HMRC Is Shite

Monday, 29 February 2016

Chinese VAT Fiddle

CCH Daily reports that HMRC has raised an additional £3.5BN in the last year through inquiries into the under-payment of VAT by small businesses, according to research by tax investigation insurance company PfP which suggests this sector is coming under increasing scrutiny.

However, a loyal reader has sent me a link to a Radio 5 report about Chinese online traders who are allegedly evading VAT (possibly to the tune of around £2BN, if the report is to be believed).

Is HMRC chasing these people with the same veracity as it chases UK companies?

No.

For why?

The UK companies are low hanging fruit, and are easy target!

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

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"

Thursday, 25 February 2016

MOD Accounts Qualified Six Years Running

As a wee epilogue to yesterday's announcement about the appointment of Jon Thompson (currently the Permanent Secretary of the Ministry of Defence) as CEO of HMRC and Accounting Officer, I draw your attention to the following extract from the REPORT OF THE COMPTROLLER AND AUDITOR GENERAL ON THE 2014-15 ACCOUNTS OF THE MINISTRY OF DEFENCE:

"I have qualified my opinion for a sixth year because the Department is likely to have omitted a material value of leased assets and associated liabilities from its Statement of Financial Position.

I cannot quantify the impact of these omissions on the accounts with certainty because, as a result of its accounting policies, the Department has not maintained the records, or obtained the information required to do so...

Sir Amyas C E Morse
Comptroller and Auditor General
13 July 2015"

Just saying...

Hat tip to Kevin Reed for pointing this out to me.

Thompson: Very well respected departmental finance chief, though unable to prevent MOD's accounts being qualified :) https://t.co/yL1qwxojcC
— Kevin Reed (@Goonerreed) February 24, 2016

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

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"

Wednesday, 24 February 2016

Jon Thomspon To Be CEO of HMRC

Jon Thompson

The Prime Minister has appointed Edward Troup as Executive Chair and First Permanent Secretary at HMRC and Jon Thompson, currently Permanent Secretary at the Ministry of Defence, as HMRC’s Chief Executive and First Permanent Secretary. The appointments have been made with the approval of the Cabinet Secretary and the Chancellor of the Exchequer.

Edward, HMRC’s most senior tax expert, has been Tax Assurance Commissioner since 2012 and leads the Central Tax and Strategy Group. In his new role, which he takes up on 5 April, Edward will chair the HMRC Board, and be responsible for creating and overseeing the strategy of the department. He will be a First Permanent Secretary, will remain as a Commissioner for HM Revenue and Customs and will also attend ExCom. The arrangements for assuring large tax settlements in HMRC will be reviewed following Edward Troup’s appointment as Executive Chair.

Jon Thompson has been Permanent Secretary at the MOD since September 2012, after a career in finance in both the private and public sectors (see here for his biography). Jon will be a First Permanent Secretary, will chair ExCom and be responsible for the delivery of HMRC’s strategy, objectives and performance. He will also be HMRC’s Accounting Officer.

Cabinet Secretary, Sir Jeremy Heywood, said: “I would like to congratulate Edward and Jon on their appointments. Edward’s deep tax expertise and long experience in both HMRC and HM Treasury make him an excellent choice to lead the department through an important phase of change and amid unprecedented public interest in taxation. Jon’s experience of leading one of the biggest departments in government, coupled with his strong financial background, make him strongly placed to deliver HMRC’s ambitious transformation plans, large-scale operations and modern customer services.”

The Chancellor of the Exchequer, Rt Hon George Osborne MP, said: "These are exceptional appointments to HMRC. We have one of the country's pre-eminent tax experts and ‎an outstanding civil service leader with experience of transforming large organisations. Edward’s wealth of experience in tax and Jon’s operational and financial expertise, most recently as Permanent Secretary at the Ministry of Defence, will prove a huge asset to HMRC as it improves its customer service and continues its vital work to clamp down on tax avoidance and evasion.”

Edward added: “I am delighted to be appointed as Executive Chair. It has been a privilege to be Tax Assurance Commissioner over the past three years and I look forward to leading HMRC along the path of transformation that has been established and to working with Jon Thompson as the new Chief Executive in ensuring the delivery of the ambitious plan that we agreed with ministers in our Spending Review settlement in November.

“By 2020-21, HMRC will be a smaller, more highly-skilled, more efficient, more modern and digital organisation, bringing together tax, data and operational expertise in large regional centres. In doing this, we need to build on our reputation for professionalism and impartiality, to maintain the public confidence that is the cornerstone of our tax system.

“I will work closely with Jon and our other ExCom colleagues to ensure that we continue to meet our vital purpose of collecting the funds that pay for public services, helping the honest majority to get their tax right and making it hard for the dishonest minority to cheat the system.”

Jon Thompson said: “I am excited to be taking up the challenge of leading the delivery of the department that raises the revenues that pay for the nation’s public services. With 50 million individual and five million business customers, HMRC operates at a scale that few organisations can match. I have long been impressed by the professionalism, expertise and commitment that HMRC’s people show in serving the public and I look forward to joining at this important time in the department’s evolution.”

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 Manipulated Wikipedia

It appears that HMRC, contrary to their own self belief in their infallibility, are in fact fallible. Especially when they rely on Wikipedia to support their views.

Contractor Weekly reports that HMRC recently lost a First Tier Tax Tribunal case because of its over reliance on the Wikipedia definition of “electromechanical.”

The case of RJS Electronics Ltd v HMRC (February 2016) involved the classification of four switches for the purposes of customs duty. HMRC classified the switches as “push button switches” which attracts a duty of 2.3% whereas RJS contended they were “electromechanical snap-action switches” which attracts a duty of 0%.

In May 2014 HMRC’s Review Officer issued his decision based largely on the definition of “electromechanical” taken from Wikipedia and said, “there is little guidance on this type of product and the Wikipedia information is not altogether clear but all things considered I must…..uphold the decision.”

However, what HMRC didn't admit to was the fact that they used only a selected portion of the Wikipedia defitnion that suited them best.

RJS, during appeal, challenged the Review Officer’s reading of the Wikipedia definition saying, “the HMRC representative used Wikipedia to come to their decision, however they are taking the terms out of context……they have ignored [part of the definition] even though they have quoted it…..they have stated that their sources are not clear and have just chosen to read the outcome that suits HMRC best. It is very important that someone classifying electronic goods is not just reading some page on the internet but they have at least a minimal understanding of the electronic terms.”

A week before the Tribunal hearing HMRC asked for the hearing to be adjourned and that the parties be directed to appoint a single joint expert who would provide an authoritative opinion on the switches. Such an expert would have cost several thousands of pounds and even though the tax at stake was less than £1,000, HMRC justified their suggestion on the basis that it would help with future decisions. The Tribunal considered an expert witness’ costs to be disproportionate and both HMRC’s requests were dismissed.

The Tribunal found in favour of the taxpayer and pointed out that the Wikipedia and OED definitions were “not entirely consistent” and unreliable.

The lesson here is that HMRC manipulates sources and facts to best suit its own objectives.

Do not trust HMRC!

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

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"

Tuesday, 23 February 2016

HMRC's Threatening Charter

Remember the tired old HMRC dog, that should have been put down years ago, aka The Taxpayers' Charter (HMRC use the "c" word and refer to it as a "Customer Charter")?

Well it still exists and, apparently, is being redrafted.

CCH Daily reports that HMRC commissioned Ipsos MORI to conduct research to test taxpayers’ understanding of a revised version of its Customer Charter.

There have been criticisms that the charter is aggressive and assumes that those reading it will have contravened the tax law, rather than simply checking out their expectations around HMRC service.

The key areas that were most contentious were around whether the revised Charter used consistent language and tone, or created more confusion for customers with its threatening language.

There was criticism of the changing nuances of the language. Certain words stood out as being very different in tone to others, such as the word ‘tough’ with people questioning the language in Right 6, ‘Be tough on people who bend or break the rules’. This was felt to be more informal than language used elsewhere. One employer commented: ‘I find that a bit threatening. But maybe that’s what they want.’

There were some instances where the language was felt to be ambiguous. For example, some employers did not think Obligation 4 ,‘Keep accurate records and protect your information’ was as precise as they would like it to be. HMRC’s customer insight and knowledge team commented: ‘It made them (customers) question how long they needed to keep accurate records for and what exactly they needed to keep records of.’

The full results are available at HMRC Customer Views on the revised Customer Charter report

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

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"

Monday, 22 February 2016

HMRC Is Infallible

As loyal readers know, HMRC considers itself to be much like the Pope - infallible.

This self belief in infallibility can best be demonstrated by the following example, as published in the Telegraph, concerning the estate of Sara Hancock's late grandfather and HMRC's refusal to admit that they had lost a final tax return submitted by the family's accountant.

The result being letters sent from HMRC demanding ever increasing automatic fines.

Now that the media are involved, HMRC has "graciously" waived the fines "as a gesture of goodwill". However, it still claims that it has not received the tax return.

Given that HMRC is infallible it is clearly, once again, the fault of the hapless taxpayer!

Here is the article in full:

When Sarah Hancock’s grandfather died after suffering from dementia, she thought she would help her grieving family get his affairs in order by calling HMRC’s "Tell Us Once" service, and telling them about his death.

Little did she know that one phone call would lead to a nightmare year of letters demanding ever-increasing fines, which kept coming even when both Miss Hancock and her late grandfather's accountant wrote to the taxman explaining that he did not owe any tax.

Frank Hancock died in December 2014, after an illness which had left him in hospital for over a year. He and his wife Joyce each took half the proceeds of a small delivery business, but Mr Hancock’s half was so low it was covered by the personal allowance and married couple’s allowance.

His accountant, Thomas Shreeve, had continued to file returns on his behalf, and HMRC’s own tax calculations showed that he was actually due a small rebate.

When he died, Miss Hancock called HMRC, and an automatic letter was sent out asking her to file a return for Mr Hancock’s outstanding tax. This had already been done, so the couple’s accountant returned the forms alongside a letter explaining that the return had already been filed, so the form was superfluous.

Nevertheless, the form was sent again by HMRC in June – a full four months later – with a standard letter saying that it had not been filled in correctly.

A month later Miss Hancock received another letter with a bill for £100, the first late filing penalty. By November, almost a year after her grandfather’s death, the penalty demands, sent in "daily penalty reminder" letters, had increased to over £300.

By mid-December the penalty had doubled to £600, and in mid-January a demand for £1,200 was sent. This final letter was also the first time the family had been given an option to challenge the fine.
Miss Hancock said: “It’s been a complete nightmare for the last 12 months. I made one phone call and got put down as the point of contact, which is fine, but I don’t want to be dealing with all these fines.”

An accountant and former HMRC inspector of taxes, Mr Shreeve, who is 96, said he had filed all the returns on time and helped the family pay several years of backdated tax on the business before Mr Hancock's illness.

He said: “Everything was in order with the estate, but they have ignored every single letter that was sent to them.”

At one point the family were told to pay the fine up-front and then appeal it retrospectively - something they did not want to do as they did not trust HMRC to listen to their appeals.

When contacted by Telegraph Money HMRC said it would cancel all the penalties on Mr Hancock's estate as a gesture of goodwill - but insisted it had not received his return. However, a spokesman admitted the series of demands sent to the Hancocks did not deal with the situation appropriately.
The spokesman said: "We apologise to Miss Hancock. We have cancelled the penalty as a goodwill gesture and can confirm that Miss Hancock will not have to submit tax returns in future."

Last year the taxman was given new powers to demand payments within 90 days from those suspected of abusing tax loopholes, and to compel them to pay upfront and appeal the decisions later.
Robin Williamson, technical director of the Low Incomes Tax Reform Group, which is trying to make the tax system simpler for people with low incomes, said the Hancocks' problems stemmed from a change in HMRC's approach to fines.

"The automatic penalty regime was introduced in 2010. At the same time they separated the penalties for returns and the returns for late payment, so even if you owed no tax, you still got penalties for not submitting your return whereas previously if you had paid your tax or did not owe any that would be in your favour.

"It was a deterrent but it also had the unwanted side-effect of bringing in a lot of often vulnerable people, elderly people, taxpayers who couldn't get to an adviser or didn't know how to handle the forms they were getting. When the right way to deal with it would have been some form of personal contact, what they get into is this maelstrom of letters.

"It also results in a lot of uncollected penalties which just have to be written off at the end of the day. So it's a big problem and it doesn't solve the problem of people who are trying to avoid filing their returns.

"It's expensive, and useless, because it doesn't solve the problem of the missing return," he said.

In a consultation document published last year HMRC said it would consider removing penalties where people don't actually owe any tax, as part of changes to the system of fines. These would not be implemented until the Finance Bill 2017, at the very earliest.

Chartered accountant Peter Hollis, a senior member of accounting trade body the Institute of Chartered Accountants, who has expressed concerns about similar cases where lost returns have resulted in large fines for taxpayers, criticised HMRC for its hastiness to issue fines after technical glitches or mix-ups.

He said: "This is the sort of thing that keeps happening. The Revenue would like to think that they deal with things quickly and compassionately and pick out mistakes, but they don't. It never ceases to amaze me the lack of compassion within the revenue and how hard they can be in dealing with people."

He also warned that cases like this could get worse in future as HMRC is given powers to go into people's bank accounts to extract funds.

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"