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HMRC's "HVA" list .... High Volume Agents

HMRC's "HVA" list .... High Volume Agents

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Just heard about this "list" that HMRC are going through targeting high volume agents that process large quantities of subcontractor repayments. 

Apparently their definition of "High Volume" is 30 subcontractors which im imagining is 99% of practicing accountants.

The fall out is if your making to many assumptions about the clients expenses (not even recording the receipts!) and creating expenses i.e use of home as office, laundry, cleaning etc..you get to join an Amendment Programme. If that is the case you then have to notify all your subbie clients you cant claim more than 10% of turnover, which is ridiculously unfair to the client, so in turn you loose most of them anyway.

Thoughts please?

Replies (12)

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By Cathy R
30th Apr 2015 16:54

As I understand it you are not obliged to accept the 10% across the board expenses, but this is what hmrc will push for.  If you do accept, all your subbie clients will be limited to this, and you would have to notify them of this (and quite possibly lose some of them).  

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By Jekyll and Hyde
30th Apr 2015 17:17

so I read this as...
.... if the agent agrees the 10% rule, The subcontractors will no longer be able to self assess their income. Has HMRC confirmed that there will be no requirement for self assessment tax returns?

Not sure how this can work as if I were a subcontractor I would instruct the agent to assist me in my preparation of my tax return. If I had GENUINE expwnditire I would be expecting to claim this expenditure.

I understand what HMRC are trying to do and that is stop bogus expense claims, however not all subcontractors are the same.

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By LuKosro
30th Apr 2015 17:54

Hi

You got it all wrong. There is no absolute limit from which an accounting service provider becomes an HVA. One becomes an HVA based on a risk assessment which takes into account a large number of factors.

Once you are labelled as an HVA, it does not necessary follow that you will be required to join the Amendment Programme.

The newsletter from which you got that info only mentions "some tax agents" with "as little as" 30 sub-contractors being named as High Volume Agents. 

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By Cloudcounter
30th Apr 2015 18:05

10% limit

This has been round for a couple of years.

The suggested 10% would not apply across the board.  It is only intended to apply to subcontractors who produce no records or receipts whatsoever, so everything is made up, sorry estimated.

Subbies aren't exempt from the record keeping requirements. I wonder how many of them share cars, and then all four of them claim the full cost of travel? 

The same initiative also denies claims for use of home unless work is actually done there - simple storing of tools is not enough.

Somebody posted a link to a copy of the HMRC letter a year or three back, and if you have receipts and records there are no limits at all, subject to normaly credibility checks.

The remedy is in the subbies' own hands

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By Mallock
01st May 2015 08:50

No Different

I have never understood why subbies should be any different from other self employed individuals and why they think it is acceptable to "make up" their expenses each year. I have already turned away 2 enquiries since 5th April because that's the approach they wanted to take. Their indignation that they might need to keep contemporaneous records of "real" expenses just increases my resolve that I want nothing to do with them.

In any case I reckon a 10% deduction is probably generous.

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By 01638603404
01st May 2015 10:38

On a quick review of our  d/w

On a quick review of our  d/w subcontractors for 2015 the expenses claimed average 16% of turnover. All bank accounts have been viewed and all receipt's have been vouched for.

We do across the board, allow a £4 per week claim for use of home as office for the weeks they work, and £10 per month for cleaning/laundry, again if they have worked. If this all we ever have to defend then happy days.

'm getting fed up of hearing that's not enough my friend got £2.5k. I now politely ask them to  vacate the building and move on :-).

 

 

 

   

 

 

 

 

 

 

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By Roland195
01st May 2015 11:12

Subbies generally do not think the rule of being in business apply to them because the reality is that they are not in most cases. The vast majority are de facto employees and treated as such for nearly every other purpose.

It is very difficult to apply the usual rules in their case - For example, travel costs were mentioned where car sharing - how do you suggest the subcontractor paying a share of petrol money records this? He will not have a receipt or mileage records for the car and highly doubtful the driver will write on for him (if such a document would be acceptable to HMRC). Much the same happens with digs and subsistence costs.

We have to bear these facts in mind and act in a grown up manner with these cases.

 

 

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By Jekyll and Hyde
02nd May 2015 08:30

not quite sure I agree with you Roland

It is possible for the subbie to be grown up and keep at least a diary. So they can keep a diary showing mileage/journey and days they paid cash for petrol and whom to. They can keep a diary of accommodation and subsistence, recording actual costs and to whom or to allow a specific claim on subsistence to be made. It is all quite easy to do and this would eliminate the need to wholesale estimates. I simple cannot see the reason they cannot. If they were employed and wanted to claim back their costs from the employer they would need to keep some record so why not as a subbie. If a diary is too old fashioned, them google spreadsheets can record journeys, accommodation and Subsistence and can be kept on their phones.

It seems to me that subbies do not wish to retain any evidence and want the accountant to tell them what, when and how much they can claim. I agree that not every employee keeps actual invoices, so why not apply the same fixed allowances for subbies that an employee can claim. Therefore thoses subbies that do not pay cash for petrol or do not have accomadation costs shouldn't have these estimated in their tax return, just because they are subbies and as such may have possible incurred a slight expense.

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By Ned Ludd
06th May 2015 17:40

Our experience of the HVA approach
We received the dreaded letter in March 2014.

I'd noticed on here it did the rounds the previous year and as a result of that we had already implemented a program of phasing out use of home claims and scaling down cleaning costs.

The letter was very alarming and it annoyed me immensely that we received the letter without any prior contact from HMRC surrounding the operation of our practice.

On the back of the letter we mail shotted prior to 5th April all our subbies and reiterated the necessity for record keeping/evidence of expenses.

Lo and behold the first 2014 return I did resulted in a £3k refund but everything was supported with receipts.

We ignored Hmrc but I did some digging on here and spoke to one practice who'd copped for the letter in 2013 to get a feel for things.

We heard nothing until September 2014 when I received a phone call. I had already pretty much written a response and e mailed them across a 10 page epic outlining our procedures.

From there Hmrc wanted a meeting to perform a sample excercise. I initially refused however they said that if we didn't comply they would issue tranches of enquiries to test the returns. Probably 25 to 30 initially.

The guy also said that if everything I had put into letter was correct there would not be a problem and even if there was a problem we would not have to agree to an amendment program as this HVA are operating without formal powers. He did say that if there was a problem and we refused to co operate regarding the amendment program then Hmrc would revert to raising the enquiries again.

So on that basis we invited them in and they performed a sample across 11 clients supposedly pulled at random. Amongst them was the first £3k claim to which I referred.

I must say that even before their decision I felt we were given a really fair hearing and ultimately no amendment program was required of us although they did give us a few areas to tighten up on. They could also see that not only had our procedures tightened up on since receiving their letter but also the previous year.

This initiative is to target those accountants that simply put through round sum allowances for expenses on all clients without any thought or consideration to their validity.

The absolute key is notes of discussion to support claims and to evidence where possible the major claims inthe returns.

As an example the sample they pulled was a real mixed bag which included:

1. A subby who had materials shown on his cis docs which actually were accommodation receipts. We had no receipts as the contractor demanded them but the client kept his own invoices showing the split and these were reconciled to the amounts on the cis docs.

2. A guy that contributed to travel by way of occasional filling up.

3. A guy that made a round sum weekly cash contribution towards travel. We supported this with a cash account for the year which Hmrc absolutely loved.

4. A couple with no receipts for tools as they had been purchase second hand from car boots. The notes of discussion and the modest level claimed satisfied Hmrc

5. One guy with a use of home claim. This stood out as he had a mix of cis and non cis work and genuinely did all pricing and invoicing at home.

6. 2 guys that worked for the same contractor (obviously not random; selected in order to test shared travel arrangements)

7. One whose income was genuinely so low that the full refund was inevitable. Obviously checking that procedures were stil adopted even in these cases.

I cannot stress enough the notes of meeting and discussion as it was these that saw us home I'm sure.

Anyway I had about 4 months of sleepless nights leading up to this so of anyone has got the letter and wants to talk it through please feel free to PM me and I'll give you a buzz.

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ghm
By TaxTeddy
07th May 2015 07:34

Insurance Ned Ludd?

Ned - just out of interest was the cost of your work covered by fee protection insurance? Or was it at a cost to you?

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By Ned Ludd
07th May 2015 07:45

Insurance
Fee protection insurance is something we've never bothered with so I'm afraid I can't help you with that.

It's a very good question though; my gut instinct is that it wouldn't be covered as the Tax Agent Initiative Team that work these cases have no formal rights to demand co operation. I think the enquiry fee protection stuff quotes specific areas of legislation covered. They basically get you to co operate by putting the fear of god in you.

Although once you actually start speaking to them they are very fair in my experience

The time I spent on this wasn't particularly exhaustive however if we had had to undergo the amendment program it would have been a real drain of my time.

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ghm
By TaxTeddy
07th May 2015 09:51

That's what I thought

Makes the whole process more painful, I feel.

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