Contractor accountants will probably agree that HMRC should do something to improve the time it takes to answer incoming calls at its contact centres.

The Low Income Tax Reform Group is the latest group to complain that standards have been slipping at the Revenue over the last few years. In 1997, HMRC pledged to answer 91% of all calls within 30 seconds, but lately it has been failing to meet that objective.

The LITRG advises people to keep a note of the time they contacted HMRC if they are unable to get through, and then if they get any comeback because they were unable to comply with Revenue requirements, they should lodge a complaint and ask for compensation.

The chairman of HMRC last year informed the Treasury Sub-Committee that he hopes to see a steady improvement in performance when it comes to answering phone calls within the department.

This is a particularly busy time for Revenue staff. We’ve just had the end of the tax year and employers throughout the UK now have to file their end-of-year payroll reports. As usual, there will be a lot of queries relating to these procedures and HMRC phone lines are likely to be busier than usual. This can prove extremely frustrating, especially for small business owners who have neither the time nor the inclination to spend hours hanging on the end of a telephone line.

We hear that HMRC still needs to reduce its headcount further, but if it can’t manage to answer calls in a timely manner now, how on earth will it manage once more redundancies have been implemented?

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The ICAEW has warned the Chancellor of the Exchequer, George Osborne, that the standard of service at HMRC could drop if its headcount decreases in line with his remit.

Lin Homer, the chief executive of the Revenue recently published a letter outlining what Osborne expects the department to achieve during the current tax year. The letter, which ran to five pages, laid out five priorities. As well as delivering costs and improving tax collection, the Chancellor wants the Revenue to improve its services for business and individual customers, implement RTI and reform tax policy.

Paul Aplin, the ICAEW chairman of the tax faculty, said he was concerned at the Chancellor’s high expectations. Mr Osborne has said he wants an additional £17 billion collected this year, but at the same time he wants the Revenue’s headcount cut. This could have a damaging affect on the level of service HMRC provides to contractor accountants and members of the general public.

He went on to say that for the tax system to operate effectively HMRC needs more resources and if they were effectively deployed, the department would become self-funding.

Aplin also warned against implementing RTI before it was fully tested. He pointed out that it was an ambitious project that was being launched to a strict timetable and it had to work as intended when it does launch.

HMRC launched an initial RTI pilot scheme recently and is itself trying out the system in the hope of identifying, and remedying, potential problems before the scheme becomes mandatory.

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Now here’s an offer you won’t want to miss! Free accounting software! Yes, it’s true; contractors, freelancers and micro-businesses can now use Crunch’s online Solo accounting software completely free of charge.

Crunch Solo (free) has the same features as the company’s premium product. With this free online version of Solo you can do all the normal book keeping tasks such as recording expenses, raising invoices and checking your tax liability. You can’t really get better than that!

Crunch has also launched a monthly subscription version of Solo. It costs a mere £9.50 per month and is actually a scaled down version of the company’s original premium product. It’s designed as a taster package for businesses that aren’t ready to sign-up for a full accounting solution.

If there is a downside to these Solo packages it is that users will literally be flying solo. They won’t get access to an accountant and Crunch will not help them prepare their end of year accounts or deal with HMRC on their behalf. But for the average freelancer who sends out a couple of invoices each month and has little in the way of expenditure, these packages sound ideal.

As Darren Fell, the founder of Crunch explained, the majority of dotcom businesses start off by offering a free service and then announcing costly upgrades. Crunch has done the opposite. It already has more than 2,500 people using the standard subscription package, and by releasing a free version more people can experience the software without committing themselves to a monthly subscription.

The company still offers its complete package that comes with easy to use online software and unlimited telephone support from a team of accountants. For £59.50 a month, this package will also handle HMRC returns on your behalf.

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It’s possible that accountants for contractors might have some clients who work in Switzerland. They should therefore be aware that HMRC now treats Switzerland as an EU member state for the purposes of Social Security.

The new rules came into force on the first of April 2012 and apply to anyone who goes to work or live in Switzerland. It will depend on your employment circumstances whether you continue paying UK NICs or pay the Swiss equivalent instead. Swiss employers with UK based staff might also have to pay UK employers’ national insurance contributions.

The new regulations also apply to freelancers and other self-employed people who move between Switzerland and the UK.

Transitional arrangements have been put in place to deal with circumstances where the new rules change the nation that affected individuals pay their contributions to. Under these arrangements it may be possible to continue paying as you were until your circumstances change.

HMRC has advised people who are unsure of how these new regulations will affect them to contact it for advice.

The new rules are similar to those introduced in May 2010 to cover workers who move around the EEA. The UK had originally opted out of the Treaty of Amsterdam and said it would not apply the rules to people coming from or going to Iceland, Norway, Switzerland and Liechtenstein.

The Revenue’s website will soon be updated to reflect the new guidance but in the interim people can phone the NIC&EO International Caseworker helpline on 0845 915 4811 if they need advice.

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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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HMRC’s investigations into tax evasion have resulted in a plumber from the West Midlands receiving a 12-month jail sentence for failing to pay a total of £91,000 in national insurance and income tax.

Investigators caught up with 53-year-old David Williams last September and discovered cash totalling thousands of pounds stashed in his home.

Adrian Farley, the Revenue’s assistant director of criminal investigation, reiterated the government’s stance on tax evasion saying it deprives the UK of essential resources and the department will investigate if it suspects somebody is not contributing their fair share.

When sentencing him, His Honour Judge Challinor told the defendant that his crime was based on greed and people who were tempted to avoid paying taxes needed to be deterred. The Revenue is also instigating confiscation proceedings to ensure Williams and his family do not benefit from his dishonesty.

A further nine plumbers have also been arrested and are currently under investigation after HMRC targeted the trade with a special disclosure opportunity last year. These opportunities, which target groups the Revenue classes as ‘high risk’, give preferential terms to people who want to get their tax affairs in order. However, anyone who does not take up the offer will be heavily penalised and could face criminal prosecution if HMRC inspectors have to hunt them down.

So far the Revenue has raised more than £500 million from campaigns targeting people like medics and tutors and coaches and businesses that have been evading VAT. Follow-up activity has raised a further £110 million.

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Contractor accountants may be aware that as from the 6th of April, HMRC will be allowed to request a financial security from businesses it thinks are in danger of defaulting on their NICs or PAYE payments. Companies that fail to comply with this requirement will be committing a criminal offence and could face a fine of up to £5,000.

Roy Maugham, one of UHY Hacker Young’s tax partners, said that these new rules are designed to stop companies deliberately defrauding the Revenue, but the current economic climate means that honest businesses that are struggling to survive could also get caught in the security net.

HMRC has strongly denied that genuine businesses will be affected, saying the new rules target those employers who make deductions from their employees but have no intention of passing on the income tax and NICs to the taxman.

However, as Maugham points out, businesses that are already struggling will have to borrow money to pay this security, especially at HMRC has clamped down on the Business Payment Support Service, which allowed businesses with financial difficulties more time in which to settle their tax liabilities.

The size of the security deposit will be based on the perceived risk of default, and with bank loans hard to come by, this could compound existing problems for some firms. Maugham went on to say that a lot of businesses that withhold NIC and tax are simply trying to keep afloat and these new rules could mean they have to make a choice between criminal prosecution or mass redundancies.

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Contractor accountants will be interested to learn that HMRC is hoping to boost the Treasury coffers by £900 million by sending its employees to a new tax academy.

As from this coming September, about 400 HMRC staff will start training in taxation so that they can help the government department meet George Osborne’s target of increasing tax revenues by £7 billion a year.

Revenue staff will be able to take professional qualifications at Manchester Metropolitan University. The taxation qualifications will be fully accredited by the AAT and HMRC is confident they will enable each participant to increase the tax they collect from private sector companies by between £2 million and £3 million every year.

A spokeswoman for the Revenue explained that it would be a tough course. Students will only have the opportunity to re-sit a module once and they will be thrown off the course if they fail the re-sit. HMRC expects the attrition rate to be around 25%, but those who are successful will be well equipped to deal with the best private sector tax experts.

HMRC will pay the fees for all the courses, which include an honours degree lasting four years, a foundation course and a lower level qualification equivalent to A-level standard. It will also facilitate training at a number of centres throughout the UK.

Over the last five years, the Revenue has been spending £19.7 million on staff training. The cost of the four-year honours degree will work out at £110,000 per student but this will be an excellent return on investment if the graduates can go on to claw back at least £2 million each per year.

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It’s payroll year-end time again and some accountants will have a list of key tasks that need to complete for their clients.

HMRC has published a checklist of all the various PAYE deadlines for this year on its website. The first important deadline is April 19th. This is the date by which postal payments of outstanding PAYE and Class 1 national insurance contributions must reach HMRC.

People who use electronic payments must make sure their payment reaches HMRC’s bank account by the 22nd of April. However, HMRC has warned that because the 22nd falls on a Sunday this year, payment will need to be in its account by the 20th unless your bank operates a faster payments system that allows transactions to clear on Sundays.

The next date for the diary is the 19th of May. This is the deadline for submitting Employer Annual Return P14 and P35 forms. Employees should be given their P60 form no later than the last day of May.

The majority of employers are required to file their end of year returns online. Similar to the system of online self-assessment filing, the first step of the process is to register on the Revenue’s website. This needs to be done at least a week before the deadline date in order to leave enough time for the activation code to arrive.

People who use accounting software to process their payroll will find that their program does most of the work for them. Employers should already have received information about any changes they need to implement to their payroll package and it would be a good idea to check these over as soon as possible.

The major software providers, such as Sage, keep their telephone support lines open longer during the payroll year-end period but even so, the lines are often extremely busy and there can be problems getting through to somebody if you have a problem.

Don’t let yourself get caught out at the last minute. Start preparing for payroll year-end as soon as possible!

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Accountants will know that HMRC does not look kindly on people who do not account for VAT correctly.

James Williams, a yacht broker from Dorset, recently felt the firm hand of the law when he was found guilty of charging VAT on sales but not passing the money on to the Revenue. The 51-year-old sold luxury motor boats and quite rightly he included VAT in the sale price of each craft that was sold in this country.

However, HMRC investigators discovered that Williams failed to forward the tax, totalling £209,225.10, on six motor cruisers that he sold for just over £1.4 million.

John Cooper, the assistant director of criminal investigation at the Revenue, explained that Williams sold luxury boats that should have been exported to the Channel Islands. They were therefore supplied VAT-free. However, he sold them in the UK and therefore they did attract VAT, which he failed to account for.

Furthermore, Williams falsified an invoice to make it look as though VAT had been paid on a yacht when in fact it hadn’t.

Judge John Harrow, who presided over the trail at Bournemouth Crown Court, said this was a deliberate attempt to deprive HMRC of funds. He sentenced Williams to three years in jail for each of six counts of cheating the Revenue, the sentences to run concurrently, and barred him from holding a company directorship for a period of five years.

The Revenue is now pursing confiscation proceedings in the hope of recouping the outstanding VAT.

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Accountants may be interested to learn that the Government recently closed down another aggressive income tax avoidance scheme.

The scheme was being used by wealthy individuals to reduce the amount of tax they pay at the end of the year. It involved creating false transactions in order to generate tax relief from an artificial agricultural business. The land and property business owning it do exist, but the transactions do not. They are created solely to offset a loss against income, thus reducing the size of the individual’s tax liability.

New legislation was introduced into the Finance Bill on March 13th to close this scheme and this legislation came into immediate effect.

This is the third aggressive tax avoidance scheme that HMRC has unearthed recently and the Government realises that more similar schemes will probably emerge. Therefore it has introduced legislation to stop the artificial use of post cessation property relief.

The Exchequer Secretary to the Treasury, David Gauke, said the UK’s chief priority is to reduce the economic deficit and it is unacceptable for people to attempt to avoid paying their fair share of taxes. The Government has acted swiftly to close down this scheme and won’t hesitate to do the same as soon as it becomes aware of other tax avoidance schemes.

This latest move will not affect agricultural businesses that are trading legitimately and need to offset a loss from agricultural expenses against their general income.

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Contractor accountants may be interested to learn that HMRC has agreed to adopt a new approach towards the problem of multiple P35 penalties.

A lot of companies have complained about receiving hefty fines of £400+ totally out of the blue each September. This issue was identified as a priority that became even more acute when tribunals started to dismiss penalties and criticised HMRC’s approach as one centred around raising revenue rather than ensuring employers comply with the deadline.

The deadline for filing p35 returns is the 19th May and HMRC has now agreed to send notifications in the middle of March rather than mid-February. Reminders will be start to be sent out on the 28th of April this year if the Revenue believes P35s are outstanding.

At the end of May, the Revenue will introduce a new P35 Interim Penalty Letter that will inform employers that they have incurred a penalty and what action they should take to stop it increasing. This letter will be sent within one month of the filing deadline. HMRC also intends to improve its guidance for the online submission of P35s.

The online submission system has come in for a lot of criticism from employers who believed they had filed successfully only to discover they had actually filed in “test” mode rather than “live” mode.

A Revenue spokesperson said these new measures would help employers avoid unnecessary penalties and reduce the amount of instances where large penalties are charged.

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