HMRC's VAT Catastrophe: How the UK's Tax Giant Botched £2 Billion in Receipts and Screwed the Economy

 

In the annals of bureaucratic bungles, few rival the sheer incompetence on display from HM Revenue & Customs (HMRC) this October 2025. The tax authority—tasked with collecting the lifeblood of UK public finances—has admitted to a glaring error in its VAT cash receipts data, forcing the Office for National Statistics (ONS) to slash public sector net borrowing estimates by a whopping £2 billion for April to August. This isn't some arcane glitch in a back-office spreadsheet; it's a fundamental failure in tracking one of the government's biggest revenue streams, leaving Chancellor Rachel Reeves with an unexpected £3 billion Budget boost while the rest of us foot the bill for HMRC's slapdash stewardship. As searches for "HMRC VAT error 2025" skyrocket, one burning question echoes: How the hell did they get this so catastrophically wrong?

Unpacking the VAT Vortex: HMRC's £2 Billion Omission That Shook the Fiscal Foundations

At its core, VAT is HMRC's crown jewel—raking in tens of billions annually from everyday transactions. Yet, in a display of jaw-dropping oversight, the agency omitted entire "payment streams" from its data processing when supplying figures to the ONS. This understatement inflated borrowing projections from £83.8 billion to a revised £81.8 billion for the fiscal year to date, with ripple effects slashing the full-year estimate by another £1 billion. The error, which HMRC itself flagged as impacting "provisional 2025 to 2026 year-to-date receipts," wasn't caught until months into the year, despite VAT being a monthly reporting staple.

How does this even happen? HMRC's data pipelines, meant to be ironclad fortresses of fiscal accuracy, apparently skipped basic reconciliation checks on payment inflows—streams that could include deferred payments, adjustments, or even routine refunds. It's as if the folks at No. 1 Horse Guards Road forgot to tally a chunk of the nation's shopping bills. The ONS, reliant on these inputs, couldn't independently verify them, exposing a toxic dependency where one agency's sloppiness poisons the entire statistical ecosystem. For investors googling "UK borrowing VAT mistake," the fallout is immediate: spooked markets, volatile gilts, and a Budget narrative flipped on its head. Reeves now has extra fiscal headroom, but at what cost to credibility?

2025: HMRC's Parade of Perils – From Phishing Fiascos to Data Thefts

This VAT debacle isn't HMRC's solo act in a year of self-inflicted wounds; it's the headliner in a circus of scandals that scream systemic rot. Since January, the tax authority has been a punchline for incompetence, with errors and breaches piling up like unfiled returns.

• Phishing Plague Hits 100,000 Accounts: In June, cybercriminals exploited weak safeguards to breach over 100,000 taxpayer accounts, siphoning £47 million in fraudulent repayments. HMRC's response? A mea culpa to MPs, but no heads rolled as scammers ran rampant.

• Insider Data Heists: By August, dozens of HMRC staff were sacked for illegally snooping on taxpayer records, turning the agency's own vaults into a sieve of privacy violations.

• R&D Fraud Fumble: Efforts to curb errors in Research & Development tax reliefs faltered, with fraud and error rates hovering at 5.9%—that's £481 million flushed down the drain in 2024-25 alone, and 2025 shows no turnaround.

Add cyber attacks that weren't "purely technical" failures but symptoms of deeper cultural lapses, and you've got an HMRC that's less guardian of the purse and more a black hole for trust. Tax cheats are "running circles" around them, per critics, with massive operational black holes unplugged despite billions in tech investments. In this context, omitting VAT payment streams isn't a "whoops"—it's par for the course in an agency that's allergic to accountability.

Zero Consequences, Endless Excuses: Why HMRC's Clowns Keep Juggling the Nation's Finances

Predictably, no one's getting the boot over this £2 billion bombshell. HMRC's chief executive faced Treasury Committee grillings in June over customer service blackouts and that phishing fiasco, yet the revolving door of reviews spins on without a single high-level scalp. The ONS praised HMRC for "timely" disclosure, but that's cold comfort when the error stemmed from their own processing pitfalls. Where's the internal audit that should've flagged this months ago? The firings for data prying? Sure, low-level staff got the chop, but the architects of these systemic fails? Untouched, sipping tea while the economy reels.

This impunity isn't just infuriating—it's a green light for more mayhem. With anticipated compliance crackdowns looming by January 2025 on digital platforms, how can anyone trust HMRC to wield new data powers without botching them too?

Beyond Useless: HMRC's Toxic Data Poisons Policy, Markets, and Your Wallet

Let's be brutally clear: HMRC's outputs aren't flawed—they're fiscal poison. This VAT error didn't just revise numbers; it misled the Bank of England on inflation pressures, jacked up borrowing costs for households, and handed tax dodgers a smokescreen amid the chaos. Worse than worthless because it actively harms: £6 billion annual black holes from fraud could be plugged with better analytics, yet HMRC lags while DWP saves millions on Universal Credit scrutiny.

For businesses hunting "HMRC data reliability 2025," the verdict is damning: distorted receipts skew VAT forecasts, hobble cash flow planning, and amplify economic whiplash. Globally, IMF projections wobble on these shaky pillars, dragging UK growth estimates into the gutter.

Overhaul or Oblivion: It's Time to Gut HMRC's Broken Machine

HMRC's 2025 implosion demands a reckoning, not more handshakes with the ONS. Pump in AI-driven fraud-spotting? Fine, but link funding to zero-tolerance accuracy KPIs. Enforce real-time audits on core streams like VAT? Mandatory. And accountability? Start with sackings at the top—because if they can't tally taxes, what can they do?

Until then, scepticism is your shield. The VAT vortex is today's outrage; tomorrow's could bankrupt us all. For unvarnished UK tax truths, ditch the official fog—because HMRC's house of horrors has no exit.

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 Phone Line Clusterfuck

 

HMRC has closed all of its phone lines and can't say when they will reopen, leaving taxpayers with urgent queries in the lurch.

On Friday morning HMRC warned no one would be able to reach the department on the phone after “technical issues” forced it to shut all lines and some online services. Its National Clearance Hub line, for help moving goods in and out of the UK, remains open.

The Telegraph understands HMRC suffered similar issues on Thursday. The outage comes as millions of taxpayers prepare to submit annual tax returns, due at the end of January. Christmas is usually HMRC’s busiest time of year.

More than 12 million people filed self-assessment returns in the most recent tax year.

In addition, in last month’s Autumn Statement the Chancellor reduced the threshold for the top rate of income tax, extended the freeze on the personal allowance and cut tax-free allowances on dividends and capital gains tax.

Taxpayers will be keen to speak with HMRC to clarify their tax codes and bills.

Harriett Baldwin, Conservative MP for West Worcestershire and chairman of the Treasury Committee, said it was “seriously concerning” that taxpayers were unable to reach HMRC by telephone.

Ms Baldwin added:

“These unexpected outages should be a thing of the past. That’s why I’ve today written to the head of HMRC to demand urgent answers on the issues facing customers over the past 24 hours.”

HMRC did not give any indication as to when its phone lines might be up and running again.

A spokesman for HMRC said: 

"We are working urgently to resolve an issue which has meant we’ve had to temporarily close most of our phone lines. We apologise to those affected and will reopen them as soon as possible. We encourage people to use our online services, which are open."

Tax does have to be taxing.

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HMRC Apologises For Being Shite

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

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Pensions Clusterfuck

It seems that HMRC has uncovered decades worth of pension data errors.

The Telegraph reported over the weekend that tens of thousands of pensioners could undergo major changes in their finances as a result, with some losing up to 50 percent of their salary.

Others could see a significant boost to their income, with some who have not received the correct amount being given backpay and a future raise.

The errors were discovered during a data cleanup starting in 2014, the largest involving retirement benefits in UK history.

Missed payments to pensioners apparently range from £50 per year to £10,000 over the course of a lifetime.

The affected accounts are both public and private sector, schemes, which hold records of millions of people.


A Government spokesman is quoted by The Express:

“The reconciliation exercise has been underway for some time. Most queries submitted as part of the exercise do not have an impact on the amount of an individual’s state pension.

However where queries do result in changes, we are notified by HMRC, and where the pension is in payment, review the award and notify the individual of the change.

HMRC and pension scheme administrators determine whether the GMP figures are correct.

However, where overpayments of State Pension do occur due to incorrect GMP figures, individuals will not be expected to repay any overpayments.”

It is estimated that £22million of overpayments hit 10,000 people last year alone in the Civil Service Pension Scheme.

Some pensioners on the scheme were asked to repay overpayments to their account, prompting the Cabinet Office to call for investigation.


The Department for Work and Pensions (DWP) have said they are in the process of notifying people who have been affected.

If you are worried and want to contact the department yourself, you can do so via the government website here.

Tax does have to be taxing.

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Capita Blames HMRC For Pensions Clusterfuck!

Our old chums from Crapita have hit the headlines recently, having accidentally charged 17,000 former miners tens of thousands of pounds in extra tax

Fear not, Craptia have blamed the error on a change to HMRC's online PAYE portal.

Chris Kitchen, general secretary of the country's National Union of Mineworkers, is unimpressed and told The Register that Capita should have properly tested the new system before taking it live.

"And someone at HMRC should have picked up the area and applied common sense to pensions being hit with tax demands of £50,000 when they shouldn't have had to pay anything."

HMRC said:

"Where we are provided with incorrect information, we work hard to put matters right. We will ensure that no customer will lose out as a result of this."

A Capita spokesperson said:

"Following a change to HM Revenue & Customs' online PAYE portal, an incorrect update was made in processing information for members of the Mineworkers Pension scheme.

This issue has been resolved and all members affected will shortly receive letters to advise that they do not need to take any action.

We sincerely apologise for any concern and inconvenience this has caused."

Nothing to see here folks!

Tax does have to be taxing.

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Slow Handclap For HMRC - Another Success!

I for one would like to stand up and applaud HMRC for messing up the 2017 tax filing season in ways unseen since the year mandatory online filing was brought in.

I look forward to MTDs introduction when I feel HMRC will truly plumb new depths of ineptitude.#Bravo #Hurrah https://t.co/afazaTeZtI

— Andrew (@ataccounting) January 24, 2018

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.

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Self Assessment Glitches

The ICAEW has become aware of more errors in HMRC’s self assessment (SA) calculations and a number of other current SA issues.

All in all pretty disgraceful. Yet our "beloved" political elite don't give a monkey's, because they pay tax professionals to sort through this mess when submitting their returns!

Details as per the ICAEW:

These issues come on top of:

• A longer list of self assessment exclusions to deal with calculation issues and the first ever in-year update to SA software.
• The SA (and other) systems being unavailable between Thursday 4 and Saturday 6 January 2018. 

Error in calculation of capital gains tax affecting some trust returns

HMRC has advised us of an issue affecting a small number of electronically filed SA900 SA returns for trusts. HMRC’s systems are showing inaccurate calculations of capital gains tax in some cases. We have been advised that the problem has now been resolved and calculations shown in HMRC’s systems should now be correct for returns filed from 16 January 2018. HMRC will check and correct calculations for returns already filed.  

The 31 January payment should be based on the tax correctly calculated by commercial software.

Other errors being investigated

Members have reported some further calculation errors; these are still being investigated to check whether they are widespread.

One report concerns HMRC’s calculator not allowing the CGT annual exempt amount (and possibly any remaining basic rate band) to be wholly set against gains due at 18/28% rather than 10/20%.
Another concerns two cases where HMRC adjustments for marriage allowance reduced the liability in one case to zero and in another case to the previous value for payments on account.

HMRC pre-population service within third party software unavailable

Agents are currently unable to use the HMRC pre-population service (for employment data) within third party software. The service was disabled on 16 January 2018 while the problem is investigated.

SA statements missing and delayed

ICAEW has received many reports of statements not arriving. HMRC has confirmed that SA statements are being issued between 31 December 2017 and 8 January 2018 so clients may not receive them until the third week of January. HMRC has advised that paper SA statements will be issued before the due date for payment where returns were filed by 8 January 2018.

Payments on account not showing on statements

There has been a recurrence of the issue where payments on account (for 2017/18) do not appear on statements (paper and online). HMRC introduced a fix to correct this issue in December 2017 but it seems that this fix may have missed some cases.

It may be appropriate to advise clients who rely on HMRC statements to check that the payment on account due on 31 January 2018 is included in the sum they expect to pay.

Give us your feedback

It is extremely concerning that there are so many issues with HMRC’s SA software this year. ICAEW will pursue this poor service with HMRC. In the meantime we suggest that agents check calculations very carefully.

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.

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HMRC Takes The Protection of Customer Data Extremely Seriously and Has a Strong Security Culture!

As per The Register:

"Almost 1,500 software developers registered to use the UK taxman's sandbox or API platform have had their email addresses blabbed in a mass mailing.

The snafu happened on Friday afternoon, when an email about the HMRC Developer Hub was accidentally sent with users' addresses visible in the CC field.

The email, with the subject line "API Platform update", was sent by the software developer support team at 1604 GMT.

"Please note the HMRC Developer Hub will remain shuttered over the weekend to allow us to continue testing the service. The Developer Sandbox for testing remains available. The API Platform is working as expected," the seemingly innocent email stated.

However, about an hour later, someone must have pointed out the mistake, and the team issued a recall for the message, which meant the same group received another email with all 1,455 or so email addresses cc'd in.

At 1809, a third email – this time blind-copying in the list – was sent to apologise for the breach.
"HMRC's policy is always to protect customer data, and we take this responsibility very seriously," the email said.

"Unfortunately, in a recent email, a mistake was made and your email address may have been shared with other recipients.

"I wish to apologise for this error and for any distress this may have caused."

As the Reg reader who alerted us to the cock-up observed, this kind of error is easily made, especially when the time is ticking away to beer o'clock.

An HMRC spokesperson said: "HMRC takes the protection of customer data extremely seriously and has a strong security culture.

"We can confirm that this matter was immediately reported through our internal incident reporting process and will be fully reviewed. We have contacted the software developers affected to alert them and to apologise."

It's enough to make you weep!

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"

Taxpayers' £97M HMRC Phone Bill

As loyal readers know, getting through to HMRC on the phone is something of an endurance test. As such, it should come as no surprise to anyone to learn that the National Audit office (NAO) is none too impressed with caller wait times either.

The NAO reports that a decision to cut jobs in HMRC meant that call waiting times tripled to 47 minutes last October just as paper tax returns were due. Bizarrely more than 5,000 HMRC staff were moved away from its call centres at a time when telephone calls were not falling.

“HMRC’s overall strategy of using digitally enabled information to improve efficiency and deliver service in new ways make sense to the NAO. This does not change the fact that they got their timing badly wrong in 2014, letting significant numbers of call handling staff go before their new approach was working reliably. This led to a collapse in service quality and forced a rapid expansion of headcount. HMRC needs to move forward carefully and get their strategy back on track while maintaining, and hopefully improving, service standards”.

Amyas Morse, head of the National Audit Office, 25 May 2016

The cost to the economy of leaving millions of callers hanging on the line (which as per the Telegraph is officially priced at £17 an hour) was £97million, up by 50% in three years.

The chaos prompted HMRC belatedly to send 2,400 staff to man the phones at its call centres, which in turn meant they had to “defer essential work to maintain PAYE records”.

The consequences of moving the deckchairs in this manner was a doubling of discrepancies between PAYE and self-assessment returns, leaving a risk that 3.2million people had “paid the wrong amount of tax”.

HMRC will be quizzed by PAC next month about this clusterfuck.

How ironic that just as this chaos is being exposed to the cold light of day, Dame Homer retired last month. The timing of her retirement couldn't be better, and is the only thing that she has got right in her civil service career!

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 RTI Not Fit For Purpose Clusterfuck!

My thanks to Elaine Clark for pointing me to an article in the Telegraph about leaked emails from HMRC, that indicate 5 million taxpayers may have had their tax bills incorrectly calculated last year.

HMRC has privately admitted, to itself I assume, that those who underpaid or overpaid income tax last year may still have paid the wrong amount.

Aside from already having been sent new demands or repayments, it seems that the hapless 5 million now face the prospect of having their tax bills recalculated one again.

HMRC has stopped sending repayments until the crisis is resolved, a very neat way of improving its short term cashflow!

Elaine Clark of the Cheapaccounting tax practice is quoted:

"This is extraordinary, a disaster, and heads need to roll at HMRC."

HMRC it currently has no idea about the scale of problem.

The recipients of HMRC's leaked email were advised to tell taxpayers who questioned their bills "not to repay any underpayment" of tax, and those who overpaid tax should not cash any cheques they had received.

Ladies and gentlemen there is only one word that can describe this:

CLUSTERFUCK!

One of the whislteblowers who leaked the email said:

"HMRC refuses to admit the system doesn't work, and it's scandalous that there is no politician holding them to account as the whole programme of welfare reform could be put at risk because of this.

The system is not fit for purpose, it's inherently flawed and routinely produces errors that cause a huge mess for families and employers."

In the leaked email, HMRC admitted that duplicate entries for workers was a major factor behind its latest errors. It also blamed employers for failing to provide the correct salary information in submissions about staff.

"We are urgently investigating these cases and will look to resolve the matter in the next six to eight weeks. 

We currently do not know the scale of the issue but some large employers are involved, so several thousand of employees may be affected."

Elaine Clark said that taxpayers were being forced to wait more than half an hour to get through to HMRC to discuss tax demands. She said many then faced months in limbo before letters arrived, which might now be incorrect.

"The Revenue's flagship new reporting system was supposed to fix these types of problem but it appears to have failed completely.

The pressure put on individuals who face demands for tax is enormous, so it's extraordinary that HMRC should again have made such basic errors."

Is anyone surprised by this?

I doubt it, based on the comment made by a loyal reader yesterday, about HMRC's new death rules, everyone knows the system is fucked up, but no one has the balls to admit it to their political masters:

"As far as I know, no-one actually working on the front line in Personal Tax was asked about this change - the first we knew was when the big announcement about it was made to us a few weeks ago.

We know that this is going to be another balls-up. Even if the RTI data could be relied upon (and it can't - tens of thousands of people have recently had tax calculations for last year which are way out because either their employers or pension companies have supplied the wrong data, or the system has failed to handle it properly), then what about non-PAYE income which doesn't fall into Self Assessment, like savings interest or dividends? 

 

Not taken account of at all as far as we can see. The bereaved are likely to be ripped off all over the place through this. 

 

And why? 

 

So that Excom can cut more front-line staff, save their OBE's and go to the next prayer meeting?"

It was but a short time ago that Homer and her cronies were receiving the blessing of God for their "successes".

 

Where's God now Homer, when you need him/her?

 

Oh wait, he retired some years ago!

Sadly heads won't roll, Homer will simply be promoted to her next level of incompetence and doubtless will be made a Dame. Such a career of incompetence, how does she sleep at night?

Now is the time for the taxpayers to learn the real truth about how bad things are in HMRC. Step forward and tell it how it is!

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"

Child Benefit Changes Add To HMRC's Burden

In May I wrote about the oncoming clusterfuck aka Osborne's child benefit changes, one issue noted was that the changes could create 500,000 more self-assessed taxpayers, because taxpayers will have to assess their own liability for the new charge – which would be very expensive for HMRC to administer.

Parents on higher incomes who continued to receive Child Benefit after January 2013 have been reminded that they must register for Self Assessment by 5 October 2013 to avoid any penalties in relation to the High Income Child Benefit Charge.

Taxationweb reports that HMRC will be writing to around two million higher rate taxpayers, including those affected by recent changes to Child Benefit. The letter reminds them that if their income is over £50,000 and they or their partner received Child Benefit in 2012/13, they will need to complete a Self Assessment tax return for the 2012/13 tax year. They must register now with HMRC for Self Assessment if they have not already done so. 

Lin Homer, said:

“HMRC is committed to helping people pay the right amount of tax. If you have had certain changes to your income in the last year, including those affected by the changes to Child Benefit, you have until 5 October to register for Self Assessment.”

The increase in the number of people registering for self assessment, as a result of the child benefit changes, will significantly add to HMRC's workload.

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?

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



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The Ongoing Clusterfuck

Loyal readers with good memories may recall that I have written a couple of times before about a loyal reader who dropped me a note concerning HMRC changing her address details (without her permission), and sending her ex husband her tax credit summary for 2012/2013.

The saga continues, and she has sent me a chronological summation of the last 6 months for publication:

"For 6 months I have been battling with HMRC/DWP - here is the chronology of everything that has happened.
----------------------------------
9^thFebruary – XXXX District Council notified me that they had suspended my Housing Benefit Claim as they were notified I no longer lived at my current address. After further investigation they informed me that they had my ex husbands address on file. They were given this information by DWP apparently. I had to 'prove' I still lived at my current address.

17^thMay – Ex husband received my tax credit annual review to his address. I phoned HMRC who were unable to explain to me how this had happened. I wrote a letter of complaint and also put in a Subject Access Request.

22^ndMay – I receive a response from HRMC, with regards to my subject access request and acknowledgement of receipt of my letter.

4^thJune – Ex husband received my NHS Exemption Card to his address

19^thJune – I received a voicemail from XXXX District Council notifying me that they wished to speak to me about my Housing Benefit Claim. When I managed to get hold of them it turns out that they had been notified of an address change again (it turned out to be my ex's new address as he had recently moved again).

23^rdJune – Still no response from HMRC to my original letter (sent on25^th May) so I send a further letter of complaint detailing the further issues.

4^thJuly – Phoned to notify HMRC that my ex husband had yet again received my documents. It turns out his new address was on my file. I updated the address details back to mine and also notified them that my son would remain in full time education from September (thus they would need to update my Tax Credit claim and need to issue a new award notice). I also informed them that I have not yet received a tax credit award for the year.

I took the opportunity to phone Child Benefit to see what address they had on record for me and it turns out that they too had my ex husbands address.

08^thJuly – My ex husband received two more letters from HMRC, addressed to me

10^thJuly – Received documents related to my 'Subject Access Request'

15^thJuly – Received 2 separate copies of the HMRC response to my complaint letter (letters originally dated 28^th June). Letter apologised, gave a brief & generic response to my complaint and informed me that I would receive £100 compensation plus £10 expenses within 21 days.

16^thJuly – Received another (third copy) of HMRC response to my complaint letter

22^ndJuly – 21 days since the date of issue on the response to my complaint letter and as of yet no compensation money has been received.

25^thJuly – 4pm phoned the number provided by HMRC, regarding my complaint response and lack of compensation payment – the phone is answered but hangs up. I phone again, the call is answered by a gentleman who tells me he will transfer me to the right person....'the right' person answers but can't hear me so hangs up. Eventually they then ring me back and apologise as there is a problem with their phone!!

I enquire as to whether there is any further details as to why the address changes keep happening. The lady informs that it is connected to CSA. Seeing as I get no child support from my ex (and NEVER have) this does not add up and I don't feel this makes sense?

The lady looked on my records and can't see why the compensation has not yet reached my account either, they also do not have an answer as to why I have not yet received my tax credit award. The lady could see an award dated 1^st July, but she also notes that on 4^thJuly I called to update the fact my son was continuing in further education and for some reason an updated award notice has not yet been issued.

The lady later phoned me back and informed me that she was having to put through the changes again, as for some reason they had got 'stuck' on the system and wouldn't issue an award.

A further phonecall from the same lady some 10 minutes later revealed that the reason an award notice wasn't issued, was because the information was about a future change, so that would not take effect until 1^st September – then a new award notice would go out!"

Have other loyal readers experienced similar problems, or is this just a one off cock up?

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.

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What is Solar Tax Investigation Insurance?

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



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RTI Shambles - How Farking Predictable!

As if anyone could be surprised by this, the "good ship" RTI appears to be sinking fast barely three days after it was launched.

Payroll World reports that HMRC has disabled the filing of P45 and P46 returns for all employers reporting Real Time Information (RTI), including returns that relate to the previous tax year.

As a result if, for example, an employee left a business on April 4 when HMRC’s systems were down for scheduled maintenance an employer would not be able to send the P45 once the systems came back up.

Any current attempts to send a P45 will be rejected with the following error messages:

"3001 The submission of this document has failed due to departmental specific business logic in the Body tag 7818 This PAYE In Year Movement submission cannot be accepted as the employer has been invited to join RTI." 

Steven Tucker, managing director of The Payroll Site, says the issue is causing a lot of confusion and helpline staff seemed unaware of the change.

“Why HMRC decided to switch this feature off for past tax years is a mystery and it has come as a complete surprise to employers.

At the same time as they are trying to grasp RTI businesses are faced with trying to work out why their P45s are being rejected – as if they didn’t have enough to worry about.

The fact that the surprise removal of this feature coincided with downtime and a helpline strike has caused chaos.”

Live tweets about RTI can be followed via this link Live RTI tweets.


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"

HMRC To Take Control of Pay Cheques? - Another Clusterfuck!

Now here's a plan (originally mooted in 2010 that appears to have resurfaced) that is guaranteed to fail, if it is enacted.

HMRC are, quite rightly, concerned that the PAYE system is not fit for purpose and want to reform it.

One plan being considered is whereby employers, instead of deducting income tax then paying gross salaries to employees, would pay the gross monthly payment to an HMRC-run tax “calculator”, which would then pass the net salary to the worker; ie employers would hand over the responsibility for paying the correct net pay to HMRC.

Aha!
 

The plan would mean the end of traditional monthly payslips, because employers would no longer be able to tell workers how much tax they had paid each month.

Reform of PAYE is most certainly required, because inaccurate data will again affect millions of people this year who will be forced to pay back underpaid tax, and millions of others who will get rebates.

Anyhoo, wrt the proposed "plan" instead of a payslip detailing pay and deductions, employees would only find out how much income tax they had paid by asking HMRC.

Oh dear!

Brian Stenhouse of Armstrong Watson was quoted in 2010 by the Telegraph saying that people should have “deep concerns” about the central deductions plan.

“Are people going to be happy to give HMRC their bank details and trust HMRC to make the right deductions and pass on their salary every month? 

Given they’re not going to have a complete monthly payslip any more, people are going to be in dark about what’s been deducted. And if there is an error, they’d be reliant on HMRC to correct it.”

Along with RTI, this will be another clusterfuck waiting to happen! 

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"

270,000 Opt Out of Child Benefit

According to IFAonline, some 270,000 people have decided to opt out of receiving child benefit following changes to eligibility rules. That leaves approximately 830,000 still in the system who will be affected by the changes.

Good luck to the good people of HMRC with processing that mini mountain of "paperwork"!

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"

Child Benefit Clusterfuck

The coalition's child benefit reforms come into force today.

Under the new system, any family where one earner takes home more than £60,000 a year will lose all of their benefit. Once the household's highest earner takes home more than £50,000 a year, they begin to lose part of the benefit for every extra pound they earn.

Despite assurances that the new system is bedding in smoothly, not all are convinced. The Institute of Economic Affairs said the Coalition’s child benefit reforms are “the single most incompetent change to the benefits system since the Second World War”.

It is estimated that around 1.1 million earning more than £50,000 a year are set to lose some or all of their child benefit payments. However, the Telegraph reports that only 250,000 people had voluntarily opted out of the child benefit system by 5pm yesterday, with just seven hours to go before the deadline for registration. This leaves around 850,000 parents who will continue to receive their child benefit as usual but have it clawed back later in tax through the self-assessment process.

Hardly an efficient process, and one that will burden both the families and HMRC.

I wonder if anyone warned the coalition that this was not such a great idea?

Oh wait, I did warn about this in October 2010:

"This absurd "Heath Robinson" claw back will increase the complexity of individuals' tax affairs, and add to the burden on the already overstretched HMRC."

Also again in May 2012:

"It is disappointing that Osborne is going ahead with this oncoming clusterfuck."

I dare say that my cynicism and pessimism are misplaced though, as Lin Homer was on the radio this morning assuring us that everything is tickedy boo with child benefit. In fact she went on to defend government policy (I thought civil servants were meant to be impartil?):

"..most families don't need child benefit.."

So that's OK then!

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"

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

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"

Child Benefit Changes - The Oncoming Clusterfuck

The ICAEW Tax Faculty has vented its spleen about the government's proposals in the recent Budget for a tax charge on high earners in receipt of child benefit.

"Child Benefit will be withdrawn when someone in a household has an income of more than £50,000. The benefit will be withdrawn gradually; 1 per cent of Child Benefit for every extra £100 earned over £50,000. Only those with an income of more than £60,000 will lose all their Child Benefit."

In a nutshell that ICAEW doesn't think it will work, in fact the ICAEW is so unimpressed with the plans that it says:

"We think the proposals are in danger of becoming a practical disaster when they become law in the next couple of months."

In summary, here are the ICAEW's concerns:

• HMRC will be using the tax system to claw back from one individual a benefit paid to another. The tax system is based on individuals, while the benefits system is based on households. This undermines the principle of individual taxation.


• Families in similar financial situations could be treated quite differently, undermining the policy’s ‘fairness’ objective, and creating very high marginal rates of tax for some.


• Changed family circumstances could make it difficult or impossible to calculate the claw-back, or who should pay it. In the period between the benefit being paid and then clawed back, the couple could be separated, involved in an acrimonious divorce, or completely out of touch with each other.


• Taxpayers could be penalised for failing to submit information they have no access to, particularly if the relationship breaks down.


• Taxpayers could find their confidentiality breached, as HMRC may need to share information about one partner’s (or former partner’s) income and tax affairs with the other.


• The deadline to notify HMRC that you’re liable for the charge is 5 October, nearly one month before the self-assessment deadline for submitting a paper tax return and four months before the online deadline of 31 January. If one or both partners is taxed under self assessment, they probably won’t know their adjusted net income in time to meet the October deadline.


• Collecting the charge through PAYE coding adjustment could lead to delays of up to 3 years and undermine the PAYE system’s efficiency. Any coding adjustment is an estimate, so HMRC would have to repeatedly re-estimate the code.


• It could create 500,000 more self-assessed taxpayers, because taxpayers will have to assess their own liability for the new charge – very expensive for HMRC to administer.


• The extra admin burden could make it even harder for HMRC to improve service standards. HMRC’s processing and service standards are already poor, as identified by the Treasury committee last year. This charge may cause standards to fall further.


• PAYE coding errors could leave tax payers with bills for thousands of pounds, because those who don’t have the charge coded out will have to pay the bill directly the following year.


• It could breach the UK’s EC Treaty obligations; Couples with one partner who is an EEA migrant worker could be treated differently under EU rules, which renders the UK rule invalid because it is discriminatory.


• The resulting poor confidence in the tax system could hit tax compliance. Taxpayers could find their tax confidentiality breached and experience lower service standards while grappling with an even more complicated system. Their confidence in HMRC and the tax system will be undermined and there will be behaviour changes and planning to avoid the charge.

It is disappointing that Osborne is going ahead with this oncoming clusterfuck (the ICAEW is far too polite to use such a word), all the more so because (when plans for this were mooted in 2010) I warned about it in 2010:

"This absurd "Heath Robinson" claw back will increase the complexity of individuals' tax affairs, and add to the burden on the already overstretched HMRC."

What a shame that George doesn't read this site!

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"