Hartnett, HMRC and Hutber's Law

A non-resident's outlook

My sort of tax practice involves quite a lot of technical issues. It is not necessarily because I look for trouble, but because I specialise in certain more complicated areas of tax and people come to me because they are in trouble. That doesn't necessarily mean they are in trouble with HMRC (The Revenue), though they may be. It is quite often because they are having trouble dealing with HMRC because they cannot find anyone in HMRC who understands their problem, let alone is able to help them find a solution.

Recently I had an issue with a non-resident client whose pension suddenly started to be taxed because HMRC did not understand it was not taxable by reason of there being a Double Taxation Agreement in place. Some innocent in HMRC had issued a PAYE Code and decided that the client, who had no taxable income in UK should fill in a tax return. Persuading HMRC to leave the client alone took a lot of time, telephone calls and a tax return completed showing no taxable income. It really was the only way.

Last week, I had an issue with another client whom I believed to be non-resident by both past and current evolving standards. I wanted to telephone the HMRC Centre for Non-Residents as it is now called, which is in Liverpool. I could not find the number on HMRC's website. I called the general agent's number and was told that the only way for a non-resident or his or her agent to discuss that person's affairs was to call the public's HMRC call centre number.

Even then (this is hard to believe even for an old hack like me) apparently the Centre for Non-Residents does not take telephone calls. One has to ask to be referred to a technical officer who will call back and may be able to help.

Actually a technical officer did call me back, so this cost me only time (but time is money) as my telephone calls are all inclusive in the business package. However, to get through in the first place I had to go through an automated button pushing system, the first with three options and the second with six, so I had been on the line a while before I spoke to my first human. Suppose I has been a non-resident UK taxpayer by design or HMRC's default, calling from Tuvalu or Patagonia. How much would it have cost hanging on? Would a technical officer have phoned back anyway?

It is very difficult to pick up the telephone and be put through to anyone at HMRC who knows about tax rules. It would be almost impossible for a lay person to get through to the right tax official. Yet HMRC and Dave Hartnett like to call taxpayers “customers”.

Back in the Seventies, the late Patrick Hutber, City Editor of the Sunday Telegraph, stated his law “improvement means deterioration” referring to changes in services which large corporates said streamlined their services. One of those was not letting bank customers have back their cancelled cheques, still a source of irritation to me. Yet HMRC won't let their technical staff be contacted by the public. Indeed they now have only two addresses where one might write about a new issue which has cropped up and therefore there is no way of tracking where your letter might be until or unless you get a reply. That is no way to treat customers.

If Patrick Hutber were alive today he might, after re-stating his law, refer to an older one in the language of my aforementioned client who wrongly had tax deducted from her pension “Plus ça change (plus c'est la même chose)”. The more things change, the more they stay the same.

You CAN talk to real people at HMRC

Image via WikipediaJanuary is not my favourite month from the perspective of Self Assessment Tax Returns, though fortunately I avoid maximum stress by not taking on every last-minute prospect, giving my procrastinator clients an early “last warning” and not doing hundreds of tax returns anyway.

The biggest problem in January concerning Self Assessment is in speaking to HMRC employees in call centres who know only what is on their screens, are unable to make decisions on specific requests, don't necessarily have the information we want or are not authorised to give it.

Contrast this. I had occasion to call a Corporation Tax Office this week. The officer was helpful, we did not have a pointless barrage of security questions, she was exceedingly helpful and she changed the tax return periods while we spoke just as I asked. She was maybe a little brusque with a rougher telephone manner than one would get from the call centres, but she did the job and left me feeling happy. Above all, she did not waste my time but helped me solve a problem.

It may sound trivial but it proves to me again that organisations get better results and are more efficient if they empower their employees. I wish this ethos were prevalent throughout the leviathan that is HMRC.

What is your experience?

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.

Bank's poor service costs its customers dear

Image via WikipediaI have High Net Worth (HNW) clients, and they are very important to me. They present more of a challenge and provide more variety in their tax affairs. Generally they are appreciative of the service they get and also they pay my bills promptly. All my clients are created and treated equally, but I am sure that I can be forgiven for saying that some are more rewarding to deal with.

Banks apparently treat HNW customers no differently from the rest of their customers. They may give their service a different title such as Private Banking or Premier Banking, and in theory HNW customers might have a real person allocated in a branch whom they can talk to, but when it comes to the important things they seem to be in the same boat as everyone else.

I have had considerable trouble with one bank (light blue eagle emblem). Some years ago a client had an enquiry into her tax return when apparently the bank had failed to advise her of all the deposit interest she had received and consequently it did not go on the return. This was despite the bank's assurance they had found details of all interest arising to the client. It turned out that where an account had been closed before 5th April it did not show up on their list and consequently the interest was not notified to the client. If the account had been opened within the past year neither the customer nor the agent would be looking for interest details since the account would not have had interest to declare in the earlier year.

Now it has happened again even though I wrote three letters to the Bank last year and the client eventually had to make a special journey to the branch to get the relevant information. Somehow, and quite properly, the bank always manages to advise HMRC concerning all the accounts, but not the recipients of the interest, their own customers.

My client is likely to face a penalty and certainly interest on tax which should have been due last year. She cannot be expected to know whether the figures the bank gives her are complete when they open and close “bond” accounts with such frequency, and an aspect of being wealthy is that there is much more to keep track of and that is why HNWs pay extra to have people manage their affairs. Despite her Premier Banking plainly the bank does not deliver.

Of course the client and I will complain. The bank will apologize and then very likely will re-offend, and it will be so difficult to spot the offence until the letter from HMRC drops on the mat.

Do you have the same trouble with the banks? How do you deal with it?

© Jon Stow 2010

HMRC's stealth taxation through technology

The Revenue is introducing a new requirement to force agents to submit company accounts on-line in XBRL format from April 2011. Let me quote from their website:

“Company Tax Returns and XBRL

XBRL stands for Extensible Business Reporting Language, which is an international standard designed for business financial reporting.
At the moment accounts and other attachments to online CT600 returns can be sent in PDF format. From April 2011 (and for all CT600 returns due after 31 March 2011) we expect that all CT600 returns will have to be sent online, and will have to include attachments using the XBRL format.
You don't have to wait till 2011 to change to XBRL, and we recommend you consider doing so before it becomes mandatory. Later in 2009-10 HMRC intends to introduce a CT filing product which uses XBRL (this will be aimed at smaller, unrepresented companies), and to introduce a new main CT Online service. Other software developers have introduced or are working on products which use XBRL.”

I find this very news disappointing, especially with the short time-scale. I assume that behind this is an intention to make company accounts more accessible to staff within HM Revenue & Customs, and will help their cost-cutting. The justification is the report by Lord Carter on HMRC on-line services amongst other things. Lord Carter had to revise his proposals on individual taxpayers' Self Assessment deadlines following a furore back in 2006 that they were impractical. It would be useful if we could have just a little more time to make the change.

Self Assessment itself was introduced as a cost-cutting exercise, though it increased the cost burden of compliance for taxpayers.

The effect of the new requirement for XBRL format is to transfer further costs to taxpayers. The increase in software costs for tax agents will either have to be passed on to clients or the agents will have to bear them. No doubt the specialist tax software providers will have their developers working furiously to be ready for 2011 and they will need to charge the end user. Unfortunately the change will amount to a stealth tax even on those businesses which are not in profit. I believe in value billing, but increased overheads in software costs do not provide value for the agent or the end-user business. It is very difficult to provide the best value to clients whilst having to dance to the Treasury's discordant tune.

© Jon Stow 2009

Have you submitted your Tax Return yet?
On our bikes
Exemplary Consulting for Business Support
Follow me on Twitter

More in sorrow than in anger - Jobcentre bully

I heard something this week in the course of business that really upset me, and it has spared you, until I get around to it, a commentary on what activity might constitute trading and what might not.

I saw one of my clients this week to collect her books and those of her husband as they are both self-employed. Mrs. Y works with children. Times have been hard and generally people do not want to pay for luxuries and extras even for their children; hence Mr & Mrs Y as I shall call them have both been struggling and Mr Y had been unable to find any new assignments for a period. Fortunately his attributes have now landed him a decent engagement.

During the period of famine in the household my clients went to the Jobcentre Plus in the locality to apply for Jobseekers Allowance for Mr Y and for Housing Benefit since they have a mortgage to pay in addition to Council Tax etc. Mrs Y was required to produce her last accounts, prepared by my firm. The Jobcentre person looked down the profit and loss, or I should say, income and a lot of expenditure. She said “Of course I have to take these with a pinch of salt. Accountants produce figures to most suit the client. I cannot take into account some of these expenses” and she struck out the rent Mrs Y pays for her workspace used once a week in which to teach her pupils. This is the biggest expense, of course. Mrs Y told me she was shocked. Of course she was. When she related the story, I said “Why ever didn't you call me to ask me to speak to this person?” Mrs Y said that she felt the whole experience of dealing with the Jobcentre person was so humiliating that she did not want to prolong it by taking the matter up. She was clearly even now, months after this interview, quite shaken up.

Well, as I said, I am upset. Firstly, my client has been treated very badly by an intimidating and ignorant public servant. I know (because after a time in our business you get a nose for “dodginess” in people) that Mr & Mrs Y are completely honest, straight and decent people who do not deserve this treatment. Then again, I feel insulted on behalf of all tax advisers and accountants. The accounts were true and fair and every item was accounted for, backed by advices and receipts including obviously the rent arbitrarily “disallowed” by the aggressive woman in the Jobcentre, and of course all reconciled to my client's bank statements, paying in books and cheque stubs. I hardly need to spell it out except that I still cannot get over the attitude of the person.

In the end, despite my righteous anger at the aspersions cast at me, the worst aspect is that my clients have been deprived of benefit that is properly due to them as good taxpayers all these years. This sort of thing may be going on up and down the country for all I know. I wish my clients would make a complaint and I would back them all the way, but they would rather stay away from nasty officialdom, and I cannot say I blame them.

© Jon Stow 2009

HMRC and customer service

I wrote recently about Government and in particular HMRC disenfranchising the non-technical population. It is a sad situation, and it means that some perfectly intelligent people and in particular those of an older age group, or perhaps those who work with their hands have to employ people like me to do tasks with which they could have coped if dealing in paper.

Because there is almost no one in HMRC with whom the ordinary population can speak who actually knows anything about tax, taxpayers just have to grub along or pay someone else. It gets worse as demonstrated by a visit I made to an older couple this week. Their problem was that another elderly relative had died and they had been left to administer the estate. They had been sent a Form R27 which, for the uninitiated, is a Return of income for the previous 6th April up to the date of death of the deceased, and which is completed by the Executors or Administrators of an Estate. The couple had filled in the form but missed out completing two sections. An Assistant Officer at HMRC had sent it back with the two sections marked with red crosses and asked the worthy couple to complete the details required. Of course they dud not have a clue which is why they had telephoned me.

Now in the good old days these Executors could have taken their papers and the form to the Tax Office and had help completing the form on the spot. Nowadays, even if they could find the person who penned the red crosses, he probably would not have had a clue either, which is why after a couple of months he returned the form with such an unhelpful letter.

I reckoned the repayment due to the estate was less than £100, but the couple had not collected all the information needed to fill in the R27. I dictated letters to the organisations concerned, which the wife took down in shorthand, and said that when they had received replies they would be able to complete the form and send it off. If they were still unsure they should call me.

I came away feeling unable to bill for my 45 minutes plus the short drive. I had done the tedious Money Laundering check because that is obligatory but by the time I had done an engagement letter, written the letters myself and dealt with HMRC I would have done far more work and costs would have far exceeded the refund due to the very small estate. Effectively I had to treat it as charity work.

HMRC calls taxpayers customers, but customer service has become an alien concept. When I was a young tax junior you could track down anyone in the Revenue and get things sorted out over the telephone, which is no longer possible with the call centres.

Why should I have to do for nothing something HMRC cannot be bothered to do because it has changed itself into an even less friendly organisation than BT or my bank? Yes, those who cannot afford to pay for representation can go to TaxAid, but why should they have to, and though I am happy to help out, I think we tax advisers and agents are taken for granted and not afforded proper respect by HMRC. However, if they treat their customers like that, what do I expect?

© Jon Stow 2009