OBR Predicts Failure

The Office For Budget Responsibility (OBR) seems to be unimpressed with government/HMRC attempts to close the "tax gap", and government/HMRC bluster about tackling avoidance (perfectly legal) and evasion (illegal).

In short they have dismissed the bluster, and have ignored it.

Page 99 of the OBR November 2010 report states the following:

"Forecasts for tax receipts do not generally include any explicit assumptions about changes in the level of tax compliance. For most taxes, an implicit level of compliance will be reflected in the current level of receipts. In most of the tax models, the current level of receipts will be projected forward using the most appropriate set of economic determinants. Effectively we are assuming that the level of compliance remains constant as a proportion of overall tax revenues. The one
exception is the VAT forecast, where the forecast explicitly projects a VAT gap, the difference between the theoretical tax liability and actual receipts.

HMRC published a document in September on Measuring Tax Gaps 2010 which indicates that the tax gap for HMRC taxes (the difference between tax collected and tax that should be collected) has been close to £40 billion in recent years.a Specific factors such as Missing Trader Intra-Community (MTIC) fraud and a rise in VAT debts during the economic downturn have affected compliance in particular years, but in general the tax gap has been broadly stable. This was achieved against a 2007 HMRC Spending Review settlement of a 4.9 per cent real reduction per year.

The Spending Review 2010 settlement for HMRC included overall resource savings of 15 per cent. This assumed 25 per cent efficiency savings and a £900 million investment to address the tax gap and tackle tax avoidance and evasion. This included measures to increase criminal prosecutions, tackle offshore evasion, extend HMRC’s coverage of high risk areas and the greater use of debt collection agencies.

Inevitably there are always large uncertainties about the effects of both the efficiency savings and additional investment. As a result, we have not included the impact from either factor in the November forecast. If improvements in tax compliance do occur, receipts outturns would come in above what was implied by the economic determinants. At this point they would then be incorporated into the tax forecast. The same would apply in reverse if HMRC savings led to a loss of compliance yield for any tax."

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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Gone Phishing II

Earlier this month a loyal reader sent me a link to an article about a potential security flaw within the HMRC website, that may allow phishers to harvest personal information from the unwary user.

It transpires that there is another, similar, security flaw within the HMRC site. Concept Business System explain the issues here.

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"

Something For The Weekend

A loyal reader writes to me setting the following challenge, I assume it to be tongue in cheek, for other loyal readers:

"I challenge anyone to ring the West Yorkshire & Craven HMRC number (their office is in Nottingham and the phone number is a Lincoln one) and get through in less than 3 days."

I assume it can't really be as bad as that?

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

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

To find out more, please use this link Taxwise

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

Click the link to read about: Tax Investigation for Dummies

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

More Cock Ups?

The Telegraph reports that there may be some more cock ups in the tax system, as a result of "issues" in HMRC.

The paper quotes Richard Mannion, a director of Smith & Williamson:

"The first problem concerns HMRC asking for tax repayments to be sent back and the second relates to online requests sent by taxpayers under the self assessment system which seem to have been lost by HMRC’s computer system.

In short, it appears that the tax authorities did not include the employee benefits as shown on forms P11D when working out if people had paid the correct amount of tax for 2009/10 and so under-estimated individuals' tax liabilities. Consequently thousands of people who got a refund just a short while ago could now get a tax demand to the tune of several hundred pounds or more."

With regard to the first issue, it is of course correct that if there has been an error wrt the repayment of tax then HMRC should reclaim it. However, human nature being what it is, it is highly likely that any monies paid back to taxpayers will have been spent.

HMRC, quite correctly, point out that this is the way the system works; ie where the benefit is new in 2009/10 the first HMRC knows about it is when the P11D is sent to them by the employer by July 2010. The issue should normally be "coded out" if less than £2K, and therefore no monies will be reclaimed in the form "hard cash".

However, the Telegraph (cynically?) notes that HMRC made similar statements, playing down the scale of its PAYE errors in August, before admitting to the massive scale of the problem.

These "reconciling" errors may well be more numerous than HMRC are admitting.

Mr Mannion then goes on to highlight another issue:

"The second issue concerns online requests for repayment or for the reduction of tax payments on account, sent by taxpayers to HMRC during the six weeks between October 1 and November 15 this year. It appears that any online requests for help of this type have been lost and not acted upon by HRMC.

Although the problem has now been fixed, anyone who falls into this category should get back in touch with HMRC and reissue their request. This applies even though you may have had a receipt from the tax authorities saying they got your request.

There could be thousands of people up and down the country who think they have successfully communicated their request to HMRC but in reality they will just have to do it again."

HMRC are of the view that this only a affects a few people.

Time, for both of these issues, will tell!

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"

Whither Kenny? III

Loyal readers will doubtless recall the "resignation" (or was it really sacking?) of Bernadette Kenny (Director General of Personal Tax) that was featured on this site in early November.

Well now, it seems that this story hasn't quite ended yet.

The FT reports that, "oddly enough", Kenny will not be leaving her post empty handed (even though she allegedly "resigned" of her own free will).

Kenny will, as from February 2011, start to draw down her HMRC £50K per annum pension (six years earlier than she would have normally been entitled to - worth an extra £300K to her).

My goodness, what a generous and decent employer HMRC is...if, that is, you are in the upper echelons of HMRC and know where the bodies are buried!

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"

Service Standards Fall

The ICAEW has published the results of its survey into its members' views of HMRC's Customer Service Standards (conducted between May and July of this year).

The survey indicates that standards are falling.

Quote:

"We are extremely concerned that overall service standards seem to continue to fall."

Key issues being:

HMRC acknowledges that tax agents are an essential part of the UK tax system. Agents need to be able to communicate with HMRC easily, efficiently and reliably. However, overall service standards have fallen steadily as HMRC continues to seek to reduce its costs and improve its efficiency.

ICAEW questions whether HMRC can meet its aspiration to 'provide an increasingly efficient and high quality service' while reducing staff numbers: the evidence from the ICAEW survey and elsewhere reinforces ICAEW's concerns.

HMRC should concentrate resources on:

- better trained staff
- nominated staff having ownership of problems
- email access to HMRC.

Communication with HMRC is one of the biggest problems for agents. It is difficult to get through on the telephone, the people answering the phones have insufficient knowledge to be able to resolve queries, promised call backs do not happen and letters remain unanswered.

In 2010, 71% (2009, 63%; 2007, 55%) of respondents reported in at least five of the last ten calls to HMRC, they needed to have further contact in order to resolve the enquiry.

In 2010 61% (2009, 50%; 2007, not asked) of respondents felt that the level of
knowledge of HMRC knowledge staff was rarely or never sufficient to answer an enquiry.

34% of VAT queries took longer than three months (2009,21%; 2007, 20%) to receive a full reply.

etc...

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"