Thursday, 16 September 2010

HMRC cost -cutting will cost them dear

HM Revenue and Customs has announced that in future, where a taxpayer is represented by an agent, that agent will no longer receive copies of various forms. The forms which now only taxpayers will receive include PAYE Coding Notices (really helpful as this is an area of problems currently). Other forms and letters which taxpayers' agents will no longer have include:

  • Letter advising of a new Universal Tax Reference and advising that a Tax Return will have to be completed in future.
  • Letter advising that a Tax Return will not be required in future.
  • Tax calculation form showing HMRC's computation of the annual liability. 
HMRC thinks that they will save £1.25M in making this change. Of course in terms of paper and postage this may be true, but how much time in terms of telephone calls from agents will they waste when the taxpayers have failed to pass on the forms or in respect of Codings which should have been adjusted, but were not, due to a breakdown of communication between client and agent?

HMRC likes to refer to taxpayers as “customers”. We always say that if we taxpayers were customers we would take our business elsewhere. If we were really customers we would be contemplating loss of customer service without a cut in our charges. Anyway, in the end it is one more cut in HMRC which will make them more inefficient at a time when a few more properly qualified staff could actually bring them more money in. At the same time there is more cost and inconvenience to the public

I am all for cutting waste. It seems very short-sighted to make cuts which will end up costing more money and making communication harder. Are HMRC so deep in their dark tunnels that they have lost touch with the real world? It often seems like it.
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PAYE corrections: tax advisers as spectators

It might be thought that the audit of the PAYE system which has brought to light the overpayments and underpayments of tax under PAYE would bring in work for accountants and tax practitioners. This is not going to happen.

Overpayments of tax will be refunded by HMRC automatically. Those who have underpaid will fall into two categories. The first will be the people who knew their Codings were likely to be incorrect because they actually looked at them when the brown envelopes came through the post. Any anomalies will be because the benefit figures were wrong or the tax rates or allowances were wrong because there was a second job or a change in circumstances. It is likely that those who did not correct Codings which were wrong hoped that HMRC would not notice.

The second category will be those ostriches who never looked at their Codings. They will still not look; they will shrug their shoulders when they get notification of an underpayment.

Neither category of taxpayer will want to appoint an agent to manage the situation. It would be adding insult to injury to have to pay someone a fee when they already have to cough up some more tax. Anyway, in general it would not be worthwhile for agents to take anyone on as a client to look at their coding history. The fees which could be charged would not be sufficient to cover an agent's costs. Most of the people affected would not have a Universal Tax Reference (UTR) as they would not be filling in Tax Returns. That would mean that authorisation would have to be done with a paper application which would probably take three months for HMRC to process, by which time the Codings issue would be water under the bridge,
None of we agents' existing clients will have a problem. They will have had Tax Returns completed for them. Any overpayment or underpayment will have come out in the wash of Self Assessment.

So we can only look on, shake our heads, wonder at the noise and know that those who have underpaid probably knew there was an issue as they hid their heads in the sand.
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Sunday, 12 September 2010

PAYE overpayments, underpayments and intrusions

This week has seen a media-whipped furore over the inadequacies of the PAYE system and I am not going to expand on what others have said. If you want a sensible summary of the position then please look here.

There are a couple of worrying things which go beyond the “failure” of HMRC's PAYE system. It has to be remembered that Dave Hartnett, the Permanent Secretary for Tax, who has taken a lot of flak for a slightly undiplomatic comment on BBC's Money Box is not a politician but a Civil Servant. If he were politician he would perhaps be more careful, but anyway he would gave been out of office with the change in Government if he had been simply in the pocket of Alastair Darling and more significantly, Gordon Brown. Of course in the longer term there might be a conflict with the new administration, but Mr. Hartnett has been in the higher echelons of HMRC for a while now.

The point is that the cumbersome PAYE system is not perfect. It is better than it was in providing information and that is how the discrepancies in tax collected have come to light. HMRC has been forced to make many spending cuts over the last few years, which can't have helped. These were mainly driven by Gordon Brown as Mr. Hartnett told a number of tax practitioners on the one occasion a couple of years ago when I had a chance to talk to him. If the system were perfect we would not be having a new consultation which is now in play to see how it can be overhauled.

Mr. Hartnett can be careless with his words as he was on the radio and perhaps when talking to us tax advisers a couple of years ago. He may be overly suspicious of motives behind questions as he seemed a little paranoid about the supposed involvement of all tax advisers in tax avoidance when he addressed the meeting I was at.

That does not mean that his privacy should be treated as a target by the media Yes, he is in charge of an important Government department, and should be more media-savvy. However, he didn't get to the top because he was no good. He was a successful Inspector of Taxes and was involved in a number of high profile cases on the Revenue's behalf. He is at the top because he is good and not because he is a politician.

I knew he lived in Hertfordshire because he told our group. I have no interest in his house or what cars his family owns. He is not a footballer or rock star who feeds off media interest and is seen as fair game for exposés (if anyone should be?). What he has, he has earned, but it is none of our business, and nor is it the business of a possibly fictional neighbour of his, quoted in a Sunday newspaper story.
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