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I am currently sat on hold in a telephone abyss at present so thought would post the latest gem from HMRC.

Like many taxpayers I often wonder where my tax paid goes (frankly into a Civil Servant monetary abyss is the answer ...)

Lovely letter today from HM Revenue & Customs where most tas districts seem to have heavy backlogs of post and delays are increasing...

To

My Firm

Dated 16 July 2008

Dear Sirs,

NAME OF CLIENT...

Thank you for your letter of 17 June 2008.

Your letter has been sent to a more experienced officer to review. I will let you know the result as soon as I receive a reply.

To help us improve customer service please quote our reference number and provide a daytime telephone number in any correspondence.

Yours faithfully,

Mr J Dogsbody

Assistant Officer.

This letter is about the third or forth in recent weeks almost identical. They do cuase a lot of laughter in the office due to the sheer shock that HMRC would write such as letter and I think it would be a fair comment to say as fair amount of anger too. Why anger?

CHEATING THE POST TRY TARGET 

Is this letter a way of meeting post tray targets or rather CHEATING them? Bit of a coincidence that these type of replies seem a desperate attempt not to exceed a MONTH target as HMRC replies are nornally a day or so less than a month from the date of our letter. Or is that a bit cynical?

LACK OF DUE CARE AND ATTENTION TO INCOMING POST ON ARRIVAL

Why did it take a whole month to realise the post was with the wrong member of staff? What lack of management set up a post in system like this in the first place?

LACK OF BASIC TAX SKILLS BY HMRC STAFF

All our letter did was send in EIS certificates in support of the tax return entries already made and submitted, which HMRC have reversed with no letter or explanation? Not exactly a highly techincal letter !

On a less cynical note just maybe HMRC could be trying to be polite. After 20 years of dealing with HMRC on a daily basis I have ruled that out as an option frankly.

Why do I criticise HMRC alot in my posts? What other way is there of getting the message across of the waste of time, money and resources that is now at rediculous levels in HMRC and the Government generally and at my expense as a taxpayer in the UK?

I could perhaps send the following reply but as HMRC but as I doubt HMRC would get the point it would be a double waste of my time. Anyway posting it hear gets the message to a wider audience. 

REPLY

To HMRC Bootle 

Date 22 July 2008 (or perhaps I should wait till 15th August?)

Dear Sirs

CLIENT NAME

Thank you for your letter of 16 July 2008 in response to our letter of 17 June 2008.

You letter has been "sent" to the next floor down as they deal with letters that might be a waste of time and resources. They will sit on the your letter for a month and will let us know how to reply to your letter and whether it is a waste of time to reply to. When we have the result of their review we will let you know the result. 

To help us improve customer service, please quote our reference number and also provide us with a daytime telephone number that is not constantly engaged in any correspondence.

Yours faitfully,

Mr A Frustrated

Tax Adviser

Will this post change anything.....

13 May 2008 saw a massive U-turn by a government riddled with poorly informed, poorly qualified and frankly at times mad politians.

The 13 May statement should have been headed “WE NEED YOUR VOTES”…

I usually try and keep posts balanced but today I simply have to say just what I think as the shear incompetence on the part of the Government.

Following swiftly on the u-turn only months ago to correct a crazy policy abolishing business taper relief comes another massive u-turn on the abolition of the 10 pence tax band. Frankly this all comes from a totally incompetent Chancellor and Prime Minister (and ex Chancellor) who with all the u-turns and poorly drafted tax legislation seem to be totally confused by the tax laws that they have themselves been passing as law for the last ten years and have now simply lost their way completely in the haze (like many many members of the public and no doubt not a few accountants and tax advisers too).

Added to the fact that HMRC and many other Government departs appear to be losing sensitive data on an alarmingly regular basis and one which applied to a public sector business would probably see the directors in jail and the company publically humiliated – it seems that the Government and Government Departments and sectors are free to mess up over and over and cannot even see the egg on their faces until a heap of eggs has crash landed.

I think what irritates me most is that politians currently making tax law clearly have not a clue what to do and are just tinkering with an already massively complex system for what purpose?Umm scratching my head here a minute trying to give Alistair Darling and Gordon Brown at least some positive comment....

Nope cannot think of any...

VOTES?

Umm yep that seems to be the only thing on their minds. Just how shallow can it get from here until General Election day. It beggars belief...

TRUST? Well I actually voted for labour when Tony Blair got in but after the last five to seven years but sadly this Government has lost all credibility. It largely started with the lies over the war with Iraq and all those weapons of mass destruction which was a large part of Mr Blair’s downfall but it has simply got worse and worse. Also sadly yet another massive sign of financial madness from Government policies is still to come in the next two to five years e.g. record levels of house repossessions for starters – as we have only seen the beginning on that score.

As for drafting Tax Law as a Chartered Tax Adviser I cannot help but say what I think and that is that this Government has put the writing on the wall for all to see. “Not a clue”

Do Politians on their high wages, expense claims and allowances and gold edged pensions give a damn? Not really that much is pretty obvious… They are simply trying to look after number one is what it seems to me and will do whatever it takes to do just that.

If they started caring about the citizens of this country then just maybe we might see sense from them.

Well here it is plain and simple the text of HMRC's press release today being Gordon Brown's PLEADING for your votes..... 13 May 2008 Chancellor’s Announcement

Helping low-income customers affected by the changes to the personal tax system announced at Budget 2007

Although nothing to do with tax while researching a tax issue today and "consent orders" I came the article below. I have to say after pondering on all the legal costs no doubt funded by the taxpayers of this country in full (including a Judicial Review) I wonder if Victims or the families of victims get the same level of legal state backing in pursuing their attackers through the courts?

Surely if you come to an agreement in court after "taking advice from your counsel" costs of subsequently running a Judicial Review are somewhat unreasonable?

If the Jones' in Artic Systems had agreed to pay the £3000 or so wanted by HMRC in court after asking their counsel,  then subsequently changed their minds and appealled the decide (agreed on) I wonder is they would have been given the right of appeal by the courts?

The world and the legal system has gone mad for sure. I wonder how many tens of millions Heather got today, sorry just heard approx £24million, in the divorce courts for four years of marriage? ... thats around £16,000 for every day of marriage, plus all the money she no doubt spent while she was married to Sir Paul, holidays luxuries etc. Not bad going, and at least it was not more which I thought it probably would be so on this occasion the courts have seen a little bit of sense. But then again lots of people warned him before he married her (or at least thought so, as I sure did) "this is not going to end happily, or before very long". The only good thing is that now Heather might well end up meeting a guy after her money  as they say "what goes around comes around"...

Courts just so often seem to be detacted from reality and common sense on a week in week out basis. Too many brandy's possibly. 

I am sure the legal profession are not complaining though whether defence or prosecution.

Another bit of madness found today is here for your delight...

"ASBOs "By Consent"  

We are at any time now expecting confirmation of the Government's plans to change Capital Gain Tax particularly as they affect business.

Although not officially confirmed yet it is rumoured that the rate will be halved to 9% on gains of up to £750,000 on the buying and selling of business assets although the assets qualifying for a lower rate are not known. 

Promised before Christmas and then delayed while ministers considered the mess they had got themselves into with the rash and poorly judged previous proposals to increase capital gains tax on business sales to 18% (an 80% increase) we are still awaiting confirmation.

The original proposals seemed to be Alistair Darling trying to make his mark after 10 year with Gordon Brown as Chancellor of the Exchequer and were rushed out in the Pre Budget Report.

The rate of capital gains tax for investors and people with rented residential properties, second properties,  holiday homes and other non "business" investments is due to be cut substantially by anything between 22% to 16% depending on how long the asset had been held.

With the hugh growth in Buy to Let Properties as investments quite why Government has chosen to penalise business investors in favour of Landlords is not clear but that is the route Government seems to be taking.

It could be perhaps that many career MPs have second properties, and property portfolios but little business skills or understanding?   Afterall we are now starting to see the big cracks in the ecomomy after 10 years of Gordon Brown. Petrol soon to be over £5 a gallon, other fuel prices rising by up to 23%, Council Tax bills going up by over twice the rate of inflation. Many businesses putting their prices up due to the fast rising cost of living and trading. Overall an inflation position due to go nowhere but up. So what will Government due? It's Government's and Bank of England's only answer it seems is to drop interest rates. Basically the UK economy revolves around interest rates. Probably a reflection of the trilllions of personal debts now in the UK which are not going to go away. Personally I think dropping interest rates as they have in the UK will just mean when we do get the correction that is due, it will be all the more harsh.

Afterall Japan had almost 0% interest rates at one point and that economy still nose dived. Trying to run an economy based on interest rates to me seem flawed and a sign of just how flimsey the UK economy has now become.

A very happy 2008 to all Tax Blogs.co.uk readers.

As the 2007 Tax Return deadline of 31 January 2008 approaches fast here are some tips for saving time, money and stress.

• If you use a Tax Adviser or Accountant to complete your tax return supply all your details in one go, and sorted into a neat order. Like many businesses Tax Advisers and Accountants usually charge on a time spent basis. Therefore sorting and adding up a lot of petrol receipts or putting bank statements in order or invoices raised in order takes time and therefore costs fees. Organised clients usually pay less in fees therefore invest in yourself and get organised.
• Supply copies as opposed to original documents and make sure you keep the originals safe should you need them. If advisers have to copy documents before returning them to you again this take time and can cost you extra fees.
• Supply and further information requested by your adviser promptly. Scanning documents and and emailing them saves time, avoids relying on Snail Mail and means queries or question can be sorted quicker.
• Make sure you give your contact phone numbers on all documents and emails. The assumption your accountant knows your phone number off pat or does not have to spend any time looking it up or finding it can also save time and therefore costs.
• Don't leave it to the last minute. Some advisers might charge a premium charge for working overtime late into the evening dealing with your affairs. Give your adviser all the information neatly and in plenty of time.
• Make sure you supply the right information. The tax year in the UK runs from 6 April to 5 April so for the 2007 tax return the period runs from 6 April 2006 to 5 April 2007.
• Retain and or obtain from any banks or building societies certificates of any bank interest received during the year and let your adviser have copies. Make sure you have included all your bank accounts. Even current accounts often pay interest monthly now.
• If you are a pensioner let your adviser know whether your state pension is paid weekly, four weekly (i.e. 13 payments in the year) or monthly. Make sure you keep the annual notification from the Department of Work and Pensions of your weekly rate. This usually changes each year around 6th to 10th April. So the weekly rate notification for the April 2006 increase is what your adviser needs for the 2007 Tax Return. If you give your currently weekly rate that is higher (normally) and is relevant for your 2008 Tax Return after April 2008.
• Keep Dividend vouchers and let your accountant have copies.
• Keep Contract notes for sales of shares and unit trusts. Batch these for the same share holding to match purchase notes with sale notes of the same holding. Put them in order and let your accountant have copies.
• Write a list of everything supplied (and include your phone number and mobile and email address) so your adviser can see at a glance you have included everything.
• Make sure your tax return goes in on time. A flat £100 fine by HMRC applies if your return is in late (after 31 January) and increases to £200 if the return is more than six months late.
• If Partnership Returns are late EACH partner in the practice will received a £100 fine (increasing to £200 as above) for the lateness!
• Pay your tax on time - 31 January 2008. HMRC charge interest for late payment (7.5% from 6 January 2008 was 8.5% from 6 August 2007 and 7.5% from 6 September 2006 and 6.5% from 6 September 2005) (details click here) plus surcharge penalties of 5% for balance payments paid after the end of February increasing to 10% if paid after the end of July.
• Pay your tax online to make it easier to track the payments. For detail of how to pay online click here    
• Submit your tax return electronically so you know HMRC have received it on time rather than relying on the postal system.
• Keep receipts for payment of tax and submission of returns as your evidence and record.
• If HMRC issue a tax calculation or adjustment to your tax return do not rely on it being correct it is quite common for HMRC to make mistakes.
• Don't assume that anything you are told by HMRC is correct. Many staff are poorly trained and obviously their opinion is bias. Furthermore everyone in the tax field is very busy in January so you are more likely to get the quick rather than correct or full answer to any queries.
• Be accurate and tax care. HMRC can fine for incorrect returns. HMRC raise large sums each year from fines and penalties don't become another target for the extra funds.
• If you are not sure what you are doing GET PROFESSIONAL ADVICE.

If you need help why not try our online directory of UK Tax Advisers to find a tax adviser in your local area !

www.tax-directory.co.uk

As many people in the UK are winding down to Christmas office closures it would be nice to post a blog entry with some Christmas cheer.

It is reported today however that the UK Deficit is at it's highest record since 1993 when records began £11.2 Billion (not sure if that includes the £55 Billion lent to Northern Rock or not).

The tax take from UK citizens is also at it's highest level in 20 years and you would therefore think that with more tax being collected that ever before in the last 20 years the economy would be in a fantastic state? Sadly actually we have Gordon Browns legacy. Debt and more debt. 

Not only are personal debt levels at their highest since records began (and rising) but the Government has also been heavily borrowing at record levels.

The word prudent seems to have gone out of the window and don't worry about anything beyond tomorrow is the modern financial model. "talk it up" is the moral of this Government in the hope it will get better based on a feel good factor.

It is therefore highly likely that taxes will have to continue rising while the Government continues borrowing to pay for today.

Is this down to bad management of the economy? I am probably not qualifed to say. A personal opinion though is that there is worse to come sadly.

In fact I cannot personally see blues skies in financial terms for the majority of the UK population for probably the rest of this decade (especially anyone under 40 due to high housing costs, rising bills in almost every sector, and falling net incomes in real terms).

So sadly this year the forecast for 2008 in rising taxes, rising deficits and almost certainly rising inflation as people will need to earn more and more to keep up with rising costs of living in the UK. Basics like food, fuel, and taxes all on the up means falling net spendable incomes. This mean falling growth.

My prediction is that the Government's sole tool to try to "mange" the economy is interest rates. Interest rates will be used (possibly dropped further) in order to prop up a weak economy). To me it is a real sign of danger ahead with the interest rate tool is so heavily relied upon. I can remember with mortgage interest rates were 15% and it is less than 10 years ago. To many commentators who talk of this being a thing of the past they talk as if it was 50 years ago. Ironically 40 years ago interest rates were around 6% not that different to now. In reality low interest rates have driven high house prices and to me that means in reality that house prices have been very much linked to linterest rates and more so than ever by this Government. It is of course what Government wanted. It is largely due to "healthy" house prices that this Government stayed in office. In fact house prices (and the money that can be borrowed due to the feel good factor) are a major vote winner so why on earth wouldn't Government want to do all it can to sustain house prices as otherwise it is potentially on it's way to the exit door.

More manipulation and tinkering to try and rescue the economy is also forecast for 2008. The motive is not a "healthy" society but vote winners to keep the policitions in well paid jobs and great pensions, plus sizeable expense accounts, with sidelines such as lucrative after dinner speeches, book offers, directorships and many other perks lined up along the journey.  Lets face facts being a politician is not so much about "public service" and much more about "self service".

Still as it is all part of the financial cycle and there is certainly much more to life than money my Christmas wish to all is this...

Appreciate what you have whether that is money, love, health or just a sence of peace. It is rare to have all four and some can come at the price of others if your not careful. As the Chinese proverbs says "Be careful what you wish for...".  

A Merry Christmas to all readers of this blog.

A colleague suggested to me that HMRC were due to announce this week the results of their period of "consultation" over the forthcoming changes to the treatment of Non UK Domiciled individuals from 6 April 2008. On checking the Pre Budget statement states:

So I called the HMRC office that issued the statement and they seemed a bit suprised.

"What period of consultation" the nice lady at the other end said. "There is draft legislation coming out around the 28 February 2008" and basically there is no period of "consultation".

Therefore in this particular area of tax foreign nationals working in the UK need to be aware of the proposed changes as it would seem we can expect these from 6 April 2008 without any real "consultation" at all. So why did the Government say there would be a period of "consultation" all sounds like spin and dressing up to me. It also seems this is becoming the norm now. Say one thing and do another.

In brief the changes are along the lines of :

After a non-domiciled individual has been resident in the UK for seven years they will only be able to use the remittance basis of taxation if they pay an additional tax charge of £30,000 a year. Where an individual then decides not to use the remittance basis (and not pay the additional tax charge) they will be taxed on all their worldwide income and gains whether or not they are remitted to the UK.

Personal Allowances

Everyone who is resident in the UK is entitled to an income tax personal allowance and, in some circumstances, a blind person’s allowance. These are the amounts of income someone can receive without paying tax. Certain individuals are also entitled to the married couple’s allowance. These allowances reduce the amount of tax they have to pay.

On or after 6 April 2008, subject to a de minimis limit, individuals who are resident but not UK domiciled or not ordinarily resident will not be able to use both the remittance basis and any of the personal income tax allowances. The change will apply to personal allowances, married couple’s allowance and the blind person’s allowance. A de minimis limit will apply such that remittance basis users who have unremitted foreign income of less than £1,000 a year will be able to retain their personal, married couple’s and blind person’s allowances as appropriate.

A person who has triggered the additional tax charge detailed above will still have no entitlement to UK personal allowances in the following year if they decide to continue using the remittance basis and pay the additional charge. If, at any future point, that person no longer uses the remittance basis, they will again be entitled to UK personal allowances.

On talking to a client who emigrated to Spain sometime ago to work (only around 40 years old) today I said you were planning to possibly return to the UK next year how is it going. "Learning Spanish" was the response and after talking to a number of people about the UK economy and prospects for the UK over the next five to ten years he had no intention of returning to the UK now at least for the foreseeable future and quite possibly never. "The quality of live is much better outside the UK these days". "Selling the house in the UK as the tenents have left as worried about the UK economy".

As if that was not enough on talking to another client in the UK whose daughter lives in the USA now and again has for some time I asked how she was getting on. "Great" was the reply "anyone under the age of 40 has a much better chance of a successful future outside the UK now, get out if you can" came the comment from the client.

Comments in various reports and tax blogs around the internet express concern at HM Revenue & Customs behaviour and performance.

The National Audit Office report issued in July 2007 concluded: