Groundhog Day

It seems that, as with the regular cycle of the seasons, there is yet another government "headline catching initiative" to reduce the red tape negatively impacting British business.

The Telegraph reports that the Treasury has asked the Orifice of Tax Simplification (OTS) to identify how bureaucracy in the tax system holds small businesses back.

Exchequer Secretary David Gauke, who is beginning to feature on this site a little too frequently, claims that wants the OTS to identify ways to improve the way that HMRC interacts with small businesses, including the processes involved in starting and growing new firms.

One of the major problems with the tax system, as it currently stands, is that it was set up with a "Victorian mindset" of people working for only one employer. In the real world many people are now self employed, or work for several employers.

Job "flexibility" and "getting on our bikes" has long been pushed by governments of all political persuasions. However, it is ironic that the tax system (under the control of these governments) remains rigidly inflexible wrt "portfolio" working.

As to whether anything tangible comes of this latest "initiative", remains to be seen. I would observe:

1 Governments, over the last few decades, have all claimed that they want to reduce the burden on business. Yet that burden has steadily increased over the years. These "initiatives" for reducing red tape make nice headlines, yet nothing ever seems to come of them.

2 HMRC's mess is the direct result of government interference, and the ever increasing complexity of tax legislation. The solution lies in the hands of the politicians.

3 Politicians thrive on complexity and tinkering with the law/regulations.

Why?

They need to show the voters that they perform a useful function, and that we cannot do without them.

In order for things to change/improve those who control the system (ie the politicians) must genuinely want things to change/improve.

The question is, do the politicians really want things to change and improve?

All views and comments, as always, welcome.

Tax does have to be taxing.

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What is TAXWISE?

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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.

Click the link to read about: Tax Investigation for Dummies

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The Light Touch

The Telegraph reports that HMRC is to reform its "drawn out and costly" inspection procedures.

HMRC now intends to "throw the book at" firms suspected of avoiding (not that avoidance is illegal) multiple taxes, while treating honest traders with a light touch.

Should not honest traders have been treated "lightly" anyway?

It seems that HMRC has recognised that it is now the "modus operandi" for multiple inspectors would make a compliance visits in consecutive months.

Hardly an effective use of scarce resources, nor does it help the hard pressed business focus on earning money to pay its taxes.

HMRC are quoted:

"We want to get off the back of honest businesses."

As such a new inspection process will be tested for six months from June. If successful, it will be rolled out nationally from January.

David Gauke, Exchequer Secretary, mastering in the bleeding obvious and using the "C" word is also quoted:

"We know that agents, individuals and businesses find some of HMRC's current compliance practices drawn out and costly.

A single compliance process could help HMRC improve the customer experience and reduce costs."

"Innocent, until proven guilty" is a basic principle of English law, unless you are under the gimlet eye of HMRC.

As to whether the new inspection process actually improves things for the taxpayer, remains to be seen. Please let me know your experiences (good and bad) of the new process.

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"

Making It Up As They Go Along

ICAS have put a very well aimed and targeted boot into the "delicates" of HMRC, in respect of HMRC's Impact Assessment of Business Record Checks.

ICAS are of the view that business records checks could cost SMEs at least 10 times more than HMRC's guesstimate, and will impose an absurd administrative burden on SMEs.

In HMRC's fantasy land each visit, averaging half a day, will cost a business £54. However, ICAS has re-costed an average visit using realistic estimates of business disruption and adviser's time and have come up with a total of at least £560 per visit.

ICAS is also somewhat wary of HMRC's fantasy plans to visit 50,000 SMEs each year for four years.

That would be most assuredly bureaucratic bullying overkill, if HMRC really had the resources to do that. Additionally, ICAS is not particularly impressed with the "quality" of some of the people HMRC will be sending into the field and is concerned about the "intransigent attitudes" of these inspectors.

ICAS say:

"..the bases on which these proposals have been presented seem deeply flawed.

Assumptions made by HMRC regarding the incidence of inadequate business records are unsubstantiated by any detail, and estimated costs of the scheme are massively understated. It was not long ago that HMRC were assuring the Administrative Burdens Advisory Board that interventions would be well targeted to reduce red tape for compliant taxpayers, and we fail to understand why this policy has been changed...

HMRC's basic assertion that poor business record keeping is responsible for a loss of tax in up to 2 million SME cases annually seems to be a sweeping generalisation with little credible evidence provided to back it up. We would like to see evidence as to how this statistic has been arrived at, as the validity of the entire consultation document is based on it. Without such evidence, the proposals might appear burdensome and unjustified.

Experience of our members in practice suggests that poor record keeping (where it arises) does not necessarily equate with loss of tax – it can sometimes result in their clients paying too much tax...

We would take issue with HMRC's basic assumption that SMEs with poor records have chosen to have poor records. This is a misconception. Those with the courage and tenacity to embark on new business ventures are forced to battle from the outset against a mass of Government regulation and red tape. Typically they don't go into business because of their record keeping skills...

Anecdotal evidence has caused our members to question the skills and professional judgement of some HMRC representatives checking the business records of their clients. We understand that many of these members of staff have no significant accountancy or tax training. This can cause them to be on the defensive, and in these circumstances it is not unknown for them to adopt intransigent attitudes..."

As we can see, an unelected inefficient bureaucracy is allowing the excessive powers granted to it by a weak and incompetent political establishment to go to its head; and is attempting to use these powers to bully people and organisations that pay for its very existence.

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"

Plain Speaking

The Low Income Tax Reform Group (LITRG) has called for there to be a simplification of the language used in HMRC's forms and communications.

LITRG notes that HMRC have carried out numerous research projects to assess the needs of their customers. However, LITRG note that turning the feedback into reality has not happened.

They note that last October President Obama signed the Plain Writing Act 2010, which requires the US federal government to write all new publications, forms, and publicly distributed documents in a "clear, concise, well-organised" manner.

LITRG believe that were a similar act to be enacted in the UK, it would save LITRG countless hours of commenting upon badly drafted Government forms, leaflets and general guidance.

It would also give "the unrepresented taxpayer a fighting chance of helping themselves when trying to cope with HMRC obligations. It would certainly reduce error to a considerable degree".

Please feel free to post your examples of "confusing language" that you have encountered in HMRC communications.

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"

The Joys of Self Employment

As if it were not already difficult enough starting out as self employed, HMRC have managed to add to the burden by increasing the amount of time it takes to register with them as self employed.

HMRC have issued an apology noting that the turnaround times for newly self-employed people to register will increase to eight weeks, between now and October 31 2010.

It seems that processing times for paper form 64-8 and registrations for self-assessment will also increase over the next two months.

HMRC staff are being moved to "higher priority work", hence the delays in processing these forms.

Maybe the best way to avoid the delays and hassle, and to reduce the admin burden on HMRC to enable them to work on "high priority stuff", is to opt out of the tax system?

Would HMRC and the government approve of 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"

Well and Truly Plucked!

Research carried out on behalf of HMRC, by TNS-BMRB, shows that approximately 20% of large British businesses have considered relocating abroad for tax reasons and that 64% of large companies feel that the red-tape burden had increased over the past 12 months.

The Telegraph reports that UHY Hacker Young have analysed the research, and concluded that businesses thought HMRC was becoming less transparent in its decision-making.

Roy Maugham, tax partner at UHY Hacker Young, is quoted:

"UK companies feel that they are the goose that has been well and truly plucked by HMRC and the Treasury."

He went on to say:

"However, these results show businesses are increasingly dissatisfied with the way the tax system and HMRC is working."

It is not just large businesses who are "dissatisfied" with the way HMRC is working, it is also SMEs, individual taxpayers and the staff of HMRC.

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 Teenage Tax Trap

The Observer last Sunday highlighted a rather obscure tax trap that can catch out teenagers, who rely on receiving their interest gross.

Savers of any age, who earn too little to pay income tax, qualify for interest paid gross by completing HMRC form R85.

The "nuance" to this opt out is that when the saver turns 16 the opt out ceases to be valid, and the individual must re complete another R85 in order to continue to qualify.

Needless to say, not everyone is aware of this. However, tax overpayments can of course be reclaimed from HMRC via form R40. Unfortunately, as with all tax overpayment reclaims, the Observer notes that it "is bureaucratic and slow".

Teenagers, you have been warned!

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"

Bunged Up!

As has been noted on this site for yonks, HMRC have an enormous backlog of unresolved tax cases.

Now the National Audit Office (NAO) has publicly spanked HMRC for failing to deal with this backlog, which stands at a staggering 18 million unresolved income tax cases.

The NAO believe that around 50% of these cases might involve underpayment or overpayment of around £4.4BN of tax.

Could it be the restructuring that HMRC has endured over the last few years, and will continue to endure, is actually making things worse?

Could it be that a means to reduce future backlogs and the workload of HMRC would be to simplify the tax system?

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"

Power Corrupts - Fit and Proper Test

It seems that our "respected" MPs have foisted another piece of bureaucratic tax legislation upon us that will do nothing to lessen fraud, but will do everything to increase the bureaucratic burden on legitimate charities and their trustees.

Third Sector reports that a new measure introduced in the Finance Act earlier this month, designed to ensure that tax relief is not given to bogus charities, is too loosely worded and gives HMRC too much power.

The legislation gives HMRC the power to carry out a 'fit and proper persons' test, every time a charity hires a new trustee or senior manager. If a trustee fails to pass the test, the charity can be denied tax relief.

Sam Macdonald, partner at law firm Farrer & Co, is quoted:

"Charities will never really know whether they are entitled to tax relief or not.

HMRC has said 'you'll have to trust us', but that's not a reassuring basis on which to continue."

Bill Lewis, tax consultant at Bates Wells & Braithwaite, said:

"HMRC should have consulted on the legislation before introducing it.

This is more unnecessary paperwork, and penalises only the innocent. The red tape this produces will have no effect on fraudsters, but it will cause trouble for law-abiding trustees."

Simon Weil, partner at Bircham Dyson Bell, said:

"This is dangerously subjective legislation. I think the sector needs to fight for its independence."

Poorly drafted legislation giving more powers to an unelected bureaucracy is a dangerous combination.

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"

Staff Survey Results 2009

My thanks to one of my loyal readers who pointed me to a page in the HMRC site that lists all manner of research, including the 2009 Staff Survey (taken in Feb 2009). This was referred to in HMRC's Capability Re-Review (published 14 December 2009 by the Cabinet Office).

Rather confusingly HMRC call it "Employee Engagement Survey", and have placed at the bottom of a page called "Research", no wonder I couldn't find it!

The survey makes for dismal reading, and shows differences in key metrics compared with the bench mark (BM) survey undertaken in February 2009. The percentage point difference in positive scores between HMRC results and the median score across all
Government Departments and Agencies taking part in this survey.

Aside from showing a lack of pride in working for HMRC etc, the survey also highlights the culture of bullying that is often mentioned in comments posted on this site by HMRC staff.

Here are a few extracts:

Returns: 53,071
Response rate: 60%

Employee Engagement score

32% -16% compared with BM February 2009

Through statistical analysis the questions that best measure employee engagement say', stay' and strive') have been grouped in an index. The index score is shown below. The questions that make up the index are labelled in the "Results by question" section of this report.

Employee engagement consists of 3 elements:

- Say 21%, -21% compared with BM February 2009
- Stay 60%, -9% compared with BM February 2009
- Strive 14%, -16% compared with BM February 2009

My work gives me a sense of personal accomplishment 46%, -24% compared with BM February 2009

I am sufficiently challenged and motivated in my work 47%, -22% compared with BM February 2009

HMRC as a whole is well managed 11%, -16% compared with BM February 2009

Please state who discriminated against you, or harassed or bullied you over the last 12 months

Response count
Your line manager 2,726
Your colleagues 1,998
Your staff 281
Other 2,175
Prefer not to say 2,093

I am proud to work for HMRC 25%, -23% compared with BM February 2009.

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"

Fantasia

Yesterday's fantasy budget, based on an unachievable 2011 growth forecast of 3.5%, was remarkable in many respects.

Aside from the fact that national debt has now shot up to £1 Trillion (see below), it proposed among other measures:

- Fines for tax advisers who are incompetent.

- A requirement for Finance Directors (FDs), of large companies, to personally certify that adequate controls are in place to prepare accurate tax computations. They will be personally fined £5K if they fail to do so.

- HMRC to publish a quarterly list of names and details of individuals and companies who have been penalised for deliberate defaults.

Why are these proposals so wrong?

1 Re financial advisers, the onus is on the client of the adviser to claim redress for incompetence not HMRC/HMG. This is an unnecessary, and unwelcome, extension of HMRC's powers to levy fines and regulate commercial relationships between third parties.

2 Re FD's certifications, this goes against the principles of company law whereby the board has collective responsibility; and is yet another excuse to raise revenue by levying fines.

3 Re the "name and shame" suggestion, as "morally satisfying" as that may appear, it may well breach human rights legislation and goes against the central tenets of HMRC; ie never to reveal an individual's/firms' tax affairs. It will also be open to abuse by HMRC, who will use it as a stick to threaten people who they "suspect" (but don't have proof) of misstating their tax declaration.

So much for KPMG's call for "simplification"!



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 Health Warning

A few days ago AccountingWeb reported that Baker Tilly had criticised HMRC's "new" version of the IR20 booklet IR20 "Residents and non-residents: liability to tax in the United Kingdom", published on HMRC's website on 6th May.

Seemingly the booklet is not "new".

George Bull, head of tax, is said that the "new" booklet is in fact a revised version of the 1999 edition of the booklet.

So far so good.

Unfortunately, it takes no account of the major changes that were announced in the Budget which are in the Finance Bill currently awaiting parliamentary approval.

For example this version of IR20 includes no mention of:

-the change to the day-counting rule to include any day when a person is present in the UK at midnight;

-the new £30K charge on non-domiciliaries who have been UK-resident for over seven years and who wish to claim the remittance basis; or

-the changes to the remittance basis itself.

HMRC said a few days ago that it does not intend to publish the fully revised version of IR20 until after the Finance Bill has become law.

However, as I noted earlier this week, what a difference a few days make in politics and tax!

HMRC have now issued a health warning about this booklet.

It points out that it now includes as an appendix Revenue & Customs Brief 01/07 which was issued following the recent Gaines-Cooper case, but it does not include reference to the proposals made in the 2008 Budget to change the way days of presence are counted for residence purposes, nor to changes made to the operation of the remittance basis as we are not able to publish such guidance until the 2008 Finance Act has received Royal Assent.

You can bet your bottom dollar that HMRC would not have issued this health warning had people not raised a fuss over the booklet.

Therefore, here's the very obvious question that I am sure all of you want to ask HMRC.

Why the hell did you waste our money and your time publishing a revised booklet that you knew perfectly well was out of date, and that you knew you would have to republished in the next few weeks?

Tax does have to be taxing.

The New Statesman, Britain's leading political magazine is delighted to announce that HMRC Is Shite has been nominated for a New Media Award in the category of Campaign For Change. The campaign for change award will go to the individual or organisation that has most effectively influenced opinions and behaviour through the use of new media technology. The winner of this award will champion a cause and provide information and tools to instigate change.

The full press release can be downloaded here.

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"

Every Cloud Has a Silver Lining

Although the humble British taxpayers are bowing under the weight and complexity of the ever burgeoning tax legislation that the government and HMRC are piling upon them, it is reassuring to know that at least one group of people are very happy for the ever growing complexity, confusion and bureaucracy of the Britsih tax system.

These happy people are those who provide tax advice, for a nice fat fee.

BDO Stoy Hayward, for example, saw their revenue growth by 10%, to £159.8M in the first half of the firm's financial year.

For why?

Jeremy Newman, BDO managing partner, said BDO's fastest growing business line was its tax advisory unit.

This growth has been helped in no small part by the government's plans to change capital gains and non-domiciled tax regimes, which needless to say has generated bucket loads more work.

Quote:

"Our service to clients has been enhanced by the acquisition of the respected specialist tax advisory firm Chiltern, which accounted for 2 per cent or £3.16M of total revenue since we acquired the firm in mid-October 2007. This has enhanced our already excellent tax expertise and service proposition."

As the old saying goes:

"Every cloud has a silver lining".

Considering all the time, effort and money that is wasted by both the state and the taxpayers in trying to wade their way through and manage our absurdly complex tax rules and regulations wouldn't it be a good idea to simplify it all?

Yes it would.

Unfortunately Gordon Brown is not a "simple man".

Cheers to the tax advisers, who are on to a very nice little earner!

Tax does have to be taxing.

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