HMRC Is Shite

Tuesday, 4 September 2012

The A19 Petition

At the beginning of July I noted that HMRC had issued a consultation on Extra Statutory Concession AS19, and that:

"HMRC are proposing a significant watering down of ESC A19".

Under ESC A19, which has been a feature of the UK's tax system for around 40 years, tax arrears may be waived when HMRC has failed to use information available to it to assess an individual's tax liabilities on time.

The consultation has prompted Keith Gordon (a tax barrister at Atlas Chambers) to create an online petition opposing the changes.

He states on the petition website:

"HMRC’s proposal to “clarify” ESC A19 is misconceived and misleading. The present wording is perfectly clear and HMRC should revert to their former practice of respecting it.

HMRC’s proposal is merely a fig leaf, designed to legitimise their recent practice of denying ESC A19 to the very individuals for whom it was intended to apply."

He is also quoted by Nichola Ross Martin:

“ESC A19 is designed to be a get-out-of-jail free card available to the country’s poorest taxpayers who are told of old tax liabilities several years down the line. It applies when HMRC have simply failed to use the information available to them and the taxpayer could reasonably have believed their tax affairs were up to date.

In the past couple of years, HMRC have attempted to reinterpret their own guidance simply to avoid applying the concession in the very cases for which it was designed. This has caused unnecessary anxiety for thousands of taxpayers, many of whom will find it impossible to fund the unexpected debt.”

The petition is available here, and the HMRC consultation ends 24 September 2012.

Tax does have to be taxing.

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Monday, 3 September 2012

HMRC's Tax Return Initiative

In July I wrote about the launch of HMRC's "Tax Return Initiative":

"HMRC have relented a little on their stance wrt late submissions (ie non submissions) of self-assessment forms for tax years 2010 and earlier, and have launched the "Tax Return Initiative".

The Telegraph reports that people who have not completed self-assessment forms will be given three months to declare untaxed income earned before 2010. Those who fess up will be given reduced penalties of £200, plus a fine equivalent to 10% of the unpaid tax.

This is a significant mollification of HMRC's normal stance on late/non submissions. Fines are normally up to 100% of unpaid tax, and spot fines can be more than £1,000.

Taxpayers (not "customers") who do not make use of the amnesty to fess up will face aggressive criminal prosecutions."

The deadline for the initiative (2nd October) is now less than a month away, and today HMRC have issued a press release reminding people to come forward before it is too late.

After 2 October, if taxpayers have not submitted their tax returns and paid what they owe, HMRC will use its legal powers to pursue outstanding returns and any unpaid tax and NICs. Penalties of up to 100 per cent of the tax due, or even criminal investigation, could follow.

Here is the HMRC press release in full, you will notice HMRC uses both the "C" word and the correct form of address (ie "taxpayer") in the same document:

"Thousands of higher rate taxpayers who have failed to submit tax returns will receive letters from HM Revenue & Customs (HMRC) this month, reminding them that they have only one month left to take up a special opportunity being offered by the tax authority.

The Tax Return Initiative is aimed at people liable to pay tax at rates of 40 per cent and above and who have been told to submit a Self Assessment tax return for 2009/10 or earlier, but have not done so. The campaign is also available to anyone who has tax returns to submit for these years.

People have until 2 October to tell HMRC they want to take part, submit completed returns, and pay the tax and National Insurance Contributions (NICs) that they owe. By coming forward voluntarily through the campaign, launched on 3 July, people will receive better terms, and any penalty they pay will be lower than if HMRC comes to them first.

After 2 October, if they have not submitted their tax returns and paid what they owe, HMRC will use its legal powers to pursue outstanding returns and any unpaid tax and NICs. Penalties of up to 100 per cent of the tax due, or even criminal investigation, could follow.

Marian Wilson, head of HMRC Campaigns, said:

“If HMRC has sent you a Self Assessment tax return or notice to complete a tax return for 2009/10 or earlier and you have not yet taken any action, this campaign offers you a quick and straightforward way to bring your tax affairs up to date. But time is running out. You have until 2 October to submit your tax returns and pay the tax you owe.

“If you cannot afford to pay what you owe all at once, don’t worry. If your circumstances warrant it, you will be able to spread the payments.”

People can take part in the campaign by:

Going online and registering: http://www.hmrc.gov.uk/campaigns/tri.htm

Completing any outstanding tax returns and paying any tax and NICs owed by 2 October.

Help is available from HMRC by calling the Tax Return Initiative helpline on 0845 601 8818.

By coming forward voluntarily through the campaign, customers will receive better terms, and any penalty they pay will be lower than if HMRC comes to them first.

HMRC campaigns have so far have collected nearly £510 million from people coming forward, and more than £120 million from HMRC follow-ups, including over 18,000 completed investigations. There are also 23 criminal cases under way. Two plumbers have been jailed and another received a suspended sentence.

Notes for editors
1. The Tax Return Initiative helpline is open Monday to Friday, 9.00am to 5.00pm.

2. Anyone who has tax returns to submit for 2009/10 or earlier, and has not done so, should come forward and make their returns, whether or not they have received a reminder letter about the campaign from HMRC.

3. Previous campaigns have targeted offshore investments, medical professionals, private tutors and coaches, plumbers, electricians, VAT defaulters and online traders. Further information on HMRC campaigns: http://www.hmrc.gov.uk/campaigns/news.htm"

Tax does have to be taxing.

Friday, 31 August 2012

Agent Visits Suspended

HMRC had plans to visit between 80-90 agents at the end of this month, as part of a pilot to gather the views of "low performing" agents.

"Low performing", as defined by HMRC, being agents whose clients' filing or payment performance for corporation tax and self assessment had been judged of "insufficient" quality.

Hmmm, I wonder what "insufficient quality" actually means?

Anyhoo, worried agents can breath a sigh of relief, HMRC have suspended their plans for the visits.

For why?

Taxation reports that concerns about the pilot were expressed from the representative bodies on the Joint Tax Agent Strategy Steering Group, as such more time will be given to discussion of the matter.

Tax does have to be taxing.

Thursday, 30 August 2012

Poll On Clegg's Tax The Rich Call

Tax does have to be taxing.

Wednesday, 29 August 2012

Booze Matters - HMRC Lose Tax Revenue

I am rather amused to read that MPs are up in arms at HMRC over its "soft" approach to prosecuting people for smuggling booze, and the loss in tax revenue from smuggled booze estimated at being £1.2BN per annum.

There is a touch of irony that those who receive taxpayer subsidised booze are complaining about the voters attempting to get their hands on their own form of "subsidised" booze.

Anyhoo, PAC have published a report today entitled "HM Revenue & Customs: Renewed Alcohol Strategy". Oddly enough it is dated 12th July 2012, the reasons for the delay in publication are not clear.

The report notes that there were no more than six successful prosecutions each year, in the four years to 2009-10.

However, Lin Homer has responded (as per the BBC):

"HMRC's performance in tackling alcohol fraud is measured by the combined impact of both civil and criminal proceedings on alcohol duty evasion - which increased significantly when the strategy was introduced.

Prosecutions are a strong deterrent and HMRC continues to investigate cases criminally where this will maximise impact on the fraud."

Whilst the figure of £1.2BN lost per annum covers beer and spirits, there is no clear indication of the revenue lost from wine smuggling (much to the chagrin of PAC).

The report notes:

"The department does not make best use of intelligence and technology to detect and prevent alcohol duty evasion.

The department needs to work more closely with the industry to improve its understanding of legitimate export markets, and improve how it works with the UK Border Force to gather intelligence on illegal alcohol imports."

Here is an extract of the summary:

"In April 2010, HM Revenue & Customs (the Department) launched its renewed strategy to reduce the amount of tax lost each year due to alcohol duty evasion, principally through fraud which often involves exporting duty unpaid alcohol to the near continent, which is then redirected to the UK and released to the market with no duty paid. In 2010-11, the renewed strategy delivered £433 million in financial benefits against a target of £390 million.

The Department collected £9.5 billion of revenue from excise duties on alcohol in 2010-11. However, it estimates that there is a tax gap—the difference between taxes due and the amount actually collected—of up to £1.2 billion. The Department has not produced an estimate of the tax gap for wine, despite a commitment to our predecessors to do so. Without reliable information on the scale and nature of duty evasion for each category of alcohol (beer, wine and spirits) the Department cannot tailor its approach to target its efforts to tackle evasion to maximise value for money.

The Department does not yet have good enough information on the returns it secures from investing in specific areas of activity to make best use of the additional £917 million it plans to spend on reducing all kinds of tax avoidance and evasion. It told us that the rate of return on its work to reduce alcohol duty fraud is approximately £17 to £1 but it is not clear whether it could target its resources more effectively to secure a better return on its investment.

The Department is consulting on a range of measures to reduce alcohol duty fraud, including a proposal to introduce fiscal stamps for beer, an approach which appears to have been successful in reducing duty evasion on spirits. The Department does not yet have a full understanding of the costs and benefits of these proposals, including the compliance costs for the industry of introducing fiscal stamps for beer and the impact on legitimate wholesalers and retailers.

The Department does not make best use of intelligence and technology to detect and prevent alcohol duty evasion. The Department needs to work more closely with the industry to improve its understanding of legitimate export markets, and improve how it works with the UK Border Force to gather intelligence on illegal alcohol imports. In addition, the Department does not yet use the full capability of the Excise Movement Control System (EMCS), which facilitates the tracking of freight across the European Union, and could be used to target interventions and investigations more effectively. The Department implemented EMCS in phases over two years as planned, but did not make full use of its capabilities when implementation was completed.

Despite an estimated £1.2 billion being lost each year from duty evasion there are very few successful prosecutions for alcohol duties fraud. In the four years from 2006-07 to 2009-10 the highest number of successful prosecutions in any one year was six and the highest number of defendants was 16. The Department does not take enough account of the deterrent effect of successful prosecutions when considering the cost and benefits of
pursuing perpetrators through the courts."

Cheers!

Tax does have to be taxing.

Tuesday, 28 August 2012

HMRC's Customer Relationship Managers

As we shake off the dregs of the Bank Holiday weekend, and gently ease ourselves into the week ahead, here is an amusing variation on the concept of a "customer relationship manager" courtesy of HMRC.

In the real world CRM's are (in theory) meant to act as the interface between the customer and the organisation that they represent (eg bank, FMCG etc etc); hopefully smoothing away any "irritations" that may have upset the customer, thus leading the way to increased sales etc.

In HMRC's world a CRM is assigned to those "customers" (ugh how I loath that word when used in connection with tax matters) who come under the remit of HMRC's Affluent Unit. The Affluent Unit was set up in September 2011, with much fanfare by Danny "Beaker" Alexander, to handle the tax affairs of those individuals who earn more than £150K per annum. It consists of around 2,000 experienced HMRC staff members, who were reassigned from other duties within HMRC.

HMRC's publicly stated purpose of their CRM's is to provide better “customer service”. However, as the Telegraph notes, the CRM also builds up a detailed knowledge of their "customer's" tax affairs. Thus HMRC is in a better position to identify possible tax evasion, and will use the information garnered by the CRM's to investigate their clients.

Tax does have to be taxing.