Posts Tagged ‘HMRC’


The sheep thing

November 27, 2015

Have a look in Hansard at the debate about the HMRC closures:

Chris Stephens

Many MPs and tax experts support the view that a visible and local HMRC presence is essential to maintaining ​confidence in the tax system. Does he not believe that the measures that have been announced by HMRC will open the way for more tax avoidance?

Mr Gauke
No, I do not. As I have made clear, the number of HMRC officers has been falling since its creation in 2005, including over the past five years, and we have seen the closure of inquiry centres, as has been touched on, but HMRC’s success in dealing with tax avoidance and evasion over that period has been marked and has improved. The truth is that HMRC deals with tax avoidance and evasion principally through sophisticated data analysis and by bringing together highly skilled people. The more that we can do of that, the bigger the difference we will make.

There are several issues raised by the prospective closure of HMRC’s network of offices, and it does no-one any favours if we braid them together and pretend they’re all one and the same.

First of all there’s the argument that “tax avoidance and evasion” are fought “principally through sophisticated data analysis”.  I have no recent practical experience of whether or not that’s true – the last time I looked at a set of accounts in anger, the dispute was over whether an inspector’s judgement was more effective than a “package” of data sent from a remote analysis unit.  At the time it wasn’t, but I strongly suspect the balance has swung the other way and this is the way most cases will be broken in the future, particularly the larger ones.

But that isn’t the same argument as this one: “Many MPs and tax experts support the view that a visible and local HMRC presence is essential to maintaining ​confidence in the tax system.”  A remote analysis unit can’t do that job.

It’s an oversimplification, but think of it this way.  HMRC exists to serve us, the taxpaying public, by bringing in the money which funds public services.  They do that to a large extend by administering the tax system so that we, the taxpaying public, can pay our taxes.  That sounds like tautology but in fact it’s a profound truth.  I want to pay my taxes.  I want to pay the right amount at the right time.  I want to do it with the least amount of contact with HMRC possible, but if I *do* need to speak to them, I want them to be there, where I can get at them, to be contactable, and to be courteous, authoritative and knowledgeable when I speak to them.  And – as a taxpayer – I want them to come down in righteous wrath on the people who don’t do that.

There are two constituencies to be served, in other words.  The avoiders and evaders might well best be tackled by specialist accounts factories in remote locations: the first time an evader needs to contact HMRC is when they knock on their door with a warrant.  The rest of us, however, need an entirely different kind of service: local, accessible, friendly, helpful.  Treat avoiders and evaders like regular taxpayers and you may “nudge” some of them into normalising their relationship with taxes and behaving like the regular taxpayers they’re being taken for.  Treat regular taxpayers like avoiders and evaders, however, and you risk them saying to themselves, well, may as well be hanged for a sheep as a lamb…


Why closing all* the HMRC offices is a bad, bad, bad idea

November 18, 2015

*all but 13

HMRC announced last Thursday that their “modernisation” programme now requires them to close all their “expensive, isolated and outdated offices” and bring their remaining staff together in 13 “regional centres”.

This is a bad idea for so many, many reasons.  Here are a few of them.

  • HMRC as a national network used to have a mix of people who worked locally (who would notice a new business starting up or a conspicuous show of unexplained wealth) and people who were moved around the country for promotion (so the standards of service were national).  In the new plan, whole swathes of the country will have no physical HMRC presence.
  • Regional centres where someone spends their whole career have the potential to develop into fiefdoms with their own customs and practices – a national system becomes a postcode lottery.
  • A national system with regular staff mobility has an in-built anti-corruption apparatus**. A static regional team will need another bureaucracy of inspection and quality standard-setting.
  • As the PCS points out, there was no public consultation or parliamentary discussion of the plans. HMRC is a non-ministerial department but that doesn’t mean it can behave like a private company and arrange its affairs to suit itself rather than the public it services.  Obviously we need a tax administration fit for a twenty first century tax system… but who decided this was it?

There are also a couple of missed opportunities in the announcement

  • “The new regional centres will bring our staff together in more modern and cost-effective buildings in areas with lower rents”  I spent the last two or three years of my HMRC career living in Sheffield and working in London.  Because 90% of what almost any HMRC employee does can be done on a computer, and the computer could be located anywhere.  If HMRC invested in a decent network of secure laptops they could let large numbers of their staff work from home: do staff need to be concentrated in accounts factories to do their jobs?
  • The locations have been announced.  The buildings to be used in each location … haven’t.  Good luck with negotiating those “lower rents”, then!


**see for example Christopher Hood The Art of the State (p162) on the “gaming machine model of organisational design in traditional tax bureaucracy”


State of play

September 16, 2015

So there are fourteen open consultations listed as relating to HMRC on the website today.  If you filter instead for the “tax and revenue” policy area (all departments) the total comes up as 18 – four from the Treasury.  Query: why are some tax consultations badged from the Treasury and some from HMRC?  Answers on a postcard…

The first is a review of travel and subsistence rules.  It was published under the coalition government, in July 2014, but says that it closes at quarter to midnight on 1st May 2016.  I find this rather improbable, and I wish would have a look at it.

You have until 30th September to respond on the taxation of performance linked rewards paid to asset managers, employment intermediaries and tax relief for travel and subsistence, ISA qualifying investments and crowd funding, and the IR35 discussion document

You need to get motoring to respond to the implementation of the Personal Savings Allowance and the deduction of income tax from interest in peer to peer lending which both close on 18th September.  The other handful all have closing dates in October.

But I could have read and perhaps responded to one of them in the time I’ve taken today trying to identify which one to prioritise.  Because apparently listing consultations with a visible closure date and/or in the order in which they close remains beyond the wit of a twenty first century government.  Or, as I said on Facebook yesterday, you’d almost imagine they didn’t want responses from Jo Public.




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!)



Saving £80million

June 9, 2015

The in-year budget review announcement that a further £80million is to be cut from HMRC’s budget may have passed you by. After all, the argument has been made that spending £1 on HMRC staffing brings in £25 or more of unpaid tax  so you would think that the overriding priority of deficit reduction would imply more rather than less spending on tax collection. However if all we are thinking about is costs, well, perhaps all it takes is a little thinking outside of the box.

5 ways to save £80m from HMRC

1. Reinstate 174 paper

When I started my career, tax inspectors did their calculations with pen and paper, not computer. It would cost a few thousand pounds to give every tax inspector a pad of lined “174 paper” – ruled for double entry bookkeeping – and a pencil. And, if you look at the items on this file of April’s spending  it looks as if turning off the “desktop managed serv” – which I take to be the routine desktop “managed services” available on all HMRC computers – could start us off with a few million of savings.

2. Turn off the phones

No-one answers them anyway. Or at least they aren’t meeting (table 3.1) their own “unambitious and inadequate target“. So stop doing something expensive that you’re doing badly. Turn off the phonelines altogether. And while we’re on the subject…

3. Stop answering mail

HMRC is rubbish at acknowledging, tracking, filing and above all answering pieces of post from the public.  They can’t even produce the correspondence in court. So again they should stop doing something expensive when they’re doing it badly. People can just email…

Oh. Well, they can use Googlemail on their…

Oh. Well everyone has an iPad somewhere. The staff can use googlemail on their own computers. Just THINK how much money the department would save!

4. Stop employing staff

No, hear me out. Not all of them, obviously. Just the ones that do customer service work. With no computers to work on, no phones to answer and no post to deal with, why not? Make all the customer service staff redundant and they can set up small businesses that do emailing and online tax returns for pensioners and other computerisation refuseniks for a small fee – to be paid by the customer, obviously. So HMRC won’t need customer service staff AND we’ll gain hundreds of new small businesses, thus boosting the economy!

5. You know, really, with all this self assessment, the system practically runs itself. Give all the remaining staff a year’s unpaid leave & sort out any errors the following year. Savings? £2,267.7 million (“Total net costs” table 3 page 135 here)

Easy! £80 million? Pah! If the government don’t mind how much revenue they collect and only care how much they save, well, as you can see, it’s easy peasy, and £80 million is another unambitious and inadequate target…







[Personal note: I’m off for a spot of surgery tomorrow so I won’t be around for a while.  See you on the flip side!]

[And another update on June 15th: I’m now out of hospital after rather more extensive surgery than originally indicated.  A five day stay rather than two.  Ow!  But progressing in leaps and bounds… well, incremental steps anyway.  God bless the NHS!]


Prosecuting tax evasion is hard. Because, evidence.

February 14, 2015

Prosecuting tax evasion is hard.  Or at least, I imagine it is.  Because in all my time in the Inland Revenue and HMRC, I was never involved in a prosecution case.

Prosecutions are dealt with by a separate bit of the department.  Because, evidence.

Say I looked at a set of accounts and asked for some backing documents and then someone sent me a document that was a forgery.  Should they have been prosecuted?

Say it was an appeal: say they told me they’d appealed.  Say the thing they sent me was backdated to make it look like they’d appealed in time, and I spotted it was a forgery – could prove it was a forgery, in fact, because it referred to a thing that hadn’t happened at the purported date of the document.  Should they have been prosecuted?

What would their defence have been?  We actually did send in the appeal on time, but we couldn’t put our hands on it when you asked us?  A junior member of staff made a copy from our computer files but obviously they shouldn’t have done it and we’re very sorry, but that doesn’t alter the fact that we made the appeal in time and the dog ate our copy and why can’t you find YOUR copy, HMRC?  Is your filing system SO chaotic?

Say failing to make the appeal on time would have cost them £100.  Should they have been prosecuted for a measly hundred quid?  Would that have been worth the cost of prosecution in the first place?

Would the forged document even have been admissible as evidence?  We hadn’t had any conversations under PACE, they hadn’t had legal advice when they spoke to me, I hadn’t had any training in PACE except for the basic “this thing exists, you have to get it right, so refer to prosecutions if you think you’ve found something that needs this kind of handling” training.

It’s not as easy as it first sounds… except….

Well, except that obviously an overworked prosecution section has to prioritise.  Say they are so under resourced they can only take cases where there’s a million quid of tax at stake: would you even waste their time asking them about a forged document that £100 hangs on?

What should have happened, in an ideal world?

Well, shouldn’t there have been a prosecution unit attached to every team?  Resourced to investigate the smaller cases, under PACE, with a view to prosecution?  To prosecuting the tax cheats (and I mean the direct tax cheats, not the fag smugglers and VAT dodgers on the “most wanted” list) with the same kind of limits as the benefit cheats?

Instead of me arguing with them about their accounts and a district inspector shouting at them about the attempted forgery, maybe their accounts should have been examined with a view to prosecution and they should have been hauled in and interviewed under PACE.  It still might not have been a serious enough case to be worth prosecuting, but there’s a space between a hundred quid and a million where, surely, there ought to be some equivalence between the limits we set on benefit fraud and the ones we set on tax fraud?

Wouldn’t that bring in 25 times more than it would cost to run?  Why aren’t we doing that?

[Edited 14/2/15 because the headline should have read “evasion”, not “avoidance”.  Thank you, twitter! *beats head on desk*]


Small firms impact: not waving but drowning [Part 2 of 4]

February 5, 2015

A TIIN is supposed to answer seven questions.  (They are here in the TIIN instructions – the TIIN instructions still aren’t published by HMRC – and why not??? – but let’s assume the basic principle is still the same as “in my day”.)

The questions are:

What are you doing?

Why are you doing it?

Why are you doing it this way?

What will it cost/raise?

What will it cost the customer?

What will it cost the department?

Are there any other impacts?

“Why are you doing it” is a powerful question in the “better regulation” mindset, which basically reflects a worldview in which regulation is a Bad Thing in and of itself.  The idea is that regulation is nothing more than Red Tape, which would be Strangling Business unless it was itself regulated.  “Why are you doing it (at all)” is really the question, if you think that having no regulation at all is the ideal.

So why is the government doing MOSS at all?  Well let’s see.  The policy objective field of the TIIN (still on page A111) is where the answer ought to be, and it says:

Policy objective The measure will make business to consumer (B2C) supplies of BTE services taxable where they are consumed, thereby removing an incentive for businesses to locate offshore. This will level the playing field for UK BTE suppliers and is consistent with the Government’s aim of fairness in the tax system. The MOSS business simplification scheme is intended to reduce the administrative burdens and costs associated with this rule change and multiple VAT registrations for BTE suppliers, particularly for small and medium enterprises (SMEs).

Translated into English, I think this means there are two objectives:

  1. The main objective is to stop big companies from gaming the system by setting up shop somewhere with a low VAT rate.  Instead of VAT being charged where the supplier is located, from January 2015 it is charged (for electronic services like e-books) where the customer is located.  So small companies should have a more “level… playing field… consistent with the Government’s aim of fairness…”
  2. Because this change comes with associated costs for small companies, there will also be the “mini one stop shop”, the MOSS, which stops you having to register for VAT separately in each member state and instead handles it all in once place, the place the seller is located.

Now, I think the objectives are good ones in themselves.  Let’s make it easier for authors to sell their own works, for craftswomen to sell their own knitting patterns, for musicians to sell their own tunes, directly to the customer without having to lose a slice of their profits to a multinational selling for them.  And, yes, let’s keep the administration as simple as possible.

So what went wrong?

Let’s go back to the TIIN, to the summary of impacts that starts at the bottom of page A112.

Screenshot 2015-02-05 14.14.50

The first line shows you how much money the government expects to get as a result of this change.  The numbers are in millions of pounds, and the plus sign means the government expects to get this much tax in from the change.

The first few months of 2015 are still in the 2014-15 tax year (the tax year runs from 6th April one year to 5th April the next year).  So between January 1st and April 5th 2015 the UK government estimates it will make £70 million in VAT from the changes.  In a full year, it thinks it will make an extra £300 million plus, with the numbers rising over time.

I think we can all agree three hundred million is a sum worth having.  For the government, it’s the cost of, say, the entire NHS radiotherapy service (table 9 page 28, 2011-12 figures).  But look at this: “The MOSS element of the measure is expected to have a negligible impact on the Exchequer.”

Now, I understand “negligible” in an impact assessment to mean “less than £100,000 across the entire affected population”, which is what it used to mean in 2012 when I was last working for the government.  But have a think about that.  The entire farrago of MOSS is expected to bring in less than a hundred grand?  Seriously?

Because one of the seven questions written into the tax original impact assessment proposals, and which was still there when I obtained the TIIN instructions and published them on my blog, is

why are you doing it this way???

Why the hell are you imposing this business-busting system on people from whom you expect to raise peanuts, when you’re still going to get the moolah you want from the big businesses it’s really aimed at?  Is this really the only way?

Option appraisal is one of the key elements of impact assessment methodology: generating and assessing all the possible ways of solving a possible policy issue and then choosing the best one, even if it’s the option to “do nothing” – that’s how governments tell themselves they solve problems.

So where is the options appraisal in this TIIN?

Don’t bother to look.  It isn’t there.

Look instead at the assessment of the economic impact.

This measure should have positive economic impacts by minimising distortions to the location of the economic activity and increasing competition between large and smaller suppliers within the sectors affected.

Well perhaps it “should”.  In an ideal world it would.  But in this imperfect world, HMRC completely overlooked the one-woman kitchen-table microbusiness and introduced a system which, far from “minimising distortions” and “increasing competition” will in fact wipe out the micro businesses or else drive them into the arms of the very businesses whose behaviour caused the policy problem in the first place.

A proper options appraisal might have included:

  • excluding micro businesses from the regulation altogether
  • allowing a longer lead in time before the regulation affected small and micro businesses
  • unilaterally setting a threshold below which the regulations do not apply
  • making payment processors legally responsible for operating the regulation
  • devising a MOSS which itself operated as a payment processor for micro businesses (instead of a paypal or worldpay etc button you could have a MOSS button – your money would come to you VIA the government, but come to you guaranteed VAT-compliant)

There might have been good reasons for and against any or all of these.  But if you don’t ask the right questions of the right people, well, you’ll never know, will you?



Tax doesn’t have to be taxing?

February 3, 2015

Look, I’m an ex-inspector of taxes.  Of course I left my tax return to the last minute, and of course I finished up doing it on Saturday (the last possible day to avoid penalties) and of course I got stuck and had to ring the helpline.

(By the way, HMRC, you might want to look again at section 4.  When you’re customising the return you’re asked
Screenshot 2015-01-31 17.06.40


Well of course I said yes, because I have an occupational pension.  But then I spent a good hour baffled by section four itself, which says

Screenshot 2015-01-31 17.08.20


I mean, OK, it was five o’clock on the day the tax return was due, but I managed to get through to the helpline with no trouble.  The trouble was that the helpline didn’t know where to enter an occupational pension either!  The answer is, hit send (leaving all the boxes blank) and you will, eventually, get to the secret page 2 of part 4 which has a space for occupational pensions.  Try a bit of signposting please!

While we’re about it, where the hell do you get off with this page?

Screenshot 2015-01-31 17.12.38I don’t have a repayment due.  But you can’t get past this page of the return without entering your bank details or lying that you don’t have one at all.  Now, that may be administratively convenient for you, and I have given you my bank details before when I have been due a repayment.  But I’d very much like to know how you have the right to demand my bank details as part of my return?  Anyone?  Bueller?)

Anyway.  I finished my return, paid the tax, and sat back waiting for the Inner Peace to descend.

It didn’t.

Because, you know, when I worked on the CIS scheme, we were very proud of the groundbreaking way that the contractors’ monthly returns were pre-populated with the details of their subcontractors already known to HMRC.  And, to be honest, the thing that took me longest in preparing my return, was trying to find the P60 with my pension details on it, which I clearly have put in the Proverbial Safe Place and no doubt it’ll turn up in time for me to make an amendment.

But why am I struggling to find a piece of paper on which are written numbers that I’m going to type into a computer system so that someone in HMRC can check them against the information they already have?  Is there any compliance risk from me putting the gross payments I received into my bank account, or last year’s figures, or an estimate of some other sort into my return, given that the tax has already been paid and there’s nothing that would tip me into another tax bracket?

What I mean is: why isn’t my return pre-populated with the pension and other employment details that HMRC already knows?

I suspect it’s because the HMRC computer isn’t one big shiny Skynet or Deep Thought but, like most large organisations’, it’s a patchwork of parts,  a bundle of bits and bobs of hardware and software, tied together with goodwill and fingers crossed. To put the information HMRC already know about my pension into my actual return and feed it back to me would involve… spending more money than anyone has lying about.

The old Inland Revenue was cutting edge with its computer technology, back in the seventies. Since then all the computer experts have been made redundant and privatised, so now the giant Aspire contract and the complicated web of suppliers and operators means no-one really knows how it all works. When the contract comes to an end wouldn’t it be nice to replace the outsourcing? I know, I know, that would count as an increase in Civil Service numbers and we can’t have that, can we?

But it might cost less in the end. And I might not have to spend my January Saturday afternoons cursing a system that has to ask me to type in information that it already knows.


Small, micro, nano…

December 12, 2014

Dear Vince Cable

Actually, no –

Dear Department of Business, Innovation and Skills; please brief your Minister rather better.

Because Vince Cable has responded to the petition about the VATMOSS VATMESS with a response which just rehearses how we got into this mess in the first place.  The reply (which can be read in full here) says, in effect:

  • you already knew, but anyway
  • you won’t be affected, or else
  • you can just use Amazon, and if not
  • you can split your business

Let’s take these in reverse order.  Splitting your business may just prove to be the answer, or anyway the least worst cobbled together solution that can be put in place.  But the devil is in the detail, and HMRC’s new “additional guidance” is a bit thin on the “how to”.  I suspect there’s a number of people in the VAT policy divisions running around in small circles swearing as they try and find a way of doing this that doesn’t open the floodgates to the kind of income splitting that has always been considered avoidance.

The idea that most micro businesses can just use Amazon is… well, this whole change to the place of supply rules is designed to stop people like Amazon from gaming the different VAT rates on ebooks across Europe by making the rate of VAT dependent on the customer’s location rather than the supposed location of the platform.  But, as Cheryl Morgan wisely points out,

In practice what HMRC is doing is the equivalent of saying to a small farmer that she can’t sell her crops at a market stall, she has to sell them through Tesco or a similar supermarket.

Or, to put it another way, there’s no point stopping Amazon being rapacious with tax if at the same time you facilitate their rapacity towards small businesses instead.  The one-woman trader ought to be able to sell her own digital wares independently, and a complacent statement from a Minister that, oh well, you can always use a platform, isn’t helpful or equitable.

There is a relatively simple step which the government could take, which is to enforce the rule that platforms are responsible for the VAT on products sold via them: no ifs or buts.  Some people have asked for a list of platforms which conform to the responsibility.  I think this is a mistake.  What they should ask for is a declaration that:

  • selling via a platform is sufficient to absolve the individual seller from responsibility for compliance with the VAT place of supply rules
  • all platforms are assumed to be compliant unless listed on an easily available HMRC or BIS website, and
  • any trader with concerns about a platform should email their concerns to an easily available HMRC compliance address and this will be sufficient to absolve them from responsibility unless and until otherwise notified by HMRC after they have investigated – and investigated the platform, not the seller.

The onus should be on HMRC to deal with the platforms, in other words, and not the one-woman kitchen-table nano-business.  Dealing via a platform ought to be a sufficient answer to any challenge, and any issue should be taken up by HMRC with the platform not the seller or customer.

My real issue, though, is with the complacent belief in government that nano-businesses somehow ought to have known about this in advance.  As Vince Cable says:

The changes to VAT on digital products is not new or sudden – the change was agreed in 2008 and we’ve done a lot to communicate it to businesses.

Many people’s answer to that will be “oh yeah?”

HMRC’s stakeholder engagement model doesn’t work at this level.  Until the #VATMOSS twitter storm, the small businesses whose business models are most at risk weren’t members of any of the “stakeholder” organisations who might have told them about it.  It is no use telling someone about the changes via a VAT notice if they aren’t registered for VAT and so barely know what a VAT notice is in the first place.  Do you read VAT notices?  I don’t.  All I needed to know about VAT till now was “don’t worry about it till your turnover hits £80k”, and I wasn’t holding my breath.

The previous government did a lot to “think small” and there was a particularly clever move (in internal civil service terms) when the need to report on the impact on small businesses was introduced into the Explanatory Memorandum that goes with Statutory Instruments – you couldn’t get around it, you had to say something about it before you could get your legislation through onto the statute books.

But this was when the Small Firms Impact Test was an actual thing.  You’ll see if you follow that link that, now, the instructions are archived.  Now, all the government tells its minions to do is to “Consult enforcement bodies and business representative groups, to identify how to mitigate disproportionate burdens on smaller businesses.” (1.6.17).  In this case they couldn’t follow the default option of exempting micro businesses (because other European states have a low or zero VAT threshold and don’t want their businesses to have a competitive disadvantage) but they could, of course, have followed the third option in 1.6.9 and given them a longer period to get organized:

Extended transition period: where all businesses of a defined size are given a fixed extension to when they are required to comply compared to larger business, reducing the costs associated with implementation of new regulatory requirements. For example, the tobacco display ban gave shops below the Sunday Trading threshold an additional 3 years to comply

Give nano businesses three years to get their act together and I’m pretty sure they’ll develop an open source platform of their own that’ll take the sting out of the issue.  Give them a few grand in seedcorn money and I’m pretty sure they could get it done faster.  But telling someone they ought to have known, when you talked to organisations they aren’t members of, issued notices that aren’t relevant to them, and you didn’t know they existed in the first place… well, it’s a consultation fail.  So how about it, Minister?  Extend the transition period for the micros, the nanos, the businesses you didn’t know existed?


VAT on ebooks

November 25, 2014

As it says on my twitter bio, I’m

By day, PhD Law student researching tax simplification and better regulation; by night, writer of science fiction and fantasy.

so today my Facebook and twitter feeds are suddenly full of people from the science fiction side of my life talking about tax.  Why?  Well, take a look at the hashtags #VATMOSS and #VATMESS.

Essentially from January the loophole that lets Amazon avoid charging VAT on e-books has been closed.  VAT will now apply at the rate applicable where the customer is located, and not at the place where the business selling them an ebook has been registered.


Except what about all of those authors who make a few quid selling their back catalogue as ebooks?  Do they have to register for VAT in France just because someone in their holiday home in Normandy logs on and downloads a single copy of their ebook for some poolside entertainment?

Ah, says HMRC, we’ve thought of that.  There’s a thing called the “mini one stop shop” – MOSS – which means you can register for VAT in just one country, the UK, and pay your French and German and Italian and Spanish VAT direct to the UK every quarter.

Wait a minute, though.  Doesn’t the UK have the highest VAT registration rate in Europe (£81,000) so they won’t have to worry about it till they are in the Big Seller Who Can Afford An Accountant category, right?

Wrong.  The MOSS threshold is zero.  Yup.  Any european sales and you have to register, make returns, keep records…

Now there are two issues here (yes, I know, there are dozens, but there are two that I want to highlight)

First of all, does the MOSS zero threshold apply to ALL sales, or just to MOSS-eligible sales (i.e. to business-to-consumer sales in European countries other than the UK)?  In other words, does selling the odd ebook to someone in the EU mean you have to start charging and accounting for VAT on all your sales, to everyone, for ever?

Secondly…. well, I’m a retired tax inspector.  I Speak Tax (up to a point).  I have spent some time this morning trying to find out the answer to the first question.  Yeah.  The HMRC VAT instructions are copious, but incredibly badly written.  (You don’t believe me?  Try this page and then tell me whether MOSS sales and non-MOSS sales go on the same return?)  The blogosphere and commentariat suggest the sky will fall on the heads of small business and HMRC sounds utterly clueless and complacent.  The Guardian’s small business network has a piece which includes a quote from HMRC which seems to answer my question:

A spokesperson for HMRC says the changes should only have a “small effect on administrative burdens.”

“Although a business needs to have a UK VAT registration number before it can register for the Mini One Stop Shop (MOSS) online service, provided it separates the cross-border part of its digital services business from the domestic part, it can voluntarily register for VAT on the cross-border business only.”

Which seems clear enough, although HOW someone who sells the odd e-book off a web site is supposed to know how to do that is a bit harder to fathom.  But the press office are quoted in the same article as saying:

The HMRC spokesperson says that it has provided a “significant amount of information” about the VAT rule changes and MOSS on the GOV.UK website. “We have worked closely with stakeholders and representative bodies to publicise the changes, been involved in various webinars, held a conference that was streamed on the web, and regularly issue Twitter alerts. We have issued regular updates over the last 12 months in the quarterly VAT Notes and we are organising a Twitter clinic that anyone can join to ask questions.”

Really?  This is a change which affects micro businesses, the muggles who don’t speak tax and don’t belong to any of your “stakeholder” organisations.  It seems to have been badly thought out, badly explained, and badly handled.  And now to have come up against an organised set of articulate and well connected tax muggles who aren’t going to stand for any nonsense.

*sits back and fetches popcorn*