Today really is the last day that you can file their self-assessment returns without receiving a late filing penalty from HMRC.

Normally, returns should be filed by midnight on January 31^st, but this year the Revenue extended the deadline to February 2^nd because members of the Public and Commercial Services Union were taking industrial action on the 31^st and members of the public would struggle to get through to HMRC call centres.

The Union hailed the strike as a success, saying 14,500 members of staff did not report for work. Volunteers staffed revenue enquiry centres and there were huge backlogs at call centres.

At first glance it seems a sensible move for HMRC to extend the filing deadline. It gave a bit of extra time to the estimated 90,000 individuals who were expected to phone asking for help with their tax returns on Tuesday. And these people would have swamped the Revenue will letters of complaint if they had been unable to do and as a result, received an automatic fine.

However, the extension will not help those people who had not already applied for the unique reference number they needed to enable them to complete their return online. This is sent out by mail and can take up to 7 days from date of application to arrive.

HMRC has been having major problems with their admin system over recent months. It takes weeks, sometimes months for people to get a written response to their queries, so a further deluge of mail would have swamped an already hard-pressed department.

The extension will probably will be seen as a compromise that should suit everybody. The extension has been widely publicised so there is really no excuse for filing late. Taxpayers have been given an extra couple of days to file, but the Revenue will no doubt still rake in the fines from people who had not received their URN and those who purposely ignore their filing requirements.

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Steve by Steve Snodgrass

January, and the vexed question of self-assessment rears its head again. My accountant friends have said good bye to the family until February and closeted themselves with quill pens and envelopes of receipts. Others have burned the midnight oil trying to complete their online returns. Still others – like me for example – pay the bill to the accountant, send off a small corrective payment to HMRC and wonder what all the fuss is about.

In my case that cheque is for precisely eighty pence. Can’t pay that online so a cheque it will have to be. Which will cost the drones in HMRC around £30 to process but basic economics was never really their strong point. And it’s only outstanding in the first place because last year I ignored a similarly trivial underpayment and this year got rightly stung for the interest.

Meanwhile, away from the distractions of the self-assessment merry-go-round, a rather more invidious tax change has crept in, largely unannounced and unremarked. As of now, there is a limit on how much cash you can take out when closing your company under the provisions of Extra-Statutory Concession 16 of just £25,000. Anything over that attracts Capital Gains tax at the relevant rate. Great. More taxes you never knew you owed.

There is a way around it; you simply have to liquidate your company. That means using the services of a liquidator who, incidentally, can’t be your current accountant. And it seems that such a service comes in at around seven grand a pop. Until, that is, Liquidators-R-Us get up and running and the cost comes down, so defeating the whole purpose.

But if you think about it, if the idea is to increase the CGT take from closing companies, why leave the Liquidation loophole in the first place? Joined-up thinking? Not at all, merely another excuse to get taxes imposed by relying on people not knowing the detail.

But what really irritates me about this is the underlying assumption by HMRC that a company’s sole purpose is to grow into an eternal corporate body and any that don’t are not to be taken seriously. There is no acceptance or understanding that if you are working in a world where income is variable and frequently non-existent, using a company to store and distribute your income evenly across the year is the best way to do it. And when you finally stop grinding away at the coal face you want to get your money back as efficiently as you can while paying whatever levies are due to the Treasury, not to some pointless corporate leech.

It’s exactly the same mindset that got us IR35 in the first place. We have companies. We don’t have 300 employees and a pile of plant and machinery so we must be cheating the taxman, else why have the company? Well there’s S44-47 for one thing and the idiot tax liability transfer rules it embodies. But hey, that’s no excuse.

I have to conclude that the increasingly rapacious predations of HMRC are the single biggest inhibitor to the recovery we can think of. It’s all very well the Government saying we need a vibrant and flexible workforce, and we’d love to give them one, but getting constantly cut off at the knees by a body that has absolutely no experience or expertise in the real world is getting more than a little wearing.

And finally it’s the next meeting of the infamous IR35 Forum soon. There is a hope that they will come up with a final answer to the IR35 question. Personally, I’m not hopeful. Can’t imagine why…

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Clueless BUB by Birdies100

Whilst the majority of people, including contractor accountants, were tucking into their Christmas turkey, more than a thousand people were otherwise occupied, filing their online self-assessment income tax returns.

Data from HMRC also reveals that 102 people celebrated the dawning of 2012 submitting their tax returns. The fact that New Year’s Eve fell on a Saturday may explain why a total of 11,648 returns were filed that day, while 8,935 taxpayers decided to fulfil their obligations to the taxman on January the first.

Time is running out for people who have not yet taken the plunge and logged on to the Revenue’s self-assessment website. The deadline for both submission and payment is on January 31^st and anyone who misses it will receive an automatic £100 penalty, even if they do not owe any tax.

Taxpayers who have not used the online system in the past are reminded of the need to register in plenty of time as it can take up to 7 days for their authorisation code to arrive. Furthermore, as the deadline approaches and more and more people log onto HMRC’s website, there is a risk of the system becoming overloaded.

Anyone who has problems completing their tax return should contact an accountant as soon as possible or get in touch with HMRC’s telephone helpline on 0845-900-0444.

Self-employed individuals are also reminded that Class 2 National Insurance contributions for the 26 weeks ending the eighth of October also fall due on the last day of January.

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Rubbish by Bruno Girink

Contractor accountants will have a busy month in January filing online self assessment returns for their clients.

As the January 31^st deadline looms, it savvy accountants will already have drawn up a plan for dealing with the additional workload. However, if you have not already done so, the festive break would be a good time to start planning.

The first thing to do is ensure you know exactly what you’re up against. How many clients require you to complete their tax returns for them? Do you have all the details you need to proceed?

Are your clients fully up to date with any legislative changes and if not, should you provide them with training? On a similar subject, you must ensure your accounting software is updated to reflect statutory requirements, and if it isn’t install and test any updates sooner rather than later.

Effective communication with clients is vital at this time of year. Think about the problems you encountered during last year’s filing season and work together with your clients to find solutions. Also make sure your clients fully understand what information they need to provide you with, and when you need to receive it.

No matter how meticulous you are with your planning, problems will occur, but the trick is to spot them before they turn into a crisis. Make sure you review your progress on a regular basis and deal with any issues as soon as they arise.

Of course, once you’ve done all the hard work, you’ll be looking forward to receiving payment. Make sure all your clients know your payment terms before you start working on their return and send out your invoice as soon as possible after the work is completed. That way you should minimise the danger of late payment.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Black and white by koalazymonkey

HMRC has alerted all companies and contractor accountants that are registered for VAT that important changes to the filing process will come into effect in spring 2012.

As from April first next year, all VAT returns have to be filed online and all remittances must be made electronically. Under the present regime, only companies with a turnover of more than £100,000, and those that are newly registered have to use HMRC’s online VAT filing system.

The new regime will affect all returns for VAT periods starting on the 1^st April 2012 and beyond.

The Revenue says it makes sense to switch to the online filing system now rather than get caught up in the last-minute rush. However, before any business can take advantage of the benefits of online VAT filing, they will first need to register with HMRC’s VAT Online Service.

Whilst businesses are thinking about filing their VAT returns online, contractor accountants should be concentrating on ensuring their online Self Assessment tax return is filed before the end of next month.

Taxpayers who have previously completed a paper Self Assessment return should register for online filing as soon as possible. The registration process is simple but HMRC warns that it can take up to 10 days for the Activation Code to reach taxpayers as it is sent out by post.

People who have previously used the online filing system should make sure they have not lost their login details, as they also will have to wait up to 10 days for a replacement.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: personal journals by Spree2010

A South African has been sent to jail after being found guilty of a £1 million self-assessment income tax fraud.

HMRC discovered that Lawrence Goldberg used virtual offices to register in excess of 50 companies throughout the UK. The companies posed as nominated tax agents and through them, Goldberg sent the Revenue more than 2,000 fraudulent tax returns. As well as using the identities of innocent people, he invented people and used their details on the returns.

When his operation was at its peak, Goldberg was sending HMRC about 500 false returns a week. Most of the fraudulent returns were discovered and not processed, but Goldberg did successfully claim more than £1 million which he deposited in offshore bank accounts.

Goldberg originally conducted his operations from London, but after a brief stay in Portugal he went on the run to South Africa. He pleaded guilty to the charges against him and was jailed for two years.

HMRC’s assistant director of criminal investigation, John Pointing, said this was a huge scale fraud against public funds and the Revenue will not sit back while criminals such as Goldberg steal honest taxpayers’ money.

Meanwhile, HMRC has warned taxpayers to be vigilant if they receive emails saying they are due a tax refund.

According to the Revenue, there has been a 300% increase in ‘phishing’ emails over the past 12 months. These generally provide a link to a replica HMRC website where recipients are asked to provide details of their debit or credit card. Criminals then use the information for identity and financial theft.

Last month, HMRC received reports of nearly 24,000 of these fraudulent emails and it is helping to close down about 100 fake websites every month.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Jail cell painting by ABN2

ICAS has warned that as many as a million taxpayers could face penalties for late filing of tax returns and claims HMRC has not taken enough measures to notify the public of the changes.

As from the end of this October, anybody who files their paper self-assessment form late, even if it’s only by one day, will receive an instant fine of £100. After three months, the fine will increase by £10 for every day overdue. Even larger fines will be levied if filing is six months late.

It may be time for accountants for contractors to be at the forefront of reminding people!

The same rules will apply to people who file online as from January 31st 2012. ICAS has calculated that an online return due for filing at the end of next January, but held back until August 5 2012, would attract at least £1,300 in fines.

Since self-assessment began in 1997, almost one million people file their return late each year and many of them delay by more than 12 months. Until now, HMRC could not charge a penalty as long as the taxpayer paid all the monies owing.

ICAS’ director of tax, Derek Allen, said he was concerned that the majority of people are not aware of the new penalty regime as it has not been widely publicised.

The Scottish Institute also warns that some people could miss out on tax rebates. Self-employed people in the construction industry often have their tax deducted by the contractor initially and repayments are calculated after they have lodged their return. However, if they file late, the repayment is likely to be a lot less than the fine.

Small businesses and limited company contractors are also becoming increasingly tardy in filing their year end accounts with Companies House. The executive agency recently reported that 12,739 businesses were fined for late filing last month; up from 12,154 in May.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Never ending pile of cute [Explored...few days late – #337 June 10] by aechempati

When is a question not a question? Now there’s a question. And the answer is, apparently, if it’s a notice under TMA 1970 Section 8 which, as ony fule kno, is not a notice under FA2008 Schedule 35 paragraph 1. Until the situation is changed at which point we will be informed of the change. So that’s perfectly clear then.

Who said tax had to be taxing…

Let me explain. There are two questions on the Self Assessment return we have to complete every year that ask “Are you a Service Company?” and “Have you applied the Intermediaries Legislation?” Needless to say, you have to answer either Yes or No to both.

But since this question has been framed by HMRC, it is, of course, totally ambiguous.

Firstly, exactly what is a “Service Company”? Such a beast is not actually defined anywhere: trawl through the labyrinth that is the HMRC website and you will find many references to the now outlawed Managed Service Companies, but nothing on simply “A Service Company”. Which is useful.

Of course we know they mean a Personal Service Company – something else that doesn’t exist in law – and that by common usage is understood to be a company through which one or two individuals sell their services to a range of clients. Otherwise known as a totally ordinary business. Or, if you really have to particularise things, a nano-business.

So that’s easy then: is my company a non-existent undefined entity or not. So we can safely say Yes since it is. Or it isn’t. Sue me if I’m wrong.

Then we get to the second question, “Have you applied the Intermediaries legislation?” Well yes, I have and I have concluded it doesn’t apply. So do I answer Yes because I have applied it or No because it doesn’t apply? Which one will lead Hector to believe I am liable for IR35? Well, we know the answer to that one; any combination of answers since I am caught until proven otherwise. But I digress.

Apparently the real answer, according to people who have more time for this nonsense than I do, is to answer Yes to the first and No to the second since that is a defensible combination no matter what HMRC try to stick you with.

And, just to add to the confusion, there is an argument that says you don’t have to answer the damned question at all. That gets a bit convoluted (well it was a barrister that raised it) but basically in 2009 HMRC sought to prevent people not answering the question by making it no longer ultra vires, meaning you could be penalised for not answering it. Which is where we came in. Honestly…

The barrister in question argued that a question on a tax return is not a notice, i.e. something you are obliged to answer. And eventually he got the answer back from HMRC as per my opening paragraph: it’s a question not a notice. So you needn’t answer it.

Except of course the barrister in question is, as I understand an already confusing situation, not a nano-business so the question doesn’t actually apply to him anyway: he was merely seeking clarification that he didn’t need to explain not answering the question. I don’t think people like me can be quite so sanguine about it.

So do I answer Yes then No? Now there’s a question…

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited

Image: Stress by Dave-F

Contractor accountants may see a surge in enquiries after HMRC announced a new tax amnesty on Tuesday.

The agreement encourages plumbers or those in associated trades, such as heating engineers and gas fitters, to settle their past five year’s undisclosed tax in return for a 10% penalty. Experts however are confused as to who exactly it applies to saying it has very similar to the terms offered to anybody wanting to make full disclosures.

A tax investigation partner at PKF, John Cassidy, pointed out that specific tax amnesties have been offered in the past but the wording of this one seems to cover a broad spectrum. This seems close to offering a back door general amnesty, he added.

HMRC hit back saying the Plumber Tax Safe Plan is specific and the forms are designed so that only plumbers and associated tradesmen can complete them.

The Revenue wants to encourage other people to make disclosures and they will receive preferential treatment for doing so but HMRC does not guarantee that they will receive the 10% penalty rate promised to plumbers.

Plumbers wanting to take advantage of this amnesty have until the 31st May to register intent and then settle their outstanding liability by August 31st.

Chas Roy-Chowdhury from the ACCA believes this time frame is not generous enough. Plumbers may only see their accountant once a year, he pointed out. The professional tax and accountant bodies had asked for the deadline to be extended until the 31st January 2012. For tradesmen who see their accountant once a year, this would seem sensible as it coincides with the self-assessment deadline.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Gotita by afoncubierta

HMRC has decided to rethink its policy of just sending documents to taxpayers and not their agents. The new policy, which was introduced in September, was designed as a cost saving measure.

However, the Revenue has backtracked slightly and said that some documents will also be sent to tax advisers and contractor accountants.

The decision has been welcomed but the CIOT, but the Institute remains concerned that this change will not include all tax documents.

The CIOT’s deputy president, Anthony Thomas, said that we all know government departments are under pressure to cut costs but HMRC is likely to face more queries and adjustments by keeping agents in the dark about the tax obligations of their clients. This action could end up costing the government more than it saves.

The documents that will be sent to agents include Tax Calculation P800, Entry to Self-Assessment letter SA250 and Exit from Self-Assessment letter SA251.

Agents will not receive copies of their clients’ P2 PAYE Coding Notices but the form the taxpayer receives will advise him to show it to a tax agent or adviser.

HMRC plans to use some of the money saved from the withdrawal of P2 agent copies to create an IT solution allowing e-enabled tax agents to see the P2s of their Self-Assessment clients online.

Meanwhile, members of ICAEW have said the standard of service provided by the Revenue is still declining. 70% of members said they needed to contact HMRC more than once to resolve a single enquiry and 61% said the technical knowledge of many of the Revenue’s employees leaves much to be desired.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Letters from Friends by D Sharon Pruitt

Some freelancers may find it beneficial to consult a contractor accountant over the next few days in order to make sure their tax return is in order.

For the 25% of self-assessed taxpayers who still complete paper tax returns, the filing deadline grows ever nearer. Anyone whose return arrives after midnight on 31st October could be subject to a £100 penalty, the Revenue has warned.

There are around 9 million self-assessed taxpayers in the UK and 75% of them file online at the end of January. HMRC prefers this method of submission because it reduces the man hours spent trawling through thousands of pieces of paper.

Online filing has benefits for the taxpayer as well. Your tax is calculated automatically; you receive an acknowledgement when you’ve submitted your return; and it’s processed faster, meaning that if you’ve made an overpayment of tax, you’ll be repaid more quickly.

The taxman said there is still time to make the transition from paper to online filing by going to HMRC’s website and select “Register (new users)”.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: - Despair by Juliana Coutinho

The Chartered Institute of Taxation responded last week to the National Audit Office’s report ‘Engaging with Tax Agents’.

The report sets out ways the Revenue can work with tax agents to overhaul the tax system. Anthony Thomas, the deputy president of the CIoT, said the paper was helpful but believes the NAO could have missed a golden opportunity.

One recommendation that does meet with approval is that HMRC could reduce costs if it let agents do more self-service on-line. This would reduce the inevitable delays that always occur when using the postal system.

However, Mr Thomas pointed out that the report did not contain an analysis of who is making over-declarations of tax, and why the errors are happening. The CIoT has been working with the Revenue for several years on just these issues and he feels the report should have reflected this. The paper also relies on data that is 5 years old and does not deal with the error rate within HMRC.

The CIoT is pleased that the report acknowledges the work of tax agents and says that without them the level of tax under-declarations would probably be a lot higher. At the end of the day, tax agents save the government money by assisting clients with their tax returns and doing tasks that would otherwise need to be done by the Revenue.

Meanwhile, tax agents are angry that although their work is acknowledged in the report, it also claims that people are more likely to under-declare their taxes if they receive advice from an agent.

The NAO claimed that 37% of self-assessment tax returns from people who consulted tax advisers had under-declared liabilities compared to just over 1 in 4 of the returns filed by taxpayers on their own.

The NAO report concluded that if the average amount of under-declared tax was reduced by 3%, the government would benefit by an additional £100m each year.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Help! by nicht mehr hier