Archive for the ‘TIINs’ Category

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Schadenfreude

July 16, 2015

I shouldn’t laugh, but I used to be the person in charge of project managing and proof-reading OOTLAR (the Overview of Tax Legislation and Rates) document.  I took voluntary redundancy, which of course implies that the post was abolished.  I’m not suggesting this means that no-one proof read OOTLAR for the Summer Budget but I had to laugh when I got to page 102 and found the fonts starting to wander.  The second paragraph of the impact on business for the reform of Vehicle Excise Duty is clearly in a different font than the rest of the document.  While I can’t of course say what happens inside 100 Parliament Street now, in my day that kind of error would have meant a last minute change to the document by the Treasury (because of course you couldn’t have HMRC and HMT – in the same building – being on the same computer system) .

What other last minute changes can we infer?  Well there’s a heinous page break at Insurance Premium Tax (pages 104-105) where the table of impacts loses its first two rows and becomes hard to read, and, oh look, there are the small and micro business impact and the monitoring and evaluation sections in the different font again.

My favourite one, though, is the table of impacts for the Simplification of HMRC debtor and creditor interest rates at pages 121-122 where the impacts are not quite blank but certainly empty of meaningful content.  Robust estimates of the exchequer impact are not available.  The measure is not expected to have any economic impacts.  There is no impact on individuals, households or families.  There are no equality impacts and a negligible impact on businesses and civil society organisations, no operational impact on HMRC and no other impacts.  Well why the bloody hell are you doing it in the first place then???  The point of a TIIN is supposed to be to explain what you are doing, why you are doing it at all, and why you are doing it in this particular way.  The policy rationale for this particular change is given in this lovely paragraph:

The measure ensures that rates of interest payable on tax-related debts to which HMRC is a party are all contained within tax legislation.  It also reduces the rates of interest on tax-related judgement debts owed by or to HMRC to an appropriate level given prevailing interest rates.

To which I respond: WFT?

(No, seriously, if you know why they introduced this one at all, please enlighten me in the comments!)

 

Posted in TIINs | Tagged | 5 Comments »

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What it says on the TIIN (which never gets old, seriously)

July 8, 2015

I won’t say that calling them TIINs was motivated by the line, but I do remember we were talking for a while about what to call the new document that combined the newly-invented Tax Impact Assessment with the now obsolete Budget Notes, and someone’s joke about doing what it says on the TIIN came around the time we lighted on TIIN.

But if you found your way here after seeing my piece about TIINs in this week’s Taxation, can I also draw your attention to this entry, where I published the internal Treasury and HMRC instructions on preparation of TIINs after obtaining them via an FoI request?

At this point I usually say something scathing about the way the 64 pages of instructions on how to prepare and produce an Impact Assessment are in the public domain and isn’t it interesting/annoying/suspicious that the instructions on how to prepare a TIIN which performs the same function for tax changes are hidden from view.  Except suddenly I can’t find the instructions on how to prepare impact assessments any more either.  Have they just been quietly downgraded on the gov.uk site or is it my google-fu that’s letting me down?  But whatever the case, why can’t I find the old instructions on the National Archive site either?  <puts on tinfoil hat, retreats to bunker>

Posted in TIINs | Leave a Comment »

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Tiresomeness

February 19, 2015

You know what?  There’s too much legislation.  Not just tax legislation, all legislation.  No-one has time to read it all, yet we are all presumed to know and understand it, because ignorance of the law is no defence.  And if you have been watching the programme about what goes on Inside the Commons you will have seen why.  Who has the time, in amongst the running down corridors to be shepherded into the right lobby to vote and camping out in empty offices to get to the front of the queue for a Private Member’s Bill slot (have these people never heard of computers?)

Parliamentary scrutiny is supposed to be the way that Bills are turned into Acts of Parliament – a series of formal debates take place with select committee scrutiny in between and so anything that comes out of the process has been scrutinised by our elected representatives and that’s democracy, right?

Yeah, right.

Parliament isn’t fit for purpose, or at least not for THAT purpose.  The House of Commons is a generator of heat, not light.  Even the way the building is designed confirms it, with two sides sitting opposite each other at a distance calculated to prevent them *sticking each other with swords*.

Which is why the process is vital.  By the time the Bill gets to the floor of the House, all the democratic scrutiny should already have been facilitated.  If it is a regulation, then there should be an impact assessment to show what the proposed change will cost and why the particular option has been chosen.  There should have been a public consultation where all the unintended consequences were bottomed out.  There should be an explanatory memorandum showing what the regulation is intended to achieve and assuring Parliament that all the necessary processes have been followed (there’s a good explanation of what ought to be in the EM at paragraphs 18 onwards here, in the House of Lords Secondary Legislation Scrutiny Committee’s guidance:

The purpose of the EM is to provide members of Parliament with a plain English, free-standing, explanation of the effects of the instrument and why it is necessary)

So consultation is important.  Oliver Letwin told the Legislation Scrutiny Committee that debates in parliament were the bedrock of democracy (so it didn’t really matter if he cut the time allowed for consultation, because consultation wasn’t the place to gather public “views”)  But I disagree.  I think democracy is, perhaps not quite broken, but a bit battered and bent round the edges, and that a consultation process before changes get as far as the Commons is a good sticking plaster.

Which is why it pisses me off that, three years after I suggested it to the Legislation Scrutiny Committee and they made it one of their recommendations, you still can’t get a list of consultations ordered in the date they will close.

I mean, it’s not rocket science, is it?

Posted in Consultation, HMRC, HMT, TIINs | Tagged , | 2 Comments »

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Small firms impact: not waving but drowning [Part 3 of 4]

February 18, 2015

We have finally reached page A113 of the TIIN, the second half of the table of impacts.  In terms of the seven questions, we are now past “what does it cost/raise” to the final three questions which are:

  • What will it cost the customer?
  • What will it cost the department?
  • Are there any other impacts?

“What will it cost the customer” can be a bit hard to fathom if you aren’t used to dealing with TIINs, but start with the section on “impact on individuals and households”.  In this case, you could summarise it as:

  1. Individuals who buy ebooks from abroad will have to pay UK VAT on them
  2. There won’t be any compliance costs

Now, if you are an individual with a kitchen table business affected by this change you might object to this, but  “individuals and households” in this context means “customers” rather than suppliers.  The impact on one-woman businesses is covered in the business impact section, further down.

So all of us who buy ebooks – or music downloads, or pdf knitting patterns or any of the other things covered by VATMOSS – will feel the impact because the things we buy will have VAT charged on them at the 20% UK rate and not at, for example, the Luxembourg rate of 3%.  But the total amount of that VAT is captured in the “exchequer effect” field I looked at in part 2: the “impact on individuals” field is for any extra compliance costs the individual might incur.  And of course when you buy an ebook you don’t, as a customer, have to DO anything to pay the VAT at the right rate.  It’s up to the seller to work out the correct rate, charge it, collect it, and hand it over to the tax authorities.

(One of the interesting things about this whole mess has been the lack of any particular interest from small vendors in other European countries.  The rates of VAT are here, on page 3 of this EU document.  The interesting bit isn’t the main rate.  It’s the table of reduced rates on page 4.  Books are zero rated in the UK, and so it feels annoying to us that ebooks aren’t zero rated but charged VAT at 20%.  But look at other countries.  There are very few zero rated items, but many countries charge a reduced rate of VAT on books… so if you’re charging 3, 4 or 5% VAT on books already, why not charge 3, 4 or 5% on ebooks too, to harmonise your rates?  Maybe they should just cut the VAT rate on ebooks all round???  As I understand it, you can keep your zero rates but you can’t increase their scope or number.  So we haven’t asked for a lower VAT rate on ebooks in the UK because we have a zero rate on hard copy books and we’re afraid that the EU would insist on changing that if we changed the rate on ebooks.  Would it be worth paying say 5% VAT on all books to harmonise the rate between hard copy and ebooks?  I genuinely don’t know.)

The main thing to note in this section of the TIIN, though, is the “impact on business including civil society organisations” (in other words, the impact on businesses and charities)

Here we have the lovely suggestion that there are only five thousand businesses who will really lose out by the changes.

This is on the assumption that most small businesses will sell their electronic wares via Amazon or another big platform.  I already have an outstanding Freedom of Information Act review request asking whether HMRC really can get away with not telling us who they consulted in arriving at their decisions on this issue.  But I was always taught that the data used in calculating an impact assessment were subject to disclosure under FoI and I wonder whether it would be interesting to look at just how, exactly, the figures of “up to 34,000 businesses, of which about 5000 are not currently registered for VAT”  were arrived at, because from the face of the TIIN it looks as if they have been plucked from the air.

The estimated compliance cost for these businesses is £40 per business per year for the businesses already registered for VAT and £220 per business per year for the estimated 5000 unregistered businesses which HMRC thought would have to join MOSS.  Again, that’s not the cost of the VAT itself, just the cost of administering the tax – the time cost of filling in the VAT returns.  Even on these figures, 29,000 x £40 plus 5000 x £220 (£1,160,000 + £1,100,000) you get an increase in admin burden just on the very small businesses of around two and a half million a year.  The question the TIIN raises in my mind is, does the £300m putative tax raised from the large businesses like Amazon warrant imposing the £1.5m putative admin burden on micro businesses?

Posted in HMRC, SFIT, TIINs, VAT, VATMOSS | 4 Comments »

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Rejoice! Only a fifth of government legislation is nonsense! (last year it was a quarter)

August 27, 2014

Great news today from the Regulatory Policy Committee, the independent scrutineers of Impact Assessments.  There has been an improvement in the number of Impact Assessments marked as “fit for purpose”, from 75-77% to 80%.

Yes, that’s right.  Instead of a quarter of the government’s legislation having an evidence base which is not fit for purpose, it’s now only one in five – rejoice!

Let’s take a step back and look at what this means, shall we?  First of all, what is an Impact Assessment?  It’s a document that sets out the reasoning behind the government making a piece of legislation, particularly what the costs and benefits will be, and whether there are any other impacts on, for example, equality, small businesses, carbon emissions and, coming soon (if we are to believe David Cameron)  impacts on families.  They are supposedly a key part of policy development, making sure that the only legislation which sees the light of day is based on robust evidence.  I say “supposedly” because in my experience they are also on occasions produced at the last minute, between the policy being finalised and the announcement seeing the light of day, solely to justify the actions being taken rather than as part of a judicious consideration of alternatives.  At their heart, though, Impact Assessments should show you that there’s a good reason for the government to take the action that it’s taking.

So why would a panel of independent experts find that the ones you were publishing were “not fit for purpose”?  Well, let’s look at a few examples, shall we?  How about the BIS attempt to change the Trades Unions’ register of members regulations, where they managed not to know what they were requiring unions to do, not to give a long enough consultation for the unions to talk to them about it, and not to work out how much it would all cost to implement.  No?

Well then, how about the Cabinet Office trying to consult on the proposal to introduce a register of lobbyists, where they managed to forget to explain why they were proposing the change in the first place, what options were available, whether there were any benefits from what they were proposing, oh, and to base their costs on a register of dental professionals that the RPC thought was “unclear how relevant”!

I’m sorry, but as a former Impact Assessment professional you have to allow me my moment of schadenfreude here.  There is a serious point, however, which is that by the time an Impact Assessment goes to the RPC for its opinion, the responsible Minister will have physically signed the form (Jo Swinson in the case of the TU register) if it’s a final IA, or will have approved the documents for issue if it’s a consultation (Oliver Letwin and Mark Harper for the Lobbyists consultation) so the IA is the place where “the rubber meets the road” – the place where the responsible Minister has to rely on his Civil Service to give him the facts.  You don’t expect him or her personally to investigate whether the numbers should be 42 or 43, but you do expect them to be able to be confident that when they sign a piece of paper saying it’s 42 they’re damned certain there’s an infrastructure in place that gives them assurance they’ve got the right figures in their hands.

It’s embarrassing to the Minister, then, to be found wanting by the RPC.  It’s embarrassing to the government to have its expertise found wanting by a panel it appointed to give it independent scrutiny.

And then sometimes they go ahead and just plain do it anyway.

 a red-rated ‘not-fit-for-purpose’ opinion does not mean the policy is flawed, but that the evidence as presented in the impact assessment is lacking. Decisions on whether to proceed with regulatory proposals following the publication of an RPC opinion are for ministers to take. 

So that’s all right, then.  The impact assessment shows you the rationale and evidence for a piece of regulatory legislation.  Around a fifth of them aren’t fit for purpose.  But then the government can go ahead and do what it likes anyway, regardless of whether there’s any evidence underpinning what it wants to do.

But what of tax changes, I hear you ask?

Hmmm… well, for tax changes the impact assessment is contained in the TIIN, the Tax Information and Impact Note.  How do I know?  Because David Gauke told Parliament it was, so by definition it must be true. But, oddly enough, the New Approach to Tax Policy Making somehow forgot to include external scrutiny of the evidence base for tax changes, so the TIINs don’t go to the RPC.  I’m a lot keener on the idea that they should now that I no longer work on them, of course.  Practical experience tells me it’s enough of a nightmare to get the book of TIINs out of the door in time for the Budget and the autumn statement, let alone having to wrangle them past an external scrutiny panel first.

It would be difficult to do, and inconvenient for the civil servants who have to do it, and expensive for the government (because they’d need shed-loads more people on the RPC and so they’d need to resource them better, not to mention they’d need a big spike in analyst resource to get the TIINs produced in time to get them to the RPC in time to get the Budget out of the door on time so they’d probably have to buy in some resource there, too…)  But those are project management problems, not issues of principle.

It would be difficult in terms of Budget secrecy, too – increase the number of people who know about a package of measures by the number of people needed to give them independent scrutiny and you of course increase the number of opportunities for things to go astray.  Again, though, a practical rather than a principle issue.

Is there a principle behind the lofty insistence that tax is different and special?

No, I don’t have an answer: it’s a genuine question.  Is there?

 

Posted in Bit of politics, Budget, HMRC, HMT, TIINs | Tagged , , | 1 Comment »

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Three. Probably.

January 15, 2014

A search on “open consultations” in the category “HMRC” on gov.uk today tells me there are three open consultations.  I’m not sure I believe them after the shenanigans I reported on in my 7th January post (customer service tip: if someone tells you a site isn’t working, the least helpful response is “I don’t currently see any technical problems…”) but let’s roll with it.

The three are:

Real time information: legislative changes.  Opened 29th November (so why didn’t it show up when I searched on the same terms on 7th January?) and it closes on 24 January.  Incidentally, wouldn’t it be really, really helpful if you could search on closing date on gov.uk?  Or at least that you could tell from the search results when the consultation closes and didn’t have to click through to find out?

Onshore employment intermediaries: false self-employment.  Opened 10 December, closes 4 February.

Assistance with electronic filing of VAT returns.  Opened 20 December, closes 14 February.

So let’s start with the Real Time Information (RTI) one.  RTI, in case you didn’t already know, is the PAYE equivalent of Universal Credit – it’s the New! Improved!  All-singing!  All-dancing! method of making sure that Universal Credit will work because the government will know, from timely information from employers, who has worked where and when, so people will – perhaps, if it all works, fingers crossed – finally be able to dip in and out of paid work without screwing up their benefits for six months.

But from an employer’s viewpoint, it’s a royal pain.  You have to report payments to employees when you make them, not at the end of the month or quarter or year or whenever you can stop to draw breath.

There’s little point looking at the actual consultation, because this is one of the Finance Bill consultations – in other words, the policy has already been decided and we’re not being asked for our opinions on whether it’s a good idea or not, just for technical comments on whether or not the regulations that have been written will actually work as described.  And I don’t really feel like doing the government’s unpaid copy-editing for them this morning so we’ll skip that.

There are a few interesting things we might want to think about, though.

First of all, the TIIN (surprise!)  They aren’t publishing a TIIN with this because they’ve already published one.  In fact they’ve published two, one for the penalty regime here and one for the actual policy change.

The one for the penalty regime says that there will be no actual exchequer impact.  In fact the government says it doesn’t expect to get any money in from these penalties at all, or at least an amount which shows up as “nil” on a TIIN.  If memory serves, that’s something like a quarter of a million threshold (grateful if anyone can confirm or amend this figure please?)

That’s a good thing, of course.  The point of penalties is to change behaviour, not to collect money.  The idea is that people should make the change to RTI and get used to sending the same information they would always have sent, just a bit earlier and in a different way.  I can see two problems with that.

First of all the level of the penalty.  It needs to be a “smacked wrist” amount – enough that you know not to put your hand into the fire but not so great that your parents get done for child abuse.  So if you’re a small business with up to nine employees, it’s a hundred quid.  Enough to make you want not to incur it, but not enough (one hopes!) to bankrupt you.

But look at paragraph 16 of the condoc:

16. Regulation 67I sets the size of the late filing penalties as follows:

 £100 for schemes with 1 – 9 employees;

 £200 for schemes with 10 – 49 employees;

 £300 for schemes with 50 – 249 employees; and

 £400 for schemes with 250 or more employees.

If I have 300 employees on the average wage of £26,500 then I’m paying out over half a million in wages every month (£26,500 x 300 / 12 = 662,500).  Now, in comparison to £662,500, is £400 a “smacked wrist” or is it, well, peanuts?  An amount which it might very well be worthwhile my incurring so I can sort out my RTI submission at my own pace?

In other words, I think they got the gearing of the penalties a bit wonky.  But it’s too late now, we’re not being asked to comment on that.

Secondly, as I have commented before, there’s not a great deal of point charging “smacked wrist” penalties if you don’t actually go out and collect them, and is HMRC now committed to sending someone round to knock on the employer’s door if they incur a £100 or £400 penalty and explain to them how it arose and, more to the point, what they can do to avoid incurring another?  Otherwise I think that “exchequer effect – nil” may turn out to be, shall we say, optimistic?  Or should that be pessimistic?

And finally, what about the equalities impact?  I said in my response to the consultation on the actual policy that I was worried about the impact on “care and support” employers, which is HMRC jargon for people who have employees but who aren’t businesses.  People who employ nannies, for example, or, more worryingly, people who are given a “care budget” instead of a home help and have to get on and organise their own support package including paying their carers and working out the tax due on their pay.

In the TIIN for the actual policy it says under equalities impacts that

Care and support employers will also have the option to file RTI on paper, and those wishing to use this option will report RTI from April 2014. This date has been deferred from April 2013 in line with customer feedback, to allow more time for HMRC to thoroughly test the new paper forms and guidance with customers who will use them.

So.  We’re not publishing another TIIN.  We’re not updating the equalities impact, then?  Has there actually BEEN any testing of the impact on care and support employers?  Are they happy, or at least confident they’ll be able to comply?  Does anyone know?

Sigh.  I’d write to my MP again, but it’s Nick Clegg and I think he’s probably getting sick of hearing from me about inadequate government equality impact assessments by now.  Over to you.

Posted in Consultation, Employment, HMRC, Regulation, RTI, TIINs | Tagged , , | 2 Comments »

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Due Consideration

January 10, 2014

I have to admit, I didn’t get far looking at the “consultation” on the 2014 Finance Bill.  Being an impact assessment specialist I started with those, at page A1 (actually page 22 – of 176) of the “Overview of Legislation in Draft” document to be found here.

The first TIIN is for the government’s support-for-marriage measure, the transferable personal allowance for married couples.  A person with earnings below the tax threshold will be able to transfer £1000 of their personal allowance to a spouse or civil partner, potentially increasing the couple’s joint take home pay by about two hundred quid a year.

I got stuck at the equalities impact, which says:

Couples will benefit as a unit, but the majority (84 per cent) of individual gainers will be male.  This reflects earning patterns in the population more generally.

Now let’s just stop there for a doggone minute.  Remember when the Fawcett Society tried to bring a judicial review of the so-called “emergency” budget at the start of the coalition?  They didn’t succeed in getting the Budget overturned but they put the wind up the Treasury which was forced to concede it hadn’t done an equality impact assessment of the Budget as a whole… but it had looked at the impact of most of the measures and promised to do better in future.

So here we are looking at the equality impact of an extremely expensive change (495 million in 2015/16 and then 600, 660 and 775 million, according to the exchequer impact section of the TIIN) and the best we can come up with is that it will mostly be men who benefit, but that’s just how society works?  Seriously?

I mean, I’m not imagining it, the Public Sector Equality Duty is still in force, right? The thing that says (and I checked my memory against the Equality and Human Rights Commission guidance) that a public body like HMRC or the Treasury has to give “due consideration” to equality in developing policy?  That “due consideration” means conscious thought while the policy is being developed (and not a quick run round the equality issues when all the decisions have been taken)?  That the point of it all is to reduce, not to perpetuate, inequality?  I mean, that IS what the legislation is all about, yes, I haven’t just dreamed it?

Now it’s not perfect.  It doesn’t mean that equality has to be the overriding consideration.  The government has left itself perfectly capable of saying, in effect, “yes, I’ve thought carefully about it, but, no.”  It just has to have due consideration – is any negative impact proportionate, and are there any positive impacts that could be incorporated, and have we done everything reasonable to mitigate the negative impacts we know about?

So due consideration of the gender impact of the couples allowance might be something like, well, “it perpetuates and perhaps reinforces negative financial impacts on women by giving a financial reward to men whose partners are in particularly ill paid employment and after careful thought we have decided that our desire to encourage traditional gender stereotyped marriage arrangements outweighs the financial advantage this gives to the men affected.  We also believe they’ll share, honest.”

What isn’t – is seems to me – “due” consideration is to say, in effect, “yeah, we’re giving four times as much of the money to men;  suck it up dear.”

However since this is a consultation on how the legislation works and the TIIN is intended as a decision making tool, well, perhaps there’s time to do something about it?  Because I’m sure, she said sincerely, that the Treasury will have done some proper research into the possible gender impacts of this change and the brief line in the TIIN is just a rather infelicitous summary of some complete and careful work, right?  So how about, say, we all go here (a nifty little website that will give you your MP’s email address) and drop our MP a line asking them to bring up the equality impact when they debate the Finance Bill?  In fact, come to think of it, a Freedom of Information Act request ought to get us the underlying research in good time to inform the Finance Bill debate anyway, right?  Right?  (Goes to write FoI request.  Watch this space!)

Posted in Bit of politics, Consultation, Equality, TIINs | 1 Comment »

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Bah Humbug

December 30, 2013

Am I just hungover or is there something wrong with the HMRC TIIN archive?  If you go to the HMRC website and look at the library page here: http://www.hmrc.gov.uk/thelibrary/tiins.htm there’s a chronological list of TIINs but it stops at December 2012 and says

All recently issued TIINs can be accessed from the chronological list below, and earlier publications are available on the National Archives (Opens new window).

But if you click on the National Archives link it takes you here: http://webarchive.nationalarchives.gov.uk/+/http://hmrc.gov.uk/thelibrary/tiins.htm  … which is just the archived version of the page you’re looking at in the first place and doesn’t get you to the older TIINs at all.

Is it me?  I think I’ll come back to this when my head’s stopped throbbing quite so much.  Sigh.

Posted in HMRC, Reference, TIINs | Leave a Comment »

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Citizens are stakeholders. Discuss.

September 7, 2012

I have blogged before that I think there’s something fundamentally awry in the tax consultation process.  While it’s entirely laudable that the government wants to make tax changes in a considered way, taking account of the views of people who know about the subject, I think they need to look again at Tax Policy Making: A New Approach and be explicit with us.  There’s little or no debate on the Finance Bill any more, partly because all the supposed kinks in the wording have been worked out in the consultation process – but then that means there’s little or no input from MPs in their capacity as representatives of the Ordinary Citizen – or their capacity as stakeholders for Great Britain’s fiscal and economic health and welfare.  So is the point of the New Approach just to give those affected by a tax – the people who will pay it – a chance to say something about how it’s designed?  Or is it also intended to give those affected by the outcome of a tax – the people who pay their own taxes and who rely on the tax base to provide them with the common services the country uses tax receipts to provide, but who may not pay this particular tax?  Bluntly, are we trying to crowd-source (free of charge) the paid work that policy-making civil servants in the Treasury and HMRC used to do?  And are we doing so by asking the turkeys how to administer Christmas?

So I’m replying to all the tax consultations I can, even the ones where I’m not invited to do so – because I believe that the citizen is a stakeholder in all these matters.  And the other consultation which closed yesterday, the consultation on Life Insurance: Qualifying Policies said it only wanted to hear from “Insurance companies, Friendly Societies and Advisers involved in the sale or management of Qualifying Life Insurance Policies”.  Tough.

Here’s what I sent:

This is an individual’s response and will be posted, with commentary, on my blog, http://tiintax.com

You say that the people who should read the consultation are “Insurance companies, Friendly Societies and Advisers involved in the sale or management of Qualifying Life Insurance Policies”. I believe that the government’s intention in Tax Policy Making: A New Approach was to establish a methodology for making good tax policy which included consultation as its key element, and as a matter of principle I believe that all citizens are stakeholders in the design and operation of the tax system and therefore have a stakeholding in its development.

I have concentrated on the tax impact assessment as the best way of understanding the expected outcomes of the policy change and I see that the measure is expected to have a negligible impact on the exchequer and on the wider economy and I wonder therefore what the scale of the problem identified – of life insurance being used as a tax exempt savings vehicle – might be and whether it is cost effective to legislate. It seems very strange that, at this stage in the consultation process, you are not able to give a ball park figure of the kind of tax loss you are looking to stem and it is hard to see a justification for the enactment of legislation without this.

I also see that there is expected to be a “relatively small number” of individuals and households affected but no indication is given of how these investors fall on the spectrum of protected characteristics under the equality legislation. Is this a type of investment with a broad spread of investors where the closure of the opportunity to invest and gain higher rate tax relief will impact across the board or is it used primarily by any particular group? I am surprised you feel you have given due regard to equality issues without this information, particularly since the number of providers seems small enough that I would have expected there to be little difficulty in having or obtaining good quality information.

Nor am I at all clear what you think the impact will be on small firms. You admit there will be several providers who are small firms within the meaning of the government’s small firms impact test – have you held specific discussions with them on whether their customers are more or less likely to make use of the proposed limit? I’m not at all clear from the tax impact assessment therefore that the case for legislation is made.

Posted in Consultation, Equality, SFIT, TIINs | Tagged , , , , , | Leave a Comment »

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RTI is coming. Eep!

September 6, 2012

You may remember that, in 2010, the idea was floated that we should update the pay as you earn system.  Why should employers have to calculate how much tax to deduct from wages and salaries?  Wouldn’t it be neat if you could build some kind of machine – or, OK, some kind of app – that would work it out?  Plug that into the banks, and the employer could just transfer your whole salary to you and the bank could siphon off the bits of that money that go to HMRC using the magic machine/app.

The newspapers put paid to that one pretty quickly!  And, frankly, would you trust

  1. government IT procurement and/or
  2. banks

as far as you could throw them?

So, er, no.  Or indeed “hell no!”  But the PAYE system was still in dire need of updating – so then there was RTI.

RTI, for the uninitiated, stands for “real time information” – the “minor” change to PAYE that means employers will have to tell HMRC what they’ve paid when they pay it (and not six months or a year later).

Oh, and there’s an administrative burden “saving” to employers, because they won’t have to fill in P60s and P45s at the end of the year or when people change jobs any more; all the information will go seamlessly to HMRC when the salary payment is made.

Which, if you’re an employer with a payroll that’s computerised and a who pays via the bank, well, might actually be true.  The impact assessment thought there might be a billion quidsworth of savings.  Particularly if you don’t, er, quantify any costs!

RTI is, in fact, already here – for the small number of employers taking part in a pilot scheme.  And more employers are being added – did you know that?  And ALL employers will (or at least should) be in RTI by autumn of next year.

OK.  So far, so good.

But there’s a certain amount of, what we might politely call, “making it up as you go” involved here.  Taxation magazine pointed out on 22 August  (sorry, it’s behind a paywall) that there will be problems involved in paying

  • Casual workers
  • People receiving tips via a tronc

and various other special cases, because the RTI return has to be made at or before the time of payment.

So it’s Saturday night and you’re a pub landlady and your barmaid just called in sick and you call the two students who work odd shifts for you on standby.  They’re going to expect their wages in their hand when they go home at the end of their shifts, aren’t they?  So are you going to spend your night filling in their RTI details on your laptop so you can make them a legal payment… or are you going to go cash in hand and take your chances?

So you’re a restaurant and the tips go into a jar and the head waiter divvies them up on a Saturday night.  Is he really going to sit down and enter all the details of the payees into his laptop before he goes home?

But more worrying to me is the abolition of the Simplified Deduction scheme, which was known as the “nanny” scheme – a simpler set of deduction instructions for people who found themselves employers but who weren’t actually businesses, like people who directly employ a nanny or a cleaner (rather than paying them via an agency).  This one worries me a lot, particularly because of trend in providing services to people with special needs because of age or disability by giving them a budget and asking them to arrange their own services.  These are not people who will be immediately comfortable with running a PAYE scheme to pay for the carer who gets them out of bed in the morning.  In the equality section of the RTI TIIN published in March this year it said:

Care and support employers are individuals who employ carers to provide services to a disabled or elderly person in their home. This group of employers will join RTI from April 2013 and HMRC will offer them the option of monthly paper filing of information. They will also be able to use HMRC’s free updated Basic PAYE Tools which are available for all employers who employ nine or fewer employees, allowing them to submit RTI via the internet. HMRC has also provided funding to the Low Incomes Tax Reform Group (LITRG), to help them develop online guidance for care and support employers.

which, frankly, looks to me like an enormous exercise in Missing The Point Entirely!

In this context then you can see that I might not be too fussed about a consultation document that is concerned with penalties to be imposed for failure to comply with RTI.  In my view it’s absurdly premature to talk about penalties for failure to comply with a scheme that you’re making up as you go along.  Introduce it, work out the kinks, give it a couple of years to see what the compliance rate looks like… and THEN see what sanctions you need for the few who play fast and loose with the system.

Nevertheless, that isn’t the question being asked.  But here’s what I said in reply.

This is an individual’s response and will also be published, with commentary, on my blog, http://tiintax.com. I have followed the question schedule set out on page 35 of the consultation document.

Q1. Do you have any comments on RTI and error penalties that will help us support businesses and promote timely filing under RTI?

I think it is wholly premature to be talking about penalties at this stage in the process, when there are enormous outstanding questions about how the scheme will operate at the margins. At the moment HMRC should be concentrating its resources on “support” rather than punishment. “Care and support” employers, in particular, should be exempt from penalties except in cases where a criminal penalty could be sought – in other words where the department can produce evidence of deliberate default rather than failure to understand and apply the system.

Q2. How best can we support employers in understanding their obligations under RTI and implementing the new system?

Not via penalties! An advertising campaign, dedicated support teams, face to face training and assistance – all the kind of support services that HMRC used to be able to provide via its local office network, its employer support teams and its advertising and comms team. Otherwise there’s a serious risk that micro employers will move to cash in hand payment by default.

Q3. Is there a better or simpler way, than banding by potential filing defaults, of recognising the size of the employer but also the amount and regularity of the information to be supplied under RTI?

I would make an exception for cash payments of less than £X, where X is something like the minimum wage x say 5 days and the employer is a micro business. So the pub paying its casual staff on a Saturday night has a couple of days grace to get the RTI return made without being hit with an automatic penalty (but would still be hit if the RTI information isn’t provided within say a week) – so the crisis can be covered and RTI dealt with as part of the normal working week even if it is a couple of days behind.

Q4. Are there particular adjustments that should be considered to take account of more frequent payments?

It depends really on whether your aim is to make everyone move to electronic submission and payment. Someone who is reporting on paper should be allowed to make monthly returns – but presumably you won’t want large employers to make paper returns mischievously. So this is as clear a case as I can envisage of a case where the government’s own policy to exempt micro businesses should be followed.

Q5. Should a penalty be charged as soon as a return is late or would employers prefer penalties to be charged later, perhaps each quarter?

Um – “prefer”????? What are we talking about here? If we’re working in a world where you ask people how they “prefer” to pay penalties, isn’t there some kind of presumption that penalties will be routine? And yet I thought it was clear HMRC policy that penalties would be just that – they would be PENAL – and only apply to people actively subverting or avoiding the system, not to people confused by the system or making an honest mistake?

In which case this is a nul question. You don’t get a choice about a penalty! But my preference, in my capacity as a citizen stakeholder, would be for defaulters to be charged penalties as soon as the return was late – if it’s genuinely aimed at getting them back on the right track then they need to know straight away that their actions have consequences.

Q6. Do you agree that only one late filing penalty should apply to each PAYE scheme each month, regardless of how many returns are late that month?

Yes

Q7. Should the RTI late filing penalties include a further penalty if a return is outstanding at the 6 and 12 month points?

No. You ought to be well beyond late return penalties and into corrective action by HMRC at those points.

Q8. What are the benefits and downsides of phasing the introduction of automatic late filing penalties for RTI along the lines set out above?

It’s absolutely vital that late penalties are only applied to the very largest employers and in the case of deliberate default first, and then phased in by size of payroll, not reaching the micro business employer until the system is fully mature. And arguably never reaching the “care and support” employer at all.

Q9. Should consideration be given to including a default that does not attract a penalty along any of the lines set out above?

No. A “default that does not attract a penalty” needs to exist in the system, but this is a case where HMRC shouldn’t be judge and jury but should be required to charge a penalty via a tribunal process rather than automatically. So I would exclude micro businesses from any automatic penalty regime while leaving the option of HMRC taking offensive cases via the tribunal system.

Q10. We would be grateful for comments on the detailed design options set out above. In particular, how should we encourage employers to use the nil return facility where there is no information to be returned? Is any additional incentive or sanction needed over and above the fact that a late filing penalty may be issued if an expected return is not received?

This baffles me, I’m afraid! If RTI is predicated on a return being made whenever a payment is made, how would HMRC know that any payment had been made in a “pay period”? What IS a “pay period” for these purposes?

Example: I’m thinking of taking on a casual employee to do work on my garden. I’d think about taking on a student and employing them as-and-when I have work available. So I might pay them a tenner every week for an hour’s work in the summer, but once every six weeks in winter – but then a one-off £50 when I needed some help lifting and carrying. What would be my “pay period” – or are you assuming that this kind of casual arrangement would be “cash in hand” and not touch the sides of RTI in 99% of cases?

Q11. What are the pros and cons of charging penalties for late filing and late payment at the same time?

It’s one of my pet peeves about the tax system that the two aren’t linked – it’s absolutely no use to anyone to establish a requirement to pay £x, a penalty of £y for not returning the requirement to pay £x… and then never bothering to collect either of them!

Q12. We would be grateful for comments on these models, or any combination of the elements included in the models. We would especially welcome ideas to simplify them, but which still support and encourage compliance with the RTI information obligation.

See comments above on the need to exclude micro businesses. In accordance with the government’s stated policy on the small firms, micro businesses should be exempt from regulatory change unless there’s a really good reason not to.

Q13. We welcome comments on these proposals. (This refers to the changes to the existing late payment penalty model).

It would be in keeping with what I understand of the RTI proposals, as well as a welcome simplification for everyone, if late return and late payment penalties were merged. Why doesn’t the submission of a return also trigger the submission of a payment? Employers should no longer be able to use their PAYE scheme as a cash flow tool. It’s not their money – it’s their employees’.

Q14. Should we consider charging late payment penalties quarterly?

As above, the late payment should trigger the penalty; the penalties shouldn’t be “banked”… and anyway, they should be merged with the return penalties.

Q15. Should we consider allocating employers to a quarterly stagger period for both late payment and late filing penalties under RTI?

No

Q16. Are there any particular easements that we should consider for new employers?

You need first to provide information, training and support. Until those are in place – and I don’t believe they are at present, and I don’t believe HMRC has the resource to provide them on a continuing basis – then no penalties should be chargeable.

Q17. Do you have any views on applying interest to late payment and late filing penalties under RTI?

I think penalties should be clear, simple and immediate. And collected. There should be no need to apply interest if you apply active collection methods.

Q18. Do you have any views on applying a late payment penalty as well as interest where further sums become due for a period?

I don’t think it’s a good idea. There should always be the possibility of drawing a line under the past and moving on. So if someone fails to make an RTI return and payment it should be clear to them they’ll be charged a proportionate penalty and it should be collected immediately – and if possible (depending on the “payment period”) before the next return and payment are due.

Regards

Posted in Employment, HMRC, RTI, TIINs | Tagged , | 1 Comment »

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