WHO CARES, IT'S ONLY TAXPAYERS' MONEY

 

BLOG 223

WHO CARES, IT’S ONLY TAXPAYERS’ MONEY

 

I read the other day that the Department for Work and Pensions (DWP) has had to pay HMRC £88 million in back PAYE and NIC for not having correctly applied the rules on Workers’ Services Provided to the Public Sector through intermediaries.  The Home Office has similarly had to pay £29.5 million.

 

These rules are colloquially known as IR35.  That is not technically correct.  The rules on Public Sector workers are a parallel system running alongside IR35, which are the rules that require a Personal Services Company (PSC) to apply PAYE and NIC to income received in specified circumstances that are attributable to a supply by it of labour – typically the labour of its shareholders.  The Public Sector rules are of course the rules that (with some changes) large businesses that engage workers through PSCs or other intermediaries are now required to apply.

 

The DWP say that they used HMRC’s CEST tool.  HMRC say that an engager is entitled to rely on its CEST tool provided that it uses it in accordance with the HMRC guidance.  The inference is accordingly that the HMRC guidance was not clear enough for the DWP and the Home Office to have correctly understood it.

 

I laughed out loud when I read this.  How ironic that the government itself should be caught out by not understanding its own legislation!

 

But on reflection, I find it less amusing.  How many hours (funded by the taxpayer) did the DWP and the Home Office have to spend in trying to properly apply the legislation?  And how many hours (funded by the taxpayer) did they spend arguing with HMRC (also funded by the taxpayer) in trying to convince HMRC that they had applied its guidance correctly?

 

And if the legislation is incapable of being applied correctly by civil servants, isn’t it so fatally flawed that it is unreasonable to expect businesses to cope with the legislation much more successfully than the civil service seems able to do?

 

Another thing I read recently (very belatedly, as it was in Tax Advisor magazine last January) was an article by a gentleman called Karl Kahn entitled “Self-Assessment Tax Returns: Your FAQs”.  Mr Kahn is described as Director General for Customer Services at HMRC, which sounds to me like a pretty important role.  The first question was “I am not sure if I need to complete a tax return.  How will I know if I do”? The answer was “This depends on your circumstances.  You must complete Self-Assessment if you fit into one of the following categories …  If you’re still not sure whether you should complete Self-Assessment, you can check by running through our handy tool online at …”.

 

I was struck by the word “must”.  I generally interpret that as meaning “the law requires you to” do something.  However, Mr Kahn obviously interprets it differently.  The law is quite clear, “a person … may be required by a notice given to him by an Officer of the Board – (a) to make and deliver to the Officer a return …” (TMA 1970, s 8(1)).  The concept of self-assessment when it was introduced in 1994 was that a taxpayer has to tell HMRC that he is chargeable to income tax or capital gains tax unless they have already asked him to complete a return or the income has been taxed by deduction at source (TMA 1970, s 7).  It is up to HMRC to then decide whether they want to give him a Notice under s 8.

 

So how does Mr Kahn interpret “must”?  I assume he interprets it as meaning “We would very much like you to volunteer to”.  However, if so, I have never come across such a definition of “must” before.

 

It is of course also possible that he believes that by writing an article in Tax Advisor magazine – which is an excellent magazine, but I suspect has a very limited circulation – he is giving to the whole of the populace of the UK a notice under TMA 1970, s 8.  I hope that is not his intention.  It would clearly be unfair to the millions of people who do not read Tax Advisor magazine (and probably do not even know that it exists) if they can be penalised for not having complied with the Notice.  Many readers will by now be thinking that I am being far-fetched, and that no-one can possibly be penalised for not complying with legislation of which they are unaware.  Sadly, that is incorrect.  A number of Appeals Tribunals have penalised people for not having complied with laws of which they are unaware because lawyers have a maxim, ignorance of the law is no excuse.

 

What potentially worries me is that an alternative explanation might be that Mr Kahn is unfamiliar with the Taxes Management Act and believes that he can perform his job without needing to worry what the law may be, because HMRC seem to frequently take the view that the law is irrelevant, and that people should do as they are told by HMRC irrespective of what Parliament thinks.

 

Alternatively, he may believe that taxpayers need to comply not with the law that a wishy-washy Parliament has chosen to enact, which gives rights to taxpayers, but they should instead comply with the law that HMRC would have liked Parliament to have enacted which treats the convenience of HMRC as far more important than taxpayer rights.

 

ROBERT MAAS