We read here that Hazel Blears is to pay £13,332 on the sale of a second home. How is she going to do this? Presumably her accountants or tax advisers got the documentation right so that she successfully avoided a liability by making the appropriate election. The only way she can get HMRC to accept the money is by saying she made an error or worse, deliberately misled them. She will not be happy if they charge interest and penalties in addition to the CGT.
Perhaps she thinks the way to pay this voluntary tax is to just send a cheque. If HMRC cannot match the amount paid against a current liability, they will want to just send the money back. Remember that following the change in treatment of offshore income received by non-domiciled residents in UK, advisers on US tax told their UK resident clients that they should pay their tax due in the UK on US and worldwide income received in the period 6th April to 31st December 2008 before the end of December 2008 so as to have it matched with and set off against US tax due for 2008. The problem with this was that UK tax would not have become due before 31st January 2010, and HMRC's reaction was to try to repay the tax, thus defeating the object. Does Hazel know something we don't, or is this just political expediency without worrying about the consequences? I can guess, but answers on a post card please.
Update 14th May
Hazel Blears might have read my blog yesterday! I heard on BBC radio this morning that because HMRC would not be able to accept a cheque if they could not allocate it to a known liability (given that she has done nothing that she was not legally permitted to do), an official from HMRC was summoned to Westminster last night to accept the £13,332 on behalf of the Public Purse. I think it might have been better used if paid to a charity for the homeless. This is gesture politics at its worst, and really, you couldn't make it up, could you?
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Wednesday, 13 May 2009
Tuesday, 12 May 2009
Property flipping and knee jerk reactions
I must admit that the publicity about some Members of Parliament with two or more residences changing their designated main residence to one they are about to sell has me a little concerned because of all the publicity around it, and because of the public's ire. The principal residence capital gains exemption is there for good reason, and whilst as with any rule it might be possible to exploit it to one's advantage, the main purpose of electing as to which is the main residence is actually to prevent hardship or difficulty. Often people acquire a second property through the necessity, perhaps related to a job or through inheritance, and electing as to which property is the main residence avoids unnecessary debate with HM Revenue & Customs at a later date. If a large family home were to be treated inadvertently as the second property, then upon moving, a large tax bill might prevent the purchase of a suitable replacement with similar and adequate accommodation. There has to be a rule determining which property attracts the exemption. Of course the system might be manipulated, but it is not a “loophole” as many commentators have described it.
If it is thought that MPs or ordinary taxpayers are taking serious liberties with what amounts to serial property dealing, then HMRC can look at the background and might believe that they are participating in an “adventure in the nature of a trade”, the profits of which would be liable to income tax, so it is not sensible or true to say that the tax man or tax woman does not have some powers to clamp down. With all the publicity MPs have received, those who have abused the system more seriously may certainly expect to receive letters from HMRC, who read the newspapers like anyone else. I should be concerned if there were some sort of knee-jerk clampdown emanating from Gordon Brown or Alistair Darling which might catch and be unfair to the innocent taxpayer.
Any system can be used or exploited. Readers of this piece might be interested to read about the late Frankie Howerd's ex-partner using the new Civil Partnership legislation to avoid Inheritance Tax and pass his estate tax free to their “son”. It is very ingenious, but just because rules can be exploited and manipulated by the clever or even the unscrupulous does not mean that they are wrong in principal or have to be scrapped in favour of some onerous and unfair regime which is detrimental to the greater “innocent” population.
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If it is thought that MPs or ordinary taxpayers are taking serious liberties with what amounts to serial property dealing, then HMRC can look at the background and might believe that they are participating in an “adventure in the nature of a trade”, the profits of which would be liable to income tax, so it is not sensible or true to say that the tax man or tax woman does not have some powers to clamp down. With all the publicity MPs have received, those who have abused the system more seriously may certainly expect to receive letters from HMRC, who read the newspapers like anyone else. I should be concerned if there were some sort of knee-jerk clampdown emanating from Gordon Brown or Alistair Darling which might catch and be unfair to the innocent taxpayer.
Any system can be used or exploited. Readers of this piece might be interested to read about the late Frankie Howerd's ex-partner using the new Civil Partnership legislation to avoid Inheritance Tax and pass his estate tax free to their “son”. It is very ingenious, but just because rules can be exploited and manipulated by the clever or even the unscrupulous does not mean that they are wrong in principal or have to be scrapped in favour of some onerous and unfair regime which is detrimental to the greater “innocent” population.
Have you submitted your Tax Return yet?
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Monday, 11 May 2009
What's cooking with HMRC, MPs and networking?
It was interesting to meet HMRC representatives at the Essex Branch CIOT/ATT meeting last week, and they seemed a pleasant and friendly bunch. However, of the contingent of six (v attendance of only about 25 members) a couple had come all the way from Yorkshire to Chelmsford. I could not quite see how this was cost-effective.
I took the trouble to make notes, but cannot see on re-reading them that I really learned very much. One lady was able to assure us that they were working hard to improve the website, including the deplorable search function (generally it is better to tell Google to search the HMRC site) and to tell us that we practitioners had been re-labeled as “tax agents and advisers”, an unexpected re-branding from outside. Maybe they will stop calling their hapless taxpayers “customers” but the customer word was repeated during the meeting a number of times so any move from upstairs has not reached the grass roots.
I did get some reassurance that HMRC is still interested in the small fry compliance failures such as letting income, casual earnings and bank interest (historical interest at present in more ways than one) and that they were still keen on rounding up reluctant customers. This sort of work is welcomed by me for one, and I do not see why anyone should get away with not paying tax which should be due. I am all for tax planning and saving clients tax, but am definitely not in favour of tax evasion planning!
I sent out my tax newsletter out this week. The Budget was not very nice; in fact rather depressing, though I did avoid it by being away. Still, there was no escape from the email and I am thoroughly up to speed. I have little hope that the Finance Bill will be scrutinised any more than others in recent years. Frankly, there was little help for small business and and it seems unlikely that MPs even understand anything about trusts and the proposed 50% tax rate from next April. Still, they have the exposure of their expenses to worry about. Frankly, even many of their “justifiable” expenses paid by the Exchequer would be taxable in an ordinary mortal's hands. They are like anyone else entitled to indulge in property dealing, but please, not with my money. No names, no pack drill, but some of the shenanigans I have heard of these past few days might be treated as trading liable to income tax rather than capital gains exempt due to flipping properties within the private residence rules. Some of this might be beyond HMRC now in terms of enquiry windows depending on how it was all reported to HMRC at the time.
In May we are definitely into the new season of tax returns etc.. I do like to meet face-to-face as many clients as possible at least once a year. The two I met with last week are really both some of the nicest people I know and they cheered me up. I learned a while back not to work with clients with whom I felt the relationship was difficult because there is much less pressure if we like our clients and they like us.
I am always on the look out for more nice clients and am trying a couple of new marketing strategies including some positive networking with as much giving as possible. I will let you know how I get on. Maybe barbecue networking will catch on in the long hot summer the Met Office is forecasting?
Have you submitted your Tax Return yet?
On our bikes
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I took the trouble to make notes, but cannot see on re-reading them that I really learned very much. One lady was able to assure us that they were working hard to improve the website, including the deplorable search function (generally it is better to tell Google to search the HMRC site) and to tell us that we practitioners had been re-labeled as “tax agents and advisers”, an unexpected re-branding from outside. Maybe they will stop calling their hapless taxpayers “customers” but the customer word was repeated during the meeting a number of times so any move from upstairs has not reached the grass roots.
I did get some reassurance that HMRC is still interested in the small fry compliance failures such as letting income, casual earnings and bank interest (historical interest at present in more ways than one) and that they were still keen on rounding up reluctant customers. This sort of work is welcomed by me for one, and I do not see why anyone should get away with not paying tax which should be due. I am all for tax planning and saving clients tax, but am definitely not in favour of tax evasion planning!
I sent out my tax newsletter out this week. The Budget was not very nice; in fact rather depressing, though I did avoid it by being away. Still, there was no escape from the email and I am thoroughly up to speed. I have little hope that the Finance Bill will be scrutinised any more than others in recent years. Frankly, there was little help for small business and and it seems unlikely that MPs even understand anything about trusts and the proposed 50% tax rate from next April. Still, they have the exposure of their expenses to worry about. Frankly, even many of their “justifiable” expenses paid by the Exchequer would be taxable in an ordinary mortal's hands. They are like anyone else entitled to indulge in property dealing, but please, not with my money. No names, no pack drill, but some of the shenanigans I have heard of these past few days might be treated as trading liable to income tax rather than capital gains exempt due to flipping properties within the private residence rules. Some of this might be beyond HMRC now in terms of enquiry windows depending on how it was all reported to HMRC at the time.
In May we are definitely into the new season of tax returns etc.. I do like to meet face-to-face as many clients as possible at least once a year. The two I met with last week are really both some of the nicest people I know and they cheered me up. I learned a while back not to work with clients with whom I felt the relationship was difficult because there is much less pressure if we like our clients and they like us.
I am always on the look out for more nice clients and am trying a couple of new marketing strategies including some positive networking with as much giving as possible. I will let you know how I get on. Maybe barbecue networking will catch on in the long hot summer the Met Office is forecasting?
Have you submitted your Tax Return yet?
On our bikes
Exemplary Consulting for Business Support
Follow me on Twitter
Tuesday, 7 April 2009
Render unto Caesar...
One of the problems we tax advisers have is in dealing with people, generally as prospects, who simply don't want to pay any tax at all. Somehow, the current climate of cracking down on tax avoidance (legal) as well as tax evasion (illegal) seems to have passed by these people. Usually they go further: “Why should this Government get their hands on this money? I did not vote for them. They won't spend it wisely. It is immoral how much they try to take.” Now many of us have these sentiments, but those of us who are law-abiding and understand the law (which is the overwhelming majority) grin and bear it and pay our taxes.
There are ways of tax avoidance, and these days I find myself felling uncomfortable with aggressive contrived schemes, none of which I have recommended in recent years. Of course there are tax shelters we can all use, such as various types of pensions, ISAs, National Savings Certificates and Premium Bonds, to name but a few of the obvious approved devices. Let me know and I will find you a good IFA.
Every now and again though, these people of the alternative persuasion turn up. They may be ageing hippies come into money, or ageing hippies or anarchists who suddenly have an expectation of money, although no doubt they condemned the rich and their wealth when younger. Now some money might be about to fall into their hands, inherited from their careful parents, or from some capitalist scheme in which they are involved, or from damages they expect to get through the blame culture because they feel wronged, and suddenly it is a different game. The name of the game is greed, avarice, call it what you will, and their twenty-year-old selves would have been shocked if they knew what they would become.
I talk these prospects through their options, which for UK-based people with UK-based family histories are fairly restricted, they get all upset at not being able to keep all their money, and they spurn my preliminary advice because it is not what they want to hear. I never hear from them again, and to be quite frank that is a great relief.
“Render unto Caesar the things which are Caesar’s, and unto God the things that are God’s”
Have you submitted your Tax Return yet?
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There are ways of tax avoidance, and these days I find myself felling uncomfortable with aggressive contrived schemes, none of which I have recommended in recent years. Of course there are tax shelters we can all use, such as various types of pensions, ISAs, National Savings Certificates and Premium Bonds, to name but a few of the obvious approved devices. Let me know and I will find you a good IFA.
Every now and again though, these people of the alternative persuasion turn up. They may be ageing hippies come into money, or ageing hippies or anarchists who suddenly have an expectation of money, although no doubt they condemned the rich and their wealth when younger. Now some money might be about to fall into their hands, inherited from their careful parents, or from some capitalist scheme in which they are involved, or from damages they expect to get through the blame culture because they feel wronged, and suddenly it is a different game. The name of the game is greed, avarice, call it what you will, and their twenty-year-old selves would have been shocked if they knew what they would become.
I talk these prospects through their options, which for UK-based people with UK-based family histories are fairly restricted, they get all upset at not being able to keep all their money, and they spurn my preliminary advice because it is not what they want to hear. I never hear from them again, and to be quite frank that is a great relief.
“Render unto Caesar the things which are Caesar’s, and unto God the things that are God’s”
Have you submitted your Tax Return yet?
On our bikes
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Tuesday, 24 March 2009
March 2009 Tax Update and newsletter
As it is frowned upon to paste a blog in more than one place on the Web, please follow this link to the newsletter. I do hope you find it useful.
Tuesday, 3 March 2009
HMRC Roadshow Essex
The headline billing of the event I attended last week was as above, but upon arrival I was handed a brochure in which HM Revenue & Customs welcomed me to their Business Advice Open Day. The venue chosen, the Five Lakes Hotel was excellent, with plenty of room downstairs for the various stands as well as excellent conference rooms for the seminars going on throughout the day. We will gloss over the catering for which one cannot hold HMRC responsible.
I had heard on the grapevine that the roadshow was coming to Essex, but booked online using the information sent in a mail shot. In view of the very large number of attendees it was clear that the advance information and booking system had worked very well, for which credit should go to the organisers.
I am a tax professional, and the event was very much aimed at business in general, and small businesses in particular. Nevertheless, I have to say that I gained quite a lot from the day. Seven of the twenty-four stands represented various divisions of HMRC. They were promoting heavily their online services, and naturally encouraging businesses that had not yet taken the plunge to do so, highlighting the incentives and advantages. They had a stand where one could chat about VAT, and being a direct tax man myself I sounded them out on an issue which I had just started thinking about and had not got round to consulting an expert. The input was useful and the chap was very helpful.
HMRC also had stands for international trade (customs duties etc.), National Insurance and Research and Development Tax Credits, and one for the Olympics, the actual purpose of which I did not manage to ascertain, and for general advice. All the staff I spoke to were helpful.
Various other Government agencies were represented, from ACAS and Companies House through to local authorities and the Environment Agency. As one would expect, Business Link was very prominent, and they also ran some of the seminars. The non-profit concern Prime was also there, reflecting the reality that older people becoming unemployed need to consider how they might make a living in a hostile environment, perhaps becoming self-employed. Again, all the personnel on the exhibition stands were very helpful and I collected a lot of useful literature.
Turning to the seminars, I managed to fit in three. The first I went to was presented by a representative of the Intellectual Property Office. It was really excellent and the presenter is to be congratulated. The seminar was very informative and at a level designed not to blind everyone with science, and though I have been round the block, I learned quite a lot from it. It was made interesting by including a number of very brief examples of key points involving major companies of which we had all heard. It was really very good value for a 45 minute session.
The second seminar was frankly a demonstration of how not to do a presentation. The subject was “An introduction to Importing and Exporting”. It was a real “Death by PowerPoint” recitation, and rather than talking about the nuts and bolts of how to do things as was the IP talk, it consisted of listing the numbers of all the forms to be filled in at each stage of the process of importing or exporting, and frankly not much else. The tax rates on the slides were out of date, which seemed to surprise the presenter.
The last seminar I went to was from Business Link, and entitled “How to manage your business through a recession”. Wearing my critic's hat as a small business adviser myself, there was indeed some good generic material which would be useful and make people think. A few minutes were spent on dealing with the banks, and as the presenter was an ex-bank manager (of which there are going to be a few more) he did know what he was talking about. The Captain Mainwarings of today are useful people to know when you can get to talk to them. Anyway, this was a good presentation with useful information as to where to get further help, business coaching and training.
I enjoyed the day and HMRC deserve a good deal of credit for staging the event. They do need to use experienced and competent presenters rather than just experienced staff at their seminars, but maybe I am nit-picking at what was a very worthwhile exercise. If you have an HMRC Business Advice Day in your area, I recommend that you make the time to go.
Have you submitted your Tax Return yet?
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I had heard on the grapevine that the roadshow was coming to Essex, but booked online using the information sent in a mail shot. In view of the very large number of attendees it was clear that the advance information and booking system had worked very well, for which credit should go to the organisers.
I am a tax professional, and the event was very much aimed at business in general, and small businesses in particular. Nevertheless, I have to say that I gained quite a lot from the day. Seven of the twenty-four stands represented various divisions of HMRC. They were promoting heavily their online services, and naturally encouraging businesses that had not yet taken the plunge to do so, highlighting the incentives and advantages. They had a stand where one could chat about VAT, and being a direct tax man myself I sounded them out on an issue which I had just started thinking about and had not got round to consulting an expert. The input was useful and the chap was very helpful.
HMRC also had stands for international trade (customs duties etc.), National Insurance and Research and Development Tax Credits, and one for the Olympics, the actual purpose of which I did not manage to ascertain, and for general advice. All the staff I spoke to were helpful.
Various other Government agencies were represented, from ACAS and Companies House through to local authorities and the Environment Agency. As one would expect, Business Link was very prominent, and they also ran some of the seminars. The non-profit concern Prime was also there, reflecting the reality that older people becoming unemployed need to consider how they might make a living in a hostile environment, perhaps becoming self-employed. Again, all the personnel on the exhibition stands were very helpful and I collected a lot of useful literature.
Turning to the seminars, I managed to fit in three. The first I went to was presented by a representative of the Intellectual Property Office. It was really excellent and the presenter is to be congratulated. The seminar was very informative and at a level designed not to blind everyone with science, and though I have been round the block, I learned quite a lot from it. It was made interesting by including a number of very brief examples of key points involving major companies of which we had all heard. It was really very good value for a 45 minute session.
The second seminar was frankly a demonstration of how not to do a presentation. The subject was “An introduction to Importing and Exporting”. It was a real “Death by PowerPoint” recitation, and rather than talking about the nuts and bolts of how to do things as was the IP talk, it consisted of listing the numbers of all the forms to be filled in at each stage of the process of importing or exporting, and frankly not much else. The tax rates on the slides were out of date, which seemed to surprise the presenter.
The last seminar I went to was from Business Link, and entitled “How to manage your business through a recession”. Wearing my critic's hat as a small business adviser myself, there was indeed some good generic material which would be useful and make people think. A few minutes were spent on dealing with the banks, and as the presenter was an ex-bank manager (of which there are going to be a few more) he did know what he was talking about. The Captain Mainwarings of today are useful people to know when you can get to talk to them. Anyway, this was a good presentation with useful information as to where to get further help, business coaching and training.
I enjoyed the day and HMRC deserve a good deal of credit for staging the event. They do need to use experienced and competent presenters rather than just experienced staff at their seminars, but maybe I am nit-picking at what was a very worthwhile exercise. If you have an HMRC Business Advice Day in your area, I recommend that you make the time to go.
Have you submitted your Tax Return yet?
Follow me on Twitter
Friday, 13 February 2009
Casualties in the tax world
It seems there are a considerable number of people in the accountancy and tax world who have lost their jobs, and many more who will fear the axe. I was surprised to hear of a quite senior person who had left his Big Four job at a regional office having moved house and uprooted his family to move there. No matter what “leaving package” he has been given, the reality is that if he does not find another post soon his standard of living will fall and he and his family will have to draw in their horns. There are many people in the job market now in our sector and the over forty-fives will have great difficulty in finding jobs even after the recession recedes, though realistically that may not be for two or three years, even taking the more bullish view.
What will our redundant colleagues do whilst the economy bottoms out, and will they all find it harder to get back in in a profession where there is a culture of filling roles from younger and cheaper trainees rather than appointing the more experienced?
I wonder how smaller practitioners will be affected by new payers forced to come into the market as sole practitioners or small partnerships. In the online world this is easier than it used to be, but for those used to maintaining a good standard of living there would be considerable pain whilst building a practice against those of us who came into the market from the last accountancy recession. I think that many will be forced to go elsewhere and be more flexible.
I remain optimistic for my own business because it already “lives lean”, whilst providing a quality service, and there are only so many clients out there though there will be more start-ups as time moves on. For an established firm, it is important to maintain standards and market as well as we can. My firm had an advantage in that it was born at a time when there was only a downturn in the accountancy world. Now it is national and global. It is a sad situation when able people who have worked hard to be qualified and to be good at what they do, only to be dispensed with en bloc in a numbers game.
Have you submitted your Tax Return yet?
Follow me on Twitter
What will our redundant colleagues do whilst the economy bottoms out, and will they all find it harder to get back in in a profession where there is a culture of filling roles from younger and cheaper trainees rather than appointing the more experienced?
I wonder how smaller practitioners will be affected by new payers forced to come into the market as sole practitioners or small partnerships. In the online world this is easier than it used to be, but for those used to maintaining a good standard of living there would be considerable pain whilst building a practice against those of us who came into the market from the last accountancy recession. I think that many will be forced to go elsewhere and be more flexible.
I remain optimistic for my own business because it already “lives lean”, whilst providing a quality service, and there are only so many clients out there though there will be more start-ups as time moves on. For an established firm, it is important to maintain standards and market as well as we can. My firm had an advantage in that it was born at a time when there was only a downturn in the accountancy world. Now it is national and global. It is a sad situation when able people who have worked hard to be qualified and to be good at what they do, only to be dispensed with en bloc in a numbers game.
Have you submitted your Tax Return yet?
Follow me on Twitter
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