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What doubt and uncertainty?

What doubt and uncertainty?

It was Benjamin Franklin who declared that the only two certainties in life are death and taxes. It is probably a good thing that he never met the present day HMRC: recent events have shown that while we will be certain to be taxed, not even those on good old bog-standard PAYE can be certain exactly how much tax they are going to be asked to pay.

Of course your average jobbing contractor has been in that position for the last eleven years, thanks to the predations of IR35. No matter how sure you are of your status, and how careful your accounting, you simply cannot be certain that you will not be hit with a new assessment from HMRC that says you got it all wrong and please can we have a few tens of thousands extra. Actually, I rather doubt they even say please. Nor will they say sorry when, after several years of uncertainty and court appearances, they are told they were wrong and your tax has been correctly assessed all along.

Then there came BN66, which put simply was HMRC “clarifying” an arrangement hat had gone unchallenged for several years and declaring that it never actually applied. The sums involved in that one are horrendous, stretching into six figures for some. That case is still rumbling along, and will do for a few more years yet until all the avenues for appeal have been exhausted.

Now we have the latest fiasco, where a new system has gone back over HMRC’s records and found a raft of miscalculations. Sadly, and perhaps typically, HMRC decided that they couldn’t simply ignore the errors and are now sending out demands and tax refunds in roughly equal numbers. Given that the net balance of taxes owed is a mere £200 million, not counting the cost of the whole exercise, you have to wonder why they are bothering.

I say “mere” advisedly. While it is a significant number in itself, it seems that HMRC are not actually collecting a few billions of pounds each year that they already know about, which rather puts that £200 million into perspective. But no, HMRC are a tax collecting organisation and collect taxes they surely will, regardless of how much trouble it causes to the victims. Victims, it must be remembered, who almost all have no idea that they weren’t paying the right taxes in the first place and who can hardly be blamed for getting it wrong.

Then into the middle of all this comes a consultation document from HMRC proposing that taxes are deducted at source and will be calculated on a month-by-month basis, which on the face of it has some merit. However, a bit further down the paper they are talking about taking the whole tax calculation exercise away from the employer and using some centralised system that takes the gross pay from the employer, works out the tax due, gives that to HMRC and sends you the balance.

How terrifying a thought is that? An organisation that is so utterly inept it can’t do the equivalent of tying its own shoelaces setting itself up as the ultimate arbiter of who gets paid. I don’t think so…

I was talking recently about the wisdom – or lack of it – of giving HMRC a General Anti-Avoidance Regulation to play with. It seems my misgivings as to their ability to handle such a tool were actually rather underestimated. And I am absolutely certain of that!

Alan Watts can found at LinkedIn.
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