SOME HMRC-SPEAK

 

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SOME HMRC-SPEAK

 

 HMRC periodically issue something they call Agent Update.  This is aimed at accountants and tax practitioners and summarises things that have happened or are due to happen that HMRC feel that agents need to be aware of.  I find a lot of the content fairly amusing.  Here is a sample from Agent Update 102 that was issued in November.

 

“HMRC has identified 3900 customers [that is the term they use for taxpayers] who deferred filing their 2020/21 self-assessment return until after 31 January 2022 and paid voluntary Class 2 NIC.  If a return is filed after 31 January, the calculation will not accept voluntary contributions and a message is shown saying it is too late to pay.  We will be writing to all 3900 customers in December 2022 explaining how to resolve this issue”.

 

Well done HMRC?  They have identified a problem, put a lot of scarce resources into identifying the extent of the problem, and are writing to those people even though they are all taxpayers who deliberately filed their returns late, and have lost out by doing so.

 

Or perhaps not so well done?  Because why did those people file their returns late?  Probably because on 6 January 2022, HMRC issued a press release waiving penalties for late filed returns provided they were filed online by 28 February.

 

So it looks as if what HMRC really meant to say is something along the lines of “When we gave taxpayers an extra month to file their tax returns we could not be bothered to check that this would not cause problems with our computer.  Nor did we revisit this matter since January to see if a fix to the program was needed.  As a result, a number of taxpayers have lost out.  We have now diverted scarce resources that could otherwise have been used to track down tax fraudsters to sort out this problem that we caused”.

 

Or how about, “If you are completing a Self-Assessment tax return on behalf of a client with an outstanding student or post-graduate loan, it is important that the PAYE income for each employment is included on your client’s tax return prior to submission to HMRC”.

 

Actually, isn’t it important that the PAYE income from each employment is included on everyone’s tax return?  After all, the taxpayer is certifying that his return is correct and complete, and he cannot do this if some of the PAYE income is omitted.  Indeed, if you omit income HMRC will claim penalties for an incorrect return – and may well contend that it was deliberately completed incorrectly so as to claim very high penalties.  So why single out students?  Because, of course, student loan payments are based on total earnings so if some are omitted and the return is later corrected, it will cause extra work for HMRC.  I have nothing against saving work for HMRC, but I would prefer that HMRC explain that is why they are so concerned about students and not about the general body of taxpayers.

 

Or how about HMRC new “service” that enables companies and their agents to complete and submit applications and all supporting documents online directly to HMRC’s Venture Capital Reliefs team when seeking advance assurance for EIS and SEIS reliefs.  Good news, except that “Agents should note that a copy of the authorisation to act on behalf of the company signed and dated within the last 3 months, will need to be provided with every application”.  The authorisation is, I assume, HMRC’s form 64-8.  Normally this only has to be submitted when the agent starts to act for a company, so if that was more than 3 months ago, extra work is needed to access this “service”.  I wonder what the HMRC definition of “service” is.  It is clearly different to mine.

 

Or this one:  “We want to alert you to planned changes to the Income Tax relief for employment expenses form, known as a P87.  New additional information requirements for P87 forms will include … We will reject any forms that do not include the required information …”.

 

I have never completed a form P87.  I didn’t know it existed.  It appears to be a non-statutory form, i.e. the legislation says, “A deduction from earnings is allowed for an amount if (a) the employee is obliged to incur and pay it as holder of the employment, and (b) the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment”.  It does not give HMRC power to prescribe the form of a claim to make the deduction.  Nor does it say that a claim has to be made in any particular way.  I rarely allow clients to complete non-statutory forms because they invariably include a declaration along the lines of, “The information I have given on this form is true and complete to the best of my knowledge and belief”, and I can see no reason to volunteer such assurances.

 

I have had a look at the form P87. It is aimed at employees not within the scope of self-assessment, but even they cannot use it if their deductible expenses exceed £2,500.  If they do, they are told to ask for a Self-Assessment return.

 

I cannot see any basis for HMRC to reject a non-statutory form that does not include the new information – apart that is from the fact that the new information required is the employer’s PAYE reference number, so if HMRC have to look this up it requires extra work for HMRC.  It is surely better to penalise the taxpayer who does not look it up than for an HMRC Officer to have to look it up.  After all, they explain that the employee “can get this from their personal tax account” (to which the agent does not have access but to which I imagine an HMRC Officer does).

 

And, finally, “Under current legislation those advance payments [of salary] are treated as a payment on account of earnings.  This means that employers must submit additional RTI reports … HMRC recognises that the statutory position imposes extra administrative burdens for both employers and HMRC …  To address these issues, HMRC will amend secondary legislation …”.

 

Secondary legislation is not made by Parliament.  It is made by either HMRC or the Treasury under delegated powers.  The offending legislation in this case dates from 2012, so it has taken HMRC 10 years of coping with this additional administrative burden before they worked out that they had created it!

 

What I particularly like is the next bit.  “Employers who are currently reporting salary advances on or before the contractual pay date may continue to do so until legislation is in place”, i.e. if you insist on complying with the law even though we would prefer you to ignore it, we cannot stop you doing so.

 

All the best for 2023.

 

ROBERT MAAS