Monday, April 30, 2012


BLOG 128


I was at the Treasury the other morning.  I notice that they have opened a coffee shop in their atrium.  This is the waiting room after you have passed the first level of security and before someone comes to usher you through the second.

I am glad to see that George Osborne is at last taking the country’s economic woes seriously.  Whether trying to get even more out of those taxpayers who visit The Treasury or HMRC (they share the building) is going to contribute much to the national debt seems doubtful, but it is at least a start.

The coffee shop does not have any seating of its own.  Customers have to sit on the Treasury’s sofas if they wish to consume their purchases on the spot.  I suspect this is to avoid having to charge VAT.  George Osborne has no doubt called in one of his VAT specialists to ensure that the takings will not be depleted by VAT.

I think that George’s VAT avoidance scheme works.  The seats are not part of the “premises” of the coffee shop.  Even after his budget changes, they will still not be, as they are not specifically set aside for the consumption of food.

So (I never thought that I’d ever say this, I must admit) “Well done George!”.


Wednesday, April 11, 2012

BLOG 127


In his budget speech, George Osborne said, of small businesses, “the first goal is a far simpler tax system, …where ordinary taxpayers understand what they are being asked to pay. So we will radically change the administration of tax for our smallest firms”. I wonder what Mr Hung On Chan thought when he heard that!

On budget day HMRC issued a largely self-congratulatory paper, “Making tax easier, a quicker and simpler for small businesses”. In the forward David Gauke, the Minister responsible for HMRC, said, “for small businesses … the way the tax system works day-to-day really matters too; that’s why HMRC is committed to making it easier, quicker and simpler for SMEs to get their tax right!” I wonder if Mr Chan read that and, if he did, what he thought.

In that document HMRC said, “HMRC is committed to making it easier, quicker and simpler for small businesses to get their tax right, and we want to remove the anxiety still felt by many of those who … genuinely try to do so”. I wonder what Mr Chan thought of that if he read it.

By now I hope your wondering who is Mr Chan. Mr Chan is a small businessman who was anxious to get his tax right. Indeed he was so anxious that he decided that he would rather pay too much than get a penalty for paying too little. You might call him a model citizen.

But not if you were HMRC!

I don’t know Mr Chan. I know of him only because HMRC took the view that if a taxpayer deliberately pays too much, he is not entitled to the excess money back unless he follows the correct HMRC procedures. Indeed they seem to have forced him to the appeals tribunal to teach him how contemptuous they are of people who deliberately overpay their tax rather than lean over backwards to get it right.

In a way it is hard to criticise this. Mr Osborne has just produced a Finance Bill that runs to almost 700 pages. The law expects all small businessman, like Mr Chan, to assimilate and understand this by the time it is enacted in July. And that 700 pages is only this year’s legislation. The law also expects Mr Chan to understand the thousands of pages of legislation published in earlier years that is still extant. If every small businessman decided to overpay his tax rather than risk penalties for underpaying it, where would the country be? Mr Osborne might suddenly find himself with enough money to repay the national debt! But he wouldn’t know how much he might have to pay back later when the real tax liabilities were agreed. Although the country would get a massive cash flow benefit, it would make life difficult for the civil service, so clearly someone needed to put a stop to such generous but anti-social behaviour! And that is exactly what HMRC did with Mr Chan.

I now need to get a bit technical. If you are not a tax specialist I need to tell you two things. VAT overpaid can be refunded only if a claim is made within 4 years of the overpayment (it was three years when Mr Chan overpaid). Where VAT is overpaid in error, the overpayment can be corrected on the next VAT return after the overpayment is discovered.

So back to Mr Chan. At the end of each year Mr Chan’s accountant calculated the tax that he actually ought to have paid. Mr Chan duly corrected the overpayment on his next VAT return. So what was the problem? He paid too much on account and corrected the position within 18-24 months when the correct figure was ascertained. That seems very reasonable to me, albeit that I think that Mr Chan’s fear of penalties was unjustified.

So why did HMRC take Mr Chan to the appeals tribunal? Silly question! Times are hard! To force him to pay £4,268 of extra VAT that he did not owe! You may be thinking, “but of course HMRC lost such a ridiculous claim”. Sadly no, the tribunal said, “Sorry, Mr Chan, however much of a model citizen you may be, the VAT law comes down hard on those who deliberately pay too much tax”. (They didn’t actually say that in so many words but that is the gist of the decision).

To get technical again, what HMRC said was that they agreed that if Mr Chan had overpaid his tax in error he could correct the position on the next VAT return after he discovered the error, as he had done. However he had not overpaid in error; he had deliberately overpaid. In such circumstances the only way to correct the position was to tell them about the overpayment. They would then have allowed him relief. Unfortunately they could not now do so because there was a three-year time limit for such a claim and, although Mr Chan had made his claims on his VAT return within that period, because those were invalid as he had used the incorrect procedure, they had to be ignored. The tribunal had to agree with this technical analysis.

Tough luck for Mr Hung On Chan, who I imagine is either Chinese or of Chinese origin. It has cost him £4,268 (plus the costs of his accountant who argued the appeal for him) to learn how inscrutable are the ways of English tax law. It should certainly teach him not to overpay his tax, however scared of penalties he may feel. The State will simply find another way to penalise him!

I don’t know, dear reader, if you are thinking, “Three cheers for HMRC; they have contributed to the reduction of the national deficit by extracting from Mr Chan more money than parliament could possibly have intended. Well done!!”. I’m not. As a taxpayer I feel ashamed that this has been done on my behalf.


Monday, April 02, 2012

BLOG 126


Is George Osborne very embarrassed about his budget and the resultant Finance Bill?

I ask because we were told that it would be published last Thursday. Indeed I read in the press that it was indeed published last Thursday.

But what does “publish” mean? My dictionary says, “Make generally known”. Surely “generally” means to the world at large? What does George Osborne think it means?

I buy the Finance Bill every year. I am getting old and think that in my sixties I am entitled to try to miss the rush hour, so I aim to get to my office at around 10.00.

That is what I did last Thursday. When I got in I powered up my computer and rushed to the Stationery Office website. I keyed in Finance (No 4) Bill (yes that is what it is called, don’t ask me to explain why) and when I got through to order the Finance Bill, it flashed up “Out of Stock”.

I assumed that meant that it had not yet been published. However from press articles I have read that was clearly a wrong assumption. It had indeed been published. I can only assume that Mr Osborne must have said to the Stationery Office, “Only print a very tiny number so that we can say that it has been published, but try hard to keep most tax specialists away from knowing what I really propose”. What other explanation can there be for any publication being out of stock by 10.15am on the day of publication?

I refuse to believe that Mr and Mrs Average Taxpayer were so impressed with the budget that they got up early on Thursday to be sure of getting a copy of the Finance Bill before tax experts logged on so it was unexpectedly quickly sold out.

Curiously, when I logged on to the Stationery Office website later on Thursday, they still told me that the Bill was out of stock but told me I could buy the Explanatory Notes, so ordered them. I have just received these. I left them to be sent by Royal Mail. When I ordered the Bill itself I paid an extra £10 for it to be sent urgently as soon as it was available.

I have just received the Explanatory Notes. I have yet to receive the Bill itself. I look forward to doing so. I am suspicious, as it is fairly obvious to me that George Osborne must have told the Stationery Office to keep from taxpayers the reality of what he is proposing and fob them off with HMRC’s interpretation in the hope that will dull their expectations.

Sorry George, it won’t dull mine; it will make me more suspicious.