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Dishonest agent letter

Dishonest agent letter

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Not a happy bunny this evening.

My partner and I were at our planning retreat day and a phone call from the office alerted us to the letter.

The letter opens with "dealing with  dishonest tax agents" it is rather accusatory, then gives 7 pages of guidance on how to complete a tax return and finally a 2 page memorandum of agreement.

Background

We are a 2 partner 6 person practice, standard stuff.

We do however have a separate business which specialises in cis subcontractor income tax returns, which are invariably rebates.

Letter says they have identified us as filing a large portion of refund returns. Yes, proportionately 100% but the service is quite new and only has 150 clients. So not exactly huge fish in the pond of 10 million returns. And the 10 enquiries in the last year amounted to nothing, couldnt say nothing was returned to HMRC but we are talking maybe £3k from refunds totalling probably over £300k. 

I would like to spell out the returns are done properly and not inflated and we dont work on a % fee. No do we guarantee any level of refund, some get 200 some get 3000, they get what they are due no more no less.

I have to say i object to being forced to sign this MOA through cohersion, if we dont sign we are being threatened with blanket investigations or withholding of all refunds relating to our clients.

The MOA also puts forward that we agree to changes in our practice, which they havent seen. That we agree to a review of our procedures and meetings to discuss our work. And 3 arbitary bandings for size of expense claims <10%; 10-20%, 20%+ (% of t/over) and differing levels of scrutiny to which these returns must be placed.

I am certain we complete returns that are accurate to the best of our knowledge and we gather evidence as best we can in a client class which can be lax in their record keeping. We cross examine all claims for expense which look suspect for coorborating evidence. But ultimately the return is the clients responsibility.

My main concern is that HMRC wont chase the phantom agents who set up, inflate refunds for a few years and scarper possibly also with client money aswell as HMRC's. I fear they will hassle people like us who are spot on the vast majority of the time and who try to get errant taxpayers up to date (we do a lot 3 or 4 years behind), but who run a legitimate business in a tax area which while not technically difficult can be a nightmare to get accurate information.

Anyway, anybody has this and thoughts on how to deal with it.

Replies (92)

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By The VAT Doctor
07th Mar 2013 22:45

Complain

I think I would be writing to the head of the tax office to remind them of the law of libel and ask them for the specific facts that have caused them to mark you down as dishonest.  this is bound to flag up the claims of every client you submit claims for in future and delay repayments etc, so I would go to the top and give them a few facts too about your level of compliance etc.

Honestly, it's Orwellian.  If the tax man is unhelpful, I would write to David Gauke, George Osborne and David Cameron (may wish to involve your local MP) and ask them why they are victimising your firm.  Why not write to Margaret Hodge too for good measure!!

Good luck.

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By Peter Kilvington
08th Mar 2013 09:52

Limited company

As you said partners I assume you do not trade as a limited company.  

If you did trade as a limited company though is it possible for the company to be dishonest?  That also raises the question of is a limited company capable of being honest as well.

A Friday morning thought.

On a more serious note HMRC seem to be linking "expenses" to turnover, do they define expenses.  Do they mean overheads or overheads and cost of sales or even overheads, cost of sales and capital allowances?  

Lets assume "expenses" means overheads. Do they not understand that fixed overheads are by definition fixed?  

If he were to lease a van for say £250 per month plus VAT and he is not VAT registered then he has an overhead of £3,600 per year, this will not vary with turnover. To get into the 10% band he has to turnover £36,000 assuming he has no other overheads, this equates to ,just below, a daily rate of £140 per day for five days a week for 52 weeks a year.

Say your accounts fee is for a CIS subcontractor is £250 then HMRC are saying for the contractors accounts to be in the "good 10% band" he needs to turnover £2,500, try explaining that one to your client.

A van and an accountant well that's £38,500 of turnover.

A van an accountant and some insurance?

The world has gone mad. 

 

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By chicken farmer
08th Mar 2013 09:54

The shape of things to come.

Sch 38 of FA 2012 does not come into force until 1 April 2013 so the Revenue are being a bit quick off the blocks. I would ask them what their statutory authority is for sending such a letter.

Also get your professional body involved. This is all part of the Agent View where the Revenue are going to judge an agents standing simply by statistics rather than the quality of the work they produce. Unless those bodies come out publicly to oppose the Revneue's plans, the profession will end up under State Regulation.

It would also be interesting to see the actual letter - are you able/willing to put the text up on line?

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Nichola Ross Martin
By Nichola Ross Martin
08th Mar 2013 10:09

Have you discussed this with your professional body?

My suggestion would be to write back to HMRC making the points that you make to us and get a meeting asap.

I would not wish to sign a MOA unless completely happy with it and so you need to discuss this with HMRC.

I cannot imagine that they have written to you without some considerable due diligence on their part. It would be very interesting to see their criteria for what is a "bad practice" as our concerns on this were always that we are often working with damaged material over which we have no control - this is presumably why they wish to restrict expense claims.

What you need to do is work with HMRC and not against them but if necessary change somethings your end to close their file. 

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By ShirleyM
08th Mar 2013 11:03

Just a thought, but 100% of them receive refunds?

We do quite a few CIS tax returns, and some need to pay additional tax. It depends on their turnover and expenditure, obviously, but in your practice 100% of them receive refunds????

It is unusual, so I can understand you being singled out.

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By thacca
18th Mar 2014 17:46

we do quite a few as well.

We do around 50 "subbies". With 10% expenses, which seems quite modest, I calculate that income would need to be in excess of £35k not to be in a refund situation. We have a couple who have a tax bill as well but their income is in excess of £50K. I don't think it is unusual that they all get rebates if they all have modest incomes.

I have quite a lot of experience in this sector. Back in about 2006/07 when I worked for a firm who acted for hundreds of subbies there were a lot of investigations on these clients. The common theme seemed to be materials costs and wifes wages. I now scrutinise these two expenses headings thoroughly. I pretty much don't allow a subbie to claim for wifes wages anymore.

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Locutus of Borg
By Locutus
08th Mar 2013 13:05

Chilling
Not dealt with subbies for years, but when I did the vast majority got tax refunds and had expenses over 10%.

It is chilling to think that HMRC imply that you are dishonest and want to send the "heavies" down to gather evidence and no doubt "re-educate" you.

Another reason not to get involved with subbies methinks.

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By perpetual
11th Mar 2013 18:52

Thanks thus far

Well after mulling this overnight I am certainly not rolling over and signing a MOA which could be a stick to beat me with in the future.

I will happily setup a meeting and with adequate safeguards take them through our systems, let them establish they are as robust as possible and assure them they as we a long stading (over 10 years for our main firm), insured, regulated (acca & cta) that we should present a low risk of legging it or other dishonesty. Then have us removed from this debacle.

Also the large point in that we work to a fixed fee, we have nothing to gain financially from inflating or creating bogus returns. So simply put why would we.

Next stop a stern letter to HMRC putting our case as to why we wont sign but are willing to cooperate and also a discussion with CIOT/ACCA as to what assistance they can provide.

ps we are a ltd company, partners is a term i have always used.

pps refunds do not happen in all cases but the huge majority, simple mathematics means anyone earning under £35k with even a modest expense claim will be due something back. Earings under 21K and you are guarateed because of the PA. And in current times subbies earning under 21k is pretty common.

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Chris M
By mr. mischief
10th Mar 2013 18:32

My thoughts

Let's face it, no-one who deals with HMRC can possibly imagine that they are smart enough to correctly identify the bad apples.  Much more likely to let the rogues go unpunished and harrass people seen as easy targets, as with IR35 for example.

I have 15 CIS clients inlcuding one limited company one which has a £5k to £10k PAYE refund every year, all 15 have refunds every single year.

That's because that is the way the 20% tax regime was set up, it is designed to take too much tax off construction industry sub-contractors who - as every HMRC employee knows - are all robbing the system blind on a daily basis, not hard-working guys working outdoors in all weathers in a tough slow pay or no pay sector.

As a profession, we MUST kick back against thid latest drivel.  Personally I would not sign anything I felt was out of order.  I would be complaining like hell.

In the last 4 years I have personally met 4 HMRC staff in total.  Three of these people were seeing clients purely to get money out of them for late VAT.  The fourth one was checking a VAT refund which went through no problem.

One of the first things I will be putting in a reply if I get one of these letters from HMRC is "How can you possibly form a view on my business which has 120 clients when you've only ever physically seen about 30 invoices from one client on a VAT return over 2 years ago?"

Kick it back at them and either get the computer to say yes, or make them do some hard yards to back up their silly and insulting insinuations.

 

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By Black Panther
10th Mar 2013 19:02

Get your solicitor involved

I think I would get a solicitor to write to them reminding them of the law of libel, and the very sizable claim you will be making if they effectively make it impossible for you to pursue your profession.

In fact they are effectively accusing you of what amounts to a criminal offence, which is the most  serious form of libel.

Your solicitor should be challenging them to either produce proof “beyond reasonable doubt” of their implied allegation, or, to supply an immediate full retraction and apology together with their proposals for compensating you for the distress caused and expenses (solicitors fees) incurred.

Remember they have to prove their accusation (assumptions about 10% expenses are not proof), you don't have to prove your innocence. Make them put up or shut up.

 

 

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By Flash Gordon
11th Mar 2013 08:32

Overreaction

I can't help thinking that getting a solicitor involved before even speaking to HMRC is more than a little heavy-handed and likely to end up with both you, and through association your clients, in a rather large pile of never-ending unpleasant stuff. Just take a few deep calming breaths to let the not unreasonable tension out of system and write a calm but firm letter back to them. Remember the reaction you've had to their less than complimentary letter - if you send the same tone (or worse) back then you'll be provoking the similar type of reaction in them.

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By Black Panther
11th Mar 2013 10:24

Too late

I think that receipt of the letter indicates that the OP and his clients are already in "never-ending unpleasant stuff".

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By justsotax
11th Mar 2013 10:53

isn't this just part of the territory?

Presumably the fascination of CIS for accountants is they can offer a service where the client is almost guaranteed to get money back (which more than covers the accountants fee) - just like a no win no fee solicitor.  

 

And for every honest CIS accountant there are probably 3 that perhaps push the boundaries to ensure a client refund....or in order to maximise the fee charged.  The business model is based upon the client not having to find money to pay the fees....which invariably leaves the expenses open to abuse (even if they are not abused)....you can see why the revenue feel this is fair game (and yes they are pretty crap at what they do....but wouldn't you go for the 'easy' money....i guess with CIS tax returns you kinda have!?)

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By Flash Gordon
11th Mar 2013 10:54

Not at all

Apart from the fact that it sounds very much like a standard, press the button and churn it out, type letter, at the moment its one letter. If, and I'm not saying that the OP should, the OP signed their agreement then I can imagine there being very little else to bother about. But if you go in all guns blazing threatening them with legal action from the word go then you're putting their backs right up. How can that be beneficial? Politeness and courtesy can get you a lot further in life than being hostile, arrogant and throwing your weight around. 

Naturally it's up to the OP but they have rather more to lose than Black Panther in this matter. Any of us can advocate extreme measures safe in the knowledge that if it all goes pear-shaped we can just go 'oh well' and move onto the next AWeb posting...

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By ShirleyM
11th Mar 2013 11:13

I agree with Flash & Justsotax

The saying 'he doth protest too much' springs to mind. If you go in with the heavy guns blazing it may indicate that you want to head them off before they get into the pass (ie. looking at your records and procedures).

I wouldn't have a problem with HMRC comparing our submission with the client records, and/or looking at our procedures.

Take heart from your previous enquiries, which didn't result in much of a yield for the tax man. As Justsotax says, a refund service is bound to attract unwelcome attention.

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By Ding Dong
11th Mar 2013 11:20

a conciliatory approach

Like Flash I do not in any way advocate the heavy handed threatening approach.

(My former boss did with EVERY HMRC letter/enquiry and it always got their backs up)

I have always tended to contact HMRC openly and discuss matters - touchwood has worked so far.

In your shoes - and might I add very easy for me to say sat here in the cold - I would contact HMRC - maybe even a call to the inspector in charge of the case - and discuss some of the FACTS as you stated in your OP.

If the returns are 99% (I say that as the odd client will probably have managed to slip a small non business receipt in that you missed during your work) clean and correct why not say that to the inspector.

Point out what you have been doing - taking the figures, checking, and removing non business expenses the clients (like they all do) put in (e.g. protective clothing (trousers) purchased from a High Street Store at £60/pair). Perhaps explaining/reminding then that a van and an accountant already means they are in a repayment situation in most cases and agree the next steps with them pragmatically. Every inspector I have dealt with is human (maybe I have been lucky) and in most cases they are knowledgable so however jobsworth one or two might be, if they see you as being honest and helpful they too invariably are. They will then agree the returns are all correct and potentially you can get a clean bill of health to protect you for future years.

Mybe my approach would put me in the minority but just thought I would share.....

 

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Replying to SXGuy:
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By mike01
11th Mar 2013 15:07

AGREE WITH DING DONG

You need  to take a deep breath here.

I used to be an investigating inspector with HMRC but I have been in practice for over 30 years and I also primarily deal with subbies.

You say you have 150 clients and these produced repayments totalling over £300K i.e you are generating repayments of £2K+ on average which is way over the top.I am not surprised you are being targetted!

The problem you have is that using the three line account system that HMRC wants you to use for small accounts means that they can only base their statistical analysis on the crude results given by % of turnover but that is how the system works! Obviously,you can submit a more detailed analysis of expenses and/or use the"white spaces" but I can tell you from experience that if expenses represent more than 20% of turnover on a regular basis you will be targetted by HMRC.By the way, a subbie earning  30K with 20% expenses will generate a refund of just under £1200(2011/2 figures) and that is the benchmark you should be looking at.

I suspect you are being a little naive and are accepting statements from clients that that are not true - possibly in relation to materials(usually very little) or another favourite is "out of town " expenses whilst supposedly working away.Additionally,subbies often share vehicles with other workmates.If you are basing vehicle running costs on a mileage basis you should check the MOT certificates to corroborate the claim.

You need to challenge whoever sent you the letter frim HMRC in a polite but firm way and as ShirleyM said take heart from the results of previous enquiries.

I would resist signing a MOA but you may have little choice for the reasons you set out yourself.Be prepared to lose clients as I have done in the past when you won't compete with the many cowboys operaring in this field.However, there are now very clear signs HMRC are really beginning to clamp down in this area.

 

 

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Replying to memyself-eye:
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By perpetual
11th Mar 2013 19:09

Please give me the credit for not being new at this game, 20+ years actually.

The figures stated were rough, possibly very rough. I am having 1 of my team gather statistics to see how our returns fair against this arbirtary measure.

Also refund figures, round sums. Frankly I dont know how many clients nor how much refunds we gathered last year, they were guesses. But I would say £1500 on average may be close.

I run 2 businesses, our main accountancy practice and this CIS offshoot. It is held seperately for marketing and reputation issues, I am well aware there are a lot of dodgy inviduals who advertise in the back of redtops etc. That was the reason we entered the market, to give a decent honest service, a good portion of our clients have been stung by agents scarpering with cash or agents inflating refunds and client being left with tax to repay plus penalties and charges at a later date. This while my responsibilty ultimately isnt actually my baby, i barely touch the day to day.

I wouldnt be daft enought to use the 3 line accounts, it asks for trouble. Frankly never understood why it is in there.

We do have robust systems fof checking and confirming income and expenses, I designed them so I know they work.

We are currently considering our response, though it wont be claiming for defamation as I think a more measured approach is likely to get me further and faster than going ballistic at them.

 

 

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Replying to lionofludesch:
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By mike01
11th Mar 2013 20:05

PROFILE

Given your elaboration of your CIS practice I have to say that I am a little surprised by the letter you have received from HMRC.I still think the repayments may be a little on the high side but they what they are and this seems to be borne out by the level of settlement achieved by HMRC in the enquiries to date.

However,you have clearly acquired a number of what HMRC would consider to be high risk clients and true to form as in so many other ways HMRC have probably over-reacted.HMRC will soon get tired of conducting enquiries into your clients when they achieve very little but please remember the old saying "you may win the battle but not war".

IMHO the right way to deal with this is to follow the line espoused by DingDong and to let the Inspector know that you are not happy and to make him aware of the settlements reached to date.I don't think it would hurt to also let him know that you feel your practice is being unfairly victimised for the past sins of others.

 

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Replying to lionofludesch:
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By Baison
11th Apr 2013 21:37

I have made no attempt to reply to them other than by sending my signed MoU.  Unfotunately the threat of putting a block on the repayments was enough to make me sign.  If they dont pay out, I dont get paid (a fixed sum per client, not a % of the claim I may add).  I am the sole provider for my family and need continuity of income.

I have heard so many times from many of my clients how the guy down the road had £4k last year yet I only had just under 2....who has the 'risky' agent there I ask?? 

It has already affected my income for this opening week as the family car is often in the wifes name yet used to get to site by the husband.  Under the guidelines, he can not claim the mileage on a return I may prepare.  Needless to say hes off to find another company who will accept his mileage log alone.

What seems unfair is that a Company can claim the expense of an employee using their car/van even though all the vehicles involved are not in their name....

 

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By Black Panther
11th Mar 2013 12:01

I'm unconvinced that a "chat" will help.

Perhaps the “lets have a chat” method might pay off.

I admit my initial reaction if I received such a letter would be “how dare they”. I don’t think any accountant could justify signing an “agreement” to give HMRC blanket permission to investigate clients depending on their level of overheads.

Speaking to HMRC might resolve the issue, but as they have already labelled the practice by issuing the letter I very much doubt it.

Certainly as (or I should say when) talking to HMRC fails I would then suggest a solicitor’s letter as HMRC are implying that fraudulent returns have knowingly been submitted, which is a very serious accusation which HMRC should not be allowed to make without absolute proof.

 

 

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Replying to Tax Dragon:
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By BKD
11th Mar 2013 12:53

We shouldn't read too closely between the lines

Black Panther wrote:

HMRC are implying that fraudulent returns have knowingly been submitted,  

 

I cannot see that implication anywhere. What I do see is that HMRC have identified a greater than normal risk of tax being under-assessed, and are seeking to manage that risk. How they actually carry out that management is the issue, and I agree with the contributors above that have suggested that entering into reasoned dialogue with HMRC is likely to be far more productive than charging in making wild and unsubstantiated accuations against HMRC. From what I have seen, those that take the latter approach end up only with a wall between themselves and HMRC and will be likely to find themselves under unnecessarily close scrutiny.

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By Flash Gordon
11th Mar 2013 12:06

@ Ding Dong

I bet your clients sleep much more soundly at night!

Maybe all the inspectors you've dealt with come across as human because you start out by treating them in that way and so they have no reason to act otherwise! After all, what goes around, comes around. You make their working day more pleasant and therefore they reciprocate as a matter of course. It may not be a popular approach in some quarters but I'd put money on it getting better results.

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By justsotax
11th Mar 2013 12:09

Well if i was receiving such a solicitors

letter i would indeed issue a grand apology - and for the next 12 months would closely monitor said accountant and carry out some 'random' checks on returns to ensure accuracy etc.

 

There is nowt wrong with being pragmatic....as inevitably we all make mistakes and you can bet your bottom dollar the only mistake this guy makes ends up being a big one which is picked up by the revenue.  And to be honest why line the pockets of a solicitor for the sake of a stupid letter....really!?

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By Black Panther
11th Mar 2013 13:16

Its very clear

The phrase "dealing with dishonest tax agents" together with the demand for a signed MOA agreeing to changes in the practice is a very clear accusation in my eyes. I can’t see any other way it can sensibly be interpreted.

 

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Replying to Ruddles:
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By BKD
11th Mar 2013 13:30

Fair enough

Black Panther wrote:

The phrase "dealing with dishonest tax agents" together with the demand for a signed MOA agreeing to changes in the practice is a very clear accusation in my eyes. I can’t see any other way it can sensibly be interpreted.

 

I'm not going to instruct you on how others should interpret things. I prefer to stand back and take a more measured approach. Each to their own, I suppose.

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Replying to Mike Yardley:
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By Black Panther
11th Mar 2013 13:40

What then ?

BKD wrote:

[ I prefer to stand back and take a more measured approach.

 

And when your "measured approach" results in you being labelled a "dishonest agent" by HMRC ?  What then ?

 

 

 

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Replying to PatrickMorrello:
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By BKD
11th Mar 2013 13:43

That's for me to know

Black Panther wrote:

BKD wrote:

[ I prefer to stand back and take a more measured approach.

 And when your "measured approach" results in you being labelled a "dishonest agent" by HMRC ?

  

And you to find out (though it's such an unlikely event, there's really no need to consider a response)

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By paulwakefield1
11th Mar 2013 13:22

In any situation like this, always write two letters.

The one you would like to send - it's cathartic (and can help to clear the thoughts). Then tear it up and write the one you should send.  :-)

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By justsotax
11th Mar 2013 13:26

agree Paul....

indeed i am sure there is no argument over the interpretation of the revenue letter....perhaps it is more about the agents 'sensible' response.....

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By justsotax
11th Mar 2013 13:44

and?!?!

so they have labelled someone a dishonest agent...and?....does it mean you can't do your job.....are the clients less happy (given all of the competition have the same label).... 

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By Black Panther
11th Mar 2013 15:30

Who needs them

I'm rather glad I only have 3 subbies on my books.

If this is going to be typical of the kind of letter HMRC send out I think the fees for dealing with subbies will start to climb drastically.

 

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By ShirleyM
11th Mar 2013 15:43

Running scared?

Not me!

Looking at the posts above, quite a few of us deal with CIS subbies, and I have never (touch wood!) had a problem with HMRC (except for the black hole when the refunds occasionally get delayed).

You can usually suss out the ones that fiddle, or claim disallowable expenses, pretty quickly and they either toe the line, or go find another accountant.

Simples!  :)

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Replying to tom123:
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By mike01
11th Mar 2013 17:15

RUNNING SCARED - PART2

@SHIRLEYM

Succinct as always and bang on!

There is absolutely no need to fear HMRC if you are doing your job properly.Mind you experience is a wonderful thing!

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Replying to lionofludesch:
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By Black Panther
11th Mar 2013 17:34

Touching, but misplaced, confidence

mike01 wrote:

There is absolutely no need to fear HMRC if you are doing your job properly.Mind you experience is a wonderful thing!

 

Try telling that to the thousands of people wrongly over assessed every year.

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Replying to Matrix:
By ShirleyM
11th Mar 2013 17:48

Confidence in whom? Ourselves?

Black Panther wrote:

mike01 wrote:

There is absolutely no need to fear HMRC if you are doing your job properly.Mind you experience is a wonderful thing!

 

Try telling that to the thousands of people wrongly over assessed every year.

Are you referring to people who have an accountant?

I cannot imagine 'thousands being over-assessed' if they have a competent accountant representing them. If you are talking about unrepresented clients, then it has absolutely no relation to the comment you picked out, as this refers to accountants doing their job properly.

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Rebecca Benneyworth profile image
By Rebecca Benneyworth
11th Mar 2013 17:30

Not started yet
The dishonest agent process has not started yet, and the process for dealing with a dishonest agent is quite different from that outlined above. So whatever OP believes, this absolutely cannot be that process. It maybe that the letter refers to this process, but it cannot be an accusation as this can only be sent in a determination, against which there are rights of appeal. Maybe OP has understandably got het up about a challenging letter and read a bit more into it than it says.
HMRC has also NOT commenced "agent view" nor is this currently what agent view will do as currently proposed. The proof of concept model is currently being tested on a small sample of agents and will include client filing and payment statistics, and later compliance intervention outcomes.
However, HMRC has quite separately been looking closely at high volume repayment agents as a risk category, and I suspect that this is where your firm has come under the microscope. There are plenty of good suggestions here on appropriate action, but be assured that resources are only expended where risk is identified. You can easily demonstrate that the risk does not apply to your clients so that should be your objective.

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Rebecca Benneyworth profile image
By Rebecca Benneyworth
11th Mar 2013 19:42

Spot on

It sounds as if you have plenty to evidence your work and the fact that your business is not high risk but low risk. To be honest, this is really what HMRC needs - professional firms doing the work properly and taking work away from the cowboys.

Your approach is absolutely the best one in my view. It enables you to demonstrate and evidence professionalism and prove that your risk is lower than the generality of these agents.

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Chris M
By mr. mischief
11th Mar 2013 20:55

Targetting

One of my clients was targetted by HMRC for a PAYE enquiry in Nov 2011.  On questioning this I was told this was for false self-employment as their special team of dance school experts had identifed my dance school client as "high risk."

Me:  "This dance school has 23 instructors, all on the books.  In the 2010-11 tax year it paid £19k in PAYE and NI and it is on target to pay a higher sum in 2011-12."

HMRC :  "Did they?"

DID THEY!!!  the crack team of hotshots had failed to properly check the PAYE records.  Luckily for my client the full scale visit planned for the following week was called off.

I stand by my original post on this topic.  I have total confidence in HMRC to target all the wrong accountancy practices.

 

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By Black Panther
11th Mar 2013 22:30

Naivety

I would be very worried about any accountant naive enough to trust HMRC to get it right or indeed naive enough to think that HMRC are capable of reasoned judgement.

Their reference to overheads as a percentage of turnover demonstrates complete ignorance of reality.  

 

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Replying to davidwinch:
By ShirleyM
12th Mar 2013 07:46

Doom & gloom merchant

Black Panther wrote:

I would be very worried about any accountant naive enough to trust HMRC to get it right or indeed naive enough to think that HMRC are capable of reasoned judgement.

Their reference to overheads as a percentage of turnover demonstrates complete ignorance of reality.  

 

If you carry on in this vein, we will all be slitting our own throats soon ;) 

We all have the occasional bad experience, but it is nowhere near as bad as you make out.

You sound quite bitter. Are you? And if so, what happened to you to make you so pessimistic, and to assume that everyone here is naive, and that HMRC are incapable of reasoned judgement?

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By Flash Gordon
12th Mar 2013 07:54

Doom & gloom

I'm guessing that Black Panther must be an avid Daily Mail reader - it's the same 'sky is falling' mentality :)

For every poor / bad / terrible HMRC officer out there I'm sure there are dozens (and some) who do a good job, accurately, efficiently and cheerfully. But of course if you treat them like sub-human cretins then remarkably that's the treatment you'll receive.

I may be naive or maybe I just believe in giving most people the benefit of the doubt. I'd rather do that and be wrong than be bitter and cynical for no reason 24-7. All that negativity and stress isn't healthy...

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Replying to DanaB:
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By Black Panther
12th Mar 2013 10:23

The higher they go the worse they become

Flash Gordon wrote:

For every poor / bad / terrible HMRC officer out there I'm sure there are dozens (and some) who do a good job, accurately, efficiently and cheerfully. But of course if you treat them like sub-human cretins then remarkably that's the treatment you'll receive.

I’m sure at the grass roots there are, unfortunately the ones who are promoted to higher positions don’t seem to share those qualities. HMRC’s complaints procedure for example is a complete farce designed to fob off complaints not to resolve them.

Revenue staff have no idea of the realities of commercial life and routinely make the most bizarre assumptions when dealing with enquiries.  As an example the letter received by the OP which “assumes” that only 10% of a sub contractor’s income should represent overheads is a joke. Perhaps HMRC are not aware that hourly rates paid to sub contractors have plummeted recently (due to recession and cheap immigrant labour).  Sub contractors are having to travel further to find work, and accept lower rates (often half what they used to be). Now oddly petrol prices have not halved, and additional mileage increases those costs, plus extra mileage equals extra maintenance and repairs too. The price of tools , any materials they buy etc has not reduced either, so quite logically a sub contractors overheads are now a much larger percentage of his income than they used to be.

What we are currently seeing with HMRC is a target led regime determined to suck the maximum possible out of the small trader who cannot fight back, whilst quietly allowing large corporations to evade billions of pounds by dubious means.

For example it was recently reported that Rolls Royce has paid no corporation tax for two years despite reporting annual increases in profits. This is a huge company, based in the UK, generating profits in the UK, yet avoiding UK taxes by shifting its profits overseas. Has HMRC investigated this?  No.  It;’s too busy trying to extract an extra couple of thousand out of the local plumber.

 

 

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Replying to Tornado:
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By BKD
12th Mar 2013 11:26

What am I missing?

Black Panther wrote:

As an example the letter received by the OP which “assumes” that only 10% of a sub contractor’s income should represent overheads ....

Where does it say that?

Black Panther wrote:

For example it was recently reported that Rolls Royce has paid no corporation tax for two years despite reporting annual increases in profits. This is a huge company, based in the UK, generating profits in the UK, yet avoiding UK taxes by shifting its profits overseas. Has HMRC investigated this?  No.   

(a) how do you know HMRC are not looking at RR?

(b) without wanting to open up another can of worms, there's nothing wrong with [legal] avoidance. If a plumber (or anyone else) is [illegally] evading tax then HMRC have every right (and duty) to go after them (and, in certain circumstances, their agents).

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Replying to Tornado:
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By perpetual
12th Mar 2013 11:33

decent point

Black Panther wrote:

Revenue staff have no idea of the realities of commercial life and routinely make the most bizarre assumptions when dealing with enquiries.  As an example the letter received by the OP which “assumes” that only 10% of a sub contractor’s income should represent overheads is a joke. Perhaps HMRC are not aware that hourly rates paid to sub contractors have plummeted recently (due to recession and cheap immigrant labour).  Sub contractors are having to travel further to find work, and accept lower rates (often half what they used to be). Now oddly petrol prices have not halved, and additional mileage increases those costs, plus extra mileage equals extra maintenance and repairs too. The price of tools , any materials they buy etc has not reduced either, so quite logically a sub contractors overheads are now a much larger percentage of his income than they used to be.

I am not getting into the HMRC mud slinging, got more important things on my mind. But this paragrpah is a very fair point and mirrors what we see. I doubt many subbies are under 10%, simply because day rates and price work rates have fallen massive, 40-50% in some cases I have seen.And that is when work can be found, often subbies are only wokring 6-9 months of the year. Travelling 100 miles a day is not uncommon (a personal friend travelled from newcaslte to harrogate daily for 6 months, 160m per day), and long periods of working away (olympics  being common in last few years, but i guess not after this year). These guys have families to support and a lot are struggling big time and frankly are working for peanuts.

Now the standard HMRC question, if a guy earns gross £20000, and has expenses of (35%) £7,000 (say 10,000 miles; 50m pd, my business partner commutes that; 60 nights away at £40 a few odds n ends) then receives a refund of about £2500. Then what does he live on. I tell you, he struggles, his wife has a job and they claim tax credits and anything else they can to survive. Same story again and again. When I first started getting subbies incomes were often £35-£45k gross and refunds were smaller more often tax was due. That is not the case since about 2009.

 

 

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By BKD
12th Mar 2013 08:06

Couldn't agree more

You're spot on, Flash and Shirley

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By ShirleyM
12th Mar 2013 10:54

We agree in part @Black Panther

HMRC falls far short of providing the service it should provide.

What I don't agree with is assuming the worst, and going in all guns blazing at HMRC staff, most of whom are just trying to do their job as best they can.

It is clear (to me anyway) that the OP was targetted because he offers a refund service. Is it wrong for HMRC to target these? I don't think so, as I suspect that a large proportion of them are not doing the job properly. As Rebecca said, if correct procedures are in place then these agents should have nothing to fear.

All of us should want to get dishonest agents put out of business. How are HMRC to distinguish between the honest ones, and the dishonest ones? By comparing agents, obviously. As the OP's separate business has 100% refunds (or close to) then I can understand the interest from HMRC.

 

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By Black Panther
12th Mar 2013 11:13

ShirleyM

“Interest” is one thing, I suggest sending an accusatory letter and demanding signed agreements to restrict genuine overheads to a percentage of turnover (or face an automatic investigation) is something else.

The letter received by the OP seems far more than mere “interest” or an intention to run a few checks.  It appears to assume that the OP is dishonest, an accusation which were I in the OP’s position I would take very seriously.

 

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By ShirleyM
12th Mar 2013 11:30

You are maybe reading too much into it

You (or I) haven't seen the letter, and the OP may just have overreacted and automatically linked it to the 'dishonest agent initiative, as this has been publicised on AWeb recently. As Rebecca said, this new initiative hasn't started yet.

I am really uncomfortable with any sort of scaremongering, while you seem to be very comfortable with it.

As the OP says, he is confident in his procedures. Why should he think it is any more than a general enquiry into a separate business that deals only with refunds, and has therefore come under the spotlight?

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By ShirleyM
12th Mar 2013 11:44

Sorry, Perpetual, but you are being misled by BP

HMRC have not said that expenses should be limited to 10%. This is the scaremongering that I refer to, and it serves no purpose.

If you read the opening post, HMRC recommended that more checks be done on differing % expense bands.

 

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