MOD Accounts Qualified Six Years Running

As a wee epilogue to yesterday's announcement about the appointment of Jon Thompson (currently the Permanent Secretary of the Ministry of Defence) as CEO of HMRC and Accounting Officer, I draw your attention to the following extract from the REPORT OF THE COMPTROLLER AND AUDITOR GENERAL ON THE 2014-15 ACCOUNTS OF THE MINISTRY OF DEFENCE:

"I have qualified my opinion for a sixth year because the Department is likely to have omitted a material value of leased assets and associated liabilities from its Statement of Financial Position. 

I cannot quantify the impact of these omissions on the accounts with certainty because, as a result of its accounting policies, the Department has not maintained the records, or obtained the information required to do so...

Sir Amyas C E Morse 
Comptroller and Auditor General 
13 July 2015"

Just saying...

Hat tip to Kevin Reed for pointing this out to me.

Thompson: Very well respected departmental finance chief, though unable to prevent MOD's accounts being qualified :) https://t.co/yL1qwxojcC

— Kevin Reed (@Goonerreed) February 24, 2016

Tax does have to be taxing.

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HMRC Markets The Services of Accountants

Despite HMRC bemoaning tax avoidance schemes devised by "evil" accountants it seems that, according to a loyal reader, it is dead keen that taxpayers use the services of accountants:

"Oh and I was told by managers not to give help to fill in returns. The customer should go to an accountant!!!"

Ooh the irony!

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 In Colombian Standoff With Ipsa

I am gemused to see that our "respected" and "morally erect" MPs (the group of people who like to  lecture the rest of us on the immorality of tax avoidance) have got themselves into hot water with HMRC.

It seems that, quite correctly, HMRC are a tad worried that MPs are claiming accountancy fees on expenses; these claims for fees might amount to taxable benefits, as opposed to work related costs.

MPs, being the "morally erect" citizens that they are,  have countered the allegation via the expenses watchdog (the Independent Parliamentary Standards Authority - Ipsa) asserting that they are business expenses.

FYI the costs being claimed are up to £5K per annum per MP.

The Guardian reports that HMRC have repeatedly told Ipsa that other employees are not allowed to claim back professional fees or the tax, and MPs should not be given special dispensation.

Ipsa insists that MPs are more akin to small businesses, which can reclaim such costs.

Funny that, I didn't know that public service was in fact a "business"!

Anyhoo, there is now a "Colombian standoff" between Ipsa and HMRC; it will be interesting to see who blinks first.

Now what was it Cameron, Gauke et al were saying about tax avoidance???

Tax does have to be taxing.



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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.

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HMRC Accounts Qualified Ten Years Running

Those of us who are a tad "irked" by the EU's profligacy, incompetence and interference in the UK's affairs often cite that fact that the EU's accounts are regularly "qualified" by their auditors as a significant indicator of the EU's failings.

Well, as the old saying goes, people in glass houses etc.

Who are we in the UK to talk about "qualified accounts" being an indicator of incompetence, when our own government departments have had their accounts qualified by the National Audit Office (NAO)?

The qualifications by the National Audit Office (NAO) are for a mixture of overspending, underspending or failing properly to account for expenditure.

Needless to say HMRC figure in the list of shame of Whitehall departments that have been qualified. In fact, as Exaro News points out, HMRC has seen its accounts qualified for the 10th year running, between £2.25 billion and £2.75 billion for 2011-12, around the same level as 2010-11.

Well done lads!

Amongst the highlights:

- HMRC is estimated to have lost between £2.08BN and £2.46BN of tax credits through fraud and error. This is between 7.5% and 8.8% of the £28BN total payments made, breaching HMRC’s target of 5%.

- HMRC underpaid to claimants between £170M to £290M.

- HMRC met its target to reduce tax credit debts to £4BN only after writing off £1.7BN in 2011-12.


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"

Get A Grip!

Oh dear Margaret Hodge (Chairman of PAC) continues to be "underwhelmed" by HMRC's less than stellar performance.

She is quoted by the Telegraph, in response to an National Audit Office (NAO) report on HMRC's accounts published yesterday:

"'Sadly it is no surprise that the NAO has found substantial problems with the HMRC's accounts. This year has seen a litany of tax errors and scandals come to light with mistakes made at the most senior level from the permanent secretary for tax downwards. 

The sheer scale of waste and mismanagement at HMRC never ceases to shock me. Without even mentioning the tax gap, in 2011/12 the department wrote off a staggering £5.2 billion of tax owed, overpaid nearly £2.5 billion in tax credits due to fraud and error and underpaid around £290 million. 

In some areas the department is moving in the right direction and has made progress to implement improvement plans. But the department is still plagued by IT problems; limiting, for example, its ability to link together the debts owed by taxpayers across different tax streams. 

With its long history of large scale IT failures, the department needs to get a grip before it introduces its new real-time PAYE information systems and begins the high-risk move from tax credits to the universal credit.'' 

The warning about the oncoming car crash that is RTI was echoed by Amyas Morse (the Comptroller and Auditor General), who said:

''Our high-level recommendations in today's report are that, first, the department should get a better understanding of the costs and benefits of its interventions - such as debt campaigns and initiatives to drive down levels of error and fraud in tax credits.

Secondly, it should prioritise and target its activities on the basis of a better understanding of risks, such as risk-profiling of taxpayers. 

Finally, before implementing significant structural changes, the department needs to be clear about what its future operating model will be: it needs to understand how its business will change following the introduction of real-time information and universal credit. 

There are broad lessons here which reinforce the messages in our recent value-for-money work on tax administration. The department should seek to apply those lessons across the full range of its activities.''

However, HMRC are quite upbeat about things:

"Today's report recognises the new system has bedded in well, and the legacy cases we inherited from the old clerical system are well on the way to being cleared.

We have a long way to go before we are delivering the standards of service to which we aspire, but today's report reflects the real strides forward the department has made, and sets solid foundations for the future.'' 

So that's alright then, nothing to see here move along please!

The key issue, in my humble view, is that both PAC and NAO are "politely" flagging their very real fear that RTI is going to be a clusterfuck. Loyal readers know full well that this site has repeatedly warned of this oncoming clusterfuck that is RTI. Seemingly others are now waking up to the dangers, sadly rather late in the day.
  
Anyhoo, here is the summary of the report, the full version can be read here C&AG report: HM Revenue and Customs 2011-12 accounts:

"The report details progress by the Department in stabilising the PAYE service since the serious problems that emerged when it introduced the new National Insurance and PAYE service (NPS) in 2009. The report also covers HMRC’s performance in managing tax debt; and its progress in tackling fraud and error and in managing debt in respect of tax credits.

In 2011-12, the Department received total revenue of £474.2 billion, an increase of £4.5 billion (0.96 per cent) more than in 2010-11. Tax revenue has continued to recover from the effects of the recession in 2008-09 and 2009-10. VAT revenue has increased by £9.3 billion, largely because of the VAT rate increase and increases in revenue from the oil, gas and business services sectors. Revenue from corporation tax has decreased through turbulence in the financial sector, offset by increased revenue from offshore companies because of higher oil and gas prices.

The Department is part way through its plan to stabilise the administration of PAYE. It has met its target to process 6.7 million end-of-year reconciliations relating to the 2008-09 and 2009-10 tax years. In addition, it is on track to reconcile the 2010-11 and 2011-12 tax years by March 2013; and, by December 2012, to clear outstanding reconciliations predating the introduction of NPS relating to 2003-04 to 2007-08.

Today’s report points out, however, that stabilising PAYE has come at a cost, in terms of the amounts of tax the Department has decided to forgo to keep workloads manageable. In 2011-12, it remitted an additional £12.7 million relating to claims from taxpayers, bringing the total of those claims to £53.7 million.

The NAO recommends that, as a step towards forecasting its overall work load and the operational resources required, the Department complete its review of its PAYE operating model, taking account of the findings from the pilot for testing its new ‘real time information’ (RTI) system.

The value of tax debt at 31 March 2012 under active management stood at £13.3 billion, compared with £15 billion in the previous year. The Department has made progress in implementing its debt strategy through tailoring its approach based on the characteristics of the debt. The Department’s records show a large increase over the last two years in the amount of tax which the Department has decided not to pursue, especially for income tax which was £756 million in 2011-12. This is in part owing to PAYE stabilisation work but also as a result of improvements in the recording of remissions.

The NAO recommends that the Department identify the full cost and evaluate the cost-effectiveness of each of its debt collection activities. It should also accelerate its work to undertake full risk profiling and customer segmentation of its debt balance, as recommended by the Public Accounts Committee in 2004 and 2008.

In 2010-11 (the latest year for which figures are available), the Department overpaid between £2.08 billion and £2.46 billion to claimants as a result of error and fraud and underpaid between £0.17 billion and £0.29 billion to claimants because of error. The Department has not met its target to reduce the level of tax credits error and fraud to no more than 5 per cent of entitlements.

The Department met its target to reduce tax credit debt to £4 billion at 31 March 2012 (down from £4.7 billion a year earlier), but only after writing off old debts of £1.7 billion during 2011-12. It estimates that £2.3 billion of the £4 billion is unlikely to be recovered. The Department’s campaign approach, aimed at collecting tax credits debts more promptly, has had limited success."

Tax does have to be taxing.






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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

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Shortlisted For "Accountancy Personality of The Year"

My thanks to PQ Magazine for placing me on the shortlist for their 2012 awards, in the category of “Accountancy Personality of Year“.

Tax does have to be taxing.

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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"

Financial Power List 2011

My thanks to Accountancy Age for placing me (at 42) on their Financial Power List for 2011. I also appeared in the list in 2006.

The list identifies the top 50 who will wield the most influence over the future direction of accounting.

42 Ken Frost, scourge of HMRC
Known better as one of the ICAEW’s main agitators during its failed attempt to merge with CIPFA, Frost has more recently, and equally successfully, channeled his ire at the taxman. His blog, hmrcisshite.blogspot.com, has consistently come up with nuggets of information HMRC would rather not have been made public.

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 Question of Qualifications

A wee while ago on this site I noted that HMRC's interim chief financial officer, Philip Moore, was not a chartered accountant (although he is an actuary, 2004 government guidelines stipulate that all CFO's running government departments must be "professionally qualified").

Annyhoo, Moore has now left HMRC to join a defined benefit pension buyout company, Pension Corporation.

Moore's role has now been split between Simon Hopkins, HMRC's director of financial planning and analysis, and Jon Fundrey, financial controller (both of whom are chartered accountants).

Doesn't splitting the role lead to confusion and conflict?

Moore was appointed temporary CFO in January 2008. He will not be lonely at Pension Corporation, HMRC's former chairman (Sir Nicolas Montagu) is on the board there.

Tax does have to be taxing.

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

Cloud Cuckoo Land

In HMRC's world things are very different from the world in which you and I inhabit.

Indeed, some far more eminent accountants than myself have referred to HMRC as living in "cloud cuckoo land".

Why would they be so rude about HMRC?

Well, it seems that way back in April 2005 HMRC wrote a paper about tax. This being Britain, the details of this paper only came out last month under a Freedom of Information Act request.

Now at this stage I could make some pithy comments about why HMRC feels to need to try and hide what it does from the humble taxpayers, but I wont.

The paper covered details of HMRC's "tax gap" calculations, in which it split tax advisory work into three types: tax computations, tax planning and avoidance.

Then, having slaughtered a goat and looked at the entrails (HMRC claim that there was "detailed methodology"), HMRC concluded that:

"The result is that some 50% of total fees are earned from avoidance."

Using some extra "logic" they then concluded that for every £1 paid in avoidance advisory fees to an accountant, £10 is avoided in tax, total tax avoidance costs are in fact around £10BN.

At this stage I would remind you all again, what I have been "banging on about" for ages on this site:

Tax avoidance is perfectly LEGAL!

It is only Hartnett, HMRC and Brown who would try to have you believe otherwise.

The real scandal is that people have to waste money and time in trying to reduce their tax bill.

Would it not better for the taxpayers, HMRC, all of us in fact, if tax were made simpler?

That way complex/expensive tax advice would not be needed.

Would HMRC not save money by having less leg work to perform?

Would this not in fact save Brown money, and enable him to cut taxes?

I think it would.

However, as long as Brown is in government, simplifying the tax system is the last thing that will ever happen.

The phrase:

"When hell freezes over"

springs to mind.

However, I have digressed, there is another point to this story; it would seem that HMRC have got their figures wrong.

How surprising!

Grant Thornton's Mike Warburton said:

"We certainly do tax planning work, but we are not spending half our time doing schemes. They are living in cloud cuckoo land if that's their idea."

Deloitte partner John Cullinane said:

"None of the categories seem to pick up most of our advisory work on commercial transactions."

Oh dear, it would seem that HMRC have got it wrong...again!

I wonder how much time, energy and money was spent putting together their flawed paper?

Who will pay for it?

We will of course!

Tax does have to be taxing.

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

HMRC's Stealth Tax

Recently Her Majesty's Revenue and Customs (HMRC) introduced a register for Accounting Services Providers (ASPs) - auditors, external accountants (any person who by way of business provides accountancy services) and tax advisers - whose business is not supervised by a designated professional body.

All such individuals are required to register by 1 October. However, given that this is an HMRC edict, nothing is ever quite that simple. HMRC have added an "administrative deadline" of 1 July for the receipt of applications to ensure processing; remember we work for the convenience of HMRC, not the other way around.

In the event that an ASP is not registered by 1 October, then that ASP will not be able to trade legally.

HMRC have added a little extra piquancy to their proposal, by levying a registration fee of £95. I guess that if this scheme works well, HMRC will add "registration" fees to a number of other tax areas eg; buy to let landlords, company directors, self employed etc the possibilities of HMRC making money out of "registration" schemes are endless.

In fact HMRC have already come up with an additional fee, how surprising!

Where the ASP provides Registered Office facilities, and/or provides company formation services and/or company secretarial services, there is an additional fee of £50.

This fee entitles the ASP to a "fit and proper test". Contrary to the title, this is not some form of medical assessment. The "fit and proper test" ensures that the ASP is known to HMRC by the ASP supplying the following information; NINO, Passport Number, UTR Number, VAT Registration Number and Bank Details.

So that everyone is clear as to what is happening here, let me summarise, the HMRC are to charge £50 for making an ASP do all the "leg work" of providing details that probably HMRC already have anyway.

The question arises, why don't the ASPs charge HMRC for the time and trouble that they will have to expend in gathering/submitting information to HMRC?

We can assume that all of this information will then be collated onto a CD, which will then be "lost".

Some of you may be asking, aside from the obvious revenue generating potential of this scheme, how HMRC is justifying this to the ASPs.

HMRC's official rationale for this is to minimise the risk of tax/accounts professionals being involved in money laundering, and with international terrorists. An interesting justification, unfortunately it does not stand up to rigorous intellectual scrutiny.

What dishonest, money laundering, terrorist ASP will ever apply for registration with HMRC in the first place?

This scheme will simply cost ASPs a lot of time, effort and money as they scrabble around trying to satisfy another pile of unnecessary questions from HMRC. It is of course a nice little earner for HMRC, aside from the registration fees, they will also make a killing with fines as individuals struggle to comply with the reporting requirements.

This is a stealth tax!

Tax does have to be taxing.

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The Comeback Kid

Question:

-When is a resignation not really a resignation?

Answer:

-When you are a senior member of the HMRC.

As proven by the very curious case of the recently "resigned" ex head of HM Revenue and Customs, Paul Gray. Gray "fell on his sword" (temporarily it would seem) over the fiasco of the loss of data belonging to 25 million people.

At the time, when Gray "resigned", one could have had a degree of respect for the man for actually taking such prompt and swift action to demonstrate that he took responsibility for this mother of all fuck ups.

Unfortunately any feelings of respect for him have been somewhat short lived, as he has now made a stunning comeback (after only 13 days) on a salary of £200K per annum.

Not bad for someone who put the security of 25 million people at risk for the next 20years.

Gray has taken up a position under Sir Gus O'Donnell, the Cabinet Secretary.

Here's a few more questions:

-What is his new role?

-Something important?

-Something worth £200K per annum?

Well, not exactly.

He is now involved with "special projects to develop civil service skills".

The Civil Service bullshit their way through this "jobs for the boys" appointment as follows:

"..for contractual reasons, he remains a senior civil servant. He will be leaving the civil service at the end of this year.

In the meantime, he has agreed to a request from Cabinet Secretary Sir Gus O'Donnell to undertake a short piece of work on cross-government matters until Christmas.

When he resigned with immediate effect, Paul Gray's period of notice meant that he would be paid until the end of the year.

As a result, he could receive payment for no work, or receive payment for doing some work.

It was thought to be better in the public interest that he did some work. There is no additional cost to the public purse. He will leave the payroll on 31 December."

Now that bullshit above might be plausible to those people, such as those in the civil service, who have no experience of the real world. However, those of us who have experience of the real world can use a simple but effective accounting term to describe the above reasoning.

It is bollocks!

It would be very easy to argue, were it to be taken to court, that Gray resigned because of gross incompetence and negligence. After all, if the loss of data belonging to 25 million people isn't incompetent then what is?

Were he not to have resigned he would have been sacked.

Those lower down the pecking order in the HMRC would most certainly not have been treated so well.

Based on the above, he most certainly is not deserving of remaining under contract.

In the private sector, when senior staff are sacked (for restructuring reasons, rather than incompetence) they often re-emerge as "consultants" on a higher level of pay. The nature of the reported figures means that the headcount of full time staff will appear to have fallen, even though the reality is different.

The government, Gordon Brown and Gray's chums haven't got that nice fig leaf to hide his reappointment.

One must therefore ask, what does he know that the government and his ex boss Gordon Brown are so afraid of that they are willing to taken the flack for this most absurd public appointment?

There are some very large skeletons in the HMRC cupboard just waiting to come out.

Mark my words!

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