Partner McCann Christensen
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A Greek tragedy: Saved by intervention from on high

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25th May 2017
Partner McCann Christensen
Columnist
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This is the sad tale of how a taxpayer was over-charged and badly served by the UK tax system. It was resolved by my pulling some strings, which shouldn’t have been necessary.  

On tour

Miss F is a dancer and Greek national, who came to the UK in August 2013 to perform as part of the tour of a well know musical production for a period of twelve months. When the tour finished, she returned to Greece as she had no more employment in the UK, and could not afford to stay to try and find more dance work.

During the period from August 2013 to 5 April 2014 Miss F was aware that deductions were being made from her weekly pay, but she did not understand what these deductions covered.

The return

In April 2014 Miss F was told she needed to fill in a tax return. At this time she was performing with the touring company which moved venues every two weeks, so she had no permanent base. Eventually with the help of a friend she managed to complete a tax return for 2013/14 which was late.

Because she did not understand that Class 1 NIC, which was being deducted from her weekly earnings, removed the requirement to pay Class 4 NIC on those earnings, she did not tick the relevant box on her tax return. As far as Miss F was concerned the Taxman had all of the right information.

First penalty

As the 2013/14 tax return was late she was charged an automatic late filing penalty. Eventually her appeal against the penalties for 2013/14 was accepted, and they were waived; however, she was erroneously assessed to Class 4 NIC which she did not understand.

Miss F telephoned the tax office to discuss the Class 4 NIC and she was told quite clearly that the weekly amount she paid on her salary did not make any difference, and she must still pay these extra contributions.

Gone home

When the tour finished in September 2014 Miss F returned to Greece. She had attempted to get back into the Government Gateway to access her tax information, but had failed. She was under the impression that she would not need to make another tax return, and didn’t believe that she had earned enough to pay tax.

More penalties

Eventually because no tax return for 2014/15 was made Miss F began to receive penalty notices. She didn’t know what to do about this, but she was worried about them. She made contact with another dancer (of UK origin) who she had toured with, and this young lady gave Miss F my contact details.

Sort it out

I could see straight away that she had written to HMRC on a number of occasions and she had explained her problems, but they failed to deal with them correctly.

We completed her 2014/15 tax return and submitted this online to stop the penalties increasing, and we requested the cancellation of all penalties. We appealed and at the same time we also wrote to Rt Hon David Gauke MP (he has yet to respond to our letter of 14 March 2017).

My client’s thoughts about whether she owed tax for 2014/15 proved to be absolutely correct, she didn’t owe any tax, but did owe a small amount of Class 4 NIC (Class 1 stopped being deducted from theatre workers at the end of the tax year 2013/14). Our appeals against the penalties on the grounds of language, distance, etc. were not accepted and we asked for a review. The HMRC review upheld the penalties in full.

The letter

We pointed out to HMRC that Class 4 NIC had been assessed incorrectly for 2013/14 and needed removing. The response received is reproduced in the box below, including all the spelling mistakes, although I have excluded the HMRC officer’s name.

Dear Sir or Madam

Miss F [client’s name redacted]

Thank you for your letter of 14/03/2017

Calls 4 NIC are not national insurance contributions. They do not count all for benefit purposes. They are an additional form of tax paid on self-employed profits.

We do not tax account of class 1 national insurance contributions in tax returns. There is no box where they can be recorded. The class 4 charges to you client for the 13/14 tax year are therefore due and payable. As mentioned they are just extra tax he has to pay on his self-employed profits

Yours faithfully

Strings were pulled

I was so astounded by this letter, that I shared it on Twitter, where it went viral. I also contacted Ruth Owen who was then HMRC director general for customer services.

Owen asked for the case to be passed to a trained officer, with whom I had telephone contact. He was very quick to see that the case had been badly handled but he could not reverse the review decision on penalties. Had this been possible my client would have actually received a repayment!

The eventual outcome I accepted was to have all outstanding amounts showing on the clients account waived.

Learning points

One of the promises which HMRC have made recently is that they will not ask for information which they already have. Had HMRC troubled to look at the P60 which they had received for 2013/14 for my client, they would have seen that Class 1 NIC had been deducted against the whole of her income, which is in fact rather more than her taxable income thus she had in effect overpaid.

Furthermore, despite HMRC having been told on four separate occasions that my client returned to Greece in September 2014, and did not return to the UK, they demanded a return for 2015/16. I am pleased to say this tax return was cancelled promptly by the HMRC officer to whom Owen referred this matter.

Frequent errors

If this sad story were a one-off occurrence then I wouldn’t be too worried, but actually HMRC errors are happening every week, so more HMRC staff and better training is desperately needed. I worked on a free basis for Miss F, but had the client had to pay for all of my time it would have cost her several hundreds of pounds, which is not an acceptable position to be put in by HMRC errors.

 

Sue Christensen is a partner with McCann Christensen, which specialises in helping people in the entertainment industry meet their accounting and tax obligations.

Replies (4)

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paddle steamer
By DJKL
25th May 2017 17:00

Love the letter from HMRC, stunningly inept.

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PJ
By paulgrca.net
30th May 2017 13:18

So what's new!

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By bendybod
02nd Jun 2017 10:20

That is a new level of awful English for HMRC and, seemingly, a new level of lack of awareness of what HMRC actually does and what tax and NI we pay in this country.

Sadly, it is not a new level of awful service. I'm currently dealing with a letter that has taken seven months to be passed around three departments before finally coming back and asking for additional information. It doesn't make us look too good when the client assumes 'no news is good news'.

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By jivebunny
02nd Jun 2017 11:54

Sometimes when I compose a complex or lengthy letter I actually read it over out loud to make sure it makes sense all the way through.
Maybe something HMRC officers might think about trying!

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