BLOG 72

WE DON’T CARE ABOUT YOU! WE’RE HMRC


I received an e-mail the other day from a client who is CEO of a major company but also is the sole director of a tiny private company. The tiny company received a phone call from HMRC last week asking to speak to a director. The phone was answered by the Company Secretary, who is in fact the officer of a company who is primarily responsible for the proper administration of the company. The HMRC Officer refused to tell the Company Secretary what HMRC’s concerns were. They insisted on the Company Secretary giving them the phone number of a director, which she duly did.

HMRC then phoned the director and said that the company had not paid its PAYE for month 6. The director said that he did not deal with the PAYE but would look into it.

When he told me what had happened I said that I thought that HMRC’s refusal to talk to the Company Secretary was outrageous.

HMRC called the director again later in the week. I reproduce below part of the first paragraph of his e-mail to me.

We received another call from HRMC at 08 55 this morning. I told the lady that Robert had said that it was inappropriate for them to be calling and she replied that Robert didn't work for HRMC so he had nothing to say about it. … As it happened I was rushing about doing other things and she told me, “ I was trying to help you but if you are going to take that attitude I will pass this onto local people and we will just keep your money and assume that you haven't paid us”. I told her that I really could not deal with this at this time. She quickly said something along the lines of "" or something of that sort. I thenasked her what her name was but it seems that I was speaking to a dead receiver as she had quickly hung up.

The Company Secretary phoned HMRC later in the day. She said that the director had informed her of the problem. She was puzzled as she always pays over the PAYE at the end of each month when she pays the salaries. She had checked the company’s bank statements and the payment had left the account via BACS. The Officer she spoke to checked on the computer and told her that she had found the money. The problem was that the company had paid it “too early”. Accordingly HMRC had allocated it to month 5 (despite the fact that they already had a payment for month 5).

HMRC talk a lot about “customer service” and wanting to help taxpayers to get things right. Wouldn’t it be a good idea if instead of this simply being a mantra chanted periodically by Dave Hartnett he did something to tell his staff about his desired approach?

I appreciate that HMRC is a big organisation. I appreciate that it takes time to change attitudes. But I thought that customer service (or simply “service” as it used to be called when I started in tax 40 odd years ago) had always been important to HMRC. Accordingly what seems to me to have actually happened on the ground is that the concept of service has been jettisoned in favour of bullying taxpayers. Certainly bullying can get results but, as my client has said to me, “that attitude is, of course, one that is not likely to get particular co-operation out of me”.

The above is not an isolated incident. I am aware of other instances where HMRC seem to me to have adopted wholly unreasonable attitudes when they thought that money was due to them.

Some years ago the US Congress concluded that abuses of power by the US tax authority, the IRS, had reached such a level that something had to be done to rein them in. I think that it may be time for Parliament to do something similar in this country!





ROBERT MAAS

BLOG 71


DON’T CALL US IF YOU WANT OUR ADVICE – AND INTEND TO RELY ON IT!


Every so often there is a tax case decision that worries me. One such is the decision of Sales J in R (on the application of Corktech Ltd) v HMRC.

Mr Malde, the director of Corktech, had a VAT problem. He was an experienced exporter and knew that a sale within the EU does not attract VAT whereas a sale outside the EU but with the goods being situated in the UK at the time of the sale does so. In early 2005 he was approached by a Belize company with an office in Poland to sell goods to it for delivery to its own customer in Poland. It was a large order. Mr Malde hoped that he would obtain further sizeable orders from the Belize company. He was aware that VAT was chargeable on a sale to a Belize company but, as the goods would remain in the EU, thought it illogical to have to charge VAT. So what should he do?

VAT Notice 725, “Guide to VAT in the Single Market”, contained at the front “If you need general advice … please ring the National Advice Service (“NAS”) on XXX”. So Mr Malde did. He says that he spoke to a Mr Baker who, after checking, told him that he need not charge VAT if he included on his invoice and delivery note the address and VAT number of the Polish company. Fair enough! Well, it would have been had that advice been correct. In December 2006 Mr Malde received a visit from HMRC. They told him that he ought to have charged VAT on what by that time had been a string of sales to the Belize company and please could they have a cheque for £370,717 being the VAT that he should have charged plus interest plus a surcharge for late payment.

At that stage Mr Malde consulted a VAT specialist, Mr Mainprice – presumably the late Hugh Mainprice who, until his death last year, was a leading VAT practitioner. Mr Mainprice expressed the view to Customs that VAT was not due as “triangulation” applied. HMRC disagreed. Mr Mainprice then pointed out that Mr Malde had been told by the NAS in early 2005 that no VAT was payable. HMRC disputed that Mr Malde had been given any such assurance.

When the case came to court, Mr Malde gave evidence of the phone call. HMRC did not call Mr Baker to give his side of the story. He no longer worked for HMRC, although it is hard to see why that should have been a bar to calling him. Instead they called Ms Harris, who did not know Mr Baker but worked in NAS. She said that NAS staff are given nine weeks full-time training during which they are told, “not to give advice in the form of expressing their own views about the VAT treatment of a particular transaction but rather to give it in the form of directing the caller to the terms of the relevant parts of public guidance notices”.

So that’s what HMRC mean by customer service! They tell Joe Public if you need advice call NAS and they tell NAS that when Joe Public asks for advice, refer him back to the notice that told him to make the call in the first place. How helpful!!

But back to Corktech. Mr Baker had made a brief note, “Caller wanted to know about the supply of goods to an EC Member State and the VAT liability of the supply. Advised caller as per public notice 725 that they would be able to zero-rate the supply provided that the conditions in section 3 are met”. Mr Malde did not himself make a note of the phone call. There was no dispute that one of the 3 conditions in section 3 was not met. Mr Malde knew that it was not met. That is why he had called NAS in the first place! Indeed as an experienced exporter it is hard to think of any other reason for him to have called NAS at all.

Faced with the evidence of Mr Malde, no evidence from Mr Baker, a bland file note of HMRC and evidence from Ms Harris that Mr Baker should not have given the advice that Mr Malde said he did, what could Mr Justice Sales do? I would have expected him to have had to accept what Mr Malde told him as he had no evidence before him other than the fairly ambiguous file note, to contradict Mr Malde. After all the only other person who was aware of the phone call was Mr Baker and HMRC had chosen not to bring him along.

How naïve can 1 get! Mr Justice Sales reasoned that, as he had not heard Mr Baker, he could only conclude that Mr Baker had followed his training and that therefore Mr Malde must be lying. After all HMRC had not given him an opportunity to form his own view of Mr Baker, so it was only reasonable to assume that he had followed his instructions not to seek to help taxpayers. Sales J also pointed out that Mr Mainprice had initially told HMRC that his own view was that no VAT was due and it was only after he had lost that complex technical point that he had resorted to non-technical issues and had pointed out that, even if he were wrong on the technical point, Mr Malde was entitled to rely on the NAS advice. Sales J thought that Mr Malde should have said to Mr Mainprice something like, “It doesn’t matter what you as a VAT expert believe the VAT position to be; just tell HMRC about the advice I got from Mr Baker”. Personally I find this extraordinary. I would get fairly uptight if a client were to say something like that to me! Sales J also found it strange that, as a layman, Mr Malde did not make a note of the telephone call. After all lawyers are trained to do this, so clearly someone without any such training should have done it too!

But the real worry is what Sales J said next. He said that even if he had believed Mr Malde’s version of the phone call, he still would have upheld HMRC’s claim. This is because in R v CIR ex parte MFK Underwriting Agencies Ltd the Court of Appeal had said that if someone intends to rely on advice from HMRC – which is surely why most people seek such advice – “it is necessary that the taxpayer should have put all his cards face upward on the table. That means that he must give full details of the specific transaction on which he seeks the Revenue’s ruling … It is one thing to ask an official of the Revenue whether he shares the taxpayer’s view of a legislative provision, quite another to ask whether the Revenue will forgo any claim to tax on any other basis. It means that the taxpayer should indicate the use he intends to make of any ruling given”.

MFK involved a marketed tax scheme where the promoter had written an innocuous letter to HMRC asking them to confirm that the indexing element on indexed linked bonds was not taxable as income. They had not said that the reason they were asking is because they were trying to develop a tax avoidance scheme.

Sales J pointed out that in Mr Malde’s case “Mr Malde’s approach to the defendant was not in writing, involved only a telephone conversation of about six or seven minutes duration (with no prior notice to Mr Baker even of the broad nature of problem on which his view was to be sought) and did not involve full disclosure of the transaction and the perceived problem which Mr Malde wished to have addressed. In all these circumstances Mr Malde could not reasonably have thought that Mr Baker had given Corktech a fully considered and binding ruling in its favour”.

Unfortunately he did not say what he believed that Mr Malde could “reasonably have thought”. HMRC are just fobbing me off with the first thing that comes into their head to get rid of me? When HMRC tell me to phone for help they are trying to trap me and have no intention of helping me at all? If HMRC need further information to deal with my problem they will tell me, not simply make a guess based on what I tell them?

Mr Malde seems to me to have acted wholly reasonably in following HMRC’s instructions to phone them. I do not myself think that he could have been expected to be aware of the MFK Underwriting decision (a direct tax case not a VAT one) and the HMRC notice did not say that if he wants to rely on advice from HMRC he should ignore their instruction to call them and send them a detailed letter instead. Indeed I think that Mr Malde could have reasonably expected Mr Baker to have told him that if Mr Malde wished to rely on what he was telling him, he would have to write to HMRC in addition to speaking to Mr Baker.

Personally, I would have thought that a businessman phoning HMRC for help – at the suggestion of HMRC – on a commercial issue ought to be entitled to “reasonably have thought” that HMRC would help him and that, if in order to do so they needed more information, they would tell him what extra information they need. I would have thought it wholly unreasonable for him to have thought, “When HMRC tell me they will help me they are only going to let me speak to someone who has no ability to help me but has been trained to politely refer me back to their booklet”. Indeed if I had been Mr Malde and Mr Baker had simply told me to look again at the booklet, I suspect that I would have found it somewhat difficult not to have been fairly rude and very sarcastic when Mr Baker conveyed that message to me. Mr Baker must have been unbelievably thick-skinned not to have reflected that in his note.

Of course VAT specialists know that it is possible to contact NAS in writing even though HMRC do not advertise this fact to taxpayers such as Mr Malde. They also know that many years ago the then Minister, Mr Sheldon, told Parliament “if an [HMRC] Officer, with the full facts before him, has given a clear and unequivocal ruling on VAT in writing” HMRC will not seek to collect the tax that is due if that ruling turns out to be incorrect. At that time HMRC’s normal method of communication was by letter. It seems to me a bit unreasonable that in current conditions, where they urge people to deal with them by telephone, they should turn round and say that the taxpayer cannot rely on what they tell him on the telephone. But obviously my perception of reasonableness is very different to that of Mr Justice Sales.
Robert Maas

BLOG 70


THE SAYINGS OF SARAH McCARTHY-FRY – NUMBER 1


In my last blog I puzzled over how Sarah McCarthy-Fry, the Exchequer Secretary to the Treasury, could see a distinction between extending the scope of a tax and mitigating revenue losses when such mitigation was achieved by extending the scope of the tax.

I now realise that Ms McCarthy-Fry probably has a view of the world that is somewhat different to how most of us approach it. Accordingly I am now on the look out for her concepts.

Today’s offering is, “One effect of increasing the AMAPs rate would be to provide an incentive to those employees whose actual costs are less than the proposed 45p a mile rate to drive further in order to profit from the mileage reimbursement. That is not the purpose of the allowance, and it could lead to an increase in unnecessary driving and thus to an increase in overall carbon dioxide emissions, contrary to the Government’s environmental objective”.

For the benefit of those, like me, who had never heard of an AMAP, it stands for Approved Mileage Allowance Payment (I think). Mileage allowance payments were introduced on 6 April 2002. They are exempt from tax. They are amounts paid to an employee for expenses related to the employee’s use of his own car for business travel and are 40p a mile for the first 10,000 miles a year and 24p thereafter. Business travel is travelling, the expense of which would be deductible under ITEPA 2003, ss 337-342. Under s 337 the employee must be “obliged to incur and pay” the expenses as holder of the employment, and the expense must be “necessarily incurred on travelling in the performance of the duties of the employment”.

The Opposition proposed an amendment to the Finance Bill to increase the 40p to 45p a mile. Inflation since 5 April 2002 (using HMRC indexation allowance table) is a bit over 21%. A 5p increase on 40p is 12.5%. Accordingly it does not even cover inflation.

Ms McCarthy-Fry seems to think that if the government were to allow employers to increase their mileage allowance payments to their employees not even to reflect inflation, but to reflect only 60% of the effect of inflation, employees with small cars whose actual cost of fuel maintenance, depreciation and insurance amounts to less than 45p a mile would needlessly drive around, spewing carbon emissions into the air, in order to reclaim from the employer an extra few pence a mile. This in circumstances where they need to convince the employer that the extra mileage is “necessarily incurred” on the business journey! That is a pretty stiff test. If an employee takes a longer route when a shorter one was available, is the extra mileage “necessarily incurred”? Obviously Ms McCarthy-Fry believes that it is, as she envisions thousands of motorists driving necessary, but needless, miles to earn a few extra quid tax-free.

Personally I find it hard to understand how something can be both necessary and needless at the same time. Which just goes to show that I am not Ministerial material.

It’s good to know that Ms McCarthy-Fry is there to protect us from those who would otherwise be tempted to drive necessary mileage simply for the sake of it!





ROBERT MAAS

BLOG 69


Q. When is a tax increase not a tax increase?

A. When it is mitigating revenue losses. At least that is what the Exchequer Secretary to the Treasury, Sarah McCarthy-Fry, explained to parliament when she told it that the government intends to charge to landfill tax something that the Court of Appeal has held to be outside the scope of landfill tax and for which she told parliament, “The Government have accepted that decision”.

The Minister actually said, “I stress that this is a case of mitigating revenue losses and not extending the application of the tax” (Hansard, Public Bill Committee, 25.6.2009, col 639).

This concept of mitigating tax losses is a novel concept. What it appears to mean is that if the government wants to tax something, but introduces legislation that actually exempts it from the tax then, when they try again to tax it, they are not taxing something that was not previously taxable; they are simply mitigating the loss that the State has suffered because the government originally exempted it when they actually intended to tax it. I hope that is clear.

If the government were to say that they originally got it wrong but were now “extending the application of the tax” so that it catches the item in question, the Opposition parties and many commentators might label the extension of the application as a stealth tax. Mitigation of a loss is not a tax increase at all; it merely increases the tax that is being lost because the law did not reflect what the government would have enacted had they been bothered to think more carefully about what they wanted to do, and not bulldozed masses of legislation through parliament to a timetable that left no room for either themselves or the Opposition parties to work out what the government was trying to tax and ensure that the wording of the legislation achieved that objective.

Obviously, like me, the Minister is a fan of Humpty Dumpty, “when I use a word … it means just what I choose it to mean – neither more nor less”.

At least Ms Carthy-Fry’s ridiculous distinction between extending the application of a tax and mitigating revenue losses caused by the tax, not extending it to the item that she now proposes to tax, is a big advance on the approach of one of her predecessors, Dawn Primarolo.

When it was pointed out to her that legislation that she was introducing was unclear, she dismissed any suggestion of clarifying it before it was enacted in its unintelligible state with the statement:

“We expect people to be sensible. The tax system cannot be absolute and is not designed to be. The Schedule gives clear indicators of the type of development we want”.

In other words, “The law doesn’t matter; people should guess what the government wants them to do and do it, irrespective of whether or not the laws that we choose to enact require them to do”.

I doubt that even Lewis Carroll would have had the nerve to put forward such an outlandish proposition.







ROBERT MAAS

BLOG 68

DON’T MESS WITH US – OR ELSE!


“Organisation Values – a broader relationship with customers … Broad principles such as treating customers courteously, dealing with their issues promptly, being fair and professional are covered under this heading”.

“H M Revenue & Customs … aim to make the tax … system feel easy to use. You can expect HMRC to … provide you with accurate information”.

“Don’t mess with us. We can destroy you. Even if you don’t owe us a penny we have the power to destroy you. And be under no illusion. Even if you don’t owe us a penny, we will destroy you if you choose not to co-operate with us”.

The first of the above quotes is from the June 2008 Consultation, “HMRC and the Taxpayer: A new Charter for HMRC and its customers”. The second is from the February 2009 Consultation, “HMRC Charter”. The third is from my imagination; I imagine that it is what someone said to Mr Cassells. I will come back to Mr Cassells later. I’d like to start with a hypothetical scenario.

Mr X does not believe that he owes any tax. He is a bit uptight that he is asked to complete tax returns because he thinks that he has had tax deducted at source under the construction industry scheme that exceed his tax liability. His income is low. He and his wife jointly own their house, which is worth in the region of £80,000 but is subject to a substantial mortgage. Mr X’s equity in the house is in the region of £26,500. That is his only significant asset. Indeed he is so uptight that he cannot be bothered to complete the tax returns that he has been sent.

After a few years HMRC work out that Mr X owes them tax of £4,533. They send him a demand. Because he does not believe that he owes anything, Mr X ignores it. HMRC make Mr X bankrupt.

This wakes Mr X up. He writes to HMRC and asks how they arrive at the £4,533. After a few months they say, “What a surprise. You don’t owe us £4,533 after all. We owe you £6,113” (or words that that effect).

Mr X is so uptight and so convinced that he owes nothing to HMRC, that he refuses to co-operate with the trustee in bankruptcy too; he sees him as brought in to do HMRC’s dirty work and he is not going to help him.

When HMRC tell Mr X that, although they lodged the petition on the basis of which he was made bankrupt, they made a mistake he applies to have his bankruptcy annulled. (I assume that they made a mistake; I am sure that if Mr X believed that HMRC owed him £4,533 and it turned out that he owed them £6,113, HMRC would say that he had clearly failed to take reasonable care in dealing with his tax affairs, but I also believe that in HMRC eyes failure to take reasonable care is a one-way street; HMRC staff always take care but being human can occasionally make mistakes). A judge hears the story and annuls the bankruptcy. All’s well that ends well. I like stories with happy endings.

I said earlier that I’d get back to Mr Cassells. Actually the above story is not hypothetical at all. Mr Cassells is Mr X. So what about the happy ending? HMRC are contrite, apologise profusely and compensate Mr Cassells for the hassle that their mistake has caused him?

Not a bit. Even if he owed nothing, Mr Cassells didn’t complete his tax returns. If people can get away with not doing what they are told to do by HMRC, however unreasonably it may seem (or even may be to them), what would the world come to? Other people may even start to think that parliament has given them rights and might challenge what they are told by HMRC. That would undermine the whole concept of HMRC expecting people to do as they are told. So HMRC – or, perhaps you and me as it is our money that HMRC paid out in legal fees – applied to have the annulment of Mr Cassells’ bankruptcy set aside.

Eventually Mr Cassells swallowed his pride and completed his outstanding tax returns. As a result HMRC calculated that they were wrong in thinking that they owed him money; he actually owed them £3,890. Oops! Another HMRC error. By the time the case came to court they accepted that he did not owe them a penny.

So why did HMRC pursue their application? Personally, I suspect that it was to teach Mr Cassells (and anyone else who is tempted to cross HMRC) a lesson. But that is obviously not what they told the judge. What they seem to have told the judge is that Mr Cassells had been threatening throughout to take action to prove that he didn’t owe them anything and he had been “all mouth and no action”. Accordingly they had been right to serve the petition. Having done so in error they have a responsibility to his other creditors (of roughly £5,000) as it had taken HMRC so long to work out what Mr Cassells did or didn’t owe them (assuming, that is, that their fourth try is right) that their debts would now be statute barred if Mr Cassells were to decide not to pay them and his bankruptcy were annulled. Furthermore, although if Mr Cassells had paid those debts at the beginning he would still have net assets of £21,500 (plus whatever HMRC might owe him), those creditors are entitled to interest and the trustee in bankruptcy has obviously incurred both his own fees and legal costs, which by now had amounted to £64,524. Accordingly as a direct result of HMRC’s actions he is now well and truly bankrupt even if he was not before.

“Yes”, said the judge, “I’ll cancel the annulment”! So that’s all right then. Result: Mr and Mr Cassells thrown out on the street. No tax collected (as none due). But, most importantly, HMRC have clearly established that anyone else who dares to challenge them needs to realise the extent to which HMRC are prepared to go to punish them.

A puzzling aspect of this case is why HMRC should have spent taxpayers’ money to appeal a matter in which they clearly had no interest. Indeed someone cannot simply initiate a court case, or I would have thought an appeal, simply because they feel like it. They need to have some standing that the court will accept gives them an interest in the case. I doubt that being upset because someone declined to co-operate with you is sufficient.

The answer lies in what is called equitable liability. In law Mr Cassells does owe tax even though in terms of arithmetic his tax deductions fully cover his liability. He owes the £4,533 that HMRC originally claimed and later accepted was an error. He owes it because HMRC assessed it on him and he did not appeal against the assessment. The reason that HMRC accepted that he now owes them nothing is the concept of equitable liability under which, where information received after the statutory deadline has passed shows that tax assessed is too high, they are prepared to make an administrative decision not to pursue recovery of the full amount assessed.

I wonder whether it is a coincidence that on 22 May, HMRC issued a statement saying that they intend to withdraw the concept of equitable liability from 1 April 2010.

I know nothing about Mr Cassells’ circumstances other than that he was a building industry sub-contractor, had little assets and used to live in an £80,000 house subject to a substantial mortgage, which the case report tells me. For all I know he may be a university graduate with a deep knowledge of the tax statutes. He may have deliberately not made tax returns, deliberately not applied to have his bankruptcy set aside the minute he was informed of it and deliberately refused to co-operate with his trustee in bankruptcy. It is, though, equally possible that he was a frightened little man with no knowledge of tax or of bankruptcy law who did not know what to do when the State claimed from him money that he knew he did not owe, who did not know that he could appeal against the bankruptcy order and was deeply upset that the State could strip him of his livelihood and his assets for no obvious reason whatsoever. If he has read Kafka’s “The Trial”, he will undoubtedly have empathised with Joseph K, whose nightmarish world seems to resemble that of Mr Cassells.

As a taxpayer I feel as angry about HMRC’s proposal to withdraw equitable liability as I do about the State’s treatment of Mr Cassells. HMRC say that equitable liability was introduced to protect other creditors in insolvency cases. But that is not the circumstance in which most of us have used it. In my experience, and I suspect that of TaxAid and LITRG, it is mainly used to avoid penalising those who are too frightened to open brown envelopes, who do not see HMRC as the friendly, loveable folk that HMRC wish to be perceived as, and who freeze at the very mention of the word “tax”. It provides a safety net for the vulnerable. It brings a touch of humanity and fairness into the tax system.

The powers review seems to me to have tipped the balance between HMRC powers and taxpayer rights, which the Inland Revenue strove hard to achieve when self-assessment was introduced, firmly towards enhancing HMRC powers and largely replacing taxpayer rights with taxpayer obligations to be enforced with an iron fist. I also notice that the draft HMRC Charter does not use the word “fair” at all, whereas that came right at the beginning of the original Inland Revenue Charter. Accordingly for HMRC to decide that there is no longer room for humanity and fairness in the Brown/Darling new tax world is perhaps not surprising. It is nevertheless very sad.

HMRC say that as under self-assessment from 1 April 2010, a taxpayer will have three years both to file a tax return and to displace a legal determination based on an estimated amount so it is no longer necessary for them to operate equitable liability. So does this mean that it is an obsolete concept as since 1996 taxpayers have had almost six years; that it has never been used since 1996? Of course not. Most of us have had instances where vulnerable people have come along with issues several years old because they have been too frightened to react to the bits of paper and it is only when the writ had been received or the bailiff had knocked on the door that they have realised that they had to do something.

I realise that the government is short of money and is probably pressuring HMRC to collect what is owed to it. However as a taxpayer I do not want the country’s financial problems to be alleviated by oppressing the most vulnerable members of society; by collecting money that is technically due from them but which to my mind it is morally offensive to society as a whole to exact; or by punishing for their inability to cope those who are bewildered by the tax system. I hope that I am not alone. I hope that someone in parliament can persuade Mr Darling either to keep equitable liability as a safety net for the vulnerable or, if he really believes that the House of Lords in Wilkinson meant him to withdraw such discretion from HMRC, to enact an equivalent power to enable them to continue to act fairly towards the vulnerable.



Robert Maas

BLOG 67

HMRC: MOTHER’S LITTLE HELPER?


HMRC, the caring department of government: caring about you (or, perhaps, rather your assets and income) from the cradle to the grave. Actually, apparently, even from before the cradle!

I have been reading a press release on “Information for mums-to-be”. This tells me that from April 2009 a “mum-to-be who’s at least 25 weeks pregnant” (and who’s due date is after 5 April 2009) can claim a “one-off, tax-free payment of £190” from HMRC. Oh, but not if she is too independent minded. She must have been given health advice from a midwife or doctor on matters relating to maternal health if she is to qualify for this handout.

I do not know what the technical definition of a “mum-to-be” might be. The 25 week period seems to have been determined on the basis that abortion is legal in this country under 24 weeks of pregnancy (if two doctors agree that it is necessary for specified reasons). This 25 weeks therefore looks like a tax (or rather relief) avoidance provision. It prevents a woman from claiming the relief, getting the money, and then aborting the foetus.

So how come that HMRC have suddenly become so generous? I suspect that it is a ploy to get people onto their books as early as possible! Or it may be that the government couldn’t persuade anyone else to administer this grant. Actually I’m not sure that HMRC want to either. They have made claiming the £190 as hard as possible. You obviously have to fill in a claim form. But you can’t download it from the internet. You can’t even get it from HMRC. You need to get it from your midwife or doctor, who must confirm on it that advice has been given to you on matters relating to your pregnancy and sign and date it before they give it to you. You then need to complete it and send it to HMRC within 31 days of the midwife or doctor dating it. This is apparently a strictly enforced time limit. HMRC helpfully say that if your midwife or doctor doesn’t have any claim forms you should call their Health in Pregnancy Grant Helpline and they will send a form – but not to you; to your doctor or midwife. If the expectant mum-to-be is ill or disabled and cannot manage her own affairs, the prospective dad-to-be (or anyone else) can make the claim, but this needs another form, which is not obtainable either from HMRC or the doctor or midwife; you have to go to a Jobcentre Plus office to pick it up.

I was so intrigued with this new role for HMRC (who I thought did not even have sufficient resources to do their basic tax collection role properly) that I wondered where the legislation is. It is in ss 140 – 140A of the Social Security Contributions and Benefits Act 2002 inserted by s 131 of the Health and Social Care Act 2008 – and supplemented by the Health in Pregnancy Grant (Entitlement and Amount) Regulations 2008 and the Health in Pregnancy Grant (Administration) Regulations 2008.

There is still no definition of a mum-to-be though. This is apparently an HMRC version of baby talk. The law refers to a woman (which in turn is defined as a female of any age – presumably because we know that in today’s Britain pregnancy starts in the gym-slip). The Regulations impose the further conditions that she must be pregnant and have reached the 25th week of the pregnancy. A woman is not entitled to the grant unless she is in Great Britain (or Northern Ireland) at the time she makes the claim. Unless she is under 16 she also has to have a National Insurance number and information or evidence establishing that that number has been issued to her (or she must evidence that she has applied for one).

The Regulations define a health professional as a practicing midwife who is registered with the Nursing and Midwifery Council or an obstetrician or General Practitioner who is registered with the General Medical Council. They also say that a woman must be treated as not being in Great Britain if she is not ordinarily resident here or does not have a right to reside here (but a woman deported to the UK from another country is treated as being ordinarily resident here; and so is a Crown servant posted overseas, a partner accompanying such a person or the daughter of such a person if child benefit is being paid in respect of her). A partner is defined as one of a couple and a couple embraces a man and woman who are married to each other (or living together as husband and wife) and two people of the same sex who are civil partners of each other (or living together as if they were).

If a woman is not yet 25 weeks pregnant HMRC say that they will send her a “free reminder” when she becomes 25 weeks pregnant. Anyone who wants this free reminder can register for it online or send HMRC a text message (text DUE followed by the date – e.g. DUE 060909 if you are due to give birth on 6 September 2009 – to 83377). Can the provider of such a friendly, helpful service really be HMRC?



ROBERT MAAS

BLOG 66

MORE THOUGHTS ON MPs EXPENSES


The rules on MPs expenses are contained in a 72 page publication, “The Green Book: A guide to Member’s allowances”. You can find this on the web, www.parliament.uk/documents/upload/GreenBook.pdf. This contains some fascinating information that I thought I would share with readers.

The current edition of the Green Book was published in March 2009. The Forward tells us that the new edition “is the result of decisions taken by the House over the last year”. I am fascinated by “over the last year” which I take to mean on several different occasions. While the rest of us have been worrying about the recession, international terrorism, Afghanistan and Iraq and the situation in the Middle East and Sri Lanki, MPs have apparently turned again and again to worrying about their expenses!

The first Chapter is headed “Welcome”. It tells us that “MPs are provided with financial support in the form of allowances to enable them to work effectively in Parliament and in their constituencies”. It appears that “work effectively” in the minds of many MPs requires them to be relieved of all financial worries that beset the ordinary man. “Welcome” section does go on to explain that this relates to “costs properly incurred in the performance of their duties”, but perhaps MPs are too busy to have read that far. “Welcome” also tells us that “Members who are contemplating incurring an expense which is large or unusual, or who are uncertain about any allowance, should contact the Department [of Resources] beforehand for advice”. I see from Saturday’s paper that Tom Dalyell did that two months before he retired and the Department told him that £18,000 for three bookcases in which to keep his archives was a bit OTT but £7,800 would satisfy the test of being “properly incurred in the performance of” his duties as an MP. Lucky for Tom that he needed to ask the Department not HMRC. HMRC would have said that no part of the £18,000 was incurred “in the performance of the duties”, whether properly or otherwise. As I mentioned in my previous blog, Andrew Walker, the man in charge of the Fees Office is reported to have said that, “he had virtually no ability to scrutinise [MP’s] claims beyond a “common sense” test”. Personally I cannot see how even a common sense test could have produced £7,800 or, indeed, any figure other than nil.

In passing, I see that Andrew Walker said that, “responsibility for policing expenses lay with voters, they could eject an MP from Parliament if he or she had been exploiting the system”. My understanding is that even if I mobilise all of the voters of Brent North we cannot eject our MP from Parliament. Once we have voted him in we are stuck with him until such time as Her Majesty chooses (on the advice of the Prime Minister) to dissolve Parliament. But even if I am wrong, how can I and my fellow constituents carry out our responsibility for policing? Although my MP sends me a newsletter every so often, he does not include in it the amount of expenses that he has claimed. The last figure I can find on the HMRC website is a total figure for 2007/08, 14 months ago. It took the Sunday Telegraph four years to obtain the release of details of MPs expenses under the Freedom of Information Act and they only got it because the sponsor of a private member’s bill to block the release of the information (widely supported in the Commons) could not find a sponsor for the bill in the House of Lords.

So I have to leave policing to the Fees Office. Sadly, “Welcome” tells me not that the Fees Office cannot disallow expenses. Rather it “is expected to bring to the attention of individual Members instances where they may appear to be vulnerable to criticism or accusations of impropriety”. They don’t seem to have done a very good job there, then. If an MP does not recognise his vulnerability, the Fees Office can refer the matter to the Members Estimate Committee of the House of Commons.

The House has adopted a Code of Conduct which, readers will be pleased to know, “includes a number of general principles of personal conduct. These are based on concepts of selflessness, integrity, objectivity, accountability, openness, honesty and leadership”. Yes, seriously, even after all of the exposures in the last couple of weeks that is what “Welcome” actually says! It also gives a useful tip to MPs, “How comfortable do I feel with the knowledge that my claim will be available to the public under Freedom of Information”. Tom Dalyell apparently feels very comfortable but a number of others seem to have not noticed this tip, as now that the information has become available they do not seem that comfortable.

I do not wish to dwell on chapter 2, “The Allowances” as others have done so fairly extensively. I did however notice para 2.1.3.6, “Subsistence: A flat-rate sum of £25 may be claimed for any night which a Member spends away from his or her main home on parliamentary business”. I noticed it because HMRC have recently issued “benchmark scale rates” for subsistence that HMRC will accept from all employers (or, apparently, all employers other than Parliament which has its own, far more generous limits). These are £5 for breakfast – but only if the employee leaves home before 6.00am and actually buys a breakfast away from home and does not regularly leave home before 6.00am – and £15 for an evening meal – but only where the employee has to work later than usual, finishes work after 8.00pm having worked his normal day and actually buys a meal (or the £15 can provide both lunch and dinner if the worker is away from home for at least 10 hours). Presumably the House of Commons canteen overcharges MP’s; they surely do not simply think that they deserve to eat better than “the little people”?

An MP can also claim for the provision of an office (in addition to the one that Parliament provides for him at Westminster that is). This includes “additional costs of using part of your home as an office … but you must take particular care to ensure that you do not claim twice for the same expense”. So that’s all right then!

The MP also gets an allowance for staff. He is told though to “ensure their staff are … able and (if necessary) qualified to do the job, and actually doing the job”. I would hope so too. Curiously the Green Book contains no special rules about employing your spouse or children or ensuring that they are not paid above a market rate.

On travel, I note that, “Examples of appropriate expenditure” includes “routine travel … by the recognised direct route between Westminster, your constituency and your main home as well as travel within the constituency”. For the rest of us, home to work travel is of course private expenditure for which we cannot claim a tax deduction. Spouses and civil partners and children under 18 of MPs are each entitled to up to 30 single journeys each year between London and the constituency or the Member’s main home. For the rest of us, of course, the number of such journeys that attract tax relief is nil.

I’ve got a radical suggestion. Parliament ought to be a good employer. It should provide the maximum benefits that qualify for tax relief for the ordinary man in the street. There should be no extra tax privileges for MPs as compared with anyone else whose job has two bases. I think it would be reasonable for Parliament to revisit the tax rules that apply to such people. I do not think that the current rules are reasonable and if MPs have to fix rules that apply to everyone, including themselves, they should be given the opportunity to consider whether they might want to be less harsh than they decided to be when they fixed the rules to apply only to “the little people”.

That would make HMRC the guardian of MP’s expense allowances. They can do a far better job of this than either voters or, on the basis of the past, the Fees Office. Voters would see that MPs are both not in a privileged position and not in charge of vetting their own expenses. Such an independent scrutiny should overcome the current public suspicion of MPs’ expenses. Any revised system that either leaves Parliament in charge of vetting its own expenses or takes MPs expenses out of the ambit of public scrutiny cannot restore people’s faith in the integrity of their MPs. The knowledge that MPs were answerable to HMRC would surely do so!



Robert Maas