The Secret of HMRC's "Success" Doesn't Stack Up

Unsurprisingly HMRC have received another drubbing, this time from PAC.

In a report issued by PAC, PAC chairwoman Meg Hillier said HMRC's claims about its success "just don't stack up".

Well then, finally people other than the readers of this site are waking up to reality!

Of particular concern to PAC is HMRC's "one rule for the rich, another for the poor" approach to tax collection and enforcement.

Amusingly, HMRC claim that the rich get extra scrutiny; as some loyal readers have already pointed out, "extra scrutiny" appears to mean power lunches/dinners with HMRC top brass.

In an "ironic" twist, since HMRC set up a specialist unit dealing with so-called high net worth individuals in 2009, the amount of income tax they paid had fallen by £1bn. This is despite income tax receipts from the public as a whole rising by £23bn over the same period.

Since 2009, each of the estimated 6,500 individuals worth £20m or more has been assigned a "customer relationship manager" by HMRC to administer their tax affairs.

HMRC said this had resulted in the collection of an additional £2bn in tax. However, it was unable to explain why the income tax they paid fell by 20% - from £4.5bn in 2009-10 to £3.5bn in 2014-15 - when the overall income tax take rose by 9% £23bn.

The BBC reports that in the five years to 31 March 2016, HMRC completed just 72 fraud investigations into high net worth individuals, with all but two having been dealt with using its civil powers. Only one case resulted in a successful criminal prosecution.

Of the 850 penalties issued to the very wealthy since 2012, the average charge was £10,500, a figure the MPs said was unlikely to be a deterrent to multi-millionaires.

PAC chairwoman Meg Hillier said:

"If the public are to have faith in the tax system then it must be seen to have fairness at its heart. It also needs to work properly. In our view, HMRC is failing on both counts.

HMRC's claims about the success of its strategy to deal with the very wealthy just don't stack up."

An HMRC spokesman said:

"In fact we give them additional scrutiny, with one-to-one marking by HMRC's specialist tax collectors, to ensure that they pay everything they owe, just like the rest of us do." 

"Marking" should not mean power lunches/dinners!

As ever though, low hanging fruit is the easiest to pick. Therefore HMRC will continue to bully SME's and individuals of modest means, and increase the number/frequency of automatic fines for minor cock ups on tax returns.

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

MPs Mass Debate Over Tax Fairness

MPs are to debate tax fairness today in the House of Commons.

 
The debate on tax fairness is expected to begin between 12:45 and 1pm.

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"

ICAS Calls For Improved Tax System

The Institute of Chartered Accountants of Scotland (ICAS) has written to George Osborne, the new Chancellor of the Exchequer, calling on him to address a number of serious deficiencies in the UK tax system.

Competitiveness: The United Kingdom needs to have a clear policy on taxation which encourages business to retain and develop UK based operations and headquarters.

Fairness: The tax regime for unincorporated businesses should be brought more closely into line with that for companies. Also, working should always be more profitable than not working, and the highest marginal rate of income tax should be limited to 50%.

Simplicity: Existing complexities should be cut to help ordinary individuals and small businesses self-assess their tax liabilities. Tax credits rules should be aligned more closely with income tax rules, personal tax allowances should be rationalised to reduce the bureaucratic churn of taxing individuals on small incomes and then paying them benefits, and income tax and National Insurance should be merged to simplify administration.

Osborne's priority, rightly or wrongly, will be to reduce the budget deficit as quickly as possible. Sadly, simplifying the tax system will not be his number one priority.

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"

Statutory Compensation

Nichola Ross Martin, on AccountingWeb, bemoans the fact that complaining to the HMRC about their cock ups costs time and money:

"If you are like me, then your experiences of HMRC error, mistake and delay will have cost your average clients hundreds, not thousands of pounds.

The time and expense of writing into HMRC and the adjudicator to make a claim for compensation will often increase the claim disproportionately – it might double. Making such claims also feels like a waste of one’s professional time."

She calls for a fresh approach, and the implementation of a table of statutory compensation for HMRC cock ups.

"The level of compensation would apply to the gravity of the problem. The highest level would be paid where it was found that the incident to which it pertained was wholly avoidable by HMRC and the taxpayer or agent had suffered prolonged stress, delay and were unable to carry out one or more tasks as a result."

I and, I suspect, many other taxpayers heartily endorse her suggestion.

However, I fear that HMRC and the government will never implement it.

HMRC and the government wish for the dice to be loaded against the taxpayer, in their eyes we are their servants not the other way around.

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"

The Devil Is In The Detail

Who, why or what is a "professional adviser"?

This question has been vexing the minds of the good people of UHY Hacker Young, as they ponder HMRC's definition of "reasonable care".

UHY Hacker Young believes that taxpayers could be fined for innocent mistakes on their returns, despite HMRC promises that people who took "reasonable care" would not be fined.

Could it be that Hacker Young don't trust HMRC?

Surely not!

Simon Newark, the firm's VAT partner, told the Telegraph that HMRC defines reasonable care as taking advice from a tax professional.

This means that the majority of high street accountants would be excluded, as they are not "tax professionals" in the strict sense of the term, even though they are the main source of advice and help for many taxpayers.

HMRC have provided a rather slippery answer:

"We cannot and do not specify that an adviser should have certain qualifications. That is for the taxpayer to consider when choosing who to seek advice from."

At first glance that may seem reasonable. However, it leaves HMRC with the final decision as to whether the person from whom the advice was taken was qualified enough and as such whether the taxpayer took "reasonable care".

In other words HMRC are loading the dice in their favour, by not giving and equivocal "yes" or "no".

Mr Newark agrees, and told the Telegraph that:

"The 'reasonable care' clause was clearly not given proper consideration and is causing much confusion rather than making things easier."

Until HMRC provides an equivocal "yes" or "no" answer, people will have to trust HMRC to judge them fairly in the event a dispute arises.

Hands up all of you who trust HMRC? (Certainly not the staff I would warrant).

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"

Fairness

In news that should not really come as too much of a surprise to those of us on the receiving end of our tax system, the UK's tax system is viewed as less fair and less transparent than other tax regimes around the world.

That is the finding of an international study of finance professionals conducted by ACCA (the Association of Chartered Certified Accountants).

"Perspectives on Fair Tax" surveyed ACCA members in Australia, Canada, Hong Kong, Singapore, the UK and the US, gauging opinions on tax fairness, complexity, transparency, and how well tax authorities communicate with their citizens.

Professor Francis Chittenden, ACCA Professor of Small Business Finance at Manchester Business School, who wrote the report with colleague Hilary Foster, said that:

"The message from our research is for governments to reduce the volume of laws, directives and regulations that contributes most to complexity.

There is a fundamental issue for governments around the world to decide the purpose and structure of tax systems, and importantly to communicate the rationale behind these decisions."

A very good point, the trouble is the current government in the UK and its Prime Minister has an obsession with complexity and regulations.

Respondents from the UK rated the UK tax system as the least transparent, and said that there were too many taxes in the UK which added to tax complexity.

Specific concerns raised included:

-The increasing role of employers acting as tax collecting agents for government

-Retrospective changes to the tax system

-"Stealth taxes" – such as the failure to index link thresholds and allowances

-The assumption of additional powers by HM Revenue & Customs

Respondents in the UK also said that a lack of clarity, increasing complexity and a seemingly aggressive stance by HM Revenue & Customs were breaking an already fragile trust.

Trust, as the report notes, is crucial for a tax system to work in any country. Governments should create a system that treats them with respect.

The current government in the UK and its Prime Minister has an obsession with complexity and regulations, and do not treat the citizens with respect.

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"