efficiency programme and must make further savings as a result of the Comprehensive Spending Review. Looking ahead, the Government has made tax compliance a priority, with funding being made available in the CSR, and recently concluded a consultation on PAYE reform.

The sub-committee’s inquiry will build on its predecessor’s work, which identified areas of concern in relation to the impact of the efficiency programme on HMRC’s performance, staff morale within the organisation and its performance on issues such as the payment of tax credits. Its inquiry will focus on the following questions:

HMRC's performance as an organisation and whether it is delivering its key aims;
What the implications are of HMRC's spending review settlement;
Whether HMRC is able to deliver the Government's aims on tax compliance;
Whether PAYE reform is necessary; and
What HMRC’s priorities should be for the future?

The sub-committee invites written submissions on these and related points. Guidance on how to make a written submission is given below.

Please be aware that the Sub-Committee cannot not investigate individual cases....

NOTES ON SUBMISSION OF WRITTEN EVIDENCE

Written evidence should be in Word or rich text format—not PDF format—and sent by e-mail to treascom@parliament.uk. The body of the e-mail must include a contact name, telephone number and postal address. The e-mail should also make clear who the submission is from. The deadline is 12 noon on Wednesday 17 November 2010. Submissions should be no longer than 3000 words. Submissions should be in the format of a self-contained memorandum. Paragraphs should be numbered for ease of reference, and the document must include an executive summary...."

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Whither Kenny? II

My thanks to the loyal reader who sent me a copy (see above) of Leslie Strathie's letter to HMRC staff about the departure of Bernadette Kenny (Director General of Personal Tax).

Stephen Banyard (Director of Business Customer Unit) takes over today, temporarily.

Strathie says that Kenny's full time post will be filled by "a competition" (Pin the tail on the donkey? Musical chairs?). I suspect that her note was written in haste, and that the "a" was a mistake.

Still, you never know:)

In the meantime, it seems that, Kenny will stay on for a "couple of months" to "transform" the department.

If Kenny really had "resigned" why shift her to another role for 2 months, why not simply let her stay in her current role until the term of her notice period expires?

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Retrospective Legislation

I read with interest the recent article in the Telegraph about Robert Huitson, an IT consultant, who has been landed with a £100K tax bill (others have also received backdated bills) as the result of retrospective changes made to tax legislation.

Mr Huiston set up Isle of Man trusts to avoid British income tax.

The scheme was entirely legal and ran for seven years until Parliament closed the loophole retrospectively in the 2008 Finance Act, and issued backdated demands for millions of pounds.

Changing the law to close "loopholes", and prevent them being used in the future, is one thing. However, retrospectively applying those laws to tax arrangements set up legally and in good faith is contrary to the fundamentals of British law.

David Elvin QC is acting on Mr Huiston's behalf in the Appeal Court and is challenging the retrospective law, on the basis of a breach in human rights for people to be allowed to have "free enjoyment" of their private property.

"The degree of retrospectivity is unprecedented in the history of tax legislation and imposes an individual and excessive burden on users of the (tax avoidance) arrangement."

It will be very interesting to see how this case progresses.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Whither Kenny?

My thanks to the loyal reader who alerted us about the recent demise of Bernadette Kenny (Director General for Personal Tax at HMRC):

"Well, Bernadette Kenny is no longer part of the ExCom... shame really.. ahem..

Now here is a funny thing, there is a Blog Post from Kenny dated 01/11/10 which waxes lyrical about the challenges facing Personal Tax and all the things that she is focusing on... then on 02/11/10 Leslie Strathie's Newsboard Message is saying Kenny is leaving and thank you and goodbye!

I wonder what occurred between the BlogPost of 01/11 and the departure as noted in the NewsBoard of 02/11/10. Did anyone else find this strange?

Now a cynic may assume it is because heads had to roll because of the PAYE fiasco (of which Kenny was apparently in charge)... but I couldn't possibly comment on such cynicism!"

I did a wee bit of a "Google" on Ms Kenny and came up with a few background nuggets, that may be of interest.

Opprotunity Now (some form of quango by the looks of it) highlights Kenny as a "Champion" in a case study from 2009:

"...Bernadette Kenny who is the Director General for Personal Tax at H.M. Revenue & Customs and also the organisation's gender champion. Bernadette has responsibility for over 35,000 people and is one of the organisation’s most senior women.

As gender champion Bernadette provides visible leadership commitment to equality and diversity. She helps to articulate the business case and ensures that it is understood and acted upon at the highest levels of the business. H.M. Revenue & Customs (HMRC) commends her for her commitment, enthusiasm and personal passion for the subject...."

In the real world, what exactly does a "gender champion" do that cannot be done by the HR department?

Why is the Director General for Personal Tax involved with HR matters?

Oddly enough, despite being "demised", Kenny still appears on the Corporate Governance section of the HMRC site (no mention of her demise, and indeed no mention of her "gender champion" role. Did HMRC not know that she was "gender champion"?)

"Bernadette's Executive Committee portfolio includes Customer Operations, Customer Contact, PAYE, Self Assessment and National Insurance contributions, Individuals Customer Directorate and Charity, Assets and Residence. Bernadette joined HM Revenue & Customs (HMRC) in May 2005, following a short period as acting Chief Executive of the Royal Parks.

She had previously spent 24 years at the Department for Constitutional Affairs (DCA), having started in the then Lord Chancellor's Department as a Government lawyer in 1980. After an early career in a range of both legal and policy posts, she moved into operations in 1991 managing civil and the higher criminal courts in South East England.

She led the team that launched the Court Service as an executive agency in 1995 before setting up the new agency's Human Resource and Learning function. She moved onto the agency board in 1999, leading on business change, IT, procurement and tribunals operations. She returned to DCA Headquarters in 2002 as Change Director."

So is she going or not?

Please could someone send me a copy of the announcement from Strathie about Kenny leaving?

Thanks.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

£6.4BN Bad Debt Write Off

HMRC's bad debt write offs have risen by 40%, from £4.6BN to £6.4BN, as at March 2010. This rise is due to a number of reasons including; the recession, the change in IT systems and debts becoming time barred.

There is now some debate as to whether HMRC are becoming more aggressive wrt debt collection (eg sending in private debt collection agencies sooner than they used to do).

Tax professionals and some trade bodies claim that HMRC is "tightening the screw", whilst HMRC are quoted in the Telegraph as saying:

"Before any debt is passed to a debt collection agency, a 'final opportunity to pay' letter is issued – only if that is ignored would the debt be passed to an agency."

Two contrasting views, what's the reality on the ground?

Please feel free to comment if you have noted a change, or no change at all, in HMRC's debt collection procedures/attitude.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Complexity Increases - The Bugger's Muddle

The coalition government has claimed that they want to simplify the tax system.

As ever, when a politician speaks, there is a world of difference between the words of the politician and reality.

George Osborne's recent proposals to stop child benefit for higher rate taxpayers are a case in point. I noted in early October that the claw back mechanism for child benefit payments will increase the complexity of individuals' tax affairs, and add to the burden on the already overstretched HMRC.

This, of course, is not the only complicating factor within Osborne's proposals. In order for the claw back to operate, the taxpayer (and the family unit) will have to be deemed to be "higher rate".

Easy enough for HMRC to deduce if the recipient (the mother) is herself a higher rate taxpayer. However, the proposal by Osborne is that the cut off will apply to the earnings of the wife and her partner together (means tested benefits are calculated on the basis of household income).

Fair enough, in principle.

Except there is one rather large problem. The independent taxation of husbands and wives has been a key principle of taxation since 1990. In order for HMRC to know if the family is higher rate they will now have to ask the husband/wife to disclose if his/her wife/husband is a higher rate taxpayer, and for the husband to disclose if his wife is receiving child benefit.

At the moment the law specifies that an individual's tax matters are an individual's responsibility, yet the government proposes (via HMRC) to fine those who do not honestly/correctly declare their partner's status wrt the new child benefit rules.

The law, as it now stands, makes those proposed fines unenforceable.

Instead of simplifying the tax system, if this is to work, the coalition will now have to pass new legislation to enforce fines on taxpayers for failing to disclose information about other taxpayers; ie the coalition will increase the complexity of the tax system.

It's a "bugger's muddle", make no mistake about that!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"

Back Claims

Tax professionals will be well aware that HMRC has the right to revise an individual's tax submission, on the assumption that there is evidence to show that the submission contained errors, even if it is up to 6 years old.

The result being that tax paid in previous years may turn out to be over/underpaid.

Unfortunately, not everyone is a tax professional (nor indeed can most people afford to pay a tax professional). The average taxpayer (trusting that their employer and HMRC have managed to get the numbers right) will have assumed that once the tax is paid, that is that.

As we now all know, from the recent issue wrt tax reconciliations, HMRC have discovered that there is a significant amount of unpaid tax (£2BN) over the last two years owed by approximately 2 million people due to errors in their Pay As You Earn (PAYE) tax code.

HMRC are in the process of sending out letters to people who they have identified as owing them money.

However, it seems that this is but the tip of the iceberg and many more people will be on the receiving end of a demand for underpaid tax.

For why?

HMRC is extending its investigation (PAYE reconciliations) into earlier years, as it has every right to do.

HMRC has admitted that it is struggling with a backlog of 17.9 million "open case" files, with almost 2 million dating back to 2004.

As noted, HMRC has every right to issue revised assessments for earlier years. However, many taxpayer will simply not be in a position to (or indeed expect to have to) pay several years of underpaid tax.

The issue is not merely one of "reconciling" open items, but one of politics and understanding human nature when it comes to people's attitude to "money in their pockets" and taxes.

The demands for the underpaid tax of the last two years will spark considerable anger, were the government and HMRC to push ahead with demands going back six years the political fallout and public anger will be unimaginable.

Good luck with that then!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

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"