It's tax return deadline day

In the UK today is the day that personal tax returns are due to be submitted to HMRC. If you're going to be up late working on your figures, here's some appropriate music...


Beatles - 'Taxman'
"Be thankful I don't take it all"
Do I really need to remind you of the rest of the lyrics?



So get your return in and pay the tax, even if you do so from behind gritted teeth!

Centralised Deductions - what could possibly go wrong

HMRC has shown itself incapable of administering the PAYE system correctly as it tries to sort out the mess of almost six million people paying the wrong amount of income tax, some are now facing demands for repayment whilst others qualify for rebates. Those figures are for the two years 2008-10, there are another 18 million open cases relating to wrongly paid tax predating 2008. So is now the time for HMRC to try and persuade the UK that Centralised Deductions will be the way ahead? Centralised Deductions would mean that instead of employers deducting income tax (and National Insurance) from an employees gross salary and then paying the net amount to the employees, the gross monthly amount would be paid to an HMRC-run tax “calculator”, which would then pass the net salary to the worker. This would mean an end to payslips as employers would no longer be able to tell workers how much tax they had paid each month. Apparently instead of a payslip detailing pay and deductions, workers would only receive a notification of their net pay and would have to ask HMRC if they wanted to find out what deductions had been made.

Some problems:
Will people be happy to give HMRC their bank details bearing in mind their data security record?
Will people trust HMRC to make the right deductions and pass on the right amount each month?
How will errors be corrected, at the moment employees have a relationship of mutual trust and need with their employer?
What about other deductions such as holiday pay, SMP, SSP, student loans?
Bearing in mind recent Government IT project failures, why should we believe that this huge new system would work properly?


For a very short time I worked in a DSS (as it was then) office and was staggered at the sheer laziness of the civil servants 'working' there. It took about 10 people to run three payrolls, something that in the private sector would have been managed by two people at most. Most of the staff worked short days, took long lunches and spent most of their time in the office chatting and eating. I was shocked at the complete lack of work ethic and would say that in that office at least, 40% cuts would have no negative effect on productivity, in fact 60% would be possible.

The Taxman changing the rules to get more tax

The Times reveals a worrying story of how the HMRC has changed some tax rules retrospectively and has been supported in this by the Court of Appeal:

"Thousands of entrepreneurs and celebrities face huge tax bills after a British businessman based in the Seychelles lost a long-running court battle over his residency yesterday.

The Court of Appeal ruled that Robert Gaines-Cooper was liable to pay UK tax despite spending less than 91 days a year in the country because England had remained “the centre of gravity of his life and interests”.

The ruling is a serious blow for wealthy men and women who are based overseas but visit Britain frequently. After the court’s decision, Revenue & Customs (HMRC) said that it would increase its efforts to catch people who owed tax.

Although the three Court of Appeal judges expressed “some sympathy” for Mr Gaines-Cooper, they ruled that he had never qualified for exemption from British taxes as a non-resident. Now he may be pursued for tax bills dating back to 1993, estimated at about £30 million. "

So there we go, judges have kowtowed to the HMRC and thrown out the well understood 91 day rule and replaced it with an entirely subjective and arbitrary "centre of gravity" rule.

Retrospective changes in the law, whether tax or otherwise, cannot be right. However 13 years of Labour misrule have left the UK needing every last penny of taxation, hence all the short-term "tax amnesties" to be followed by many in-depth tax investigations.

The other realisation that many are coming to is that there is a now a presumption in the UK that all the money 'earned' by individuals really belongs to the state and that citizens should feel privileged to be allowed to retain some of these 'earnings'. Of course the socialists who believe this don't realise that taxing the rich until 'the pips squeak' gives the rich a great incentive to move themselves, their wealth and their tax elsewhere thus eventually impoverishing everyone.

That reminds me of the story that I have told before about how the Tax System works, do read it:

"Suppose that every day, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay £1
The sixth would pay £3
The seventh would pay £7
The eighth would pay £12
The ninth would pay £18
The tenth man (the richest) would pay £59

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your daily beer by £20.' Drinks for the ten now cost just £80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the £20 windfall so that everyone would get his 'fair share?'

They realized that £20 divided by six is £3.33. But if they subtracted that from everyone's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid £2 instead of £3 (33%savings).
The seventh now pay £5 instead of £7 (28%savings).
The eighth now paid £9 instead of £12 (25% savings).
The ninth now paid £14 instead of £18 (22% savings).
The tenth now paid £49 instead of £59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

'I only got a pound out of the £20,' declared the sixth man. He pointed to the tenth man, 'but he got £10!'

'Yes, that's right,' exclaimed the fifth man. 'I only saved a pound, too. It's unfair that he got ten times more than I did'

'That's true!!' shouted the seventh man. 'Why should he get £10 back when I got only two? The wealthy get all the breaks'

'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill.

And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up any more. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier and weather is nicer. "

HMRC - more errors

Furher to this I now read that:

"This week more problems have emerged with a new computer system which tells employers how much tax to deduct from our pay.
...
Revenue insiders have told Money Box that in some cases it is double-taxing the value of benefits like a car or health insurance provided by employers.

It has also emerged that married couples and civil partners aged 76 or more could lose an allowance worth nearly £700.

And more than half-a-million people, who started claiming their state pension this tax year, could automatically have too much tax deducted from their income next tax year.

The Revenue says it has recently fixed problems including those with state pensions and benefits in kind, but admits it is still working to resolve remaining issues. "

Another great HMRC IT system...

Strange how the errors are always in the favour of HMRC

The BBC report that:

"Incorrect tax codes may have been sent by HM Revenue & Customs (HMRC) because of a new computer system.

The codes tell taxpayers how much their employers and pension firms will deduct in income tax in the coming financial year 2010-11.

The Chartered Institute of Taxation (CIOT) says taxpayers could be asked to pay up to £108 a month too much.

The Revenue said it had no evidence of a widespread problem but advised taxpayers to check carefully.

"There will be some incorrect tax codes as there always are at this time of year," said an HMRC spokesman.

"But the coding notice tells people what the code relates to and tells them to contact us if it is wrong," he added. "

HMRC being HMRC their reaction is reported thus:

"The Revenue explained that the increase was a natural feature of the new system.

"It creates a single record for customers for the first time, and this, together with increased automation compared to previous years, is resulting in many more people having more accurate codes than before," the spokesman said."

So the increase in errors is a "natural feature of the new system"; interesting, was it in the specification that HMRC drew up?

The Chartered Institute of Taxation have uncovered the root of the problem:

"the CIOT said the system's database was failing to distinguish between current jobs and old ones, leading to tax codes being calculated on the assumption that someone has more than one job.

It said this was resulting in some people having their personal allowance split between two jobs, or allocated entirely to a job they no longer had, which would force their current employer to deduct too much tax. "

Did the HMRC, when specifying a new computerised tax system, really fail to allow for the possibility that people might change jobs between tax years?

HMRC step in

The Labour Ministers who claimed the cost of their accountancy/taxation advice on expenses may have a problem. It seems that Her Majesty's Revenue and Customs have declared that:

"It’s a general principle of tax law that accountancy fees incurred in connection with the completion of a personal tax return are not deductible.

...

This is because the costs of complying with the law are not an allowable expense against tax. This rule applies across the board."

Quite clear but maybe MPs thought they had an exemption? Nice try but HMRC issued a guide to all MPs in 2005 "MPs, Ministers and tax" which gave specific guidance to MPs and Ministers and prohibited such tax- free claims, which accountants say constitute a "benefit in kind" and should be taxed. The booklet states very clearly that: "accountancy fees incurred in the preparation of the self assessment tax return or related expense claims... not allowed" as tax expenses.

It is rumoured that HMRC are looking to launch investigations into the tax affairs of some Labour Ministers.


As an aside; when I awoke this morning to hear nothing on the Today programme about the Telegraph's expenses story I assumed that today must be a bad day for Labour. I was right... In fact it seems that I missed the whole three minutes the Today programme allocated to the story at 07:12

"Revenue officials are investigating whether MPs have broken the law by not paying tax after claiming personal accounting costs on expenses, the BBC understands. David Gardner, a former assistant general secretary of the Labour Party, discusses a Labour committee set up to look into the expenses scandal. "

Slightly less emphasis than the Today programme have used on moats etc.

Is the Labour government that short of money

The Mail reports that:

"Millions of self-employed workers could end up paying tax which is not yet due because of a glitch in the HM Revenue & Customs website.

Those filling in an online return are being asked to pay their tax for the last financial year - and make a contribution towards the amount due for this year.

However, although the back tax must be paid by midnight today, half of the so-called 'payment on account' is not due until July.

But HMRC has not publicised the website error because they fear it could cause chaos so near to the annual deadline.

And while it charges an interest rate of three per cent to those who owe it money, it will not pay out any interest on cash which is handed over too early.

More than nine million people will fill in self-assessment forms this year, and two out of every three do so online. Many of those will wait until the last moment to complete their forms.

This means they rely on the Revenue website to calculate the final figure they need to pay by tonight's deadline.

The current problem affects self-employed taxpayers who have a bill of more than £2,000.

These people are asked by the Revenue to contribute towards next year's bill as well as pay their tax for the previous year.

Although half of the 'payment on account' is due today, the other half is not due for another six months.

Despite this, the Revenue website is asking for the full amount.

As a result, many self-employed workers will automatically assume they must pay this amount now. "

Is the Labour government that short of money that the HMRC have to make mistakes and not correct them in time in order to bring forward tax revenues?

Here comes the disingenuous get out:

"A spokesman for the Revenue said: 'Nobody will pay more tax than they need to.

'This issue only affects those customers who make payments on account but we are taking it very seriously and apologise for any inconvenience caused.'"

True they will not pay more tax, but they will pay tax six months early; good cashflow for the Treasury, not so good for the poor taxpayer who pays early due to a HMRC mistake.

Will anyone at the HMRC pay the price for this mistake? In the private sector a mistake like this on such an important website would mean the loss of a job or the IT contract, but in the public sector I presume the only outcome will be a new contract to fix the problem. As Private Eye like to say.... "trebles all round".

Inland Revenue online tax glitch

It seems that HM Revenue & Customs have a problem with their online system to allow the public to file their tax returns online, which is the only way you can file last year's tax return after 31 October last year. The online system is still letting taxpayers ask for any tax owed for 2007-08 to be re-paid via their new PAYE tax code for 2009-10. However this option, for tax of up to £2,000, should have ended on 30 December 2008. The HMRC have said that: "This option should be unavailable but it is presently available." Apparently it is investigating the problem "urgently".

Is this being an accessory after the fact?

This story is most peculiar, "The British tax authorities have paid an informant for the bank details of scores of wealthy Britons. The records were stolen from one of the world’s most secretive tax havens.

HM Revenue & Customs paid £100,000 for data that it is using to launch investigations of up to 100 British citizens who have accounts at Liechtenstein’s biggest bank.

British authorities regard it as a coup to have penetrated accounts that have been beyond their reach for decades."


Am I alone in thinking that HMRC by paying money to someone who has been "sacked and convicted of fraud" are guilty of handling stolen goods and being an accessory to theft?

At last a blog we can all enjoy

Take a trip to this blog - HMRC is shite and enjoy the truth.


Thanks to Burning Our Money for the spot.

HM Revenue & Customs in fine form

I read on Sky News that "Fraud and blunders by the HM Revenue and Customs are costing British taxpayers £1bn a year. Despite thousands of complaints and promises of improvements, there is "little evidence" HMRC has got the tax credit system under control, according to a committee of senior MPs.

Some £65bn has been paid out in tax credits since their introduction in 2003."


It is my belief that Tax Credits were brought in partly because Gordon Brown is a control freak and really wants to micro-manage everything and partly because if he can get a client base of people on tax credits then he has a much better than evens chance of keeping them as Labour voters.

The next big story

This story has been bubbling around for a while without ever becoming headline news. I predict that it will become big news soon and when it does...my emphasis...

"Contraband seized by customs officers has gone missing from a secure depot close to Coventry airport.
Police have been called in to search for the goods which disappeared from the HM Revenue and Customs (HMRC) store before last weekend.

A HMRC spokesman refused to comment on claims drugs, firearms and passports may have gone missing.

He said officials were cooperating with Warwickshire police. "We are taking this matter very seriously," he added.

HMRC said security had been stepped up and investigations were continuing, but did not reveal when or how the items disappeared.