HMRC Is Shite

Rewarding Failure - Lin Homer

2012-02-23T10:27:00.001Z

I am gemused to read that MPs have finally woken up to the fact that Lin Homer (recently appointed £180K per annum CEO of HMRC) has a track record of failure in her previous roles.

Keith Vaz is quoted in the Telegraph:

"Successive Home Affairs Select Committee reports criticised the operations at the UKBA whilst it was under the leadership of Lin Homer.

The Vine report endorses the Select Committee’s view that this has been a dysfunctional organisation for a number of years.

It is important to know if the selection panel for Ms Homer was aware of these concerns. We should never be seen to be rewarding failure.”

I am also rather gemused to see that, despite the fact that I warned about Homer's track record in December 2011, The Telegraph and The Mail are only now (3 months later) reporting her promotion and highlighting her failures.

Wake up lads!

Anyhoo, here is the Telegraph's article:

"Ms Homer, 54, who led the UKBA through a string of scandals, will be paid £180,000 a year in the new post, prompting MPs to warn against “rewarding failure”.

During her time as chief executive of the UKBA from 2008 to 2011, Ms Homer received nearly £1 million in salary and bonuses, while the department was dealt a series of highly critical reports by MPs.

Her tenure saw hundreds of foreign prisoners and more than 100,000 asylum seekers told they could stay in Britain – a figure MPs said amounted to an “amnesty”.

A report this week by John Vine, Chief Inspector of the UKBA, heavily criticised the department over failures which allowed hundreds of thousands of people into Britain without proper checks.

Labour MP Keith Vaz, the chairman of the Home Affairs Select Committee, told the Daily Mail

“Successive Home Affairs Select Committee reports criticised the operations at the UKBA whilst it was under the leadership of Lin Homer.

“The Vine report endorses the Select Committee’s view that this has been a dysfunctional organisation for a number of years.”

Referring to her HMRC promotion, he added: “It is important to know if the selection panel for Ms Homer was aware of these concerns. We should never be seen to be rewarding failure.”

Ms Homer has occupied a series of powerful roles in a civil service career spanning three decades.

Following her first major town hall job as chief executive of Suffolk Council, she was parachuted in to run Birmingham City Council in 2002 on a £174,000 salary.

The city was embroiled in a major postal votes scandal that ended up before the courts during her time there.

Election judge Richard Mawrey said fraud in the city “would have disgraced a banana republic".

In 2005, she was picked by the Home Office to run the Immigration and Nationality Directorate on a £200,000-a-year wage.

Former Home Secretary Charles Clarke was forced to resign during her watch when in 2006 it emerged that 1,000 foreign criminals had been mistakenly released.

Ms Homer was instrumental in shaping the new UKBA was made its chief executive in 2008, becoming one of Britain’s highest paid civil servants.

In both 2009-10 and 2008-9 Ms Homer was paid, including bonus, between £225,000 and £230,000.

HMRC defended Ms Homer’s appointment, saying she had a “strong track record”.

Chancellor George Osborne also voiced his support, saying: “As was made clear by the Home Secretary’s decision, the problems at UKBA were structural.

“Lin Homer is a very able public servant who is already bringing positive change to HMRC, building on the good work already going on in the department.”

Anyone care to take a guess as to how long she will remain in her role?

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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The Face of HMRC

2012-02-22T10:20:00.000Z

My compliments to Moira Stuart (the face of HMRC) for taking steps to ensure that her tax bill is minimised.

Ms Stuart has set up a company that entitles her to pay corporation tax at 21% on some of her earnings, rather than income tax at up to 50%.

HMRC have taken action against people who use these arrangements if they deem them to be "disguised employees".

However, the Telegraph quotes a spokesman for HMRC:

"Moira Stewart works on specific advertising campaigns for HMRC. She is not employed directly by us so there is no question of disguised employment."

Ms Stuart replaced Adam Hart-Davis as the face of HMRC. Adam Hart-Davis, was booted out by HMRC in 2008, as I wrote at the time:

"It seems that the recent comments by Mr Hart-Davis about wishing that the tax system was simpler, and describing VAT as "absurdly complicated", has not gone down well with HMRC.

Mr Hart-Davis, for good measure, then called for a flat rate tax and said that the merger of the Inland Revenue and Customs & Excise in 2005 was a mistake. His rationale being that the two departments were too large to "slam together"."

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

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"

An Inspector Calls - An Investigation Into Border Security Checks

2012-02-21T11:02:00.000Z

Yesterday John Vine CBE QPM, Independent Chief Inspector of the UK Border Agency, issued his report into the ongoing fiasco of our border security checks "An Investigation Into Border Security Checks".

A litany of failings were noted in the report, eg at times immigration staff acted potentially illegally by relaxing the supervision of travellers entering this country at least 15,000 times in the last five years.

More than 500,000 people were allowed into Britain unchecked due to the repeated suspension of vital checks, opening up an “unacceptable” breach in the country’s defences against terrorists and criminals.

Mr Vine last night said that ministers, senior officials and border staff must all share the blame for potential security breaches.

All very interesting, but what has this got to do with HMRC?

Well the recently appointed head of HMRC (Lin Homer) was head of the UK Border Agency until summer 2011, in fact she was the UKBA's first CEO.

Good job Lin!

By the way, it is now likely that the UKBA will now be split up in order to improve its performance.

Could the same fate be awaiting HMRC?

I reproduce an extract of Mr Vine's summary below:

"There is an urgent need to establish a new framework of border security checks. This should unambiguously specify the checks that must be carried out at all times and those where there is discretion to suspend checks based on risk or health and safety. There must be a shared understanding of any such discretion by Ministers, senior managers and front-line staff across all ports so any suspensions of checks are applied consistently and only when necessary. There must be greater clarity on the levels of authorisation required to suspend checks and when decisions require the explicit agreement of Ministers. Language and terminology must be precise in all policy proposals, responses from Ministers and operational guidance to prevent any misunderstanding by front-line staff.

Records must be kept which accurately set out the number of times checks are suspended and the reasons why. Ministers should be told of the suspension of checks so they are aware of what is happening at the border. If 100% checking at all times is the model that Ministers and the Agency decide upon, it requires a detailed analysis of staff deployment at the border, how technology is used and how passenger queuing times can be managed without compromising security.

Overall, I found poor communication, poor managerial oversight and a lack of clarity about roles and responsibilities. There was no single framework setting out all potential border security checks, which of these could be suspended, in what circumstances and the level of authority required at Agency or Ministerial level to do so.

There is a fundamental question of how free the Agency should be to decide its own operational priorities. These are important issues that need to be considered in order to define and agree the boundaries between the Home Office and the Agency.

There had been no attempt to incorporate the verification of fingerprints using Secure ID within the existing Home Office Warnings Index (WI) Policy. The purpose of the Secure ID check is to identify any passengers trying to enter the UK using a false identity and considerable public money had been spent on its introduction. Despite this, its implementation was hampered by the absence of an operating policy and associated guidance for staff. This led to different assumptions being made about whether, and, if so, in what circumstances, the check could be suspended. When it was introduced, there was no evidence to indicate whether decisions on its use or suspension should be made by the Agency or by Ministers. This lack of clarity continued until May 2011, when the Home Secretary stated that she did not want Secure ID to be suspended as part of a move to risk-based border checks. At that point there was no evidence that the Agency informed Ministers that Secure ID had been suspended in the past or secured approval for any subsequent suspensions.

Communications between the Agency and Ministers and between senior managers and operational staff was poor. There was a lack of clarity in the language used with consequent ambiguity when decisions were converted to operational practice. This was compounded by instructions to staff that did not always accurately reflect what Ministers had agreed. The number of suspensions, the precise reasons they occur, the level of authorisation necessary and the specific impact on both border security and on passenger clearance times must be absolutely clear.

The number of occasions when WI and Secure ID checks were suspended and risk-based measures invoked was affected by a number of factors including the volume of passengers arriving, the level of risk presented by them, the numbers of staff deployed and the infrastructure of ports affected. This was most apparent at Heathrow and Calais and resulted in more frequent suspension of checks at these ports. Any framework of border security checks must take account of these factors and there needs to be a clear understanding of how these policies will operate in practice. Importantly, there was no clear understanding of when „health and safety‟ was a ground for suspension, resulting in different assumptions as to the number of times checks might be suspended.

While there was a consistent understanding that suspensions may be necessary for health and safety reasons, these occurred more frequently than the Agency‟s senior management and Ministers had assumed. In addition, there was no consistent understanding at senior management and Ministerial level of when and why the length of passenger queues might constitute a health and safety issue. Records showing the number of times border security checks were suspended and the reasons for these were maintained at all ports. However, the level of detail recorded differed, and there were significant discrepancies between the records maintained at individual ports and records maintained centrally by the Agency. Record-keeping showing the suspension of Secure ID checks was particularly poor.

There was limited staff understanding at ports as to why accurate and detailed records needed to be maintained and how and whether the information would be used by the Agency to maintain management oversight, develop policy or change operational practice. Despite regular visits by senior managers, there were insufficient enquiries undertaken to find out precisely what was happening at ports. No process was put in place to analyse the number of occasions and reasons why checks were suspended.

There is nothing I have discovered which could not have been identified and addressed by senior managers exercising proper oversight. I was particularly concerned to find one example of a local initiative operating at Heathrow under which border controls were relaxed and which had not undergone any scrutiny by more senior managers or Ministers. I found this to be potentially unlawful and it reinforces the need to clarify what local managers can and cannot authorise. The risk to the border when checks were suspended needs to be kept in perspective. I found that the WI check which indicates whether a passenger has previously committed a terrorist, criminal or immigration offence or is of interest to law enforcement agencies was generally carried out consistently. This check occurred even where other measures were relaxed and provided assurance that those who had previously come to the attention of the authorities would be identified and, where appropriate, refused entry. However, I believe that the number of occasions when this check was suspended – over 350 and notably at the juxtaposed controls - was too high. Although these were generally for health and safety reasons, the volume indicates an urgent need to assess how the particular health and safety issues at those locations can be addressed.

Furthermore, it was unacceptable that the WI check had not been carried out for British and EEA nationals on a limited number of Eurostar services. This amounted to a considerable number of passengers over a period of four years. On the basis of what I have seen since 4 November 2011, it is apparent to me that the Agency does now have a much firmer grip in respect of border security checks than was previously the case. A significant test will be whether this can be maintained during periods of greater passenger volume and for the Olympic and Paralympic Games.

Security of the border is paramount. Overall, I found significant room for improvement in this important area of work. Based on the evidence provided in this report, there is much to do in order to provide the assurance that the public and Parliament expect."

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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HMRC Issues Tax Return Penalties

2012-02-20T11:04:00.000Z

As per the HMRC site:

"850,000 penalties for late tax returns will be issued over the next fortnight, 550,000 fewer than the same time last year, HM Revenue & Customs (HMRC) announced today.

Letters containing the £100 late-filing penalties are being sent to people who failed to send their 2010/11 Self Assessment returns to HMRC on time.

Anyone who still hasn’t sent their return to HMRC should do so now or risk further penalties. For example, anyone whose return is more than three months late will be charged an additional £10 penalty for each day it remains outstanding, up to a maximum of 90 days.

Although the deadline for receiving online returns was 31 January, this year HMRC is not issuing penalties to people who sent their 2010/11 return online on 1 or 2 February, following strike action at HMRC’s call centres on 31 January.

People who get a late-filing penalty can appeal against it if they think they have a reasonable excuse for not sending back their tax return in time, or they think a penalty should not have been issued for any other reason. Appeals should be made in writing by 31 March.

Examples of a reasonable excuse could include a family illness or bereavement, or a delay in HMRC sending out an online activation code. More information is available at www.hmrc.gov.uk/online/excuse-missed-deadline.htm

Under a new initiative to help its customers, HMRC has confirmed that anyone who receives a penalty, but who believes they don’t need to be in Self Assessment, can call the department on 0845 900 0444. If HMRC agrees, the return and the penalty will be cancelled. Full details are contained in a leaflet that will accompany the penalty notice. Alternatively, visit www.hmrc.gov.uk/latetaxreturn for further information.

HMRC’s Stephen Banyard said:

“We want the returns, not the penalties. So anyone who still hasn’t sent theirs should do so as soon as possible.

“People who receive a penalty notice should act now to avoid further penalties. They should send in their return, appeal if they think they have a reasonable excuse, or contact us if they think they shouldn’t have been in Self Assessment.”

Notes for editors
1. The new penalties for late Self Assessment returns are:

an initial £100 fixed penalty, which will now apply even if there is no tax to pay, or if the tax due is paid on time;
after 3 months, additional daily penalties of £10 per day, up to a maximum of £900;
after 6 months, a further penalty of 5% of the tax due or £300, whichever is greater; and
after 12 months, another 5% or £300 charge, whichever is greater.

2. There are also additional new penalties for paying late of 5% of the tax unpaid at: 30 days; 6 months; and 12 months.

3. Further information on the new penalties is available from the HMRC website at www.hmrc.gov.uk/sa/deadlines-penalties.htm

4. Late appeals received after 31 March will be considered, if you can show that you had a reasonable excuse for missing this deadline.

5. Follow HMRC on Twitter at: @HMRCgovuk"

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
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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

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"

Aspire Renegotiated

2012-02-20T09:23:00.000Z

In July 2011 I wrote the following:

"The Guardian reports that the government is paying up to 10 times more for IT projects than the standard commercial rate.

The public administration select committee (PASC) found ministers were "overly reliant" on a few large suppliers, resulting in the waste of an "obscene amount of public money".

Is HMRC being ripped off?

Well, judge for yourselves:

"The Aspire contract between HMRC and Capgemini covers a 13 year period and was originally valued at £2.8 billion.[49] This contract is a case study of what is wrong with the present procurement culture. Such a large contract is too complex to manage. The assessment of costs and benefits is opaque and it commits too much power and money to a single supplier."

Source Government and IT- "A Recipe For Rip-Offs": Time For A New Approach"

HMRC last month renegotiated Aspire (now worth around £8.5BN) with Capgemini, in line with the government's revised IT sourcing strategy.

My thanks to a loyal reader who pointed me to an article in Information Age, which notes that HMRC has agreed "operational efficiency and cost savings" with Capgemini. Additionally, work that is currently subcontracted to over 240 suppliers by Capgemini may (note that is only "may", not "will") be transferred to direct contracts with HMRC.

The last renegotiation of Aspire in 2009 aimed to save £110M per annum, by scrapping the legacy systems taken on board by the merger of the Revenue and Customs and Excise, and by shutting down a number of data centres.

Unfortunately, the renegotiated contract details are confidential.

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"

The Tax Avoidance Iceberg

2012-02-17T10:37:00.000Z

The tip of the government (both Labour and Tory) approved tax avoidance iceberg is gradually being uncovered. The FT reports that Treasury officials believe that as many as 100 civil servants have been paid as private companies, rather than as individuals.

HMRC have confirmed that it has allocated more staff to investigate “IR35” breaches in both the public and private sectors.

Quote:

"All sorts of people work through service companies for all sorts of reasons.

But where the arrangement is really only a way of avoiding PAYE tax and national insurance, then the law says the service company must pay the PAYE and national insurance to us on behalf of the individual at the end of the year."

However, it seems that the FT's figure of 100 may be a tad out of date. The Guardian reports that the figure may in fact be 4000.

Tax avoidance is not illegal. However, the current anti avoidance "morality" message being pumped out by the government and HMRC has been shown to be hypocritical.

Unfortunately, instead of the ire being quite rightly focussed at the hypocrisy of the government, the investigations are now in danger of being turned by the government (in order to deflect criticism) into a witch hunt against those who have been employed under these schemes.

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

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 Ed Lesters - More Avoidance Hypocrisy

2012-02-16T11:02:00.000Z

As I noted a couple of weeks ago, there will be more Ed Lesters coming out of the woodwork.

In today's Guardian there is an article that highlights more "Ed Lesters", which are but the tip of a very large iceberg.

Despite what HMRC and the government may try to have people believe, tax avoidance (perfectly legal0 is fully supported by the state (and almost encouraged, when it keeps the salary bill down).

Here is the Guardian article in full:

"The Department of Health has apologised after documents sent to the Guardian showed that contrary to assurances given to parliament, more than 25 senior staff employed by the department are paid salaries direct to limited companies, with the likely effect of reducing their tax bills.

In some cases, the documents show the named individuals are being paid more than £250,000 a year, as well as additional expenses. The payments amount to almost £4.2m in one year.

The department claimed the 25 were not civil servants, or technically even staff, although a large number have been employed by the department for many years and hold very senior positions. It said the arrangements will be subject to review by the Treasury.

One Whitehall source said: "We cannot defend these arrangements, but it may be it is very common in Whitehall and this is just the tip of an iceberg."

Danny Alexander, the chief secretary to the Treasury, set up a cross-Whitehall review this month into the extent of the pay arrangements after it was revealed the Department for Business, Innovation and Skills had sanctioned a similar salary deal for Ed Lester, the chief executive of the Student Loans Company.

At the time it was presented as a rare practice.

The single largest payment was £273,375. Nineteen of the staff are paid more than £100,000.
In the majority of payments at the DH, the fees were paid to companies with the same address as the home address of the staff.

The majority of companies provided to the department are registered as business and management consultancies, yet the internal DH payroll information also details the health department offices in which they work, job title and email address. In most cases the companies' names emerge to be little more than an adaptation of the individual's surname. The Guardian holds details of the payments to 25 individuals, month by month, for the tax year ending April 2011, the identity of their limited company and their work in the DH.

The staff work in a variety of areas such as the policy, strategy and finance directorate, medical directorate, the office of the chief scientific officer, and commercial contracting.

The emails handed to the Guardian also show senior civil servants at the department discussing the possible reputational damage to the department and seeking to avoid ways of revealing the nature of the payments sought in a written question last December by Gareth Thomas, the shadow Cabinet Office minister.

Asked by Thomas if any health department staff were paid by means of payments to limited companies in lieu of salary, the health minister Simon Burns said in a written parliamentary answer that no payments were being made to civil servants in this way.

He also stated: "It is not the department's policy to permit payments to civil servants by ways of limited companies."

In a fresh statement on Wednesday the department said: "The definition of staff in this context refers to civil servants, and we can confirm that no civil servant who is an employee of the Department of Health is paid in this way. To this extent it was certainly not our intention to mislead anyone involved.

"We would be happy to clarify the situation in greater detail with anyone who asks and apologise for any misunderstanding involved. We are currently carrying out a full audit of such arrangements in line with the recently announced Treasury review of tax arrangements of public sector appointments."

Health department sources said it allowed staff to define themselves for payroll purposes neither as civil servants nor payroll staff.

In the emails, Jason Skill, in the procurement centre for expertise, discusses the motivation of the written question by Thomas, saying: "There is probably an employment and taxation angle to this question though it might not be in the mind of Mr Thomas.

"Salary is paid to employee. It may be that some or all of the non-payroll workers are in reality employees and the payments made to their limited companies would be in lieu of salary, but we would not want to suggest that all payments to limited companies are in lieu of salary."

The email also goes on to discuss Revenue and Customs (HMRC) rules, including tests "to differentiate between a contractor who HMRC deem to need to pay tax like an employee and a contractor who does not".

It continued: "The department would probably want to avoid anything that implies its NPWs [non-payroll workers] are disguised employees reputationally, to avoid unnecessary employers' national insurance and because HMRC may use this to take forward IR35 cases with those NPWs."
The emails also discuss whether it would be possible to reply that an answer cannot be provided due to disproportionate cost.

Thomas said he was writing to the health secretary, Andrew Lansley, to seek clarification. "The question was clear enough and I am therefore very surprised that the Department of Health was unable to provide a complete and accurate answer.

"Given the importance of parliament being given accurate answers from government ministers I will be writing to Andrew Lansley for a full explanation. I will also be asking other departments to check whether their answers were complete and accurate, and whether they have similar numbers of staff asking for their salaries paid to companies to reduce their tax bill."

In the wake of the students loans episode, Alexander said Lester's tax and national insurance will in future be deducted at source. He urged Whitehall departments to unwind similar schemes as quickly as possible, adding:

"When we all have to pull in the same direction to tackle the country's financial problems it is essential we all pay our full and fair share."

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"

HMRC RIP

2012-02-16T10:39:00.000Z

Commiserations to Dave Stacey of Torquay who, despite still being very much alive, was recently pronounced dead by HMRC.

This Is South Devon reports that Mr Stacey received a letter from HMRC asking him to fill out a form about the estate of the late David L Stacey (ie himself).

A spokesman for HMRC said:

"We are very sorry to hear of the problems your reader has had. We apologise to both him and his family for any distress caused by the letter we issued to him in error."

At least HMRC have readily acknowledged the error. In June 2010 Tonie Francis had considerable problems convincing HMRC that she was still alive:

"Tonie Francis whose family were sent a letter by HMRC's tax credit office in Preston informing them that she was dead. The letter requested details of Miss Francis's next of kin, and a copy of her will.

However, there was a small fly in HMRC's oinkment, Ms Francis is still very much alive!

She therefore called HMRC to correct the error.

Can you guess what happened next?

Yes, that's right, HMRC refused to talk to her because she was dead; needless to say her tax credits and child benefit were stopped as well."

Re Mr Stacey, there might be an upside, being pronounced dead before you are actually dead does at least mean you won't receive any more letters from HMRC!

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

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"

Here Come The Penalties

2012-02-15T10:33:00.000Z

HMRC, as from 17 February, will begin sending out penalty notices to all taxpayers who failed to file their 2010/11 returns by the 31 January deadline.

However, HMRC have slightly softened their earlier stance on fining people £100 for failure to send in a self assessment on time (even if they owe no tax). HMRC now states that outstanding returns and associated penalties, where taxpayers call HMRC and explain that they do not need to be in the self assessment (SA) system, may be cancelled.

HMRC will be sending a flyer with the penalty notice, inviting taxpayers to phone the general SA helpline number if they think they don’t need to be in SA.

The change of stance by HMRC was communicated to the ICAEW:

"For information - from 17 February, all customers who failed to file their 2010/11 return online by the deadline will receive a flyer with their penalty notice inviting them to phone us on the general SA helpline number if they think they don’t need to be in SA. A copy of the flyer is attached.

Our contact centre staff will ask them some questions and if we decide we don’t need the return back we will advise the customer that we will cancel the return and remove the penalty.

This additional step has been introduced to mitigate the impact of the new penalty regime, such as by ensuring customers who have to pay penalties are people we need to be in SA whilst others are taken out.

Obviously we hope that customers dealt with in Personal Tax International will call our dedicated helpline number. We will also 'cancel' their return and penalty if it becomes clear that they should no longer be within the SA system.

If any of our PT International customers do contact the 0845 Helpline we will receive notification and make a decision as to whether they should complete the SA return or not. We will write to these customers."

Tax does have to be taxing.

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HMRC Hypocrisy - Business Records

2012-02-14T10:33:00.000Z

I recently wrote that HMRC have placed on hold their plans to carry out business records checks on SMEs. Additionally they have also decided to exclude practices from any future checks, as and when the scheme is relaunched.

However, it seems that their own records may be a tad disorganised. Accountancy Age reports that Abbey Tax submitted a Freedom of Information request (FoI):

"How many accountancy firms have been subject to a business record check?"

HMRC were unwilling/unable to provide an answer.

The reason, if HMRC is to be believed, is that it would cost more than £600 to go through the data.

Does this mean that HMRC do not have decent records that are easy to analyse and access?

This being the case, should HMRC not get its own house in order first before subjecting SME's to business records checks?

Tax does have to be taxing.

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HMRC and Tax Avoidance

2012-02-13T11:25:00.000Z

HMRC has rewritten its guidance to the disclosure of tax avoidance schemes (DOTAS) regime.

Although the number of schemes reported has reduced over the years, the government (ironically) is concerned that some avoidance schemes seem to be slipping the net (avoidance is of course perfectly legal).

Taxjournal reports that Graham Aaronson’s report on the merits of a general anti-avoidance rule (GAAR) concluded that "purposive interpretation [of tax legislation], specific anti-avoidance rules and DOTAS are not capable of dealing with some of the most egregious tax avoidance schemes".

Why does HMRC want to know tax arrangements, who has used such arrangements and how they work?

HMRC answer the question thus:

"On its own the disclosure of a tax arrangement has no effect on the tax position of any person who uses it.

However, a disclosed tax arrangement may be rendered ineffective by Parliament, possibly with retrospective effect."

Retrospective legislation is a step on the road to dictatorship, and the government would be advised to steer clear from that particular course of action.

Moreover it is more than a little surprising that HMRC and the government are still pushing the anti avoidance message, given that both HMRC and the government support tax avoidance eg:

- Ed Lester

- Deepak Singh

- Vodafone/Goldman Sachs

- Vodafone (again!)

Hypocrisy from the government and HMRC?

Surely not?

Tax does have to be taxing.

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HMRC Disputes Redknapp Costs

2012-02-10T09:51:00.000Z

HMRC have described as "nonsense" reports that it has spent £8M on the Harry Redknapp case.

HMRC claims that the costs of the five year investigations into Mr Redknapp, Milan Mandaric and Peter Storrie cost less than £300K, while Crown Prosecution Service costs were almost £1M.

Does this ring true?

Not really, as the BBC notes the cost of the trial to the public purse will have been far higher than just the cost of HMRC's investigation because of the costs of bringing the cases to court.

I would also note that an investigation of this length and complexity would have involved quite a few HMRC man hours. Although HMRC do not "charge" per hour, there is of course the internal opportunity cost of working on a specific case.

Let us assume that only one person (a senior manager) in HMRC ever worked on this case (a ridiculous assumption), and that his/her time was valued (in terms of internal opportunity cost) at £300 per hour (professional firms charge out rates are far higher than this for senior managers).

Using HMRC's £300K figure this would equate to 1,000 hours (before expenses), or (assuming an 8 hour day) 125 days.

It seems a tad "light" on the hours for a five year high profile investigation to me.

However, maybe they really only did spend 1,000 man hours on this?

Tax does have to be taxing.

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Tax Avoidance Hypocrisy - GOD Approved The Ed Lester Deal

2012-02-10T09:29:00.000Z

Documents obtained by Exaro show that Sir Gus (now Lord) O’Donnell (GOD), as cabinet secretary and head of the civil service, approved Ed Lester's special pay deal.

It also seems that Danny "Beaker" Alexander, chief secretary to the Treasury, was informed of the plan, although he has said that he was unaware of any potential tax benefit to Lester.

Tax does have to be taxing.

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Je Ne Regrette Rien

2012-02-09T10:42:00.001Z

Following yesterday's acquittal of Harry Redknapp and Milan Mandaric and the failure (at a cost of £8M) of HMRC to win their argument that Redknapp and Mandaric had evaded tax, there has been something of a falling out between HMRC and the City of London Police.

The Telegraph reports that the City of London Police have laid the blame for the failure at the door of HMRC.

The City of London Police issued a statement:

“The case followed an HMRC investigation, which began after an earlier City of London Police inquiry identified possible tax related offences and referred the matter to the HMRC.

City of London Police respects the verdicts of the jury.

Officers will sometimes uncover evidence of potential tax offences, which we will pass on to the HMRC. We have supported the HMRC throughout this investigation and will continue to work closely with them in the future.”

HMRC, for their part, stated that they regretted nothing. Chris Martin, assistant director of criminal investigations at HMRC, said:

"We have no regrets about pursuing this case because it was vitally important that the facts were put before a jury for their consideration.

We accept the verdict of the jury but I would like to remind those who are evading tax by using offshore tax havens that it always makes sense to come forward and talk to us before we come to talk to you.”

Given that Redknapp and Mandaric have been acquitted of tax evasion, why are HMRC still implying that tax evasion took place and using the trial as a warning to those who actually evade tax?

Tax does have to be taxing.

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Up Pompeii! - Redknapp Cleared of Tax Evasion

2012-02-08T11:44:00.000Z

Spurs manager Harry Redknapp and former Pompey chairman Milan Mandaric have been cleared of tax evasion charges.

HMRC were after £189K of allegedly evaded taxes. However, the cost to the taxpayer of the trial was around £8M.

Milan Mandaric was also tried and acquitted of another tax evasion charge at Portsmouth.

Tax does have to be taxing.

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Quelle Surprise

2012-02-07T10:33:00.000Z

Seemingly the Treasury was "surprised" to learn that £10.9 billion of unpaid tax had been written off by HMRC in 2009/10.

PAC expressed "surprise" at the Treasury's "surprise":

"We were surprised to find that did not have a grip on trends in some key areas of risk or plans for managing them."

I must admit to being "surprised" as well, given that the Treasury is meant to have a grip on HMRC and things financial.

The Treasury spokesman said:

"HMRC collects almost all tax debt and write-offs are relatively low.

What's more, around 90% of those write-offs are due to insolvency where further debt pursuit is actually barred by law."

Anyone else care to express "surprise"?

Tax does have to be taxing.

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HMRC Backtracks On SME Spot Checks

2012-02-06T10:52:00.001Z

In January I wrote:

"The New Year is upon us, and already HMRC has been flayed by certain MPs and the Federation of Small Business (FSB) for harassing small businesses.

The cause of the outpouring of ire are the plans drawn up by HMRC for conducting spot checks on the paperwork, going back several years, of up to 20,000 firms as from April.

Ironically, as per an article I wrote in September, the original target was 50,000:

" HMRC have reduced their target for checking business records down from 50,000 to 20,000.

However, for reasons best known to HMRC, they are describing this reduced target as an "extension" of the scheme.

For good measure they also claim that the record checks are in the businesses best interests .."..."

I also noted that HMRC "appear to be backtracking on the plans."

Well blinkey blonkey blimey, here we are in February and lo and behold HMRC have indeed backtracked on the plans.

Following the public drubbing of the scheme, HMRC will now postpone making new appointments to check firms’ records until early in the 2012/13 financial year. In the meantime, HMRC will attempt to implement the recommendations of the review into this tainted and ill thought through scheme.

Let's see how that goes then!

Tax does have to be taxing.

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EU Refers UK To ECJ

2012-02-03T10:51:00.000Z

Taxation reports that the European Commission will refer the UK to the European Court of Justice for abolishing the law concerning the remedy for repayment of taxes paid in mistake, without proper transitional rules.

EU legislation states that taxes that must be reimbursed, when they have been levied in breach of EU rules, should be repaid according to the national regulations on internal tax reimbursements.

The UK retroactively abolished one of the remedies used by taxpayers seeking reimbursement of taxes paid in breach of EU law. However, no proper transitional rules were provided, except in certain limited circumstances.

The result being that it became almost impossible in certain cases to exercise the rights conferred by EU law.

Naughty naughty!

Tax does have to be taxing.

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Tax Avoidance Hypocrisy - Deepak Singh

2012-02-02T12:16:00.000Z

Oh gosh how surprising, you know how I said earlier this morning in relation to the Ed Lester tax avoidance debacle, that others using tax avoidance schemes would be outed in the coming days?

Well here's one I told you about (relating to an HMRC employee no less!) in July 2010:

"Congratulations to HMRC's ex Chief Information Officer, Deepak Singh, who according to ifaonline was paid £149,500 by HMRC to work three months (June 2009 - September 2009) after his leaving date.

Singh's 3 year (£160K per annum) contract ended in June last year.

However, HMRC persuaded him to stay on for another 3 months in the guise of his consulting company Orwell Consulting.

In the private sector, when headcounts are being reduced, a well known "fiddle" is to sack someone then rehire them as a consultant (thus avoiding them appearing in the headcount figures).

Needless to say, I am sure that this was not the intention or the case here.

One rather nice little benefit for Singh of this arrangement, is that he is only liable for corporation tax of up to 28% (editor update: I have subsequently been advised that the rate was in fact 21%) on his earnings for these 3 months, compared with the higher-rate of income tax of 40%.

I have no problem with tax avoidance. However, HMRC claims that it disapproves of it (when dealing with non HMRC staff)."

My oh my, this is proving to be a right old clusterfuck of hypocrisy isn't it?

More outings soon!

Tax does have to be taxing.

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Tax Avoidance Hypocrisy - The Ed Lester Debacle

2012-02-02T09:48:00.000Z

As we all know, the government is skint. Therefore over the last year or so the government and its bureaucratic arm, HMRC, have been doing their best to promote the idea that tax avoidance (which, unlike tax evasion, is perfectly legal) is somehow akin to tax evasion and morally wrong, and have attempted to whip the media up into a moralistic crusade against avoidance.

In January this year Cameron said the following:

"I think we need a tougher approach and one of the things we’re going to be looking at this year is whether there’s going to be a more general anti-avoidance power that HMRC can use, particularly on very wealthy individuals."

This of course is rather hypocritical, given that many MPs sit on boards of companies that operate tax avoidance schemes.

Anyhoo, imagine my amusement last night when coming home from the pub and settling down to watch Newsnight only to discover that the government and HMRC have happily signed off on a tax avoidance scheme.

Ed Lester, the CEO of the Student Loans Company, is happily receiving his £182K per annum without deductions for tax or National Insurance.

How?

He is using a tax avoidance scheme, whereby his pay is is transferred gross to his private service company, which has been signed off by HMRC!

This is the same HMRC that has been bleating that tax avoidance is somehow morally wrong!

In classic damage limitation mode, feigning surprise and shock, Danny "Beaker" Alexander has ordered an inquiry. Rather pointless given that the state signed off on this deal, ie the state knows about it.

Beaker claims that he was "not made aware" of the potential tax benefits to Mr Lester when he approved his appointment and salary levels.

Bollocks!

Mr Lester's deal was signed off by Universities Minister David Willetts and was passed to the Chief Secretary to the Treasury Danny Beaker Alexander for approval because his salary was above the prime minister's pay.

By the way, those in government and HMRC who are claiming that this is a one off had better take a stress pill or two, there will be others outed in the coming days who also have a similar arrangement.

Hypocrisy from the state and its bureaucratic arm (HMRC), who would have thought it?

Therefore, despite the bleating by HMRC and the anti avoidance campaign pushed by the state and HMRC, have no qualms about using tax avoidance schemes; the fact that the government and HMRC signed this one off shows that they perfectly happy that people use them, they just don't have the guts to admit it.

UPDATE

In the fallout from this clusterfuck of hypocrisy, the government has just announced that Ed Lester will now have his tax deducted from his income at source!

Tax does have to be taxing.

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HMRC Clarifies Year End Extension II - Tax Credits

2012-02-01T12:39:00.002Z

HMRC have issued a further clarification about the year end extension to 2nd February.

This clarification relates to tax credits.

The ICAEW reports the following from HMRC:

"...‘We can confirm that the same principle will apply as for Self-Assessment customers, that is tax credits customers who renewed their claims in 2011, but have only given estimated incomes, will also not be disadvantaged if they call with their actual income on 1 or 2 February.'

Claimants who renewed their tax credits at the first deadline, 31 July 2011, but who did so using an estimate of their 2010/11 income, had until 31 January 2012 to supply details of their actual income. For example, a claimant might have used an estimate of income if they were self-employed and did not yet have final 2010/11 accounts in time for 31 July 2011.

The 31 January deadline is also an important one for those people who have not yet renewed their tax credits for 2011/12 – it may still be possible to make the renewal."

Tax does have to be taxing.

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Reasonable Excuse - I Was Deducted By Aliens

2012-02-01T10:46:00.000Z

As the 2nd of February extended deadline approaches, HMRC have tweeted that 445,000 returns were filed online yesterday, there will be those who will miss this deadline.

Some of those who miss it will have a reasonable excuse, whilst others will not.

Therefore I was amused to read in The Telegraph some of the more "unusual" excuses proffered by those who have missed past deadlines:

- the dog swallowed the envelope
- I had it in my back pocket and the wife put my trousers in the wash
- I was just about to send in the return when I was abducted by aliens.

As "imaginative" as the above may be, I don't think they stand up to rigorous analysis wrt "reasonableness".

Tax does have to be taxing.

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HMRC Clarifies The Year End Deadline Extension

2012-01-31T14:14:00.000Z

In case you were confused by the recent announcement of a 2 day deadline extension by HMRC, HMRC have issued further clarification.

HMRC have emphasised that this is not actually an extension of the deadline, since this would have required legislation to implement an extension.

Instead HMRC is using its ‘collection and management’ powers, which allow it not to collect sums that are legally due if it would not be cost effective to do so.

In this case, people affected by not being able to contact HMRC with queries on 31 January, who then can’t file their returns, could appeal against the penalties on the grounds that they have a ‘reasonable excuse’ for being late so no penalty would be due in the end.

The cost of this exercise to HMRC would outweigh the penalties that might be due from the small number of people who might file late anyway on 1 and 2 February without a reasonable excuse for being late.

Everyone clear now?;)

Tax does have to be taxing.

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Click the link to read about: Tax Investigation for Dummies

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Hanging On The Telephone - How Long Have You Spent?

2012-01-31T11:50:00.000Z

Today (tax deadline day) up to 20,000 members of the Public and Commercial Services union working in HMRC will strike, in opposition to planned call handling trials where HMRC will use two private sector companies.

As a result of the strike HMRC, although keeping the 31 January deadline for online filing of self assessment tax returns, have added a 2 day "grace period" to 2 February to allow more time for taxpayers seeking help in completing a return. Tax returns filed on 1 or 2 February will be treated as having been filed on 31 January.

Anyhoo, today's reduction in call centre functionality provides an opportunity to hear from anyone who believes that they hold the "record" for spending the longest on the phone to HMRC waiting for their call to be answered.

I already have two contenders for this record. One loyal reader informs me that he spent 48 minutes waiting for his call to be answered, whilst another had several bites of the cherry:

"Trying to contact HMRC by phone.

Been cut off three times after waiting for someone to answer for over 45 mins, in all cases.

Just holding on for 'an adviser to be with me as soon as possible' for just over 26 mins now.

Help.

Need to make an appointment with local HMRC centre. They will not speak with me unless appointment is made by phone.

No one seems available to answer the phone in order to make the appointment!!!!"

Anyone care to top that?

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

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"

Das Boot

2012-01-30T10:22:00.000Z

Let's start the week with a little light reading about HMRC boarding a U-boat last Thursday and arresting its "captain", wrt allegations over a £1M VAT fraud.

The Yorkshire Post reports that officers from HMRC boarded "U-8047", a converted barge which is tethered to a jetty behind the Royal Armouries museum in Leeds, and arrested Richard Williams its "captain".

Officers then conducted a detailed search of the U-boat, examining fittings and artifacts of the floating museum.

The early morning raid (part of Operation Cloudcastle) was carried out by investigators from HMRC, assisted by UK Border Agency officers and local police.

Mr Williams, aside from "commanding" a U-boat, also once built a Star Trek Enterprise “bridge” in his front room.
Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

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"