It may be because I attended a talk by an NLP practitioner a few days ago, but I thought I would try and be more upbeat in what is written here.
So isn't it exciting? Alistair Darling is due to give his pre-budget speech at lunch time on 9 December. There is a general election coming up and Nick Clegg is looking forward to leading the country.
So there will be lots of change coming up over the next few months to take my mind off the 31 January deadline for filing personal tax returns and indeed for some time to come.
Are we going to see VAT rise after the election? What about Capital Gains Tax at an all-time low rate (if you ignore the 10% rate that used to apply to people selling their businesses) - is that going to change again and perhaps increase to 40% or even 50%?
VAT is already up for an overhaul in the new year, with new rules about reporting business done with other EU countries coming in on 1 January and a requirement for lots of businesses to file their returns online from April 2010.
There are going to be lots of opportunities to review and perhaps come up with a better way of doing things.
So here's to the New Year.
Wednesday, 2 December 2009
Tuesday, 10 November 2009
Schemes and things
Thumbing through my emails this morning I cames across a link to a blog suggesting that some accountants spend too much time worrying about ways of avoiding tax, rather than giving straightforward help and advice.
This appears to be an old failing. King Solomon wrote something similar a few thousand years back
More recently PG Wodehouse described one of his characters (Mrs Gedge in "Hot Water") in the offices of her London lawyers
I don't think Solomon's tax rules were quite as complex as the rules we suffer in the UK. I am almost certain he would not have had rules requiring taxpayers to own up to using schemes which had previously been reported and numbered by the tax collectors.
David Hartnett (permanent secretary for tax) tried to convince an audience of tax advisers a little while ago that the rules have to be complicated so that the tax system is fair. The audience was not convinced.
We seem to be piling complexity on top of the existing rules.
And the result? Hours spent trying to make sure we understand the new pension tax rules which are full of complications which will affect one tax year only and maybe find a way to avoid the rules biting out clients quite so much.
Could we come up with something simpler? In this day and age we are probably bound to have complex rules simply because we are taxed by one country at a time when we can easily move to another or at the least oversee business or investment in another country. Bring on the single World Tax - I am sure that would be easier.
(Cue song - "Fly me to the moon")
This appears to be an old failing. King Solomon wrote something similar a few thousand years back
God made mankind upright, but men have gone in search of many schemes (Eccliesiates 7 verse 29).
More recently PG Wodehouse described one of his characters (Mrs Gedge in "Hot Water") in the offices of her London lawyers
His [the lawyer's] operations on her behalf in the matter of evasion of English Income Tax had dissatisfied her, and she was talking pretty straight to him
I don't think Solomon's tax rules were quite as complex as the rules we suffer in the UK. I am almost certain he would not have had rules requiring taxpayers to own up to using schemes which had previously been reported and numbered by the tax collectors.
David Hartnett (permanent secretary for tax) tried to convince an audience of tax advisers a little while ago that the rules have to be complicated so that the tax system is fair. The audience was not convinced.
We seem to be piling complexity on top of the existing rules.
And the result? Hours spent trying to make sure we understand the new pension tax rules which are full of complications which will affect one tax year only and maybe find a way to avoid the rules biting out clients quite so much.
Could we come up with something simpler? In this day and age we are probably bound to have complex rules simply because we are taxed by one country at a time when we can easily move to another or at the least oversee business or investment in another country. Bring on the single World Tax - I am sure that would be easier.
(Cue song - "Fly me to the moon")
Wednesday, 9 September 2009
What debt crisis?
It is now a decade ago that the "Jubilee Debt campaign" started. The hope was to reduce the debt of poorer nations to something that could be managed by the turn of the century (ie before January 2000).
But it was only when I was reading a magazine this morning that I realised the parallels between this (ongoing) campaign and the recent debt crisis hitting the richer countries.
The poorer countries were plagued by irresponsible lending - long term debt in return for current spending power (sometimes used to finance the lives of the politicians controlling the countries rather than making any difference to the country at all). The current crisis has come out of irresponsible lending - to people who cannot afford to pay back their mortgages, presumably on the back of ever-increasing land values which meant the banks would get their money back one way or the other.
Of course it is more complicated than that, but the solution seems to be grossly unfair.
In the current crisis, billions have been spent very quickly to bail out the banks to avoid a global economic crisis. There are conditions on the billions - at least I assume there are. But for the HIPC (heavily indebted poor countries) it has taken years to obtain relief - Haiti obtained relief earlier this year but only after years of negotiation (see the jubilee debt campaign press report).
Iceland - one of the financial centres which has suffered most in the banking crisis has said it will not repay more than it can afford (see michael hudson's article which featured in the FT). But poorer countries have not been allowed this luxury.
What is the answer? It is complicated! A starting point though must be to think again about the meaning of wealth. If we are just pursuing money and what money can buy, these crises will happen again (Alan Greenspan - former head of the US Federal Reserve). This suggests we should invest in something more valuable. For example our home should be just that, not an investment we can borrow against...
But how about giving poorer countries the same chance we have given ourselves and relieve a little debt? After all it wont cost anything like what we have just spent on our banks.
But it was only when I was reading a magazine this morning that I realised the parallels between this (ongoing) campaign and the recent debt crisis hitting the richer countries.
The poorer countries were plagued by irresponsible lending - long term debt in return for current spending power (sometimes used to finance the lives of the politicians controlling the countries rather than making any difference to the country at all). The current crisis has come out of irresponsible lending - to people who cannot afford to pay back their mortgages, presumably on the back of ever-increasing land values which meant the banks would get their money back one way or the other.
Of course it is more complicated than that, but the solution seems to be grossly unfair.
In the current crisis, billions have been spent very quickly to bail out the banks to avoid a global economic crisis. There are conditions on the billions - at least I assume there are. But for the HIPC (heavily indebted poor countries) it has taken years to obtain relief - Haiti obtained relief earlier this year but only after years of negotiation (see the jubilee debt campaign press report).
Iceland - one of the financial centres which has suffered most in the banking crisis has said it will not repay more than it can afford (see michael hudson's article which featured in the FT). But poorer countries have not been allowed this luxury.
What is the answer? It is complicated! A starting point though must be to think again about the meaning of wealth. If we are just pursuing money and what money can buy, these crises will happen again (Alan Greenspan - former head of the US Federal Reserve). This suggests we should invest in something more valuable. For example our home should be just that, not an investment we can borrow against...
But how about giving poorer countries the same chance we have given ourselves and relieve a little debt? After all it wont cost anything like what we have just spent on our banks.
Thursday, 3 September 2009
False self-employment
There has been quite a lot in the tax press about the consultation document issued in July. A major concern is that the consultation is not about whether or not subcontractors in the construction industry are really employees, but how to change the rules to tax them as if they are. The Revenue are working on the assumption that there are lots of people out there cheating the system and they need to find a way to deal with it. But when they have actually taken people to court, the courts have often confirmed that the subcontractors are indeed self-employed.
There is one major issue which I have not yet seen much talk about - compliance cost issues.
Yes, more NIC and a little bit more tax is paid by someone who is employed compared with someone who is earning the same money but is self-employed.
But the CIS scheme (the scheme for taking some tax at source from subcontractors) is reasonably flexible and can tax someone who is working for every day in the month and just as easily someone who only works one day a week for a number of different people.
The PAYE system (the scheme which the Revenue want to adopt for labour-only subcontractors) cannot cope very easily with people who have more than one job at the same time or who regularly move between jobs. The default position is likely to be that subcontractors will be taxed at basic rate because the PAYE paper-trail will not allow a better tax code to operate. As the basic rate is now 20% and the main CIS rate for labour-only subcontractors is also 20%, the difference subcontractors will see is the additional NIC payable under the PAYE system.
But the paper-chase could be horrendous. Every time someone moves from one contractor to another there will be a P45. So working alternate weeks for two different contractors will mean 52 forms P45 a year. It will also mean that both contractors will have 26 different lines on their end-of-year PAYE return for this subcontractor. The CIS scheme would involve just 24 monthly summaries. And, of course, the contractors will need to not only process all these P45s (probably online) but also a joining form (P46) each time a subcontractor starts on a new site - so that is another 52 forms.
More importantly, can the Revenue cope with these new complex personal tax cases? For each of these subcontractors they will have to undertake an end of year review to check whether personal allowances have been given or whether higher-rate taxes are due. Can their computers cope with large numbers of small employments or will Revenue staff have to rely on working papers and just transferring the totals into the tax calculation system?
For higher earners there may also need to be a review on NICs paid - a problem when you work for more than one employer in the same month.
How many more Revenue staff are going to be employed to deal with all this?
There is one major issue which I have not yet seen much talk about - compliance cost issues.
Yes, more NIC and a little bit more tax is paid by someone who is employed compared with someone who is earning the same money but is self-employed.
But the CIS scheme (the scheme for taking some tax at source from subcontractors) is reasonably flexible and can tax someone who is working for every day in the month and just as easily someone who only works one day a week for a number of different people.
The PAYE system (the scheme which the Revenue want to adopt for labour-only subcontractors) cannot cope very easily with people who have more than one job at the same time or who regularly move between jobs. The default position is likely to be that subcontractors will be taxed at basic rate because the PAYE paper-trail will not allow a better tax code to operate. As the basic rate is now 20% and the main CIS rate for labour-only subcontractors is also 20%, the difference subcontractors will see is the additional NIC payable under the PAYE system.
But the paper-chase could be horrendous. Every time someone moves from one contractor to another there will be a P45. So working alternate weeks for two different contractors will mean 52 forms P45 a year. It will also mean that both contractors will have 26 different lines on their end-of-year PAYE return for this subcontractor. The CIS scheme would involve just 24 monthly summaries. And, of course, the contractors will need to not only process all these P45s (probably online) but also a joining form (P46) each time a subcontractor starts on a new site - so that is another 52 forms.
More importantly, can the Revenue cope with these new complex personal tax cases? For each of these subcontractors they will have to undertake an end of year review to check whether personal allowances have been given or whether higher-rate taxes are due. Can their computers cope with large numbers of small employments or will Revenue staff have to rely on working papers and just transferring the totals into the tax calculation system?
For higher earners there may also need to be a review on NICs paid - a problem when you work for more than one employer in the same month.
How many more Revenue staff are going to be employed to deal with all this?
Tuesday, 25 August 2009
The right amount of tax
I have just been looking at two National Insurance issues in the press.
In one case, a man was claiming a higher national insurance pension on the grounds that the government should have spotted the NIC saving scheme his employer was using and stopped it. Because the government had failed in its duty it ought to pay him more pension without being able to claim the back NIC from him (as the saving scheme only benefitted him in recent years because his employer paid the same amount of NIC either way). The tribunal dismissed his case although it did comment that there seemed to be some failing in the government system back in the early 1980s.
The other case is the government's consultation document on workers in the contruction industry. Not content with the CIS scheme (which means that smaller contractors have tax deducted at source from their income from main contractors) they want to go a stage further and recategorise large numbers of smaller contractors as employees for tax and NIC purposes.
What is the benefit for the government? There are differences in the rules for claiming tax relief on expenses, so there may be a higher tax take but the big difference is the NICs (the self-employed pay at most 8% whereas the take from employers and employees is over 20%). One commentator has suggested that if the tax rules are changed so that there is little difference in the overall tax take, workers will worry less about whether they are employed or self-employed. I think this misses the point.
The difference between employed and self-employed workers is in their rights. If you are an employee, you have employment rights and special tribunals to make sure you get them. As an employee you are entitled to various benefits (unemployment benefits and statutory sick pay and benefits when a child is on its way). As a self-employed worker your only rights are under the deal (contract) you make with the employer and if you are off work for any reason, the only benefit you might receive is a tax credit.
By all means change the rules, but please make sure that the change is proportionate - in other words, if you are going to increase the "tax" take (which is going to be mostly NICs), then expect a lot of benefit claims from construction workers and make sure that they are given employment rights too.
But of course expecting employment rights is probably too much - after all when IR35 was introduced back in 1999, the original intention was to tax the engaging company - and the rules changed after complaints from the bigger business lobby, so that it was the subcontractor who was stung with the new tax. And what was the new tax? Taxing the subcontractor as if he was an employee without giving him any employment rights against the engaging company.
In one case, a man was claiming a higher national insurance pension on the grounds that the government should have spotted the NIC saving scheme his employer was using and stopped it. Because the government had failed in its duty it ought to pay him more pension without being able to claim the back NIC from him (as the saving scheme only benefitted him in recent years because his employer paid the same amount of NIC either way). The tribunal dismissed his case although it did comment that there seemed to be some failing in the government system back in the early 1980s.
The other case is the government's consultation document on workers in the contruction industry. Not content with the CIS scheme (which means that smaller contractors have tax deducted at source from their income from main contractors) they want to go a stage further and recategorise large numbers of smaller contractors as employees for tax and NIC purposes.
What is the benefit for the government? There are differences in the rules for claiming tax relief on expenses, so there may be a higher tax take but the big difference is the NICs (the self-employed pay at most 8% whereas the take from employers and employees is over 20%). One commentator has suggested that if the tax rules are changed so that there is little difference in the overall tax take, workers will worry less about whether they are employed or self-employed. I think this misses the point.
The difference between employed and self-employed workers is in their rights. If you are an employee, you have employment rights and special tribunals to make sure you get them. As an employee you are entitled to various benefits (unemployment benefits and statutory sick pay and benefits when a child is on its way). As a self-employed worker your only rights are under the deal (contract) you make with the employer and if you are off work for any reason, the only benefit you might receive is a tax credit.
By all means change the rules, but please make sure that the change is proportionate - in other words, if you are going to increase the "tax" take (which is going to be mostly NICs), then expect a lot of benefit claims from construction workers and make sure that they are given employment rights too.
But of course expecting employment rights is probably too much - after all when IR35 was introduced back in 1999, the original intention was to tax the engaging company - and the rules changed after complaints from the bigger business lobby, so that it was the subcontractor who was stung with the new tax. And what was the new tax? Taxing the subcontractor as if he was an employee without giving him any employment rights against the engaging company.
Thursday, 20 August 2009
We shouldn't let them get away with it
The government introduced a number of interesting changes to the tax law recently. A new tax rate for those earning a lot (over £100,000) by reducing their personal allowance and taxing them at 50% from next year (April 2010).
There is also a reduction in tax relief on pension contributions for those earning over £150,000. They will only be entitled to basic rate rate relief on contributions over £20,000 from April 2011.
Oh, but that's not fair on people who have set up regular pension contributions in the expectation of the higher rate relief, so there are complicated provisions to give these high earners their higher rate relief. The provisions are complicated because it is not always obvious that pension contributions are regular.
And then there are those naughty people who see a tax relief and try and get it even when it is not due. So we have even more complicated rules to stop these naughty people getting relief they are not entitled to.
And now we have even more rules published a few weeks ago so that those even naughtier people who look at the rules and work out what they mean and how to make best use of them. They now have to tell the Revenue they have found a "scheme" which gives people tax relief which they might not otherwise have got.
Sometimes you wonder - why is it all so complicated? Why do we use so many words which then have to be read in great detail and probably argued about through the courts in due course? If the government need to raise more tax, why don't they simply put up the tax rate or introduce a new higher tax rate instead of introducing a whole raft of legislation which only makes life more complicated for everyone. But no, taxes have to be fair, so they are complicated in their approach. (Oh and national insurance is going up but that isn't a tax and it isn't happening till 2011 so we don't need to worry about that).
We shouldn't let them get away with it - that seems to be the motto of the government - here have a tax relief, but don't you dare try and use it because that is unacceptable tax avoidance!
There is also a reduction in tax relief on pension contributions for those earning over £150,000. They will only be entitled to basic rate rate relief on contributions over £20,000 from April 2011.
Oh, but that's not fair on people who have set up regular pension contributions in the expectation of the higher rate relief, so there are complicated provisions to give these high earners their higher rate relief. The provisions are complicated because it is not always obvious that pension contributions are regular.
And then there are those naughty people who see a tax relief and try and get it even when it is not due. So we have even more complicated rules to stop these naughty people getting relief they are not entitled to.
And now we have even more rules published a few weeks ago so that those even naughtier people who look at the rules and work out what they mean and how to make best use of them. They now have to tell the Revenue they have found a "scheme" which gives people tax relief which they might not otherwise have got.
Sometimes you wonder - why is it all so complicated? Why do we use so many words which then have to be read in great detail and probably argued about through the courts in due course? If the government need to raise more tax, why don't they simply put up the tax rate or introduce a new higher tax rate instead of introducing a whole raft of legislation which only makes life more complicated for everyone. But no, taxes have to be fair, so they are complicated in their approach. (Oh and national insurance is going up but that isn't a tax and it isn't happening till 2011 so we don't need to worry about that).
We shouldn't let them get away with it - that seems to be the motto of the government - here have a tax relief, but don't you dare try and use it because that is unacceptable tax avoidance!
Thursday, 23 July 2009
Just fill in the form
I picked up the latest publication from the Institute of Fiscal Studies this morning. It is a look at how we might best measure the cost of claiming benefits to help policy makers design a better benefit system (in other words one which helps claimants without giving them vast costs in making the claim in the first place).
But what interested me most were some of the appendices.
Annex 2 is a report by a CAB adviser in 2008 about how to claim a crisis loan if, for example, your only form of household heating breaks down.
In a nutshell, you go to any of the local offices you might think of (Job centre, DWP offices or websites) and they give you an 0800 number to call.
If you persist long enough (the adviser had to call 18 times in succession before getting through and was cut off on the previous 17 calls because there was no-one available to answer the call), you are told that the claim form will be sent to you in the post.
There is a happier end to the story. If you go to http://www.jobcentreplus.gov.uk/JCP/Customers/WorkingAgeBenefits/Dev_013949.xml.html , you can now download a form directly, without sitting on the phone for days waiting to get through.
I have not tried the other methods to find out if you get help straight away or are still put through this sort of ordeal.
But what interested me most were some of the appendices.
Annex 2 is a report by a CAB adviser in 2008 about how to claim a crisis loan if, for example, your only form of household heating breaks down.
In a nutshell, you go to any of the local offices you might think of (Job centre, DWP offices or websites) and they give you an 0800 number to call.
If you persist long enough (the adviser had to call 18 times in succession before getting through and was cut off on the previous 17 calls because there was no-one available to answer the call), you are told that the claim form will be sent to you in the post.
There is a happier end to the story. If you go to http://www.jobcentreplus.gov.uk/JCP/Customers/WorkingAgeBenefits/Dev_013949.xml.html , you can now download a form directly, without sitting on the phone for days waiting to get through.
I have not tried the other methods to find out if you get help straight away or are still put through this sort of ordeal.
Wednesday, 15 July 2009
Rules and codes
I am still trying to get my head around the way the Revenue want to deal with the banks.
They are setting up an agreed code of conduct about tax matters, so that banks will not only comply with the tax legislation, but also not do anything which might be considered unconscionable by the public at large.
The recent scandal over MPs expenses has shown how complying with the rules may not be enough to satisfy the public at large, but I cannot see how a "code" can operate for what is a small number of very large businesses. What happens if the code is broken? If the law has been broken, then the Revenue can take them to court, but if it is just the code that is broken, all they can do is complain.
What effect will the complaint have? Some people (possibly the smaller customers) will take their business away in disgust. Others may admire the bank's approach to tax and decide this just the sort of people they want to do business with!
But because there are only a few big banks, it is difficult to see how any code can have a real effect if the banks decide not to comply. There are enough MPs for a few to lose their jobs over the expenses scandals - I do not think there are enough banks for any to lose theirs over a breach of a code.
They are setting up an agreed code of conduct about tax matters, so that banks will not only comply with the tax legislation, but also not do anything which might be considered unconscionable by the public at large.
The recent scandal over MPs expenses has shown how complying with the rules may not be enough to satisfy the public at large, but I cannot see how a "code" can operate for what is a small number of very large businesses. What happens if the code is broken? If the law has been broken, then the Revenue can take them to court, but if it is just the code that is broken, all they can do is complain.
What effect will the complaint have? Some people (possibly the smaller customers) will take their business away in disgust. Others may admire the bank's approach to tax and decide this just the sort of people they want to do business with!
But because there are only a few big banks, it is difficult to see how any code can have a real effect if the banks decide not to comply. There are enough MPs for a few to lose their jobs over the expenses scandals - I do not think there are enough banks for any to lose theirs over a breach of a code.
Monday, 13 July 2009
Prudence
Her Majesty's Revenue and Customs are updating their banking arrangements so that, instead of one account with the Bank of England there are now accounts with the Royal Bank of Scotland and CitiBank. The changeover has had its problems - some banks could not transfer the money across properly to start with.
But at least we know where the money is being dealt with. The main offices for looking after the tax money received by the Revenue are in Shipley and Cumbernauld.
There may be some questions about who is better with money, the Yorkshiremen in Bradford (the Shipley office) or the Scots in Glasgow (the Cumbernauld office), but at least we are reasonably sure the money is going to be looked after well.
But at least we know where the money is being dealt with. The main offices for looking after the tax money received by the Revenue are in Shipley and Cumbernauld.
There may be some questions about who is better with money, the Yorkshiremen in Bradford (the Shipley office) or the Scots in Glasgow (the Cumbernauld office), but at least we are reasonably sure the money is going to be looked after well.
Friday, 5 June 2009
Car scrapping scheme
I have just been reading an outline of how it will work. What a brilliant idea!
The government are organising a £2,000 subsidy to the few people who have owned a car for more than a year and want to scrap it in favour of a brand new car. When I say organising, it will only cost the government £1,000 - the rest comes from the manufacturer (actually it is less than this because he gets some VAT relief).
What is really clever is the tax rules though. If you are in business and it is a business vehicle you are selling, then the £2,000 is NOT sale proceeds. The car is scrapped, so you get nothing for it. Instead the £2,000 is a discount off the price of the new car.
With the new capital allowance rules, this could mean that if you are going for a really green car, the 100% allowances you get will be on the lower value (the price of the new car less £2,000). And the new "pooling" rules for cars means that you do not get the balance of any relief when you sell the old one - you only get a writing down allowance on the balance so that it will take about 10 years to get 90% of the the balance.
Did Gordon come up with this, or is this one of the reasons Alistair has kept his job at number 11?
The government are organising a £2,000 subsidy to the few people who have owned a car for more than a year and want to scrap it in favour of a brand new car. When I say organising, it will only cost the government £1,000 - the rest comes from the manufacturer (actually it is less than this because he gets some VAT relief).
What is really clever is the tax rules though. If you are in business and it is a business vehicle you are selling, then the £2,000 is NOT sale proceeds. The car is scrapped, so you get nothing for it. Instead the £2,000 is a discount off the price of the new car.
With the new capital allowance rules, this could mean that if you are going for a really green car, the 100% allowances you get will be on the lower value (the price of the new car less £2,000). And the new "pooling" rules for cars means that you do not get the balance of any relief when you sell the old one - you only get a writing down allowance on the balance so that it will take about 10 years to get 90% of the the balance.
Did Gordon come up with this, or is this one of the reasons Alistair has kept his job at number 11?
Wednesday, 3 June 2009
Help, but not as we know it
The writer has always been wary about tax helplines operated by HMRC since an experience many years ago when it took a year for the HMCE (as it then was) to agree that the advice given on the helpline was wrong and that compensation should be paid.
In the light of the most recent ruling in the Corktech case, we may have been lucky to receive the compensation.
The circumstances are simple - a company telephoned the VAT helpline to check what it should do about something. The advice it relied on was wrong and it ended up owing £300,000 in VAT. There was a difference of opinion over the advice given - the notes made by the helpline at the time and the taxpayers notes were different. But that did not make any difference! The tribunal ruled:
What should you do about this? Firstly, don't telephone the helpline, because you can only rely on them when you know their answer is right, and if you know the answer, you don't need to ask!
Any other reasons for paying for advice instead of getting it free (Apart from the old saying that you get what you pay for)? The helplines will only answer the question you put - an adviser can ask you whether you have thought of doing it some other way.
Why will the helpline get it wrong? The helplines are based on HMRC publications and databases which are often interpretations of the law, rather than the law itself. And whatever anyone else may say, tax is complicated - if you get an inexperienced adviser on the telephone, they may not even realise there is a problem.
I could go on, but that is probably enough..
In the light of the most recent ruling in the Corktech case, we may have been lucky to receive the compensation.
The circumstances are simple - a company telephoned the VAT helpline to check what it should do about something. The advice it relied on was wrong and it ended up owing £300,000 in VAT. There was a difference of opinion over the advice given - the notes made by the helpline at the time and the taxpayers notes were different. But that did not make any difference! The tribunal ruled:
"The [helpline] was only held out as a source of "general advice", rather than as a source of binding rulings on the proper tax treatment of specific transactions," such that the unfortunate taxpayer "could not reasonably have thought that [HMRC] had given [him] a fully considered and binding ruling in [his] favour."What this means is that, even if the helpline get it wrong, it is you, the taxpayer, who will end up paying for the mistake.
What should you do about this? Firstly, don't telephone the helpline, because you can only rely on them when you know their answer is right, and if you know the answer, you don't need to ask!
Any other reasons for paying for advice instead of getting it free (Apart from the old saying that you get what you pay for)? The helplines will only answer the question you put - an adviser can ask you whether you have thought of doing it some other way.
Why will the helpline get it wrong? The helplines are based on HMRC publications and databases which are often interpretations of the law, rather than the law itself. And whatever anyone else may say, tax is complicated - if you get an inexperienced adviser on the telephone, they may not even realise there is a problem.
I could go on, but that is probably enough..
Wednesday, 27 May 2009
Is HMRC getting too hip?
In their attempts to contact "customers" in different ways, HMRC is also opening up new ways for scammers and phishers to try and get hold of confidential information.
Apparently HMRC now send out emails to taxpayers, but we are assured that they never ask us for credit card or similar details. My experience of HMRC emails is that they always ask me to ring them back on a premium rate number (beginning 0845), because of the security risk of actually saying anything in an email to me.
They have gone one step further now and are sending out SMS text messages. How? Where did they get my mobile phone number from? I don't even know what my mobile phone number is. Again the message asks you to call them back (on an 0845 number) The problem is that anyone can send you a text saying they are from the tax man and can then get you to pay for the phone call that allows them to rip you off!
Perhaps HMRC could take their "customer" approach a step further and offer 0800 numbers instead of 0845 numbers - that would put off the scammers.
Or maybe they could actually telephone us rather than sending voicemail messages.But no - that would not work - how could we possibly get them to verify that they are genuinely from HMRC - could they tell us the date of the last letter they wrote to us or the amount they think we owe on the most recent tax statement? The only answer would be to call them back and the chances of being put through to the person who has called you is probably very slim!
If you think this is a joke, have a look at http://www.hmrc.gov.uk/security/index.htm and the related links.
Apparently HMRC now send out emails to taxpayers, but we are assured that they never ask us for credit card or similar details. My experience of HMRC emails is that they always ask me to ring them back on a premium rate number (beginning 0845), because of the security risk of actually saying anything in an email to me.
They have gone one step further now and are sending out SMS text messages. How? Where did they get my mobile phone number from? I don't even know what my mobile phone number is. Again the message asks you to call them back (on an 0845 number) The problem is that anyone can send you a text saying they are from the tax man and can then get you to pay for the phone call that allows them to rip you off!
Perhaps HMRC could take their "customer" approach a step further and offer 0800 numbers instead of 0845 numbers - that would put off the scammers.
Or maybe they could actually telephone us rather than sending voicemail messages.But no - that would not work - how could we possibly get them to verify that they are genuinely from HMRC - could they tell us the date of the last letter they wrote to us or the amount they think we owe on the most recent tax statement? The only answer would be to call them back and the chances of being put through to the person who has called you is probably very slim!
If you think this is a joke, have a look at http://www.hmrc.gov.uk/security/index.htm and the related links.
Wednesday, 13 May 2009
Antiavoidance rules
There has been a lot in the press recently about the difference between evasion and avoidance.
Now that MPs expense claims have been made public, there is a lot of concern about them breaking the rules.
There is of course a big difference between breaking the rules and claiming for something you are not entitled to (which we might call evasion) and following the rules and claiming for something which the rules did not really mean you to have but that you are entitled to (which we might call avoidance).
So are we going to see a new set of rules which will be much tighter or rules drawn up in a different way which will rely on principles more than details?
Hang on - isn't that what the prime minister and chancellor have been saying about tax? They want to claw back all the tax that has been avoided by claiming what was allowed by the rules.
Sadly the government finances are not going to be sorted out by MPs repaying expenses that in retrospect they should not have claimed.
But if MPs were only obeying the rules which they had themselves written about their own expense - can they blame the rest of us for obeying the tax rules and claiming everything we are entitled to under the rules? Can they demand a higher standard than they exhibit themselves?
Will the government begin to see things from the other side of the fence (the side so many MPs appear to be on when claiming expenses) and change the language they use? Perhaps "unacceptable tax avoidance" will become "bringing the country's tax system into disrepute" and the tax system updated with this in mind.
Now that MPs expense claims have been made public, there is a lot of concern about them breaking the rules.
There is of course a big difference between breaking the rules and claiming for something you are not entitled to (which we might call evasion) and following the rules and claiming for something which the rules did not really mean you to have but that you are entitled to (which we might call avoidance).
So are we going to see a new set of rules which will be much tighter or rules drawn up in a different way which will rely on principles more than details?
Hang on - isn't that what the prime minister and chancellor have been saying about tax? They want to claw back all the tax that has been avoided by claiming what was allowed by the rules.
Sadly the government finances are not going to be sorted out by MPs repaying expenses that in retrospect they should not have claimed.
But if MPs were only obeying the rules which they had themselves written about their own expense - can they blame the rest of us for obeying the tax rules and claiming everything we are entitled to under the rules? Can they demand a higher standard than they exhibit themselves?
Will the government begin to see things from the other side of the fence (the side so many MPs appear to be on when claiming expenses) and change the language they use? Perhaps "unacceptable tax avoidance" will become "bringing the country's tax system into disrepute" and the tax system updated with this in mind.
Wednesday, 22 April 2009
The budget
Today will be a chance to write all sorts of things about not very much. For example the Chancellor has raised the taxes on the rich (well he will charge more tax on those earning over £150,000 next year) and lots will be written about this. In global terms it does very little to help him balance his budget.
This year sees the removable of the married couples allowance for the younger pensioners (those under 75). Why? Because Gordon Brown decided that he could remove the allowance from younger marrieds because he was going to introduce child tax credits the following year, but he could not remove it from retired couples. The answer - to restrict the allowance to those born before 6 April 1935 - and that is 74 years ago this year.
You see, even I can find something to write about!
This year sees the removable of the married couples allowance for the younger pensioners (those under 75). Why? Because Gordon Brown decided that he could remove the allowance from younger marrieds because he was going to introduce child tax credits the following year, but he could not remove it from retired couples. The answer - to restrict the allowance to those born before 6 April 1935 - and that is 74 years ago this year.
You see, even I can find something to write about!
Friday, 13 February 2009
Valentine's Day
With Valentine's Day coming up very soon, what should the astute business man or woman be thinking about.
Perhaps taking some time off on Saturday after the morning round of golf? I am told this would go down very well.
If you are thinking about a gift for someone special, is there any chance of some tax relief?
The tax rules do say that conspicuous advertising on a gift should mean it is tax deductible (providing it is not food or drink or tobacco or a voucher you can exchange for goods). You may need to find something more than an office pen, but don't go too wild as there is an upper limit of £50 in the legislation.
In these difficult times, you could consider offering that someone a job. They would have to work for you to justify the salary, but they may already be helping in the business anyway. Do be careful you pay them enough to avoid worries about the national minimum wage.
If the relationship has already moved on to marriage or civil partnership, you can be much more generous, since gifts are tax-free. But you may want to think a little longer before giving away part of your business - your other half may not always be entitled to the capital gains tax reliefs you will get when you do decide to move the business on and retire.
You could go for the more usual options - dinner, chocolates, a show - just don't try to put them through the books though as the Taxman has heard about romantic gestures.
Perhaps taking some time off on Saturday after the morning round of golf? I am told this would go down very well.
If you are thinking about a gift for someone special, is there any chance of some tax relief?
The tax rules do say that conspicuous advertising on a gift should mean it is tax deductible (providing it is not food or drink or tobacco or a voucher you can exchange for goods). You may need to find something more than an office pen, but don't go too wild as there is an upper limit of £50 in the legislation.
In these difficult times, you could consider offering that someone a job. They would have to work for you to justify the salary, but they may already be helping in the business anyway. Do be careful you pay them enough to avoid worries about the national minimum wage.
If the relationship has already moved on to marriage or civil partnership, you can be much more generous, since gifts are tax-free. But you may want to think a little longer before giving away part of your business - your other half may not always be entitled to the capital gains tax reliefs you will get when you do decide to move the business on and retire.
You could go for the more usual options - dinner, chocolates, a show - just don't try to put them through the books though as the Taxman has heard about romantic gestures.
Congratulations to the VAT man
No, I am not being serious!
This month's VAT return comes with a set of notes about changes to rules which taxpayers may need to be careful about.
One of these (item 9) tells us that if we export services to which the reverse charge applies, we will have to produce EC sales lists from January 2010. A quick look at the EC Sales List page doesn't mention the change at all, so there is no help from there.
The notes say that more information is available in Business Brief 53/08. Sadly not much more information. It tells you how the change in rules has come about and that you will have to comply with the new rules, but not how to find out what they are.
Looking up reverse charge tells you about some complications, but not the basics. It also tells you that different EC countries apply different rules - so here is another point of possible confusion - as the reverse charge is going to be applied by your customer in another country, do you need to find out about the rules in his country or do you apply the UK rules (which obviously don't apply as the supply is being made to someone outside the UK).
The answer - will have to wait for another day.
This month's VAT return comes with a set of notes about changes to rules which taxpayers may need to be careful about.
One of these (item 9) tells us that if we export services to which the reverse charge applies, we will have to produce EC sales lists from January 2010. A quick look at the EC Sales List page doesn't mention the change at all, so there is no help from there.
The notes say that more information is available in Business Brief 53/08. Sadly not much more information. It tells you how the change in rules has come about and that you will have to comply with the new rules, but not how to find out what they are.
Looking up reverse charge tells you about some complications, but not the basics. It also tells you that different EC countries apply different rules - so here is another point of possible confusion - as the reverse charge is going to be applied by your customer in another country, do you need to find out about the rules in his country or do you apply the UK rules (which obviously don't apply as the supply is being made to someone outside the UK).
The answer - will have to wait for another day.
Thursday, 12 February 2009
HBOS's Boss
The recent media coverage of the resignation of Sir James Crosby from his role as deputy chairman of the FSA does raise a lot of questions.
In principle turning a poacher into a gamekeeper can be a good idea, because poachers know how to beat the system. But there appear to be worries that the system did not need any beating - you could just ignore the FSA in those days.
Then there is the other view that most bank chairmen are being held to account for the way they ran their banks back in the early 2000's but Sir James was escaping this criticism.
But the most worrying is that we still do not seem to know what went wrong and how to avoid it in the future.
HBOS did have a system for managing risk - there was a least one person in the department, because he, Paul Moore, was sacked in 2005 for blowing the whistle on the level of risks he thought were being taken. His view seems to be confirmed by the fact that the FSA had warned HBOS about its lack of risk management infrastructure back in 2002, 2004 and 2006 (see the BBC article).
The issue - the banks did not seem to grasp how much of a risk they were taking with the banking system as a whole. They appear to have seen profit opportunities without considering the maxim "if it looks too good to be true, it probably is." So how do we avoid such problems in the future? Perhaps we can put in safeguards to avoid the same problem happening again, but I am not sure we can change human nature - the profit-seeking which overrode the caution that bank managers used to show when anyone asked them for money! Come back Mr Mainwaring, all is forgiven!
In principle turning a poacher into a gamekeeper can be a good idea, because poachers know how to beat the system. But there appear to be worries that the system did not need any beating - you could just ignore the FSA in those days.
Then there is the other view that most bank chairmen are being held to account for the way they ran their banks back in the early 2000's but Sir James was escaping this criticism.
But the most worrying is that we still do not seem to know what went wrong and how to avoid it in the future.
HBOS did have a system for managing risk - there was a least one person in the department, because he, Paul Moore, was sacked in 2005 for blowing the whistle on the level of risks he thought were being taken. His view seems to be confirmed by the fact that the FSA had warned HBOS about its lack of risk management infrastructure back in 2002, 2004 and 2006 (see the BBC article).
The issue - the banks did not seem to grasp how much of a risk they were taking with the banking system as a whole. They appear to have seen profit opportunities without considering the maxim "if it looks too good to be true, it probably is." So how do we avoid such problems in the future? Perhaps we can put in safeguards to avoid the same problem happening again, but I am not sure we can change human nature - the profit-seeking which overrode the caution that bank managers used to show when anyone asked them for money! Come back Mr Mainwaring, all is forgiven!
Thursday, 15 January 2009
When will the bad news end?
I decided that my bank was being a little mean with its 1/4% interest rate and looked for somewhere a little more generous. This morning the bank I looked to is being taken over by the Irish government!
Is there going to be and end to this crisis? I thought I would check the stockmarket and it is still going down. In the long term, it has not gone anywhere in years. The chart on the right tracks the FTSE from 2005 (with thanks to Livecharts.co.uk).
The chart on the left for the last few months is just depressing. Although we are higher than the 3000 low point.
At least some action is being taken - the fact that Anglo Irish will keep going rather than being closed is something. The fact that there is some support for families heading into a mortgage crisis and some help for smaller businesses needing loans or help paying tax bills.
The big lesson? Enjoy what we have but don't borrow to have it?
Is there going to be and end to this crisis? I thought I would check the stockmarket and it is still going down. In the long term, it has not gone anywhere in years. The chart on the right tracks the FTSE from 2005 (with thanks to Livecharts.co.uk).
The chart on the left for the last few months is just depressing. Although we are higher than the 3000 low point.
At least some action is being taken - the fact that Anglo Irish will keep going rather than being closed is something. The fact that there is some support for families heading into a mortgage crisis and some help for smaller businesses needing loans or help paying tax bills.
The big lesson? Enjoy what we have but don't borrow to have it?
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