HMRC's £16M Snafu

To gently ease everyone into another week, here is a gemusing tale of what happens when a date is entered on the wrong part of a letter.

Step forward HMRC which, owing to a "snafu" confusing a date with a sum of money, sent Enid Fisher (a semi retired pensioner of 73) a tax bill for £16,022,012. Aside from the sum being a "tad" OTT, the error is even more ironic given that Mrs Fisher was in dispute with HMRC over an HMRC error that gave rise to them issuing her a rebate.

Anyhoo, all's well that ends well; Mrs Fisher has now received £200 compensation for the distress caused etc.

HMRC are quoited by the Mail:

"We are unable to discuss the details of individual taxpayers due to restrictions on confidentiality, however we have apologised to Ms Fisher for any distress caused and understand the matter has been now resolved."

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.

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Nudge Unit Wants HMRC To Overclaim Tax

In what has to be the most cretinous suggestion to have come out of Number 10 thus far in the tax avoidance witch hunt, David Halpern, head of the Government's Behavioural Insights Team (aka 'The Nudge Unit'), has suggested that HMRC should deliberately overclaim taxes so it has to pay taxpayer a rebate at the end of the year.

At the Civil Service Live event Halpern said "it would be better for us to modestly overclaim tax" because when HMRC underclaims people become irritated and tempted to cheat.

He then went on to talk ever more bollocks about the "the psychological boost of getting a rebate" - and the possibility that people spend rebates:

"When people get tax back from HMRC, they feel great.

In the US, people love it, and they spend the money differently too. So we're trying to persuade you guys [HMRC] that's what you should do. Make sure you have a certain amount of outcome which means you have to give people their money back."

Our taxes are paying the salaries of cretins like Halpern!

Tax does have to be taxing.






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

To find out more, please use this link Taxwise



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

Click the link to read about: Tax Investigation for Dummies

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HMRC Delays Repayments - Updated

Economia reports that a survey, conducted by Bloomsbury Professional, highlights a consensus amongst those taxpayers surveyed that delays by HMRC in paying tax rebates are worsening.

Martin Casimir, Bloomsbury’s managing director, is quoted:

“HMRC does not pay any interest on tax repayments which effectively gives it an incentive to drag its heels.

The concern for taxpayers is that the amounts involved can be substantial, which can cause serious cashflow problems. 

Businesses have been known to get into financial difficulty, or even go bust, while waiting for a tax rebate from HMRC.”

Delays in the payments of rebates have been discussed on this site before. Therefore, as ever, I am interested in hearing the views of loyal readers.

Do you agree with the survey's conclusion?

UPDATE

Oops, red faces all round.

As was quite correctly pointed out yesterday, by a loyal and observant reader, Martin Casimir's assertion that HMRC does not pay interest on tax repayments is wrong. HMRC (as I noted in the comments section) does in fact pay 0.5% (perversely it charges 3% for late payments).

I wrote to Martin yesterday about it, and Bloomsbury have acknowledged that they were wrong and will be asking Economia to correct their copy.

It is shameful that Economia (the professional magazine of the ICAEW) and myself (an FCA) didn't spot it when we published Martin's quotes!

So well done and thanks for pointing that out, and mea culpa on my part for being asleep yesterday!

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

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 Fear

Christopher Lunn, the accountant who runs CLAC (Christopher Lunn and Company), which has been in a protracted dispute with HMRC, has been featured in the Telegraph.

The paper says that Mr Lunn claims that HMRC has attempted to frighten his clients into paying tax that they do not owe, and that the investigation has been "a catalogue of blunders".

His clients have received letters informing them that any tax rebates due have been frozen because of the investigation, and others urging them to make a full disclosure of any irregularities that they are aware of in previous tax returns.

One letter, dated July of this year, addressed clients who had not contacted HMRC "with the intention of making a full disclosure".

The letter added:

"I have noted that to date you have not contacted me with the intention of making a full disclosure. I will now be checking your tax returns and if I identify any irregularities then I will deal with these matters either by criminal or civil procedures open to HMRC depending on the nature of these irregularities. 

"Please note that until we have checked your Tax Returns, HMRC will not be making any repayment of monies shown as being overpaid."

HMRC have confirmed that Mr Lunn's clients are not being paid any money at present.

"We have endeavoured, throughout our dealings with CLAC's clients, to give them every opportunity to come forward and discuss their affairs with us.

We wrote to all clients on 29 July, 2011, explaining that repayments would not be made until all returns had been checked. All repayment claims are currently being reviewed and individual claimants will be contacted shortly."

No charges have been brought against Mr Lunn, and there is no suggestion that his clients deliberately mislead HMRC.

Clearly this is another case to watch with interest.

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"

HMRC Hackers

There was a rather interesting article in yesterday's Sunday Times, about hackers gaining access to HMRC systems and diverting tax refunds.

The article also refers to an earlier piece on this site (published in June 2011) about 91client accounts being hacked. The Sunday Times uses the "polite" alternative domain name of this site www.hmrconline.com.

Here is the article in full:

Tax rebates stolen by Revenue and Customs hackers

HMRC has emerged as the most recent target of hackers after fraudsters tap refunds system and divert funds into their own accounts

Jon Ungoed-Thomas and Cal Flyn


Fraudsters have found a way to hack into government tax records and divert refunds meant for others into their own bank accounts.

An investigation by The Sunday Times has revealed that criminals are secretly examining HM Revenue & Customs’ records looking for anyone who has paid too much tax. They then change the details of the bank accounts into which the repayments are to be made.

Alternatively, the hackers file fictitious tax returns showing large overpayments directly into the HMRC computer in the names of genuine taxpayers, then ask for refunds.

Victims become aware of the scam only when they are officially contacted by HMRC and told an overpayment is being transferred into their account.

HMRC is now facing questions over its security procedures and how the hackers are able to infiltrate its records. Experts claim it has failed to react as promptly as the banks to the risk of online fraud.
Roger Symes, 53, a ship broker from Surbiton, in south-west London, received a letter last month from HMRC advising him of a refund. He said: “They gave details of a bank account into which they were paying the money, but it wasn’t my bank account.

“My accountant said he had the same problem with 18 other clients.” The refunds applied for were between £100 and £4,000.

The hackers are accessing the tax files using the sign-on and passcodes assigned to accountants who file clients’ tax returns online. How they are obtaining these security details is unclear. It is not known whether it is via computer attacks on individual accountancy firms or by breaching HMRC’s own systems.

One hacker who spoke to The Sunday Times this year said he had accessed HMRC’s systems and had been able to obtain details of agent sign-ons and passcodes. A security expert said the claim was credible but HMRC denied its systems had been compromised.

Once a hacker has an agent sign-in, he can read the tax records of all the accountant’s clients, amend them and change the bank account details. Accountants who have spoken to this newspaper said hackers have been accessing taxpayer records for at least two years.

Claire Savage, a chartered accountant in Milton Keynes, Buckinghamshire, spotted irregularities in one of her clients’ files in June last year.

She said: “I called him up to ask about his new bank account, which turned out not to be his at all. When I realised that security had been breached I went through all of my clients’ files. A fair chunk of them — around 10 — were affected, and repayments of up to £3,000 had been requested in each case.” None of Savage’s clients lost money to the fraudsters.

Ralph Hayden, a chartered accountant at GW Cox & Co in Frinton-on-Sea, Essex, said 41 of his clients had been affected by a similar scam, which was first noticed in November 2009.

He said: “HMRC said that it must be our systems that had been breached but we called in computer experts who confirmed that it definitely wasn’t.

“In most cases, a tax return had not yet been filed, so a false return was submitted. In others, their returns had been edited, so that a repayment was now due. HMRC were not advising their frontline staff in case it was an inside job.”

On hmrconline.com, a blog about the HMRC, one taxpayer reveals that his accountant was also targeted. The posting states: “We recently returned from holiday to the news that 91 of our accountant’s client accounts had been hacked at the HMRC government gateway website.
“Hackers had accessed information on 91 individuals or organisations and had entered false end-of-year accounts in order to claim self-assessment refunds.

“We then received a letter from HMRC to advise us that the refunds were on their way to what we knew were false accounts. They actually paid out. HMRC now apparently know what they have done but to add insult to injury they have now started to send demands for repayment to the people [whose] accounts had been hacked.”

Unlike HMRC, the big banks ask customers conducting transactions online to provide additional passcodes for each financial transaction. These are generated by inserting a bank card into a hand-held reader provided by the bank.

Jason Hart, managing director of Cryptocard, a computer security company, said: “If you just had a static passcode, then once it’s compromised, you’re going to be a massive target for the fraudsters. It’s an invisible threat because they can get into your system at any time and you don’t even realise.”
A spokesman for HMRC said: “We take the security of our customers’ data extremely seriously and we do not discuss the details of our security defences ... We actively monitor repayment transactions and continue to address any fraudulent repayments.”



Tax does have to be taxing.

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To find out more, please use this link Taxwise

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

Click the link to read about: Tax Investigation for Dummies

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Ker Farking Ching!

Thanks to the incompetence of our political "elite", the country is broke.

Therefore no one should be under any illusions that the state, in order to maintain its existence, will do all it can to extract every last penny from the taxpayers.

ICAS have issued a timely warning concerning the aggressive new penalty regime being applied by HMRC as from October.

Instant £100 fines will be applied for even a one day delay in filing, together with additional fines for lengthier delays.

"If people are even one day late in filing their paper self-assessment tax form they will be hit with an instant £100 fine. After another three months an additional fine of £10 a day is added for each day overdue, up to a maximum of £900. Tougher fines are added if passing the six month or one year mark; the larger of £300 or five per cent of the tax due.

From the 31 January next year the same will apply for people who file their form online. So a return due by the end of January 2012 but not filed until 5 August 2012 would attract £1,300 or higher in fines.

According to ICAS, the professional body of Chartered Accountants (CAs), since self-assessment was introduced in 1997, nearly one million people each year have been late in filing their return. Many people delay submitting their return for longer than 12 months. Until now so long as the person had paid all the tax due no penalty could be charged by HMRC.

Derek Allen, Director of Tax at ICAS, said:

'We are concerned that most people will not yet be aware of these new penalties as they have not been widely communicated. Based on the last decade of experience, at least one million people could find themselves liable to the additional penalties.'

The new penalties could also see taxpayers losing out on tax rebates from HMRC. This is particularly relevant for self- employed in the construction sector, where tax is often deducted initially by the contractors. Individuals are then due repayments after calculation once they lodge a return. However, under the new rules if the return is late the repayment owed will be a lot less because it has been used by penalties."

Suck it up people, the country is broke and the political "elite" have no intention of removing their snouts from the trough.

Ker Farking Ching!


Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
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Quote ID code "ABC" when contacting a QROPS specialist.

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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"

Bullying and Not Fit For Purpose

The Times reports that a taxpayer tried to reclaim £3K in overpaid tax for the year to April 2010.

However, HMRC calculated that he was in fact owed £1K.

Fair enough!

However, under the new penalty regulations HMRC can fine people up to 30% of tax owed for careless mistakes and up to 100% for deliberate errors.

Now being a simple sort of person I would suggest that these rules, unless there has been a deliberate attempt to defraud HMRC, are meant to be applied with some form of commonsense (most especially if it is a tax reclaim rather than annual self assessment).

HMRC took the "middle route", and fined the taxpayer 70% of the £2K difference between the sum that he felt he was owed and the sum that HMRC calculated it would repay him; ie there is an implication that he was deliberately trying to defraud HMRC.

The taxpayer was fined £2K, even though he was owed £1K.

Phil Berwick, director of tax investigations at McGrigors, the law firm that became involved in the case after HMRC issued the fine, told The Times:

"Calculating a rebate can be complicated and the taxpayer in question was unrepresented by an adviser, yet HMRC has refused to take any of this into consideration.

We believe he made an honest mistake, so for HMRC to be fining him is outrageous. HMRC has charged this taxpayer with a higher penalty than someone committing a serious fraud under the old penalty regime."

It is clear that the heavy handed treatment of this taxpayer by HMRC (have they proven that he was attempting to deliberately defraud them?) will put people off from claiming rebates, lest they be fined more than the rebate they get for any accidental error.

Matthew Elliott, chief executive of the TaxPayers' Alliance, put it more directly:

"HMRC seems to have given up entirely on serving the public and taken to bullying them instead. We have a hugely complex tax system, and no one should be fined for being unable to understand its every technicality.

A lot of people are already angry at being overtaxed and, if HMRC tries to deter them from claiming rebates in this way, tempers are going to rise further. The tax system and the tax authorities have ceased to be fit for purpose."

The state is using HMRC to subjugate the population, as it becomes ever more desperate in its search for funds.

Sadly I do not see any change of direction likely, whoever wins the coming election. Lazy MPs voted through the legalisation, that HMRC are now so eagerly using against the taxpayer, without any real scrutiny or care as to the consequences. Many of these same lazy MPs will be returned to parliament after the election.

Who will ask the akward questions?

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

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Snowed Under

In keeping with the season, the FT reports that HMRC is snowed under with claims for tax repayments from companies.

Seemingly, businesses are waiting twice as long for corporation tax rebates from HMRC than they were a year ago.

Waiting times of a month (in comparison with 14 days last year) are now common.

The problem arises because the recession has increased the number of claims for rebates, which HMRC simply doesn't have the resources to handle in a timely manner.

Self assessment rebates for individuals are processed automatically. However, business rebates are processed manually.

Doubtless there will be those who argue (as they have done before) that if returns were input by businesses earlier in the year, the backlog would be lessened.

That is not unreasonable, up to a point. However, it should be remembered that the businesses are trying to drum up business and continue in operations; their time and energy are focused on that. HMRC's role is to make tax administration/payment etc simple, efficient and as least time consuming as possible.

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"

I Am The law

New HMRC, in the shape of guidance note EM1609, seems to allow inspectors to retain tax rebates for self assessment tax payers whilst reviewing the case but without the need to open a formal invetsigation.

Mike Warburton of Grant Thornton and the Chartered Institute on Taxation's John Whiting claim that there is no basis in law that allows inspectors to do this.

HMRC claim that the note "broadens the options" available to tax inspectors.

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

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Wooden Money

The Herald reports that a number of Scottish councils are getting very excited over the possibility of receiving tax rebates on VAT overpayments made during earlier periods (in some cases claims have been made dating back 35 years).

Seemingly councils, individuals and companies have received, to date, around £1.5BN in rebates from HMRC; eg Glasgow recovered £2.6M in VAT wrongly accounted for on hostel charges from 1974 to 1996, as well £3M in interest.

The councils will use the money to offset budget cuts.

All very well, maybe.

However, the rebates of "wooden money" are merely going from one organ of the state to another; no real income in the overall scheme of public finances has been received, the money "gained" by the councils will have to be saved elsewhere by the government and cuts then passed on to the councils.

They are spending time, effort and money scrambling after "wooden money"

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"

Tax Refund Delays III

This appeared in the Times on Saturday (see below). It seems that HMRC are delaying a large number of tax repayments (see my earlier articles about tax refund delays for further background on this).

The Times wants people who are experiencing delays with tax repayments to write to them at this email address troubleshooter@thetimes.co.uk, with a view to giving HMRC a well deserved kick.

Might I also suggest that you copy your emails to Dave Hartnett at this address dave.hartnett@hmrc.gsi.gov.uk, in order to focus HMRC's attention on the matter.

"I have received a self-assessment tax statement for the year 2007-08, showing that I was due a £4,000 rebate in January. Three months later, I have yet to receive it.

On ringing the tax office, I was told that 10 per cent of all tax returns are called in at random for checking and that mine is one of them. I was also told that since I had now chased it, it would move up the pile and be dealt with in the next couple of weeks - the implication being that had I not chased, I would never receive the money. That was a month ago. Further chasing was met with the same answer.

If the tables were turned, I would be fined immediately and charged interest. Is it just me, or is there a lot of this going on at present, given the Government's financial mess? How do I get my money and can I expect interest?

Roland Grant, Middlesex

The Revenue's response was typically unapologetic. It said that it aims to deal with repayments as quickly as possible, that it cannot always prioritise repayments but there is no policy of delaying them, and that checking will take longer at peak times of year. Yawn. Three months to repay £4,000? Come on. The private sector would never get away with it.

You eventually received your cheque while Troubleshooter was investigating your case, but without the interest. Troubleshooter was somewhat confused by this, as the Revenue had confirmed that interest is payable from the date that you paid the tax until the end of the month when the repayment is issued. Normally, at least.

Now that the Bank of England base rate is at the subnormal level of 0.5 per cent, the Revenue has reduced interest payable to an invisible 0 per cent, defending itself thus: 'The rate of interest on overpaid tax reflects the average commercial rate for a return on deposits. No commercial body has the same rates for both paying and charging interest.'

True, except that 0 per cent does not reflect the average commercial rate for a return on deposits, which is 0.66 per cent, according to Moneyfacts. Furthermore, the Revenue began applying 0 per cent from January 27, when the base rate was still 1.5 per cent. It did not fall to 0.5 per cent until March 5. Did it know something we didn't?

The Revenue went on to say that it does not wish to pay too much interest and encourage 'banking' with the tax office. So you are left without compensation for the interest that your £4,000 could have earned in a savings account, which is unfair. Clearly, the accusation of unfairness does not worry the Revenue, as no compensation has arrived yet. What is needed is people power. Anyone who has not had interest paid on their rebates should contact Troubleshooter."

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 Magic Carousel

Now, as we all know, HMRC being a tool of the state is "honour" bound to treat everyone in exactly the same way and not be discriminatory.

The cynics amongst you might argue that HMRC achieves this by treating everyone equally badly. However, it would seem that some are treated more badly than others.

VAT traders have accused HM Revenue & Customs (HMRC)of discrimination, as a result of HMRC's attempts to reduce the costs of the fallout from the carousel fraud scam.

The traders say that despite complying with new regulations, HMRC is delaying repayment of hundreds of millions of pounds due to them from VAT rebates.

Peter Carnall, owner of Eurostar Global, believes that he is being "treated like a criminal" by HMRC.

He is quoted as saying:

"They have forced Eurostar to be without finance and to have extensive problems because of their actions. They haven't paid us a penny."

Mr Carnall has been trying to reclaim £114,000 from HMRC for nearly a year, without success.

"Nearly 12 months after it started trading Eurostar is still without any money which HMRC commissioners are arguably illegally holding."

Martin O'Neil, a senior consultant with Vantis Tax, business advisers that are handling more than 20 delayed payment cases, says:

"We know that fraud exists but it doesn't follow that everybody should be tarred with the same brush."

Carousel fraud has occurred where fraudsters have obtained VAT registrations to buy items VAT free from other EU states before selling them at VAT inclusive prices, they then disappear before HMRC can claim the VAT.

HMRC has decided to use the "one size fits all" approach, and work on the assumption that all VAT registrants are criminals until proven otherwise. This of course goes aginst the basic concept of English law, "innocent until proven guilty".

As such HMRC have slowed down VAT registrations and introduced the "reverse charging mechanism" for the sales of mobile phones and computer chips (where the carousel fraud occurs). Under this mechanism the customer is responsible for paying VAT first, before the trader makes a claim.

A VAT Tribunal recently ruled in favour of Livewire Telecom, over a £2M VAT claim, prompting hopes of a speeding up of payments by HMRC.

However, these hopes have been without foundation. HMRC will appeal against the decision and states that:

"We have had no complaints about delays."

HMRC in denial as ever!

Tax does have to be taxing.

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