Monday 30 April 2012

HMRC bungle again

The tax department has been caught out by yet another bungle in its penalty letter dispatching system.
HMRC moved swiftly this morning to apologise for sending 12,000 penalty notices to people who have been taken out of the Self Assessment (SA) process.
An HMRC spokesman said: “We have identified that nearly 12,000 people have been sent a Self Assessment daily penalty letter in error. We are very sorry and can reassure these customers that we know who they are and that this letter is incorrect - they do not owe a penalty. We are writing to all of them to apologise and to explain this error.
“The 12,000 customers are among the 130,000 who we have already taken out of Self Assessment, following a cleanse of the database and our invitation to customers to contact us if they felt they shouldn’t be in Self Assessment. We can reassure these customers that they have been removed from Self Assessment.”
The alarm was first raised yesterday by AccountingWEB member bosclibby, who reported receiving penalty notices for clients who had successfully appealed against late filing penalties because 2011 Returns should never have been issued in the first place. Both clients received £580 late filing penalties based on £10 per day for the 58 days since the October 31 deadline for paper returns.
AccountingWEB member Jimess, whose client also received one of the letters, was told by the HMRC helpline that while his original penalty appeal had cleared the penalty, but the operative had “not checked the box or whatever they needed to do to clear the daily penalties”. In a follow-up statement on Friday afternoon, an HMRC spokesman said the mistake came about “when internal IT dates do not align correctly” in a new process to cancel SA returns already issued for a previous year.
“The cases have all been removed and are being corrected individually. We are urgently examining what happened and are acting on lessons learned from this error,” the spokesman added.
The latest incident is the third to occur in this area in the past year. In March, HMRC sent 17,000 letters wrongly claiming payments were late because payments received between 14-16 December 2011 were not recorded against outstanding charges until after the reminders had been selected for issue.
The previous incident was a simpler logistical error, when a lack of paper reportedly caused a number of statements of account to be sent out after the 31 July deadline last year. Yet it still echoes with news last week that the department had underestimated the workload that would result from its data cleansing exercise and had to switch more than 350 staff on to the task.
While HMRC has responded more quickly to this incident and is sending out letters to put taxpayers’ minds at rest, the sequence of events raises questions about whether the department learned anything from the previous incidents and has been able to put in place better review processes before dispatching penalty notices.
On this point, the deparment responded: “There is a detailed sampling process in place to ensure we only issue penalties correctly but this error was not picked up in the scans. We will be looking at the process again to make sure this error will not recur. There are over 9m taxpayers in Self Assessment . Unfortunately with a project of this scale things will very occasionally go wrong. We make every effort to minimise mistakes but when they occur we sort things out as quickly as possible.
“Over the last year we have worked very closely with agent stakeholders to devise a campaign which has been very successful in taking people out of SA. We have had a record number of taxpayers file on time, reversing a seven-year trend. We have lots more work to do but we are moving forward and whilst we deeply regret the issue of these incorrect letters, it should not be forgotten that this year at our invitation over 130,000 people have already been taken out of SA and people are still calling. We have nearly halved the numbers of people who received £100 penalties in comparison to last year and turned around years of late filing patterns.”

Sunday 29 April 2012

Downturn?

The UK may be officially in recession – according to the latest ONS figures – but London continues to attract the highest number of business travellers in the world, providing a welcome fillip to the capital’s economy.

The findings were culled from the latest global report on corporate travel and entertainment spend from Concur, the expense management provider’s detailed analysis of more than 500 million expense items from a combined £30 billion corporate spend.

‘It’s great to see London comes up trumps as a global business hub – the most visited city last year for business travellers. It’s also not the most expensive city to travel to, contrary to some beliefs, which could help draw more executives to do business in the UK,” said Isabel Montesdeoca, of Concur EMEA.

‘Additionally, the insights provided on regional spending trends across the most popular hubs for business travel helps UK companies benchmark their T&E spend policies more accurately, which is particularly important in this economic climate.’

The report revealed that in the UK, airfare was the top spend category – up by 9 per cent on the previous year, followed by lodgings and ground transport – both up by 10 per cent. Dining out rose by 6 per cent.

But the biggest rise for UK expense spend was on petrol – up by 23 per cent from 2010 to 2011.

More details on the report are available from the Concur website.

tax credits

HMRC is warning over 3 million people who receive tax credits that they must renew claims by 31 July - or risk having their payments stopped.

They are being urged to act as soon as they receive a renewal pack from HMRC. Over 3.3 million claimants renewed by the deadline last year – some 80 per cent of those required to do so.

Claimants will also be asked to double-check the accuracy of the information in the pack and of any circumstantial changes not previously reported during the year. These may include working hours, childcare costs or pay.

Having the right documents to hand will help reduce errors when they are filling out the form or calling the tax credits helpline. These would be, for example, payslips, end of year P60 forms and childcare details.

In 2013, Universal Credit will be introduced and by 2017 all Tax Credit customers will migrate to that benefit.

Simplified record keeping

Currently all businesses are required to calculate their trading profits on the same basis, irrespective of whether they are a multinational corporate or small cottage industry. Maybe this is a sweeping generalisation, but small business owners have a notorious reputation for being bad at record keeping. Who can blame them when the mountain of administration required for small businesses to calculate their profits is often completely disproportionate to the scale of the business?

So for those of you who have been presented with an overflowing supermarket carrier bag full of fuel receipts, tea stained invoices and maybe the odd chocolate bar wrapper, finally a solution may be at hand which will make business record keeping easier for your small business clients. That is, the proposals set out in The Simpler Income Tax for the Simplest Small Businesses consultation document.

Sunday 22 April 2012

Cuts? What cuts?

Cuts? What cuts?

Horsham Council in West Sussex is advertising for a "workplace health co-ordinator" at £21519 plus car allowance to "encourage small and meduim sized businesses to promote and deliver healthier lifestyle choices for their staff".

As a business owner myself, I am staggered that the authorities think that it is my responsibility to tell my staff how to live their lives. I just employ them to do a job - I'm not their Mum!

Also most businesses these days are still focussed on trying to battle their way their the recession, not worrying about if their employees are eating enough fresh fruit and veg!!!

HMRC blasted

HMRC blasted for call waiting times


Published 20 April 2012

Released 20 April 2012

HMRC has been blasted for the length of time that callers have to wait before they get through to someone on the organisation’s helpline numbers.

The Low Income Tax Reform Group recently undertook a mystery shopping exercise of three HMRC helplines in the week after Easter - the first of the new tax year - and it revealed that each caller was kept on hold for an average of 30 minutes before it was answered. The group also said it had reports of member clients hanging on the phone for up to an hour.

It says that over recent years, HMRC has consistently failed to answer their telephone helplines within a reasonable time-scale. It points to the halcyon days of the Inland Revenue back in 1997/98 when it vowed to answer a call within 30 seconds 91% of the time.

But now, according to the LITRG, callers “can spend four times as much time pushing buttons before you even get in a queue”. It said the subsequent wait can then be excessively costly for callers on a low income, especially as many rely on PAYG mobiles.

It carried out its ‘mystery shop’ on Tuesday 10 April 2012 and we made three calls using the routes taken by an ordinary PAYE caller, a pensioner and a tax credit claimant. On average the wait was 29 minutes. On a PAYG mobile that could have cost £11.60 per call, which could equate to half a day’s income for a pensioner.

An HMRC spokesman said: ‘HMRC handles around 60 million telephone calls every year. During busy periods, there will be times when customers will find it more difficult to get through. We are working hard to improve contact centre service levels and have made good progress. We are managing busy periods better by deploying extra people to deal with short-term increases in demand.’

He added that last week was an exceptionally busy week and typical call volumes can vary from 750,000 to 1.7m in any given seven day period, so it was ‘very hard to forecast’.

‘We are sorry if anyone has been kept waiting, or could not get through over the last couple of days, but we are getting back on top of things’.

Further details of the mystery shop exercise can be found on the LITRG website.

Friday 20 April 2012

Apps for business

New record-keeping mobile apps launched


Published 16 April 2012

Released 16 April 2012

A series of simple record keeping mobile apps for small businesses have been laucnched by software developers after consultation with HMRC.

Mostly free, the apps complement existing HMRC record-keeping guidance and tools. They aim to help small businesses and the self-employed who are below the VAT threshold - £77,000 - maintain good records and estimate what their tax liability might be.

HMRC worked with the Business Application Software Developer Association (BASDA) and independent developers to facilitate the development of the record-keeping apps.

The apps are part of an ongoing campaign beginning in 2012/13 to help small businesses with their record-keeping obligations.

For a list of the developers with available apps, visit:

More information on tax relief caps

http://www.ion.icaew.com/TaxFaculty/24402?utm_source=memberalert&utm_medium=newsitem&utm_term=apr12&utm_campaign=practice

HMRC in Court

HMRC in dock over Goldman deal
Comments (0)
Campaign group UK Uncut Legal Action has moved one step closer to taking HMRC to court over the sweetheart tax deal it made with Goldman Sachs in December 2010
The activists are hoping that the High Court will ultimately quash the deal under which HMRC dropped a claim for £10m in interest payments on money that the bank owed in National Insurance contributions on staff bonuses.
They are seeking judicial review of the agreement and, according to The Guardian, the court has now granted them a preliminary permission hearing, which will take place on 13 June.
The money had been tied up in a tax avoidance scheme based in the British Virgin Islands (BVI). During the 1990s Goldman set up a company there which claimed to employ all of Goldman’s London bankers and second them to the bank.
Along with 21 other investment banks and other businesses, it purchased a tax avoidance scheme, known as an employee benefit trust (EBT), through which it indirectly invested bonuses in elaborate share option schemes.
In 2005, HMRC persuaded the UK courts that EBTs were illegitimate tax avoidance devices and all the businesses – bar Goldman Sachs – paid up. The bank continued to argue for the legitimacy of the scheme until 2010 when a judge decided that the bankers’ true employer was not the BVI company.
Details of the HMRC sweetheart deal emerged after documents were leaked to Private Eye and The Guardian.
When questioned by the Public Accounts Committee in October last year, HMRC permanent secretary for tax Dave Hartnett admitted that a mistake had been made in reaching the deal.
UK Uncut was set up to challenge the coalition government’s “unjust and unnecessary cuts programme” through the UK courts.
Director Tim Street told The Guardian: “A judicial review is clearly necessary and we’re confident that we have a strong case.
“The decision by HMRC to let Goldman Sachs off an alleged £10m tax bill must be reversed and the money handed over to the public purse.”

Julia Irvine

Economic outlook

This month will see the release of the initial estimate of economic growth in the first quarter of 2012, which will show whether or not the UK has avoided recession (for now). Overall, the latest economic data suggest the UK economy will expand at the start of the year, with the latest leading indicators pointing to growth in both the manufacturing and services sectors. An easing of concerns about an immediate financial crisis in the eurozone means that the shortterm economic outlook looks better now than at the start of the year.

Charitable giving

The Treasury has published the data to highlight the extent to which the highest earners are using various vehicles to reduce their tax bills. It does not show, however, exactly which measures they are using.

The figures reveal that 3% of people with earnings of between £1m and £5m paid less than 10% tax in the 2010/2011 financial year. For those with an income of between £5m and £10m, the proportion increased to 4%, and then up to 6% for those with an income of above £10m.
The figures are tiny and hardly justify the wholesale attack by the Government on charitable giving.

Wednesday 11 April 2012

Cuts? What cuts?

Cuts? What cuts?

Under Gordon Brown’s stewardship, the last Labour Government was spending £750 billion per annum and only getting £600 billion per annum in taxes and borrowing the difference. And they’d been doing this every year since 2002. Consequently the country ran up record debts, even before the financial crisis of 2008 hit.

Clearly something had to be done about this unsustainable position. Whether or not there should be cuts in Government spending is a hotly debated issue, and hardly a day ever goes by without a union official or public sector body complaining of ‘the cuts’. However what is the real position?

In money terms, Government spending is still rising. What’s more, it is set to carry on rising throughout the official forecast period. In 2016-17 Government spending will be about 10% more than it was in 2010-11. On that basis the cuts are an illusion.

When we take inflation into account, in real terms there are no cuts- real current spending rose by 1.5% in 2010 and 0.1% in 2011. Is it even forecast to rise 0.5% this year!

Yet total Government spending is starting to fall, but it is investment expenditure that is feeling the pinch. It fell 14% last year and is set to fall 4% this year. Many commentators believe that the coalition Government have got their priorities wrong- current spending should be cut not investment spending.

But there is a problem in cutting current spending- £1 in every £3 of current spending is now on benefits, courtesy of Gordon Brown’s tax credits system. Benefit spending has risen from 15% of Government spending in 1946 to 30% now. Trying to get that particular genie back into the bottle is going to be a monumental task for many different Governments in the decades ahead.

Even if the Government manages to get the Budget back in balance (ie each year we only spend what we get in in taxes) there is still the problem of how we pay back £1.3 trillion of debt.

And even with a balanced Budget, Government spending will still be 40% of GDP. That means on average every person would be paying over 40% of their income in taxes of one sort or another, whether they’re a fat cat or not!

For many this is far too high a percentage and the calls for even more drastic cuts to Government spending are starting to grow.

What an idiot

http://www.accountingweb.co.uk/article/osborne-shocked-millionaire-tax-avoidance/526268

Amazing! You introduce a 52% rate of tax and NIC and are then astonished when people try (legally) to avoid it!!! Should this bloke really be Chancellor?????????

Tuesday 10 April 2012

High energy costs - the true reason

At the Kyoto climate change conference, Tony Blair committed the UK to generating 30% of its energy needs from renewable energy sources by 2020. To encourage the mad dash to green energy, the Labour Government created huge subsidies to electricity generators. With the subsidies, wind farms can recover their investment costs in 10 years. Without the subsidies, it would on average take 20 years to cover the costs.

However, new figures from the Renewable Energy Foundation show how ruinously expensive it is to generate electricity by wind power.

The UK’s largest onshore wind farm with 140 turbines only operates at an average of 20% of capacity (the so called “load factor”).

The figures showed that out of 300 onshore wind farms, only six operated at more than 40% capacity. 79% of Britain’s wind farms are operating at less than 30% of capacity.

By contrast, the load factor of nuclear power stations in 2010 was 59.4%. Gas powered plants operated at a load factor of 60.6% and coal-fired plants at 40.9%.

The Renewable Energy Foundation said “The consumer is paying to make these winds farms artificially viable.”