HMRC Has Limited Appetite For Learning

I have clearly been asleep at the wheel, and missed that in mid September the Adjudicator's Office published its annual report on HMRC for year end 31 March 2015.

It does not make great reading for HMRC:

“limited appetite for reflection and learning from their interaction with customers....

...A failure to embed change may be costly”

The largest proportion of complaints received by the Adjudicator were about tax credits and HMRC’s refusal to write off overpayments. Other complaints included PAYE issues around Extra Statutory Concession A19.

No surprises there then!

Also of particular concern to the Adjudicator was the failure by HMRC staff to consider the circumstances of vulnerable taxpayers, especially where the department had the opportunity to exercise discretion.

Again, sadly this should be of no surprise to loyal readers!

The report contains a number of case studies, which HMRC would be advised to read.


Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

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

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

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

What is Solar Tax Investigation Insurance?

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

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



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Coding Matters

It seems that the thorny issue of tax codes has raised its head again.

The Telegraph reports that up to three million people with more than one source of income face backdated tax bills of £2,000 per year, because of errors by HMRC.

Among those most likely to be affected are veterans who have taken a civilian job after leaving the Armed Forces, but who also draw a military pension. Pensioners with two pensions and those who have continued to work part-time after retirement are also more likely to be hit.

It seems part of the problem lies with a the fact that tax offices around Britain are failing to share information about taxpayers’ incomes on a central database.

HMRC insists that the problem is not “systematic”, and says the vast majority of tax codes are correct. However, professional tax advisors are seeing a rise in cases where incorrect tax codes have been issued.


Clive Stevens, the executive chairman of accountancy practice Reeves, who sits on the council of the Institute of Chartered Accountants in England and Wales, is quoted:

“Often when people have two sources of income, two tax codes are issued by separate HMRC offices, each acting on the basis of information given to them by an employer, pension provider or the taxpayer directly. 

Clerical errors are made because the workforce, which has suffered sweeping redundancies, is demoralised and the required attention to detail and care is not there.

In my experience, up to three out of five PAYE codes that we see in our office are incorrect when first issued. In the worst cases, it has taken 10 attempts to get a correct code from HMRC.”

An HMRC spokesman said such problems should have ceased since the introduction of centralised record-keeping in 2009, adding:

“Over 98 per cent of tax codes are correct and the vast majority of people who pay their tax through the PAYE system on either earned income or pensions pay the right tax.”

Alastair Rush, of financial advice firm Echelon Wealthcare, said the situation is worsening.

“HMRC seems to be imbued with the concept that it’s infallible.

It prefers to pretend the system works just fine when we all know it doesn’t.

It produces errors with almost casual disinterest which cause a huge mess for clients, families and their employers. I wish it would hold itself to the same measure of accountability that it attaches to its customers.”

When errors are identified, HMRC is demanding back payments even where, under concessions (ESCA19) aimed to protect taxpayers, it has no right to the money because it was at fault. However, HMRC is unmoved and insists that "due to improved processes", it would only now apply in “very unusual circumstances”.

Views and comment from the frontline are, as always, very welcome!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

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

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

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

What is Solar Tax Investigation Insurance?

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

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



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HMRC's 94% Error Rate

Kudos to HMRC for making so many mistakes wrt tax demands that the Tax Adjudicator found that 94% of those submitted to the Adjudicator were wrong, necessitating HMRC to issue almost £4M in refunds and write-offs together with £250K redress for "poor service".

Judy Clements, head of the adjudicator’s office, said:

“If my office can mediate a complaint, then the department should have been able to resolve that complaint without the customer feeling the need to refer the matter to me.

Customers often compliment the direct personal discussion my staff have with them during the mediation of cases. I feel certain this is the sort of tailored response customers can and should expect from all departments.”

She said she had seen instances where there was “no sense of urgency when making decisions on customer issues” and where HMRC staff “do not appreciate the impact matters may have on individual customers.”

A total of 12,074 enquiries were made to the adjudicator in the year. The majority of cases it took on related to instances where HMRC had sent shock bills to people who had unwittingly underpaid tax. HMRC was found at fault in 94% of these cases, with the taxpayer issued redress.

The Telegraph has published a guide on how to fight your corner with HMRC:

Sometimes mistakes are not corrected for several years. There are rules to ensure fairness in such instances. The debt should be written off under “extra-statutory concession A19” or ESC A19 if three conditions are met: 

- did HMRC make “proper and timely” use of information provided to it; 
- could the taxpayer have “reasonably have believed their tax affairs were in order”; 
- and was notification sent within 12 months of the end of the tax year in question?

HMRC still routinely rejects applications for ESC A19. 

If this happens, you need to fight your case.

First, ask your local tax office to apply ESC A19. If it refuses, file a complaint outlining what happened, when, what effect the error had on you and why you qualify for the concession, and the matter should be put right. For a guide to the concession, see hmrc.gov.uk/esc/esc.htm.

For income tax complaints, call 0300 200 3300 or write to HM Revenue & Customs, Pay As You Earn, PO Box 1970, Liverpool L75 1WX. 

If you are unsatisfied, ask for a “formal review”. If this fails, a second review will provide a final response. The next step is to contact the adjudicator. The service is free and impartial. 

You must write within six months of a final response, providing reasons for complaint and a copy of the final decision letter. Call the adjudicator on 0300 057 1111 or write to The Adjudicator’s Office, PO Box 10280, Nottingham NG2 9PF. If you believe justice has not been done, write to your MP and ask for the matter to be investigated by the Parliamentary Ombudsman, who will look into why the adjudicator rejected your claim.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

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

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

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

What is Solar Tax Investigation Insurance?

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

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



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Coding Errors and HMRC's Resistance To ESC A19

The Telegraph has highlighted the ongoing attempts by HMRC to resist claims by taxpayers for application of the ESC A19 concession. The concession allows tax arrears to be written off if three conditions are met:

1 HMRC failed to make “proper and timely” use of information provided to it.

2 The taxpayer “could reasonably have believed their tax affairs were in order”.

3 No notification was sent to the taxpayer within 12 months of the end of the tax year in question.

Unsurprisingly, given the regular coding errors, many taxpayers (pensioners are particularly prone to erroneous coding notices if they have more than one pension source) find themselves in a position of owing or being owed tax.

As per a letter to the Telegraph:

"I read with great interest your account of the case of RD, South of England. My case covers unpaid tax to the tune of £10,457 for the tax years 2002-03 to 2007-08 as advised to me in an HMRC letter dated July 3, 2008. Even though this was received with shock and concern this sum was paid in full to HMRC because I was informed by them in reality that I had no option but to pay up. 

However, in October 2011 I became aware, through reading your column, of the A19 concession and wrote to HMRC seeking it to apply it to my case retrospectively. Eventually I was told that it would not apply. However, my case seems so similar to that described in your column recently it once more raised my concern about the way HMRC has dealt with mine. It had all the necessary information."

Only after the Telegraph intervened did HMRC back down, apply the concession and pay back the tax.

HMRC said:

“We apologise for the way that we have handled matters for Mr P. This is not the level of service we aim to provide. We are sorry for any worry and distress that he has experienced. We are sending a payment for £150 to him to apologise for our poor handling.” 

Elaine Clark, director of the accountants Cheap Accounting, is quoted by the Telegraph:

“Taxpayers who suffer errors are being forced to be more tenacious.

In our experience HMRC has toughened its stance. It’s almost as if officials don’t read the case file, they just send out a letter demanding payment even if the taxpayer would have legitimately qualified for ESC A19.”

In some cases, she said, taxpayers were left totally unaware of their rights. Others were frightened to take on the authorities.

Theoretically, RTI will eliminate these coding errors.

Time will tell!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

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

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

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

What is Solar Tax Investigation Insurance?

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

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



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Is HMRC Becoming More Aggressive?

AccountancyAge poses the hypothesis that HMRC is becoming more aggressive in its approach to collecting taxes. The hypothesis is based on two sets of statistics:

1 The increase tax take of £19.5BN when comparing 2013 to 2012.

2 An increase in judicial review requests from 39 in 2011 to 51 in 2012 (the most recent data available).

The above two sets of statistics are not, in my opinion, prima facie evidence of a more aggressive approach by HMRC; eg part of the increase in tax take can be explained by an increase in employment etc.

However, Jason Collins head of tax at Pinsent Masons is of the view that the increase in applications for judicial reviews is significant:

"This significant jump in the number of applications shows just how contentious some of HMRC's decisions have become.

Although not all of these disputes will progress all the way to a full judicial review hearing, this surge in challenges reflects taxpayers' reaction to the increasingly aggressive stance taken by HMRC to increase its tax take and clamp down on tax avoidance and evasion.

Any proposals which limit scrutiny over how HMRC goes about its business could ultimately have a negative effect on the quality of the tax authority's work."

I would suggest that the indicators of a more aggressive approach are more subtle; eg the ongoing attempts to water down/eliminate ESC A19 relief and the mandatory £100 fine for late filing even when there is no tax owing.

What are your views?

Tax does have to be taxing.

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

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

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

What is Solar Tax Investigation Insurance?

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

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



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"

Miscommunications and ESC A19

Today's Telegraph has an interesting article about the problems that can be caused when there are communication failures (both ways) between a taxpayer and HMRC.

The article is reproduced in full below, but in essence it relates to a change in taxpayer circumstances which seems to have not been effectively communicated to HMRC, which in turn did not communicate the related increase in tax due in a timely/effective manner.

HMRC then withdrew the tax demand, once the Telegraph became involved, on the basis of ESC A19.

Here is the article in full:

"I started to work as an occupational health nurse in 2009 with the police on a short-term rolling contract finishing in late 2010. I started receiving my state pension in 2011. 
 

I then again resumed working with the same body in March 2011. Because I was employed by an agency my wages were paid to them and transferred to an accountant who deducted taxes and expenses. 
 

I was asked by the agency, when I went to work for them again, if my circumstances had changed. I informed them that I was now drawing a state pension. 
 

Two months after I finished work HMRC informed me that I had been receiving state pension and had not been taxed on it. Now, looking at my records, they said I owed for 2011-12 as well as later. I asked them why they hadn’t informed me before and they said they were short staffed and hadn’t got around to it and anyway it was my responsibility. 
 

I was quite shocked as I had been paying accountants to deal with my tax affairs.

Phoning up my accountants they said they had not received any new tax information about me from HMRC so how could they have increased the tax.

JR, Somerset

This came at a particularly difficult time as you had had to retire to look after your elderly mother who is housebound and in need of constant attention. Yet you now had to find some £3,000. You felt this was very unjust.

I spoke to HMRC and it agreed to withdraw the tax claim against you. You say HMRC has now acknowledged to you that it had on many occasions failed to inform you of the correct new tax code.
Presumably the change in the claiming of your pension had simply not been registered.

It seems you have not provided permission to HMRC to give me the full details of the whys and wherefores of this but I do understand that you have demanding caring duties.

You say this resolution comes as a huge relief.

For information about exceptional circumstances where a tax demand may be cancelled, see hmrc.gov.uk/dealingwith/esc.htm. Otherwise speak to Citizens Advice or call the tax office."

Tax does have to be taxing.

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

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

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

What is Solar Tax Investigation Insurance?

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

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



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"

Media Pressure

It is regrettable to see that HMRC, in some ways, can act in the same manner as a dodgy private company that seeks to avoid compensating an irate customer; only when enough pressure is applied (often via the media) will the compensation be forthcoming.

Such seems to be the case of Don and Valerie Woodhams who both faced demands for underpaid tax, yet only had one of the demands written off after the intervention of the media (in the case Money Mail).

"Mr Woodhams was sent a £1,200 bill for underpaid tax in 2011/12.

He had received pension income since 2005. HMRC had sent Mr Woodhams a tax code relating to the pensions he drew from the same insurance company. He checked it out and couldn’t see anything untoward.

But the taxman had previously always sent two separate codes for these pensions, and this meant the insurer now applied one code to both payouts.

Amazingly, HMRC says Mr Woodhams should have realised this error himself and declined his application for a special concession from them.

Mr Woodhams says: ‘HMRC has a bullying and defensive culture. The special concession is a cheats’ charter and a get-out-of-jail card for the taxman.

‘I’m convinced that thousands of honest taxpayers are misled and bullied into paying more income tax than they should.’

Mrs Woodhams was wrongly sent duplicate tax-free personal allowances. She has now had the demand she received for £1,600 written off by HMRC."

The link to the Money Mail article mentions other examples of HMRC only relenting after the intervention of the media.

To my humble opinion this is puzzling, either the tax demand is valid (these are after all relatively "simple" personal tax calculations, not the complex calculations of a multi national) and should stand or it isn't; in which case it should not require the intervention of the media to correct the error.


Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

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

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

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

What is Solar Tax Investigation Insurance?

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

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



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"

ESC A19 To Go The Way of The Dodo

I see that This Is Money reports that HMRC wants to send ESC A19 "the way of the dodo" (as per the quote from an HMRC spokesman).

Dodos aside, the spokesman went on to say:

"ESC A19 itself can no longer apply in all but a handful of cases as we reconcile all cases at the end of the tax year."

HMRC's desire to abandon ESC A19 should come as no surprise, as the threat to ESC A19 has been noted several times on this site eg last July.

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

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

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

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

What is Solar Tax Investigation Insurance?

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

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



Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

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

LITRG Responds To HMRC's ESC A19 Proposals

On Wednesday I wrote about the ICAEW Tax Faculty's objections to the proposed revisions by HMRC of ESC A19.

My thanks to a loyal reader, who reminded me that the Low Incomes Tax Reform Group (LITRG) also recently raised objections to the proposed revisions:

"We welcome the opportunity to respond to the consultation document 'Extra-statutory Concession A19 review'. 

Extra-statutory concession A19 (ESC A19) performs a very important function, serving to provide fairness to taxpayers when HM Revenue and Customs (HMRC) have made a mistake. In particular, it is often the unrepresented taxpayer who is affected by the problems which lead to claims under ESC A19. 

Any review of the concession must take this fact into account.

We raise at the outset the question of whether the concession needs to be revised in the manner proposed. The revised text will make significant changes to the concession and the circumstances in which it will apply. 

Our response strongly reflects the fact that we do not believe there should be changes to when ESC A19 should apply; rather there should be improvements in its operation.

In order to follow ‘Your Charter’, HMRC should publicise ESC A19 much more widely, as those unrepresented taxpayers to whom it is often relevant are in many cases unaware of the concession’s existence.

We believe strongly that the exceptional circumstances test should be retained, and should be interpreted correctly, according to the current wording of ESC A19."

Yes, whatever happened to the Charter?

To read the full LITRG response, please use the link below:

The LITRG response

Tax does have to be taxing.



Professional Cover Against the Threat of Costly TAX and VAT Investigations

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

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

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

What is 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"

ICAEW Responds To HMRC's ESC A19 Proposals

At the beginning of July I noted that HMRC had issued a consultation on Extra Statutory Concession AS19, and that:

"HMRC are proposing a significant watering down of ESC A19".

Under ESC A19, which has been a feature of the UK's tax system for around 40 years, tax arrears may be waived when HMRC has failed to use information available to it to assess an individual's tax liabilities on time.

The Tax Faculty of the ICAEW is none too impressed with the proposed revisions to A19 either, and has set out its views; a.o. it notes:

"we do not agree with the removal of the reasonable belief test and its replacement by a responsibilities test in the form set out in this consultation document. As currently drafted the test is not acceptable. 

The responsibilities for taxpayers are too onerous and unclear. The responsibilities for HMRC are limited and insufficiently rigorous.....

..until it can be shown that HMRC’s operation of the PAYE system is consistently meeting an agreed service standard, the exceptional circumstances test should be kept...

..we think the proposed requirement for taxpayers to contact HMRC before the end of the tax year in which the underpayment is notified is not reasonable."

Here are the Faculty's views in full:

"The concession should not be revised on the lines proposed by HMRC

ICAEW does not support HMRC’s proposed revision of Extra-statutory Concession (ESC) A19, although we agree that a review is needed of the concession and how it is operated.

Our views are set out in TAXREP 46/12, submitted on 24 September 2012 in response to the consultation document Extra-statutory Concession A19 review published on 3 July 2012.

The current concession and the proposals

Under ESC A19, HMRC will write off income tax and capital gains tax where HMRC has been slow to use information and tell the taxpayer about an underpayment, and the taxpayer could reasonably have believed their tax was correct.

We summarised HMRC’s proposals in our news item Consultation on Extra-statutory Concession A19 in July 2012. HMRC proposes that the revised concession would apply from April main proposed changes are:

·        To replace the ‘reasonable belief’ test with a responsibilities test.

·        To scrap the ‘exceptional circumstances’ test, which (broadly) applies where HMRC has made repeated failures.

·        To restrict ESC A19 to income tax, ie it would no longer apply to CGT.

·        To introduce a time limit for taxpayers to ask for ESC A19 to be applied.

The Tax Faculty’s views on the proposals

ESC A19 is an important concession which provides fairness for taxpayers where HMRC is at fault. We should like to emphasise the importance of retaining it within the tax system.

We agree that a review of ESC A19 is needed. There are difficulties with the operation of the concession in its current form, particularly the application of the ‘reasonable belief’ test.

However, we do not support the proposed revised text of ESC A19 as set out in the consultation document. It should not be introduced in April 2013. In particular, the responsibilities test as drafted is not fair or workable (though there may be merits in such a test – see below), and we do not agree with the other proposals which restrict the scope of the concession.

1.     Responsibilities test v reasonable belief test

There is evidence that the current ‘reasonable belief’ test does cause difficulties and is not being applied consistently by HMRC. In establishing whether a taxpayer ‘could reasonably have believed that his or her tax affairs were in order’, it is hard to remove a degree of subjectivity.

A responsibilities test would mean, in broad terms, that if HMRC has failed to meet its responsibilities but the taxpayer has met theirs, ESC A19 can apply. This has the potential to make the application of ESC A19 more objective and therefore fairer for the taxpayer, and has worked well in the context of disputed tax credit overpayments. Therefore we think the idea should be explored further.

However, we do not agree with the removal of the reasonable belief test and its replacement by a responsibilities test in the form set out in this consultation document. As currently drafted the test is not acceptable. The responsibilities for taxpayers are too onerous and unclear. The responsibilities for HMRC are limited and insufficiently rigorous. And most importantly, no such test should be introduced until HMRC is able to provide clear information for taxpayers about their responsibilities and how to fulfil them.

We think that ESC A19 should be retained in its current form, ie with the reasonable belief test, and not be replaced unless and until a workable responsibilities test can be devised. In the meantime HMRC should work on improving the operation of the reasonable belief test, and on developing better information and guidance for taxpayers on ESC A19 and on PAYE matters generally.

2.     Exceptional circumstances

The exceptional circumstances test is designed to deal with situations where HMRC makes repeated failures. HMRC argues that the advent of the NPS system, and RTI from next year, should mean that is processed in a more timely fashion, and thus remove the need for the exceptional circumstances test in future. However, until it can be shown that HMRC’s operation of the PAYE system is consistently meeting an agreed service standard, the exceptional circumstances test should be kept.

3.     Capital gains tax

While we accept that ESC A19 is not likely to apply often to CGT, we can envisage situations where it could. We see no need to narrow the scope of the concession without good reason Therefore the ESC A19 should continue to apply to CGT.

4.     Time limits

We have no objection to introducing a time limit for claiming ESC A19. We agree that it is better if taxpayers approach HMRC sooner rather than later.

However, we think the proposed requirement for taxpayers to contact HMRC before the end of the tax year in which the underpayment is notified is not reasonable. If an underpayment was notified in (say) March, it would be unfair to expect the taxpayer to contact HMRC before 6 April.

If there is to be a time limit, we propose a four-year limit in line with the current limit for claims, with an additional limit of one year from when the underpayment is notified if this gives a later date than the four-year limit."

Tax does have to be taxing.



Professional Cover Against the Threat of Costly TAX and VAT Investigations

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

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

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

What is 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 A19 Petition

At the beginning of July I noted that HMRC had issued a consultation on Extra Statutory Concession AS19, and that:

"HMRC are proposing a significant watering down of ESC A19".

Under ESC A19, which has been a feature of the UK's tax system for around 40 years, tax arrears may be waived when HMRC has failed to use information available to it to assess an individual's tax liabilities on time.

The consultation has prompted Keith Gordon (a tax barrister at Atlas Chambers) to create an online petition opposing the changes.

He states on the petition website:

"HMRC’s proposal to “clarify” ESC A19 is misconceived and misleading. The present wording is perfectly clear and HMRC should revert to their former practice of respecting it. 

HMRC’s proposal is merely a fig leaf, designed to legitimise their recent practice of denying ESC A19 to the very individuals for whom it was intended to apply."

He is also quoted by Nichola Ross Martin:

“ESC A19 is designed to be a get-out-of-jail free card available to the country’s poorest taxpayers who are told of old tax liabilities several years down the line.  It applies when HMRC have simply failed to use the information available to them and the taxpayer could reasonably have believed their tax affairs were up to date.

In the past couple of years, HMRC have attempted to reinterpret their own guidance simply to avoid applying the concession in the very cases for which it was designed.  This has caused unnecessary anxiety for thousands of taxpayers, many of whom will find it impossible to fund the unexpected debt.”

The petition is available here, and the HMRC consultation ends 24 September 2012.


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"

PAYE Complaints Rise

It seems that the PAYE problems of 2008-10 continue to give HMRC a headache.

Accounting Web reports that complaints to the Adjudicator about HMRC payment claims have more than doubled in 2011-12.

Overall, the number of complaints about HMRC rose 32%, but HMRC's intransigence in blocking requests for underpayments to be written off under Extra Statutory Concession A19 contributed to a 114% increase in PAYE complaints in the latter half of the year.

“We expected an increase in complaints following the introduction of the new PAYE computer system due to the high level of customer interest,” wrote Judy Clements, in the forward to her Adjudicator’s annual report. 

	Cases awaiting investigation	New cases for investigation	Cases resolved
April 2012	992	1,606	1,133
April 2011	2,041	1,235	2,284

The Adjudicator also noted a significant rise in the percentage of complaints upheld against HMRC during the year. Out of 494 taxation-related complaints received, 197 were partially or substantially upheld - a success rate of just under 40% compared to 23% in 2010-12.

As I noted in July HMRC is now consulting on watering down the A19 concession.

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"

HMRC Consults On A19

My thanks to a loyal reader who pointed me to the HMRC consultation on the extra-statutory Concession A19.

It seems that HMRC are proposing a significant watering down of ESC A19.

Oh, and rather gemusingly, HMRC now refer to us as "taxpayers"!

Here are a few extracts of the document, re the removal of "exceptional circumstances" it appears that HMRC are relying on the continuous cycle of year end processing giving rise to "fewer instances" of "exceptional circumstances" and the build up of arrears:

 "Extra-statutory Concessions ("ESCs") have been a feature of the UK's tax system for over 40 years. An ESC is a relaxation which provides taxpayers with a reduction in tax liability which they would not be allowed under the strict letter of the law...

ESC A19 sets out how HMRC may exercise its discretion not to collect income and capital gains tax which is lawfully payable, due to HMRC's delay in acting on relevant information in prescribed circumstances. This includes where the taxpayer identifies that HMRC did not properly deal with information received and the HMRC delay is the cause of an underpayment. HMRC is keen to ensure that this concession continues to apply in appropriate cases and that taxpayers understand it...

The proposed revised version of ESC A19 removes reference to 'reasonable belief' and introduces the idea of 'taxpayer responsibilities'. HMRC has introduced a set of responsibilities which HMRC considers to be a more objective measure to decide whether HMRC should not pursue the tax owed. HMRC expects taxpayers to have a certain basic level of knowledge about their own tax affairs and a set of responsibilities allows HMRC to objectively assess the taxpayer's position....

The 'Exceptional Circumstances' section has been removed in the revised text. As HMRC’s End of Year Reconciliation process now works on a continuous cycle after the end of the tax year, HMRC considers that there will be fewer instances where exceptional circumstances under its present form will occur and arrears build up over two whole tax years..."

Issue date of consultation: 3 July 2012
Date of response: 24 September 2012

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"

Secret - A 19

Yesterday I wrote that there may be an opportunity to use HMRC relief A19, in the event that you are on the receiving end of a tax demand from HMRC for tax that they should have collected a few years ago.

However, those of you who try to look for A19 within the HMRC website may be a tad disappointed.

A helpful flow chart explaining how it works used to be there, but now exists no longer.

For why?

"This text has been withheld because of exemptions in the Freedom of Information Act 2000"

Don't believe me?

Ask Nick Morgan.


Evidently HMRC do not want to help taxpayers understand how the tax system works.



Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

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"

Destined To Fail II

Those of you on the receiving end of a tax demand from HMRC for underpaid taxes emanating from HMRC's reconciliation of its PAYE "backlog" would do well to remember that there may be a way to avoid having to pay these backclaims.

Extra Statutory Concession (ESC) A19, states that HMRC should "forgive" a tax claim if it has not followed its procedures correctly.

HMRC should not claim tax if it has failed to properly use information supplied by a taxpayer, their employer or the Department for Work and Pensions.

The Telegraph quotes Jeff Taylor, editor of The Economic Voice:

"This concession applies to income tax and capital gains tax and allows someone to ask to have the tax debt remain uncollected as long as two important circumstances exist. 

The first is that HMRC must have been in receipt of all the relevant information and have used it within 12 months from the end of the tax year concerned. 

The second is that HMRC must be satisfied that the taxpayer had a 'reasonable’ belief that their tax affairs were in order."

Good luck!




Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

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"

Coding Cock Ups

The ICAEW reports that HMRC have made a wee bit of a cock up (again) with the codings for people who started receiving the state pension in 2010/11.

It seems that the new pension has not been included in their tax codes.

The normal procedure is for the DWP to tell HMRC when it starts to pay a state pension, so that HMRC can put it in the pensioner's tax code.

Where this has not been done properly for 2010/11, the state pension will not have been taxed and those affected will have underpaid tax.

Those affected should be informed by HMRC via a P800.

HMRC has said that the A19 concession is not applicable this time, because the underpayments are for current tax. However, do bear in mind that they tried to claim that A19 was not applicable for earlier tax underpayments when in fact it was.

Underpayments of less that £2K will be coded out in future years' PAYE codes. HMRC should contact those with underpayments of more than £2K, and give them 3 years to have the underpayment "coded out".

However, just in case there is a cock up wrt communications here are two helplines for contacting HMRC:

- Taxpayers 0845 300 0627
- Agents 0845 366 7855

As to why this cock up has happened again is not clear. Maybe the communications between DWP and HMRC are not as watertight as they used to be?

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

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"

Things Get Wurst For HMRC

There is an amusing article in the Telegraph concerning a German sausage seller's battle with the German tax authorities over VAT on his wurst.

Manfred Bog, a purveyor of sausages and chips from three mobile snack bars, has won a ruling from the European Court of Justice that he did not have to charge the full rate of VAT.

The rationale being that his sausages required so little preparation that they did not constitute catering.

This of course opens the doors to claims for VAT refunds from operators of food stalls in the UK (if successful, will they be contacting their customers and paying them their VAT back I wonder?)

Anyhoo, HMRC have claimed that the decision does not have "application in the UK".

Hmmm, given that HMRC have a tendency to get things wrong these days (eg the applicability of the A19 concession) I would suggest that rejecting the possibilities of VAT reclaims being made/successful is a tad premature and tempting fate.

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

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"

Gauke Red Faced

The Telegraph reports that David Gauke, a Treasury minister, has revealed in a written Parliamentary answer that 23% (almost 10,000) of those who used the "extra-statutory concession" A19 were successful and had their HMRC debt cancelled.

Why is this noteworthy?

Ah well you see in 2010, the same Mr Gauke claimed that it "does not apply that often in practice and I do not want people to build up their hopes that it will offer some kind of panacea".

To add to Gauke's embarrassment, 250,000 pensioners have also had their tax cancelled under the concession; this despite the fact that HMRC did their best to reject claims.

This whole issue of the applicability or otherwise of A19 came about as a result of the PAYE problems of last year, that prompted accountants to recommend that people use the A19 concession which puts HMRC on the backfoot if the taxpayer "could reasonably have believed that his or her tax affairs were in order".

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

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"

Emulating The Banks

The Mail is venting is spleen against HMRC over the claims being sent out by HMRC for tax underpayments (estimated to affect 1.4 million people).

Whilst it is perfectly correct that HMRC reclaims underpaid tax, the issue that wrankles with the Mail is HMRC's response to appeals sent in by many on the basis of the A19 tax concession (which allows claims for underpaid tax to be abandoned under certain circumstances).

HMRC are sending out standardised computer generated rejections of appeals from one centre, stating simply that the appeal does not fall within the A19 concession.

This is a similar approach taken by banks and other financial institutions when rejecting people's claims for excess overdraft charges, mis-sold endowments etc; one that is designed to stone wall claims.

HMRC have belatedly realised that, whilst this approach may be OK for tax professionals (who can fight their corner), doing this to a large number of people who normally do not interact on a daily basis with HMRC (but who make excellent copy - eg widowed pensioners - for tabloids) is very unwise. As such the content and format of the letters is now being reviewed, and a more "personalised" rejection will be sent in the future.

Whatever the format of the rejection, the taxpayer can still appeal and if rejected again can go to the Adjudicator's Office.

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"