Thursday, 17 December 2009

More on catching the tax dodgers

It was announced last month that HMRC's New Disclosure Opportunity deadline for those with undeclared offshore assets to come clean has been extended from 30th November 2009 to 4th January 2010. This is no doubt because rather fewer delinquent “customers” have come forward than Permanent Secretary for Tax Dave Hartnett hoped, despite the prospect of much more serious penalties for those who are caught or come forward later.

HMRC has also revamped its process for receiving anonymous tip-offs concerning tax evaders, details of which are here. To be truly anonymous, one would suppose that many would baulk at filling in an on-line form, given that web masters can generally see the IP address of whoever logs in to a web page; that is if they really want to. Similar identification issues would deter people from sending faxes.

I have a vision of the other choices:

1.Telephoning the 0800 number, remembering to withhold the caller's number, and then speaking in a hoarse whisper to drop the malefactor in it.
2.Sending an anonymous missive either with letters cut out of newspapers and stuck on to another sheet of paper, or longhand notes in purple or green ink, signed “Well-wisher” or “Bystander”.

The mind boggles, or at least mine does, but that may be the effect of Christmas being nearly upon us and my having done far too many Tax Returns for my own good.

© Jon Stow 2009

Saturday, 12 December 2009

Fairer and more reasonable - equitable liability survives

Not all was bad news in the Pre-Budget Report. I wrote in September about HM Revenue & Customs' intention to abolish the practice of Equitable Liability. I said that if HMRC thought they did not have a legal basis for this discretionary power then legislation could correct this. Mr. Darling is to introduce just such a measure.

I think this is a rare victory for the taxpayer and I congratulate Keith Gordon for his campaign and petition which I feel must have contributed to this change of heart.

Dodging the Excise Men – encouraging a tax evasion society

In my business we frown upon tax evasion. It is our duty to uphold the law through helping our clients in their self assessment of their income, profits and their company accounts. We have to tread a firmer line than Joe or Jo Public, though unrepresented taxpayers may make mistakes in the Revenue's favour as well as their own. It is my experience that they do.

This week we have seen further hikes in taxation, principally through National Insurance and more obviously the return to 17.5% VAT. Personal Allowances are frozen for next year, so there will be some increase in the tax take through fiscal drag if there is any inflation in the interim. We will have to see. The Government has to balance the books having borrowed and spent so much on the banks and on the reduction in VAT this past year, the latter with no perceivable effect on the economy as many of us predicted in November 2008. It has to be paid for, and the full horror of the eventual deficit has yet to be revealed, and will only be known after the election next May, when either the Tories will be biting the bullet amidst squeals, or New (Old) Labour will have to come clean.

In the past, the higher the level of taxation, the less actual tax take. The lower the rates, the higher the honesty level and the better the tax take. This was seen notably in the tax-cutting eighties in the UK and especially under Reaganomics in America when the IRS profited greatly from lower rates of taxation.

People are going to be much less willing to pay their legal dues and HM Revenue & Customs do not have the resources to enforce payment through more investigation. I am not sure they even have enough resources (people) good enough to deal with the Liechtenstein Disclosure Facility. If you want a steady flow of anything including tax, you need a reliable channel. If you hike up tax, especially with HMRC's technical staff pared to the bone it is like trying to collect rainwater in a cup. In a deluge your cup will overflow. Most of it will escape. You need a measured channel and that means a more prosperous economy with a population willing to pay tax rather than driving more people into dishonesty to feed their families.

I think we will inevitably see a return to more dodgy dealing, and it will become popular like the public support for smugglers against the Excise Men in the eighteenth and nineteenth centuries. You will get more questions in shops such as “Do you want a receipt because I will have to charge VAT? Can you give me cash?.” and we know into whose back pocket those notes will go. The trouble is the tax which should have been paid by the trader will be coming out of your and my back pockets instead. How can we have got back to the bad old days?

© Jon Stow 2009


Smugglers and Excise Men
Liechtenstein Disclosure Facility

Sunday, 6 December 2009

Quasi prospects, time-wasters and an experiment in human nature

Sometimes we know what is going to happen but we just carry on anyway to see if we are right, even if we get nothing out of it except the satisfaction of being prescient. So it was the other night when events unfolded as expected.

It began with a telephone call from the wife of a former client whom I had dug out of a big hole he had got himself into. She said she was starting a business and was worried about tax issues. Could I visit her? “The initial consultation is free isn’t it?” I already knew how the cards would fall as I confirmed there was no charge for the first meeting. “How much will you charge for my tax return and accounts?" I told her a figure if her records were in good order.

My caller then asked for an evening meeting not before 7:30 to 8 and only on certain days; very inconvenient for me, but I do normally try to accommodate people. I ended up seeing her after a long day with other clients and frankly wishing I could put my feet up.

I had a long discussion with her about this and that. I did not give too much away in terms of free tax advice (I am not that daft) but did give a fair number of tips about starting in business, networking, and recommendations for SEO experts (mentioned Nikki Pilkington) and was generally helpful. She then asked me how she should keep her accounting records for me, on which of course I advised her.

She then asked me whether I could reduce my quote given on the telephone as she did not have much money yet (she had spent four times as much as she needed to on a new computer). I said that my figure was very reasonable for my excellent service. She then said that she would try to do her first accounts and return herself and thanked me for my time. I was able to make a joke as I left, because after all, I was only acting in a play and knew how it would end.

One puzzle is that I do not understand why people cannot see obvious value in good services whilst overspending on shiny gadgets they do not need. However, the real mystery is how people who have no intention of buying deliberately try to suck what they can from those around them without any intention of giving anything in return.

I had put myself out to attend the meeting just to see if my instincts were still on the button but I will avoid getting myself into the same situation anytime soon as it will spoil my average. Normally I only have warm leads anyway but I count this as only about the third time I had failed to “close” a tax client in half a dozen years. It was worth the time cost, though, in terms of this experiment in human nature.

© Jon Stow 2009