HMRC's Spend on Consultants Rises by 9,000pc

HMRC's spending on consultants has risen by a “staggering” 9,000 per cent, while customer service has plummeted.

MPs are going to call for an investigation into HMRC's use of external consultants.


In April, HMRC spent £844,188 on consultants - the highest monthly amount since 2011 and more than HMRC’s entire annual spending on consultants in 2015, official figures published this week show.

The latest amount is nearly 9,000 per cent greater than the £9,618 HMRC spent in the equivalent period in 2015.

For why the increase:

1 HMRC are cutting back on staff, and

2 HMRC's IT systems are shite, and it needs external support to keep them running and maybe upgrade them.

The irony is given HMRC's obsession with IR35, many of these consultants will be withdrawing their services and HMRC will have a very hard job indeed finding more to plug the holes!

Tax does have to be taxing.

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HMRC Targets Freelancers

PCG, the organisation which represents the UK’s freelancers, contractors and independent professionals, reports that HMRC has undertaken a campaign which targets the UK’s very smallest businesses by requesting detailed information from their clients on all payments made to them under a contract for services.

The letters request a wide range of sensitive information from the clients including the supplier’s name, the ‘worker’ name if different, along with VAT number, passport number or National Insurance number and details of any amounts paid.

In a move PCG believes is designed to avoid bringing larger suppliers into scope, HMRC has only requested the information on payments of up to £350,000. According to PCG’s CEO, Chris Bryce, this instance of HMRC choosing to target independent professionals while purposely excluding large consultancies is yet another example of one rule for small companies and another for big business.

Chris Bryce said:

“There is simply no justification for HMRC to write to clients requesting detailed information on the working practices of their suppliers. Especially when you consider that they are doing so with absolutely no evidence of any wrongdoing.

For any business, it would be incredibly damaging to have HMRC writing to their clients to insinuate that the way they are doing business may not be legitimate. For the smallest businesses, where client relationships are key, this is especially harmful.”

HMRC appear to be using recent data from the Office of National Statistics which points to a rise in self-employment over the last few years in order to justify this new tactic - something PCG believes is penalising the sector for success.

“Independent professionals contributed £95billion to the UK economy in 2013. This figure is continually rising as more and more people choose to start their own business and this can only be good for our economy.

Considering that the Prime Minister, David Cameron, recently told PCG that he believes SMEs are the very lifeblood of our country and of local communities across the land, we are deeply concerned about this unwelcome development.

Waging a campaign against these enterprising individuals by targeting them via their clients is anti-business. What’s more, to use the success of the sector as an excuse just isn’t acceptable. Independent professionals should be celebrated, not penalised for the way they choose to work.”

It seems that HMRC is targeting the smaller fish, because it knows that they are easy pickings.

Tax does have to be taxing.

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Lean Goes From Strength To Strength

In October I mused on the "success" or otherwise of Lean, and what it had done for the once fine brand of Toyota:

"Toyota, you may be aware, has had to recently recall "some" of its cars because of a production fault over a number of years.

How many cars?

Over 7.4M (manufactured between September 2006 and December 2008), it is in fact the largest recall in the company's history!

Mind you, it has had other recalls in earlier years; again because of failures in production.

Oh dear!

What does this tell us about Lean?

At the very least it tells us that Lean is not a panacea for the ills of the public (or indeed the private) sector. The evangelists and zealots who spoke at last month's conference (after they have counted their earnings from the conference and Lean consultancies) may care to reflect on that! "

One month on and blinkey, blonkey, blimey, Toyota have had to issue yet another product recall. This time Toyota will recall 2.7 million cars worldwide because of problems with the steering wheel and water pump system. The recall affects nine models, including the Toyota Corolla and the second-generation Prius.

Lean goes from strength to strength!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

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

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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.

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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"

Lean On Me

As loyal readers are aware, the ever "popular" subjects of Pacesetter and Lean raise their heads on this site from time to time.

I am therefore indebted to a loyal reader who flagged up the Lean Government Conference held at the Barbican on 20th September:

"A capacity crowd descended upon the Barbican for the opening of Public Service Events' 4th annual Lean Government conference. Featuring a keynote address from Francis Maude, Minister of State for the Cabinet office, the conference boasted a programme of high profile speakers, discussing how lean thinking can transform public sector performance. If an organisation is to improve, it must be constantly searching for ways to do better, said Maude; this is the fundamental ethos of lean. The event, sponsored by Lean Consulting, also featured a range of interactive masterclass sessions and great networking opportunities in the packed exhibition areas."

The speakers at the event are all evangelists for Lean and, I assume, earn "a few pennies" from their Lean evangelism (some have connections with HMT and HMRC). Hence they are, I suspect, rather motivated to push the government/taxpayer to "buy into" Lean.

All very well, if Lean actually works.

The question is does it?

Let us consider where it came from; namely the private sector.

To my humble view (and this may surprise some of you) not every "management/consultancy fetish" that comes from the private sector, even if it works in the private sector (and often it doesn't), is applicable/suitable for the public sector. After all, the techniques and processes used to manufacture widgets are not necessarily the same as the processes/competencies used to collect taxes.

Now, let us consider where in the private sector Lean actually first came from.

Anyone?

Yes, that's right, Toyota.

Toyota, you may be aware, has had to recently recall "some" of its cars because of a production fault over a number of years.

How many cars?

Over 7.4M (manufactured between September 2006 and December 2008), it is in fact the largest recall in the company's history!

Mind you, it has had other recalls in earlier years; again because of failures in production.

Oh dear!

What does this tell us about Lean?

At the very least it tells us that Lean is not a panacea for the ills of the public (or indeed the private) sector. The evangelists and zealots who spoke at last month's conference (after they have counted their earnings from the conference and Lean consultancies) may care to reflect on that!

Tax does have to be taxing.



Professional Cover Against the Threat of Costly TAX and VAT Investigations

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

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

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

What is TAXWISE?

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

To find out more, please use this link Taxwise



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

Click the link to read about: Tax Investigation for Dummies

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

Ian Barlow, HMRC and PA Consulting

In July I wrote about Ian Barlow's appointment to HMRC as the replacement to Mike Clasper, and listed the companies of which he is a board member. Amongst them is PA Consulting Group Ltd.

My thanks to a loyal reader who pointed out a couple of things about HMRC's relationship with PA Consulting.

PA Consulting has had a commercial relationship with HMRC, eg between April 2003 and June 2005 HMRC paid PA Consulting over £20M.

PA Consulting Group have been involved in a tax avoidance litigation case with HMRC for many years, which is now on its way to Supreme Court. Contractor Calculator quotes James Abbott, tax partner at contractor accountant Abbott Moore:

"In the 1990s, management consulting firm PA Consulting decided that it would pay its employees bonuses using dividends, so they could deliberately avoid Pay As You Earn (PAYE) income tax and National Insurance Contributions (NICs).

The firm set up an elaborate tax structure, allowing it to route bonus payments through a separate offshore company with multiple share classes and pay dividends to the employees, instead of bonuses as part of their PAYE pay packet.”

HMRC challenged the scheme via the tax commissioners, and then the courts, contending that the payments to PA Consulting’s employees were ‘earnings’ and should be taxed accordingly.

The case continues.

"Curiouser and curiouser!" said Alice.

Comments and views always welcome.


Tax does have to be taxing.



Professional Cover Against the Threat of Costly TAX and VAT Investigations

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

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

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

What is TAXWISE?

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

To find out more, please use this link Taxwise



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

Click the link to read about: Tax Investigation for Dummies

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

Bye Bye Jack

My thanks to a loyal reader who has reminded me that yesterday was Dave "Jack" Hartnett's last day in orifice.

Farewell Jack, see you soon when you come back as a consultant!

Tax does have to be taxing.



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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"

Qualified NAO Report III

Another day, another National Audit Office (NAO) report about HMRC.

Gosh, busy bees aren't they?

This particular report looks at Reducing Costs in HMRC

Unsurprisingly the NAO are of the view that "HMRC faces a significant challenge in securing a £1.6 billion reduction in running costs over the next four years, at the same time as increasing tax revenues, improving customer service and achieving reductions in welfare payments."

Quite!

"Reducing running costs by £1.6 billion over four years is a big challenge for HMRC. It is making progress but there is no contingency in its plans.

To achieve value for money, it needs to better define the service it is aiming for; improve its understanding of costs; and develop its implementation plan."

Amyas Morse, head of the National Audit Office, 20 July 2011.

This is polite "audit speak" for saying the HMRC is winging it and making things up as it goes along, hoping against hope that nothing goes wrong.

Impressive yes??

"HMRC’s cost reduction proposals involve much uncertainty."

Really?

"HMRC has made no allowance in its cost reduction plans for under-delivery or slippage, and currently has no reserve of proposals on which to draw."

A recipe for disaster!

Good luck to everyone working for HMRC, and good luck to the long suffering taxpayers.

Tax does have to be taxing.

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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 Nice Little Earner

Congratulations to HMRC's ex Chief Information Officer, Deepak Singh, who according to ifaonline was paid £149,500 by HMRC to work three months (June 2009 - September 2009) after his leaving date.

Singh's 3 year (£160K per annum) contract ended in June last year.

However, HMRC persuaded him to stay on for another 3 months in the guise of his consulting company Orwell Consulting.

In the private sector, when headcounts are being reduced, a well known "fiddle" is to sack someone then rehire them as a consultant (thus avoiding them appearing in the headcount figures).

Needless to say, I am sure that this was not the intention or the case here.

One rather nice little benefit for Singh of this arrangement, is that he is only liable for corporation tax of up to 28% on his earnings for these 3 months, compared with the higher-rate of income tax of 40%.

I have no problem with tax avoidance. However, HMRC claims that it disapproves of it (when dealing with non HMRC staff).

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"

Late

The Independent Certified Practicing Accountants Group claims that HMRC is taking too long to process tax refunds.

Tony Margaritelli, ICPA chairman, said that refunds are taking an interminable time:

"Most galling is the fact that the revenue has been encouraging accountants to file self-assessment for clients because refunds are automated and should therefore come through within days."

One of the reasons for the delay may well be the new processes being introduced by HMRC.

I am advised that as part of the LEAN programme (or Pacesetter as it is now called in National Insurance Contributions Office - NICO), millions has been spent on private consultants (some from Unipart).

The consultants are implementing a production line way of working based on that of the Toyota company.

Fair enough, if it works.

However, I understand that in some departments "customer" waiting time has risen from three days to approximately eight weeks.

I am also advised that HMRC are not allowed to tell "customers" (taxpayers) about the backlog. Meanwhile HMRC presses ahead with implementing this across all departments.

Tax does have to be taxing.

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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"