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Never a department to shrink back from up-to-date technology, HMRC have moved into podcasts. Two have been broadcast so far: one aimed at employers and the other at the tax profession.
The employers' podcast discusses the completion of employers' annual returns. Among other matters it reminds employers that the deadline for filing of returns with HMRC is 19 May 2007.
In addition, it tells employers that they should contact their HMRC office as soon as possible if they do not need to send in a return and that employers with 50 or more employees must file their return online. If they fail to do so, they risk facing a penalty of up to £3,000.
Employers with fewer than 50 employees do not have to file online but, if they do, they can get £150 tax-free.
The second podcast features Dave Hartnett in conciliatory mood, talking about interventions. In this he says: 'I think agents feel quite strongly that they weren't consulted as we ran some pilots to work out how we were going to run this new approach.
'They're right. We could have involved them more and we're now doing that and we're consulting them to work out how best we can make these interventions work.'
Few tax advisers would argue with those statements. It is very encouraging that Dave Hartnett wants to consult on this often highly contentious matter with agents.
Generally welcoming this new HMRC method of communication, Francesca Lagerberg of Grant Thornton says: 'It is good to see HMRC trying to communicate in a variety of ways with those who have to interact with them. Anything that improves how, and how effectively, they talk to taxpayers and tax advisers has to be a good step forward.
However, what the tax profession is looking for even more is delivery of better systems and better processes so that the growing trust gap between HMRC and tax advisers is narrowed'.
HMRC is one of the first Government departments to launch podcasts, designed to make information on some of the most wide-ranging issues simple and accessible. The podcasts are between three and four minutes' duration, so should not take up too much of the busy employer's or practitioner's time should they wish to listen to them. At the moment, transcripts of the podcasts are not available to the general public.
PAYE penalties
HMRC have recently apologised for the 2005-06 PAYE penalty debacle and offered some guidance as follows.
HMRC began issuing penalty notices for returns which remained outstanding after the due date from 18 March. 2005-06 interim penalties were not issued as early as planned because HMRC wanted to ensure that they had taken account of any returns they were still working on.
They took the decision not to issue 2005-06 reminders for the same reason. That work required extensive analysis of HMRC's various systems and they say that the delay and this analysis has enabled them to avoid issuing a penalty notice for any unprocessed returns.
HMRC have identified about 600 cases where a penalty was issued because their systems did not correctly record CIS 36 details; they are investigating why this happened. HMRC know who those employers are and have made arrangements to discharge those penalties and issue a letter of apology in each case.
HMRC have also become aware of a number of cases where a 'test' return was the only one submitted. They say that the wording of the 'Government Gateway' acceptance message may have led some employers to believe that what they had sent as a test had been accepted as the final return. HMRC say that they are sorry that this message caused confusion.
As they cannot readily identify these cases, they are asking employers in this position to appeal against the penalty in writing and send HMRC the actual return (sending it online if they have 50 or more employees) in support of the appeal as soon as possible. HMRC expect to discharge the penalty once they have received and processed the actual return.
Recognising some of the particular difficulties that have emerged as a result of the issues above, HMRC have extended the appeal period for these penalties to 30 April 2007.
They add that they will continue to investigate other specific instances through the appeals process.
The general advice to employers who believe the penalty is not due remains the same: they must appeal in writing to their HMRC office saying why they think the penalty is incorrect. HMRC will discharge the penalty for any employer who shows them that no return was due for 2005-06.
Bearing in mind that a number of employers unwittingly sent test returns believing them to be actual returns, HMRC say that they 'are taking steps for the 2006/07 year end to help employers understand when they have sent a test return.
The acceptance message sent from the Government Gateway will be changed on Monday 16 April to include a warning about test messages'. They are also strengthening the guidance in the Online Filing Handbook and their helpbooks.
HMRC ends by saying 'We are sorry for the delay and errors, especially at this busy time of year for everyone involved with payroll work'.
It is very encouraging that HMRC have apologised for the penalty mishandling, but it does not detract from the fact that employers and their advisers have still been put to an enormous amount of trouble in that they are having to appeal against penalties, often issued completely in error, and perhaps resend returns.
It is all very well for HMRC — commerciality seems to be an alien concept to them — but time is money for accountants and businesses. It seems extraordinary that HMRC's systems were unable to cope, at the same time as they expect everyone else's to be spot on.
Tell all!
Holders of offshore accounts with hitherto undeclared interest should be interested in HMRC's 'Offshore disclosure facility' webpage. This offers such individuals the opportunity 'to come forward now and settle their affairs with HMRC'.
Nowhere on the website does HMRC mention the word 'amnesty'. It is more an opportunity to tell HMRC about any undisclosed interest within a specific time limit and, in return, HMRC will limit the penalties due on the tax.
The terms of this facility follow:
- HMRC must be notified of the intention to make a disclosure by 22 June 2007.
- A fixed penalty of 10% will apply on the tax underpaid.
- No penalty will be made on disclosures of untaxed amounts totalling less than £2,500.
- Taxpayers must disclose with full payment of tax, duties, interest and penalties before 26 November 2007.
- A final decision will be given as soon as possible by HMRC on whether or not the disclosure has been accepted, but no later than 30 April 2008.
Taxpayers who have undisclosed offshore accounts and fail to take advantage of this facility, face much stronger penalties, i.e. up to 100% of the unpaid tax due and could even face a criminal prosecution.
As is their legal right, HMRC intend to collect tax from the last 20 years, so any disclosure should cover all years back to 1987.
John Cassidy, tax investigations partner at PKF, says that this facility is 'far less generous than it might at first appear and leads to two immediate conclusions: this is not an amnesty nor is it restricted only to offshore income'. This means importantly, that 'the disclosure must cover all UK and offshore matters over the last 20 years, which could be problematic given the relatively short timeframe for reporting'.
Agreeing that the 'process is not simple', Phil Berwick of Tenon says that 'where the underlying capital in the account originated from an untaxed source, e.g. diverted business takings, the investor will also have to pay tax, interest and a penalty on those amounts also'.
A parallel deal covers all other tax, but Phil says that it 'will not necessarily be in everyone's interests to use the new facility', as the timescale is pretty tight to get all the information required to make a full disclosure and the funds together to make the full settlement.
Likewise, John Andrews, chairman of the Low Incomes Tax Reform Group, says that 'HMRC should keep this offer open for low income amounts for the whole of this tax year' as the timescale is 'impossibly short' for unrepresented taxpayers and that the scheme offers 'very little support' to those who do not have professional tax advisers.
Immunity from prosecution is not part of the facility, and HMRC say that any material submitted may be used as evidence if it came to prosecution.
Therefore, says Phil Berwick, it is important that individuals and their advisers are sure that the new facility is the right one to use. Phil points out that under the Code of Practice 9 procedure, in exchange for a full disclosure, HMRC will not prosecute and material submitted cannot be used as evidence.
Overall Phil reckons that the facility is a potential 'opportunity for taxpayers with undisclosed income of any kind to sort out their affairs'. However, some are excluded from this, e.g. those who are already under investigation, taxpayers who have previously been subject to an investigation for undisclosed income, and professional people (who presumably should know better).
Suggesting that HMRC plan to 'name and shame celebrities to generate maximum publicity and discourage further tax avoidance', John Cassidy says that the 'only sensible option for anyone who has not fully declared their income in the past is to make a full voluntary disclosure to HMRC'.
He adds that 'expert advice' should be taken, however, to minimise penalties and possibility of further investigation.
See 'Amnesty international' by Francesca Lagerberg and Paul Roberts (see Related Links above) for full details of the announcement.
