Posts Tagged ‘HMRC’

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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.

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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?

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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…

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*

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Minimum wage

June 5, 2014

Could you live on the minimum wage?  Do you even know what the minimum wage is?

It’s £6.31 an hour, if you’re over 21.  That’s £227.16 a week if you’re on a 36 hour week.  Just under twelve grand a  year.  (And a couple of grand of that is still taxed, too)

Now imagine you’re in a crappy job that doesn’t quite pay you twelve grand a year, and you have to drive around to old people’s houses and make their dinners or get them in and out of bed, and you’re not paid except for the time you’re actually in the room with the client, because the rest of the time you’re on a “rest break” (because driving from one side of the city to another in the middle of the day is so restful) and you’re vaguely aware there’s something wrong with your wage packet because you seem to have been working like a dog for forty seven hours, counting from when you left the house till when you got home, but you’ve still got barely two hundred quid in your wage packet.

What are you going to do?

Because if you complain, if you stick your head over the parapet, why, you aren’t going to work again next week, are you?  And when you go to sign on, you’re as like as not to be told you’ve made yourself voluntarily unemployed so go away and starve quietly…

There’s an asymmetry, in other words, between the employer and the employee.  In the twentieth century you might have said, well, they ought to join a union, but Thatcher did for unions, didn’t she, so these days you’d say, well, there’s minimum wage legislation.  Ring the HMRC hotline…

Which is good, but HMRC have issued a “look how brilliant we are” press release today which has really got my goat.

First thing: is is legal to refuse to pay travelling time under those circumstances?  I don’t know, but the practice is so widely reported that I had assumed it must be.  But look at the middle of page 14 of this HMRC report which says that “time work” includes

travelling in connection with their work. This includes time spent:

o travelling between appointments (but not rest breaks)

o travelling from work to a training venue

Well, if travelling time IS included in minimum wage calculations, why not clearly say so?  Instead of issuing a press release bragging that you have

recovered average arrears of around £205 per worker.

Two hundred quid???  I mean, if it’s money they’re entitled to then, yes, they should have it – but I’d be a lot more impressed if there had been some prosecutions or that the

issued 652 financial penalties, worth £815,269

had been 652 penalties averaging £800 grand instead of totalling £815k – and so averaging £1250.  I mean, scary, right?  Plenty to keep some bastard employer from screwing his poorly-paid staff out of the money they’re entitled to in order to bump up his massive profits.  Oops – sorry, I’m being normative again…

Let’s look at the worked examples in that HMRC paper for a moment again, shall we?  Turn back to page 14 and look at example 1.

Example 1 Domiciliary care worker A is paid £6.35 per hour and is paid weekly. The employer has paid the worker £190.50 for 30 hours worked. Time records show the worker spent a total of 45 minutes that week travelling between clients that had not been recorded as working time.

How to check compliance with NMW legislation

The minimum amount paid to the worker should be £6.31 x 30.75 hours = £194.03

The worker was paid £190.50 so therefore has been underpaid the NMW by £3.53 that week (£194.03 minus £190.50).

Now, just hold on a minute there – the worker is paid £6.35 per hour.  They have been paid for 30 hours when they should have been paid for 30 hours and 45 minutes.  So they have been underpaid by .75x £4.76, but HMRC will only pursue for the difference between the NMWxhours worked and pay, and not for the difference between ACTUAL pay rate x hours worked and amount paid?  In this instance (and the 45 minutes is a pretty unbelievable travel time but let that go) it only amounts to a few pence but how is the worker to collect it?

Look at example two:

Example 2 Domiciliary worker B is paid £7.50 per hour and is paid weekly. The employer has paid the worker £225 for 30 hours worked (30 x £7.50) Time records show the worker spent 2 hours that week travelling between clients that had not been recorded as working time.

How to check compliance with NMW legislation

The minimum amount paid to the worker should be £6.31 x 32 hours = £201.92 As the worker was paid above £201.92 (i.e. above the NMW amount) no arrears are due even after taking account of the additional 2 hours working time spent travelling.

They have, however, been stiffed out of £15 – two hours’ pay – they should have been paid £240 (32 x £7.50) rather than £225 (30 x £7.50).  But because the amount they have been paid is more than the legal minimum, the HMRC NMW enforcement team is going to be no use to them.

That’s like saying everyone’s entitled to £57.35 a week, so if I come along and mug you and nick fifty quid out of your purse, the police won’t do anything about it if I leave you with £57.35, isn’t it?

Ah yes, but the administration of the benefits system and the justice system are different, and so are the administration of the NMW and employment law, right?  So the HMRC team that enforces National Minimum Wage can’t get involved if your employer is ripping you off in some way that doesn’t involve breaking the NMW legislation, right?

Sod that.  There’s an easy fix.  First, make it crystal clear that travelling time – except home to the first visit, and last visit to home – is working time.  Publicise THAT and the press release might be worth having.  Second, issue the workers and the employers with an official HMRC document at the end of any investigation which says clearly the rate of pay and the number of hours worked.  This then would be prima facie evidence that the worker could use to sue the employer for the rest of it, the amount they’ve ripped off that isn’t covered by minimum wage legislation – the five pence not enforced by HMRC in the first example, and the fifteen quid HMRC weren’t interested in, in the second example.

How would the worker make use of that?  Well, an individual worker could sue separately, but it’s likely to be too small an amount for an individual to take the risk.  But maybe for a collection of workers you might get, god help us, the claims management companies stepping in and suing the employer on behalf of a number of workers.  Or – and here’s a thought – how about some kind of collective worker organisation picking up the slack and advertising their services?  Anyone know any trades unions???

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Peanuts?

May 15, 2014

 

99.81% of HMRC’s staff are paid above the living wage.  (David Gauke told Parliament, so it must be true)

So that means that 0.19% of them are paid LESS than the living wage?

How many is that?

According to the 2013 Pocket Data guide they had 64,476 full time equivalents (in other words, there might be more people, but that’s the number of units of 36 hours a week you’d get if you added up the hours of the part time people: two part timers on 18 hours a week each = one “full time equivalent”)

0.19% x 62,276 = 122.

A couple of hundred part timers being paid less than £7.65 a week by the department that polices the minimum wage.  Paying above the minimum wage of £6.31 an hour but below the living wage isn’t illegal.  But it’s a pretty bloody poor show from a government department.

It would cost the nation £1.34 per hour (7.65-6.31) x 36 hours a week x 122 people x 52 weeks to put right.  In other words, about £300k.

HMRC’s total staff costs are £2,267.3 million (table 7 page 113)

It’s peanuts, comparatively speaking.  Make it right, for goodness sake.

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Demerger

April 1, 2014

Today, some interesting rumours reach me of proposals to de-merge HMRC and restore the historic brands of HM Inland Revenue and HM Customs and Excise.  I hear that the proposals, which are to go out to consultation in the next few months, will also include a clever exit from the once-controversial Mapeley contract and a move out of leased and into properties owned by the taxpayer, saving millions in rent and services payment and creating several thousand jobs in providing building and other services direct by newly-appointed staff who will also be available to perform “back office” functions at times of need.

The de-merger will also herald the de-industrialisation of tax, as both restored departments return to a local office structure.  The main change that taxpayers will see is that they will once more be able to speak to someone, face to face or over the phone, who actually knows what they are talking about, will give their name, extension number and email address, and will then take responsibility for working an issue through to its conclusion.

I hear that the de-merger will come with a hefty staffing and budget increase, to be paid for by the expected rise in collection and compliance yield and narrowing of the tax gap.  There is also likely to be a new task force bringing long-standing disputes to a conclusion via rapid litigation, following which the task force will direct its expertise into prosecution of all tax offences resulting from the new alignment of prosecution thresholds for tax, customs, excise and benefit cases.

Whether the coalition can bring this off in time before the election is, of course, in considerable doubt, but I hear that the timetable is

May 2014 consultation

July 2014 consultation ends.  Enabling legislation passed

September 2014 contracts signed for new local office accommodation

December 2014 first District Inspectors appointed and begin appointment of supporting staff

February 2015 New offices occupied and shadow operations begin while skeleton staff winds down the last of HMRC operations

1st April 2015: New IR and New C&E begin operations.

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Muggle morality

February 24, 2014

Let’s talk a bit about “fairness”.  Or about “morality”.  Or we can talk about “equity” instead, if you like.  After all, “there is no equity about a tax” (Mr Justice Rowlatt in Cape Brandy Syndicate, 1921), and “there is no morality in a tax and no illegality or immorality in a tax avoidance scheme.” (Lord Templeman in Ensign Tankers v Stokes in 1992).  That’s tax wizard talk: people with a professional interest in tax can sometimes get caught up in the idea that tax is legal confiscation of private property and no overbearing state ought to be able to dip its hand in your pocket without good reason and legal backing, preferably from a body of law hallowed by time and created by a democratically elected parliament.  Quite right too… except, is that really the problem, in a twenty-first century democracy?

Let’s be clear: if HMRC were coming through my front door with guns I’d be against it.  When I DO deal with the actual HMRC, I get pretty pissed off if they’re inefficient, rude or inaccurate… but please note that I haven’t (so far) disappeared into a gulag for arguing my corner with them if they happen to stray.  In general, if they put their hand in my pocket, I’d rather they didn’t but I accept I also would rather have an education, an army, a National Health Service and a few quid back from the state when I’m too decrepit to work any more: that tax is, indeed, the price we pay for civilisation.  That, then, for me is the first point where morality comes into it.  We pay taxes for a good reason, we obtain public goods as a result, and it’s pretty contemptible to take the goods and weasel out of paying towards them.

But the crunch point for me isn’t there, in the dealings HMRC has with the individual citizen, but in the relationship between the state and the multinational corporation.  The hollowing out of the state by offshoring profits to tax havens (as described, for example, in Richard Brooks’ The Great Tax Robbery) seems to me to be contributing to all kinds of inequality and unfairness (see some of the examples quoted by the Tax Justice Network).  Is the relationship between the state and the multi-national analogous to the relationship between the state and the private citizen?

Well let’s think about it.  For one thing, the multinational may well have more money.  (Walmart is bigger than Norway, Apple is bigger than Ecuador…)  They may be able to bring influence to bear which the private citizen would be unable to exercise by the exercise of their single vote.  They may be able to persuade governments to modernise any inconvenient rules (for example) “to better reflect the way business operates in a global economy“, costing the economy £450 million this year, rising to £805 million in 2016/17 against not a penny of quantified benefit.

The tax wizard might be right that there is no moral failure in a corporation arranging its affairs to pay the least amount of tax according to the law of the land.  But if the corporation has the ability to influence the making of the law by which it is taxed, is there a moral failing in its doing so?

In tax policy-making, perhaps it is politicians who are failing to make moral choices when they allow themselves to be influenced?  Or perhaps it is our fault, as citizen-stakeholders, for not holding our politicians to account?

It’s not an easy thing to do – is anyone actually doing it? (Margaret Hodge?  Any time her name comes up in the news my twitter feed comes instantly alive with tax wizards complaining about or mocking her.  Similar animus is shown towards Richard Murphy)

So what are the rest of us, those of us who aren’t tax wizards and are pretty sure the “no equity” thing is a crock, to do?  Well, fellow muggles, here’s my attempt at a muggle moral maze.

  1. If it is morally justifiable to arrange your tax affairs so that you pay the least amount of tax possible under the law, and
  2. It is morally justifiable to influence tax policy making so that laws which would tax you more heavily are not passed and laws which are favourable to you are, and
  3. It is morally justifiable to say that it is up to parliament what laws they pass, then,
  4. Logically it must then be the moral responsibility of the citizen stakeholder to exercise the only power which remains in their hands…

So to arms, citizens!  Any time someone asks you for their vote ask them a simple binary, muggle, question: are they in favour of tax competitiveness, or of tax justice?