Why you can never trust HMRC even to know the law!

chrismac1 · 19 June 2017 at 2:34PM

http://www.cheapaccounting.co.uk/blog/index.php/the-smug-arrogance-of-hmrc/

I hope the above link is allowed by the moderators as it is not to a company with which I have any connections, other than just a lot of respect for them as an accounting firm.

The nub of the post is that HMRC took this guy through all the stages of HMRC internal review, right to a Tribunal, who told HMRC they needed to learn their own blooming tax laws!

For the last time HMRC a company director has no legal obligation to file a self-assessment tax return! End of story!

If the HMRC staff who frequent this site want to do something useful with your time, get your employers to remove this drivel from their website and Gov.uk forthwith.

This is why folks need accountants. 20 years ago I would be very confident in a tax enquiry that I would be up against someone who knew more about that area of tax law than I do. That's because tax is a subset of my knowledge base, and in the case of say a VAT enquiry VAT is a subset of my tax knowledge, whereas a VAT inspector spends 100% of his or her time on VAT.

But I can assure everyone reading this post that just about every enquiry I have had in the last 5 years I have known more about the area of tax law than the so-called "Inspector". In some cases I have had to explain the law either on the phone or in writing, or even both.

HMRC are an utter shambles compared to the UK tax service of 20 years ago.

00ec25 · 19 June 2017 at 3:06PM

you won't like this but none of the practices I've ever worked in take a principled view if it means they tell a director there is no need to file a return instead of being able to charge for doing the return for them

useful to know there is now a specific tribunal ruling however for when I next have the same "discussion"

Pennywise · 19 June 2017 at 3:43PM

00ec25 wrote: »

you won't like this but none of the practices I've ever worked in take a principled view if it means they tell a director there is no need to file a return instead of being able to charge for doing the return for them

useful to know there is now a specific tribunal ruling however for when I next have the same "discussion"

Two wrongs don't make a right - I can't speak for other practices, but for my own firm, I've never registered a company director for SA and submitted SA returns unless there was a requirement for other reasons, such as being a h/r taxpayer (or now by virtue of being liable to the new dividend tax).

There was no need for the tribunal ruling. The LAW is clear, there is NO LAW automatically requiring company directors to file SA returns voluntarily. HMRC have been told many times that their website is WRONG IN LAW, but as with a lot of things, they just put their hands over their ears and chant "la la la". They could have easily asked for it to be included as part of any Finance Act over the past few years, but they couldn't be bothered to ask!!

chrismac1 · 19 June 2017 at 4:05PM

I am with Pennywise. It's a shame this case was not 5 or 6 years ago, if it was well publicised several tens of thousands of people would probably have been kept out of self-assessment.

As it is, due to the dividend tax most of my previously non-filing director clients have now registered and filed a 2017 return.

dori2o · 21 June 2017 at 6:55PM

Its true that a director does not have to voluntarily notify and submit their income tax return and should not be subject to Failure to Notify penalties.

However, as is the case with any UK taxpayer, if a notice to file a return is issued by HMRC (s.8 of the TMA ), then unless HMRC agree to rescind that notification to file, the return has to be filed on or before its due date. Even if they don't meet the criteria to notify HMRC that a return is required.

Thats the difference that the linked report fails to make clear. It's not enough to say that you dont meet the legal criteria if you fail to submit a tax return that HMRC have issued and so you dont need to submit it. This ruling should only apply where penalties for failing to notify hmrc are charged but where you had no need to notify hmrc under s.7 of the TMA.

I've had a quick look online but cannot find the FTT descision in full to read through, I'd be.interested to look through it if anyone can provide the link.

jimmo · 21 June 2017 at 9:27PM

http://financeandtax.decisions.tribunals.gov.uk//Aspx/view.aspx?id=9898

chrismac1 · 21 June 2017 at 10:34PM

HMRC pay lip service to the law. That is the problem here. One of the basic reasons is that the quality of recruitment these days is so poor that in my personal experience - which I admit is not that much, as I only get 1 or 2 enquiries per year - it is only a minority of "Inspectors" these days who properly know what the tax law is in the area in which he or she is an "Inspector".

Unrepresented taxpayers assume that HMRC staff know the tax laws. This assumption is very dangerous, in the majority of tax enquiries schoolboy / schoolgirl errors are made by these "Inspectors" demonstrating simply an ignorance of UK tax law.

Putting drivel on the HMRC and Gov.uk websites does not help matters.

bob_bank_spanker · 21 June 2017 at 11:49PM

dori2o wrote: »

Its true that a director does not have to voluntarily notify and submit their income tax return and should not be subject to Failure to Notify penalties.

However, as is the case with any UK taxpayer, if a notice to file a return is issued by HMRC (s.8 of the TMA ), then unless HMRC agree to rescind that notification to file, the return has to be filed on or before its due date. Even if they don't meet the criteria to notify HMRC that a return is required.

Thats the difference that the linked report fails to make clear. It's not enough to say that you dont meet the legal criteria if you fail to submit a tax return that HMRC have issued and so you dont need to submit it. This ruling should only apply where penalties for failing to notify hmrc are charged but where you had no need to notify hmrc under s.7 of the TMA.

I've had a quick look online but cannot find the FTT descision in full to read through, I'd be.interested to look through it if anyone can provide the link.

The tribunal (linked above) findings are pretty damning. HMRC fail to provide any evidence they sent a notice to file. I think we can all assume (as the tribunal did) no such notice was sent. They then relied on the useless gov.uk website as evidence that self assessment was required.

https://www.gov.uk/running-a-limited-company/directors-responsibilities

That advice is still (!) there. The tribunal made it clear it has no basis in law. Why does nobody take ownership of this?

realaledrinker · 22 June 2017 at 12:16AM

Not helped by a self assessment submission process that omits even the most obvious checks. If I claim pension contributions for a higher rate taxpayer in excess of salary, then not only does the submission software not flag this up as incorrect, the taxpayers tax code is increased as a result!

Pennywise · 22 June 2017 at 7:40AM

bob_bank_spanker wrote: »

That advice is still (!) there. The tribunal made it clear it has no basis in law. Why does nobody take ownership of this?

Why would you think HMRC will change the website now? They've known for years their webpage and working practice was wrong - they've been told countless times by accountants and the accountancy profession. Typical arrogance of a public sector quango - they do what they want and sod the law/regulations unless it suits them!

Pennywise · 22 June 2017 at 7:42AM

realaledrinker wrote: »

Not helped by a self assessment submission process that omits even the most obvious checks. If I claim pension contributions for a higher rate taxpayer in excess of salary, then not only does the submission software not flag this up as incorrect, the taxpayers tax code is increased as a result!

Considering the HMRC website and HMRC coding issued for tax software can produce the wrong tax due in some other cases too, which HMRC have known about for a long time but have no plans to correct until next tax year, it's just par for the course of a public body not fit for purpose.

Why you can never trust HMRC even to know the law!

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