Contractor accountants are warned that HMRC will be carrying out upgrade work to its website this weekend.

The Revenue website was down at the beginning of last month to enable essential maintenance and upgrade work. However, it now appears that thus work was more complicated than expected.

Luckily the work will not affect employers who need to submit their payroll end of year returns before the May 19 deadline. Corporation tax, self-assessment and CIS will not be affected either, but it will not be possible to register for HMRC’s online VAT service while the upgrade work is taking place.

HMRC likes to give taxpayers as much notice as possible of any proposed disruption to its services.

Although the VAT online registration service will be offline from 16:00 on Saturday until 01:00 on Sunday morning, businesses will still be able to file their VAT returns. Anyone who wants to enrol for VAT Online during the downtime will be able to do so through the Government Gateway. http://www.gateway.gov.uk/

The VAT on e-services page will also be unavailable for 10 minutes while the upgrade takes place. HMRC has not revealed which ten minutes.

The other services that will be affected are obscure ones such as Electronic Binding Tariff Information and the Rebated Oils Enquiry Service.

It’s obviously important for HMRC to keep it’s services up-to-date and weekends are probably the most sensible time to do upgrades and maintenance. Let’s hope that everything goes to plan and the work doesn’t cause widespread disruption.

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Image: Unplugged – no computer, no internet, possible? by photosteve101

Most contractor accountants probably agreed with the FPB when it criticised the Revenue for closing down its online services throughout the Easter holidays.

Just before the holiday, the Forum of Private Business said the shutdown showed HMRC did not understand the needs of businesses. The Revenue only announced it would close down the entire online network a few days before the 2011-12 financial year came to an end. Its IT systems were to be out of action throughout the holiday so that upgrade and maintenance work could be carried out.

Although the majority of services should have been back online by 6am on the 10th April, some would not be available until the 11th.

This shutdown affected anybody wanting to file PAYE, Self Assessment, Corporation Tax and CIS returns, as well as those submitting stamp taxes, pension schemes and Child Trust Funds.

The online VAT filing service remained online until midnight on the official deadline date and was then taken offline for a few days.

A Revenue spokesman said systems had to be taken down so the department could ready them for the new tax year and more scheduled maintenance might need to take place in October.

Phil Orford, the FPB’s chief executive, said the work took place at a totally inappropriate time and businesses will struggle to understand why HMRC is upgrading its systems at such a critical time in the tax calendar. The fact that the Revenue only gave businesses a few days notice of the shutdown showed it did not understand their needs.

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It’s all over bar the shouting, and no doubt there’ll be a fair bit of that over the coming weeks. I’m talking about the Budget of course.

What will it mean for contractor accountants? Were there any hidden surprises? George Osborne claimed that this was a Budget that rewards work. He promised a simpler tax system and said the government was pushing ahead with plans to integrate income tax and National Insurance. More details of this integration will be published next month.

He also called tax evasion and tax avoidance morally repugnant and said legislation for a GAAR would be laid out in next year’s Finance Bill.

One of the biggest cheers came when he announced that personal income tax allowances would go up to £9,205 from April 2013. This measure will mean many low paid people will pay no income tax at all.

In the days running up to the Budget there had been rumours that the Chancellor would scrap the 50p income tax rate. It has been harming the British economy and he explained that HMRC had assessed the effect of the top rate and it had brought in a mere £1 billion, a third of what had been expected. Therefore as from April 2013, the top rate of 50p will go and be replaced by a rate of 45p.

Mr Osborne also said the government would consult on taxing small businesses with a turnover of less than £77,000 on a cash accounting basis. This is the course of action recommended by the Office of Tax Simplification and would make it much easier for small firms to fill in their tax returns.

The Chancellor had intended to reduce corporation tax by 1 percentage point to 25% as from April, but instead he has doubled that decrease. As from April this year, corporation tax will be reduced to 24%. Again this should help businesses and encourage foreign companies to move here.

At first glance, his measures seem reasonable. But what will the experts think?

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Image: Workers With Upraised Book by Thomas Fisher Rare Book Library

The government had hoped to raise additional revenue when it introduced the higher rate 50p tax rate, but it now transpires that the move is having the opposite effect.

In January this year, income tax receipts only increased by 2.4% year-on-year, compared to a 9.3% increase in the take from corporation tax. Recent data from HMRC indicates that the wealthy are turning to contractor accountants to help them with tax planning. Revenue from people submitting self-assessment tax returns totalled about £10 billion in January, down £500 from the corresponding month last year.

Francesca Lagerberg, Grant Thornton’s head of tax policy, explained that history shows that higher tax rates frequently fail to rake in as much as expected because they trigger a change in behaviour. Business owners, for example, may have speeded up their dividend payments before the tax rate changed and it may be some time before they pay another large dividend.

The Treasury now says it will publish figures showing the 50% tax take within three months, but this is later than originally expected.

Richard Mannion from Smith and Williamson said HMRC should already know how many people paid tax at the 50% rate simply by looking at the tax returns and it should be easy to produce the requisite figures.

The 50p tax rate is only meant to be a temporary measure and it will probably be removed before the end of the current parliamentary term in 2015. According to Stephen Herring from BDO, the top rate is deterring foreign companies from setting up in the UK. The UK is making good progress reducing the rate of corporation tax but that good work is being counteracted by an uncompetitive high rate of income tax.

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Image: 50p I got lots by noii’s

Contractor accountants in the UK and Ireland are bitterly opposed to a legally binding EU-wide tax rate, but the prospect of such an event is moving closer.

France and Germany have now announced that they will align corporate tax rates by next year. The announcement supports the Euro Plus Pact treaty, which outlined the regulations for fiscal and economic co-ordination. The UK, Czech Republic, Hungary and Sweden all refused to sign up for the treaty.

Germany and France intend to unify their tax rates ahead of the Common Consolidated Corporate Tax Base, an aligned rate for all EU member states.

Britain does not support the idea of a CCCTB and believes it to be a precursor to pan-EU tax rates. Countries that have low business tax regimes, such as Sweden and Ireland, are vehemently opposed to the idea of harmonisation.

Richard Asquith, the TMF Group’s head of tax, said Germany and France have been pushed into going it alone due to the reluctance of those countries with low corporation tax. The UK was always going to be opposed to the idea but this could lead to a potential division between the core EU countries and Ireland. Ireland already has a risky debt position and this split will pile on more pressure.

It’s easy to see why the UK is against a uniform EU tax rate. The government is keen to promote the UK as a nation with business-friendly rates of taxation. That would no longer be applicable if all member states were legally bound to levy the same rates.

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HMRC raked in an additional £4.06 billion through its investigations into corporation tax last year.

The Large Business Service compliance unit has doubled the amount it raised in just five years. According to McGrigors this proves that the coalition is not giving into the needs of big business as some people have implied.

Jason Collins, a partner at the law firm, the Revenue is trying to get as much money as they can from investigations into big corporations. UK Uncut and other tax lobbying groups in the UK claim the government has gone soft on large businesses, but these figures prove this is not true.

The Treasury is trying to make Britain a more attractive place for companies to operate in by reducing the rate of corporation tax. However, big businesses might think twice about setting up here if they believe HMRC has a strategy to squeeze large corporations dry, he added.

Meanwhile, the LITRG has issued guidance so that taxpayers can check their new PAYE code is correct.

By early March, HMRC will have issued about 18 million coding notices to pensioners and employees informing them of their PAYE code for the tax year beginning in April.

There are sections in the guide explaining the basics of PAYE codes, how to check your code online if you are a self-assessment taxpayer and how to contact HMRC by phone if you have problems.

There have been problems with Revenue coding notices over the last couple of years and every taxpayer should check their code carefully and query anything they do not understand. Failure to do so could mean you pay more or less tax than you should do and this can lead to problems further down the line.

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Accountants for contractors might be interested to learn more about the recently published accounts of former PM Tony Blair.

Once he left his job as Prime Minister in June 2007, Blair adopted an opaque business structure, channelling millions through a complex network of companies. The net result of this tangled web was that it looks like he paid only a fraction of the tax he should have done.

Tony Blair managed the majority of his business affairs through Windrush Venture, a management services company. Last year the company posted income of £12 million and expenses of £10.9 million. Blair paid corporation tax on the £1.1 million profit at the rate of 28%.

However, questions have been raised about the sheer size of the administrative expenses. After paying for salaries, rent and office equipment and furniture, almost £8 million remains unexplained.

Blair set up his corporate structure as a limited partnership and he is keeping this as a tightly guarded secret. Nobody knows how much money is contained in the LP. But why is he operating a totally secretive organisation?

Tony Blair has exploited legal loopholes to ensure the limited partnership does not need to file public accounts. The Windrush accounts, on the other hand, are prepared according to accounting and regulatory guidelines, and audited by KPMG.

Conservative MPs recently supported calls for a new tax avoidance rule, and Ed Milliband, the Labour leader, is calling for responsible capitalism. Under his current accounting regime, it doesn’t look like Mr Blair would fit into the category of responsible capitalist!

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Image: Hide and Seek by F. C. Photography

The National Audit Office has praised HMRC for persuading people to file their tax returns online, but says it is not clear whether the system provides value for money.

The NAO says that more than 11.5 million people a year now use online filing. However, some users have complained about access to HMRC’s website at busy times and the Low Incomes Tax Reform Group is calling on the Revenue to offer other alternatives to people who do not have Internet access.

Online filing has reduced processing costs, as well as postal, stationery and storage costs. Cumulative savings by the end of this financial year are expected to be £220 million and the drive to persuade people to file online is on time and within budget.

However, the NAO says HMRC is not able to draw a comparison between the costs of paper and online filing. It is therefore impossible to conclude that the benefits of online filing are being maximised and the system has been successful in delivering value for money.

Robin Williamson from the LITRG said that it should not be made mandatory to use the Internet to conduct dealings with HMRC and robust, well-advertised options must be made available to people who cannot transact online.

It’s both reasonable and sensible to encourage businesses to use digital channels to communicate with the Revenue but the government department should not forget that some individuals do not have access to the Internet or the capability to cope with online filing, he added.

Some professional organisations have also questioned whether it is cost effective to file corporation tax and VAT returns online.

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Regular readers will know I have never had a lot of respect for the average agency, thinking that most of them exhibit a degree of professional casualness totally at odds with their advertising. Today, for example, I got another email offering me work as a support technician in the Midlands at a whole £20k a year. Be still my beating heart.

But this week, one of them has managed to surpass even that fairly mediocre level of success.

Someone in Hays thought it a good idea to remind the people contracting through them to RBS to complete their timesheets prior to the bank holiday weekend. So they sent out an email, with, for some reason, an attachment. Followed very quickly – but not quickly enough, needless to say – by a recall of the email.

Why? Because the attachment contained a list of 3000 contractors, their day rate, the day rate to Hays and a few other interesting details. It seems that some of these contractors are on really quite juicy rates. Oops…

OK, so perhaps that’s the rate for a senior HR manager in charge of a multi-million pound restructuring programme, but needless to say the ignorati rapidly jumped on the bandwagon, demonstrating a total lack of knowledge of several fairly key areas.. The meeja started it, shouting about excess salaries for temporary staff. A spokesman from Unite – who, let us not forget, are representing workers and so might be expected to have at least a working understanding of the labour market – started banging on about “overpaid contractors” taking work from “permanent staff”. Assorted comments in a range of newspapers picked up the baton. A shadow Treasury Minister came out with the same line. OK, so he’s a politician of course, so we shoudn’t expect too much wisdom perhaps.

The thing is, to a man they were going on about excessive salaries. Nobody can possibly be worth that much (well they can, actually, work out the cost of employment of a permie on an £80k salary plus bonus and package). And what is more, as ony fule kno these aren’t salaries, they’re payments to companies for services rendered. To convert them into salaries, you have to knock off the long list of expenses that contractors have to cover for themselves – employers NICs, holiday pay, sick pay, pensions, expenses, bench time funding, corporation tax and all the rest. And even then you probably haven’t got to a salary since you don’t know how much the contractor is taking back out of his company.

Or perhaps these deluded souls actually think that the fitter from British Gas charging you £80 an hour to fix your boiler is on £166,000 a year salary? I suppose that’s quite likely, given the state of our education system…

The really sad thing is that we have a unique and highly effective contractor workforce in this country. Its end clients – like RBS – recognise its worth and understand the economic realities that make a contractor a very good use of money. One recent client of mine paid £60k for a contractor’s services over several months, but he left them with a £430,000 saving. Which I, and they, think is actually not a bad return.

Good contractors are worth their day rate. Such a shame that people who probably understand that perfectly well prefer to distort reality in the pursuit of cheap, and very hypocritical, political point scoring.

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Image: Superman (Christopher Reeve) by MEDIODESCOCIDO

You probably hadn’t noticed but I tend to write quite a lot about the faceless hordes that we affectionately refer to as Hector. Yep, our friend the taxman. Not my favourite person, although, perhaps grudgingly, you have to accept that they are merely doing their job and the real problem is the hopelessly complicated mare’s nest of tax law they are trying to implement. Which is down to a series of inept politicians (isn’t that a tautology?), not least one particularly dim specimen of the breed.

But now it’s getting personal.

I mentioned last week that I’m being chased for a CT bill that was paid, in full and on time. I just checked my online account again and it’s gone up, since they are adding interest to a debt I don’t actually owe. Nor have they responded to my accountant’s attempt’s to find out what’s happening. And the really worrying part is that aspect enquiries are usually triggered by non-payments and poor returns, so not only do they owe me money but I am waiting or another letter where they will offer to look over my records and make sure all is in order.

And then to add insult to injury, I managed to overpay my PAYE last year. Not by any great amount, and I’m still not sure how we managed it – most likely a side effect of restarting a payroll after a 14 month break, not that I really care that much – but the accountant wrote to them to tell them somewhere around last September.

Nothing happened. Gosh…

But today I get a letter from Hector (to be précis, a D. Wrightson) Form P35D, Overpayment Review. Page one is the exact same calculation my accountant sent them last year. Bottom right hand corner is the box “Apparent Overpayment”.

“Apparent”? Are your accounting systems that pitiful that you don’t actually know? Does my accountant telling you the precise amount not indicate that just perhaps it actually is a real honest-to-God overpayment?

Anyway, I have to fill out page 2 of the form. A list of things I may have got wrong. (Hint: none of them). A tick list of which one is actually incorrect. ( Guess what?) And then the last option, “I confirm the return is correct. My explanation is as follows”. Say what? You owe me money, and I have to explain to you why I overpaid you else you won’t give it me back?

And the last sentence is a lulu. Basically “Once I have received your reply, I will make any necessary adjustments and if necessary arrange for any payments to be offset… “

Hey, it is bloody necessary, it’s my money and I don’t want to offset it against anything, I want it back in my bank account where it belongs.

Let’s be clear about this: HMRC is not a service, even at the pitiful level they manage to achieve, it’s a tax collection agency. The only money that is theirs is the amount they are owed. Everything else in excess needs to be paid back, quickly, since it’s not yours and I would rather I got the interest than you. Oh yes, just to add insult to injury, there is no hint of interest being added. Hell no, they only charge that on money they aren’t owed, not on money they do.

Earlier this week a Parliamentary committee had some critical things to say about HMRC’s performance, or rather lack of it. Nice to know they’re keeping up with reality, isn’t it…

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Image: Why is this being protected in my fire safe? by someToast

You know when you’ve been commuting too long when, without having to think about, you stand on the platform, the train rolls in and you only have to stretch out your hand to open the door. The good thing is that you can get to work with minimal mental effort which, at the time of day I’m usually doing it, is rather a good thing.

In fact there’s only one thing that is really getting on my wick during the daily commute. A regular army of lycra-clad cyclepaths with silly hats who seem to think any rules of the road, the pavement and basic courtesy simply don’t apply.

I’ve lost count of how many times I’ve had to dodge them in the car coming off pavements or through red lights. Today I had to crash stop because one of them sailed across a zebra crossing; even the dumbest pedestrian has twigged that stopping and looking before stepping off the kerb is a good idea, so why are cyclists immune? Not to mention they aren’t damned pedestrians anyway and cycling across a zebra is actually illegal.

Then once off the train (having first waited for them to negotiate their idiot machines thought the barriers) and on the daily walk across the city centre I routinely get confronted by them ploughing through a busy walkway, heads down, mindless expression behind the obligatory dark glasses, utterly indifferent to any thought of risk analysis. Can’t slow down, got to get there, mustn’t stop, can’t possibly communicate with mere mortals, don’t care about anyone else; I’m a road warrior, me…

Remind you of anyone?

I paid my Corporation Tax bill last month, well ahead of the due date. Thanks to the vagaries of the banking system I couldn’t do it in one transaction (what, you think I’m going to pay extra to send Hector money?) so I sent two BACs transactions to occur one day apart. Same reference number, same destination bank account, accurate to the penny.

I got an acknowledgement for the first one. But not the second. Oh oh…

Then I get a letter. I have an outstanding payment on my Corporation Tax account. You now owe us the balance plus another lump of interest. The accountant has written to them pointing out their error, and enclosing a copy of MyCo’s bank statement clearly showing the payment.

No response. Hector doesn’t do letters, apparently.

So they phoned them up. All that achieves is to elicit a promise to send an internal email to the payments team. Say what? We don’t want payments, we want to you understand that no money is owed so payments have nothing to do with it.

Still no answer.

Next step is to log into the account and see what they think I owe. Got to wait for some more paperwork for that of course, can’t possibly use the credentials I already have to pay my employee taxes and VAT. Or register online, has to be done by post. Well I suppose it keeps a few hundred envelope stuffers off the streets.

Then the accountant tells me that Hector won’t talk to them about my affairs anyway until I fill out a form (one I’ve already done once, by the way) to allow them to do so: notwithstanding the minor detail that the accountant has been dealing with my company’s affairs for around seven years now, as even a cursory glance at their own records would demonstrate.

So I’m not optimistic about a quick resolution to this one. Nor, come to that, the payment of the money (plus interest…) they owe me for overpaid income tax from last year which has also not appeared in MyCo’s bank account.

At least when confronted with a moron on a bike you get some satisfaction by thinking you might just send him on his way wearing it rather than riding it. Sadly, that doesn’t work for taxmen.

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Image: Hand shake by khalid Albaih

The Institute of Directors has criticised the coalition for failing to reduce the burden of tax on small businesses. Tax – the Weighty Burden, the annual report from the Institute, calculates that the true burden of taxation for SMEs is between 32% and 43%.

This burden is unlikely to reduce even when corporation tax rates decrease in 2014 because employers have to pay additional fuel duty, national insurance and business rates.

The head of taxation at the IoD, Richard Baron, said the burden of taxation is weighing growth down. Although it is not possible to make radical cuts at the moment, the government should already be making plans to reduce the heavy burden of business taxation.

Baron believes corporation tax needs to be lower than originally planned and employers’ NICs should also be reduced.

However, a recent report from the TUC suggests that cutting corporation tax further would have an adverse effect on the economy and job creation.

George Osborne believes that reducing the rate of corporation tax will entice companies to set up in the UK, which will help drive the recovery in the private sector. But Brendan Barber, the TUC chief, says this argument does not stand up.

The rate of corporation tax in the UK is already amongst the lowest in Europe. The OECD average is 26.5%, but in excess of 90% of small businesses in the UK pay 20% and the average for large organisations is 23.2%.

Barber said that we have extremely competitive corporation tax rates already. He went on to point out that some people, including Osborne, have been talking about emulating the aggressive low tax policies of Ireland, but the current economic problems there suggest that this is not a sensible option.

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Image: Scale-A-Week: 14 March 2010 by puuikibeach