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Dedicated to the taxpayers of Britain, and the employees of Her Majesty's Revenue and Customs (HMRC), who have to endure the monumental shambles that is HMRC.
Friday, 23 March 2012
My thanks to a loyal reader who penned me an email the other day, advising me of a wee problem on the horizon for HMRC partly caused by the Treasury.
The Treasury has come up with a "terrific new wheeze" (well "new" is an exaggeration, this was actually formulated in the tailend of 2010 and is set to be implemented 1st Feb 2013) relating to the taxation of fruit machines etc, known as Machine Games Duty (MGD).
MGD replaced Amusement Machine Licence Duty (AMLD) in order that HMRC avoids a conflict with the EU 6th directive about not taxing gambling. AMLD taxed the machine, profits from the machine were subject to VAT (the VAT could then be recovered from the purchase and operations of the machines).
However, MGD stops the trader from recovering the VAT paid.
So far so good!.
However, as with all the best laid plans of mice, men and Treasury officials there hides a fly in the oinkment.
The problem lies in the implementation of this new tax.
The resources for the implementation of the tax (ie staff and computer systems) is, so I am advised, woefully inadequate. Currently the UK has approximately 1000 Bookmakers, 300 Bingo companies, 4 or 5 Pool Betting operators and about the same number of casino operators - plus the national lottery. AMLD licenses, whilst large in number, are usually issued to traders on an annual basis as there is an advantage built in to getting 12 month licenses, and it is fairly cut and dried if the tax is being paid.
Under the new system there will be another 42,000 quarterly returns, thus massively increasing the workload of HMRC's accounting centre.
How many extra staff will HMRC allocate for this increased workload?
Approximately 12-15 extra staff (about double the current number), they will help to input the forms. Unfortunately, despite Phil Pavitt's alleged superhuman abilities, the new computer system is not yet available for them to train on. I am also advised that the budget for development of the computer system is already "more than spent", with nothing to show for it.
Now I can hear some wise heads tutting, and asking why input is not done online (as HMRC prefers for so many other taxes etc). Well it seems that the Treasury insisted that traders be allowed to put in paper returns.
The origins of MGD can be found in the systems from Australia and New Zealand tax authorities, except that in Australia and New Zealand there are enforced computer audit functions and bank accounts from which the tax authority can take the appropriate tax amount.
Additionally, the UK legislation does not force traders to keep individual machine records. This means that the tax is almost impossible to audit, and it will make it difficult to work out what the traders' normal tax liabilities are from the start.
Oh, and one more thing, there is no machine registration within the new HMRC system.
Yes, the tax covers two categories of machines which therefore need to be known and identified.
Did HMRC warn HMT that this new tax won't work?
I am advised that they did, bit that the warnings have been ignored!
Sadly another accident waiting to happen, which will be blamed on HMRC (even though in this instance it appears not to be HMRC's fault).
Tax does have to be taxing.
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