Employment Tax Expert

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

HMRC have gradually been introducing various penalty changes and “in year” late payment penalties are something new for this tax year but there has been very little publicity about this latest addition to the employer compliance review/tax investigation/Construction Industry Scheme review regime.

So what does this actually mean from both a PAYE/NIC compliance and CIS compliance perspective – well, it means there are no opportunities to hold onto monthly PAYE and CIS payments to HMRC to aide cashflow and then catch up at the year end. Now paying late will register a default and these defaults will be tracked throughout the year and then only after the end of the tax year will penalty notices be issued – because let’s face it this is when HMRC can obtain the highest yield from you. It has already been confirmed that they won’t issue the notices “in year” so don’t think that you have got away with it because it will be stored up for the end of the tax year and then bang, the penalty notices will arrive.

Statistically HMRC will be looking for unusual remittance patterns so don’t go down the misguided route of thinking “how will they find out?” because you’ll be walking into the next stage of the the new compliance regime that of “real time record reviews”. Keep reading for further updates on this very important development …

Announcing that you have a cunning plan to avoid Employers NIC is one thing, telling the world it has HMRC approval is another thing altogether but this is the latest idea by TMS for commission-only  individuals. Now it strikes this employment tax expert that if you were coming out making bold statments regarding guaranteeing someones self employed status that you would cover your bases and realise there is more to employment status than just a contract and trying to ensure that both parties stick to it – we all know what clients are like in practice, something happens from a commercial perspective, so the nature of the relationship changes, do they immediately ring to chat through the contract!!!

So if we are looking at a red rag to a bull from HMRC’s perspective, what will make it even worse:

• Converting existing employees to self employed under this scheme – employment status is not a matter of choice, it is based on the FACTS of the relationship
• Stating that they have received approval on a pilot case – HMRC do not and will not give blanket approval for contracts, it is down to the working practices of each individual case and they will look at them be assured of that (see the comment below from an HMRC spokesman)
• Marketing it so openly and blatantly as cutting payroll overheads and increasing the earnings of the individual  – many would suggest that they are walking the tightrope of planned tax avoidance and we all know HMRC’s views on “agents” using these methods

So where does this leave potentially naive clients – right in the firing line – how much would you pay to be well and truly on HMRC’s radar courtesy of all the publicity? Brace yourselves for some really interesting employer tax compliance visits or tax investigations now that HMRC are well and truly “involved”

And finally,

An HMRC spokesperson said: “HMRC does not give approval to specific business models. In some circumstances, we do provide advice on the tax and National Insurance implications of arrangements when asked to do so. In such circumstances, we look at the facts surrounding that particular example, but as circumstances vary, HMRC would not give that model approval.”

At last the results of the consultation exercise, False Self Employment in the Construction Industry have been published and we seem to be back to an old style consultation – we ask for your views then when we don’t like the answers we’ll try and ignore them. However, HMRC appear to have left almost all parties unhappy with their initial proposals. Summarised below are details from the consultation:

• Nothing is going to happen yet and nothing will happen until the industry picks itself up, certainly not before the Olympics in 2012. So be prepared for employer compliance reviews, tax investigations and employment status reviews to continue

• The simplistic approach of the government having three tests has been widely criticised and they have conceded that further consultation will be required

• There is also a lot of criticism that any simplistic approach away from case law is only being geared at the Construction Industry, what about other industry sectors?

• The government have indicated that they will look into organisations purporting to get round the rules such as umbrella companies, managed service companies and labour style agencies, which is no bad thing as they are so blatantly flouting the rules and taunting HMRC (never a good idea for them or more importantly their clients)

• Interestingly, the Trade Unions aren’t happy as they could potentially see a lot of new members but the government proposals actually mean that although subcontractors would suffer PAYE/NIC they would not be regarded as “employees” but “deemed employees” which means that they would have no employment rights or benefits. This has been widely criticised because it would actually create “false employment” and the employment law side of this has not really been addressed

• There is a General Election due, probably around 6^th May, which could mean a different party in power. The Conservatives have not indicated that they will pursue what is effectively a witch hunt in the Construction Industry

So we’re back to watch this space but be aware that HMRC are out there looking at your self employed arrangements

Oh boy this subject is very close to my heart and I’ll tell you why later – you’ll want to read it as it is a name and shame!

Not sure about the subject matter – this refers to a company who runs up debt whether it be to third parties or even their own employees and then see fit to walk away from these debts by winding up the company and then surprise, surprise as Cilla would say, they set up in business again as if nothing has happened, leaving a trail of destruction in their wake.

It’s happening all the time and neither HMRC or Companies House are doing enough to stop the practice. Going to Court almost represents a waste of time and money – you get the judgement but it can’t be enforced as the company has been wound up, assets have been moved, sold you name it

It should be illegal but no one is doing anything to stop this well today I am going to do my bit and stand up and be counted. If you live in Kent, this little gem is for you but I would add that this person is scottish(only mentioned so that you do not think you are looking for someone with a Kentish accent), nasally impaired (you’ll be able to tell when he speaks) and trades in Wales, Northern Ireland basically wherever he can and he is a serial phoenixer with CCJ’s like a badge of honour – his name is ROBERT RYCE, who frequents Maidstone. He trades in the Construction Industry, his current company does Health & Safety training (he has no qualifications in relation to this) – so if you come across him give him a wide berth