Employment Tax Expert

Tax investigations are taking a new, slightly sinister twist – HMRC are allegedly demanding personal financial records from business people, without proper grounds for suspicion.

This comes about at a time when Section CH223430 of HMRC’s Tax Investigation handbook appears to have “disappeared. Now I know you’ll be asking what the hell is this reference all about, well it tells inspectors that they need to find something significantly wrong, questionable or suspicious in a business’s record (ie they need to ‘break’ the record) before they can demand personal financial details from an owner or director of that business.

A number of people have noticed that this has become worryingly commonplace, Anne Eager, enquiries manager at RJP, stated:

“I have had requests for private bank records from my clients in opening letters. When I challenged the request, the inspector said that it was to save time, as he felt it was very likely there would be issues with the records.

He added it was a ‘standard approach’ under the new regime.”

In other words HMRC are indulging themselves in fishing trips into people’s private bank records. Once HMRC have access to those records every payment into the account would be under suspicion, and it would be for the taxpayer to prove that the payments in do not constitute taxable income. Innocent until proven guilty – not in the tax world!

and what you may ask has happened to Section CH223430 will return , HMRC claim it will return but why was it removed/dropped in the first place?

Anyone who has a debt with HMRC, whether it be from a Tax Investigation, employer compliance review, employment status review, PAYE/NIC/CIS or Self Assessment you need to take heed of what is happening regarding HMRC debt collection agents.

To begin with, those out in the field are now not allowed to contact HMRC offices to validate the debts that they are being asked to collect. Why you may ask, well there are two very different reasons:
1.The support teams back at base do not have the time to take phone calls – this is the official explanation; or 2. That HMRC is preparing the ground for this work to be given to private debt collection agencies (The Budget announced that a further £500m of debt will be handed over to private agencies). These private agencies, will obviously not be able to phone up HMRC offices and ask for details from confidential records.

HMRC have conducted a bizarre pilot scheme to test whether going down the route of private debt collection agencies would work. Think really bizarre and then carry on reading …

The agencies were given a tranche of work to do, and a control tranche was left with HMRC teams (but was left completely untouched).

and the result, that’s right, the debt collection agencies won!

Fast forward to reality and it will be no surprise that over half of the debts that HMRC debt collectors are given to chase up are in fact incorrect but rather than the onus being on HMRC to prove the debt, these collectors are told that if they are challenged by a “customer” the onus is on the “customer” to prove that HMRC are wrong, which is morally wrong and goes against our judicial system of innocent until proven guilty. So imagine what it’s going to be like with private agencies

All herald the end of IR35, the complex and utterly futile attempt at raising extra revenue by re categorising self employed individuals as deemed employees – not quite! Although the Small Business Minister, Mark Frisk said in an interview with the Daily Telegraph that “Individuals selling their services through small companies have their taxable income policed by the so-called IR35 legislation.This will now be abolished. We want to make sure that we could undertake a comprehensive review of small business taxation in a way that makes the need for the current IR35 legislation redundant.But we want to make sure whatever we change is a lasting settlement. One of the problems with IR35 is that it’s a constantly changing set of rules.”

However, no sooner had he made this statement than people behind the scenes were scurrying around stating that he had NOT said it would be abolished. Now I like plain speaking so when I hear “This will now be abolished” I don’t think there are many areas of confusion but here we go again spin, retraction, review, consultation these are now what those immortal 5 words actually mean, so watch this space because no one who is self employed is off the hook

The Time to Pay arrangements that have helped many a business struggling with cashflow may be a target for cutbacks in the Budget next week. There have already been moves to place restrictions on those wishing to delay payments in respect of £1m by placing requirements on these companies to be reviewed by one of a panel of approved accountants, these then provide a report to support or otherwise the companies claims. However, this latest rumour could cause a lot more problems with the economy still fragile but in order to get this into context, this employment tax expert must also state that they disagree with time to pay arrangements for PAYE, VAT and CIS deductions – controversial you may think but pause for a moment – this money has never belonged to and never will belong to the company, the Company is simply an unpaid collector of taxes and the payments should definitely not be part of Company cashflow. This apart Corporation Tax and Self Assessement tax should still have a strictly controlled ability to apply for time to pay arrangements as this could mean the difference between companies staying afloat and getting through the recession and folding. These latter points cannot be underestimated, so long as the company in question represents something that is a viable proposition, so fingers crossed the sweeping rumour that Time to Pay arrangements will go unilaterally is just that … a rumour!

Answers on a post card to this one …

Very quietly, this one seems to have snuck through and it’s hardly surprising!

Lesley Strahtie (CEO of HMRC) has been made Dame Commander of the Order of the Bath, in the Queen’s birthday honours list.

Given that HMRC is bottom of the league of civil service departments, as judged by its own staff, and given that the taxpayers (“customers” as Ms Strathie prefers to call them) aren’t impressed either, why has she been made a Dame – a reward for failure or just preparing her for the Christmas season, as there is no other logical explanation