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HMRC online tool riddled with issues

11th Sep 2015
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The chairman of the ICPA Tony Margaritelli has blasted HMRC’s ready reckoner tax tool for the self-employed as being “so full of flaws and assumptions it’s dangerous”.

The online tool attempts to help micro businesses and the self-employed budget for their self-assessment tax bill. It’s very simplified, requiring only two inputs from the user: their net profit and whether it’s monthly or weekly.

But Margaritelli feels the checker is a dangerous over-simplification. “Lovely clean page on the site, put in your figures and there you go, you get a nice little answer,” said Margaritelli. “However, I’m going to hazard a raging guess and say the people that are likely to be looking at that are new start-ups and fledgling businesses trying to get an idea for their tax.”

Margaritelli cites payments on account as an example of where the tool falls flat. “You look at the calculator and you say ‘ooh, I’m gonna end up with a tax bill of x’ – but it doesn’t say ‘Don’t forget! You’re gonna have to pay all in one go and then you’re gonna have to pay half of it as a payment on account’.”

According to Margaritelli, the tool is indicative of a lack of understanding of micro-businesses and the self-employed. “This has been done by someone who clearly has never sat across a desk from a newly started self-employed tax payer,” said Margaritelli. “As an accountant, you would sit there and have a checklist that you would take them through. You’d help the business owner to understand what is and isn’t deductible in relation to their business.

“You don’t just say to him ‘oh you want an idea on your tax; oh it’ll be approximately that’. It’s actually far more dangerous than not knowing.”

The checker does have a caveat at the bottom which states: “HMRC cannot be held liable for incorrect output from this calculator”. But for Margaritelli, the statement itself is part of the problem. “I have a PI policy – does the revenue have one? It’s no good just tacking a bit at the bottom saying, ‘you can use this, but it may be wrong’.

“The revenue doesn’t have that concern, so they can just say ‘put in what your profits are’ with no cognisance of whether the person even knows what profit is?”

The checker’s over-simplicity may be a reaction to HMRC’s concerns over the taxpayer’s technological capabilities. A recent report from HMRC’s customer insight and knowledge team found a lack of internet access and skills among almost two in five taxpayers, and 42% of self-employed tax payers fell into the “assisted digital” bracket, where they are expected to need some assistance to interact with the government online.

But Margaritelli doesn’t believe the checker is the right way to address these concerns: “Wouldn’t it be grand to just be able to reduce our tax system to half a paragraph?” said Margaritelli. “But because of the potential that I can be sued left, right and centre, I have to go into a lot of detail so you don’t expose people to risks, including yourself.”

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Replies (7)

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By Tim Vane
11th Sep 2015 17:37

Well he would say that wouldn't he. He's representing the vested interests of his members.

I have a fair bit of respect for Mr M and his organisation, but of late he is beginning to sound a bit like a whining teenager complaining that the world is ganging up on him.

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By broigel
14th Sep 2015 12:05

Well said Tony!

Tony Margaritelli is one of the very few intelligent, experienced practitioners who step up and take issue with the abomination that is HMRC these days. Very glib of Tim Vane to rubbish this piece but how does pointing out the fact that this toolkit is pathetic and actually dangerous for the unrepresented become 'whining'? Might be more helpful of Mr Vane to comment on the subject matter rather than the messenger.

I am a qualified CA and can advise that my Institute remains helpless and silent on each and every new policy brought in by HMRC to discourage taxpayers from using agents at all - and at the same time making life more difficult for agents. The actual discipline of "accountancy" is being removed by HMRC, step by step. Three line profit & loss? Cash basis? Toolkits for the untrained? No more tax returns? Removing access for agents to HMRC software? All part of the process.

And no-one raising the slightest issue with this - except Tony M and ICPA. Well done sir!

And Tim Vane - you should now criticise me for this post, whining or something.

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By James Reeves
14th Sep 2015 14:15

Riddled?

How can a tool with 2 input boxes be "riddled" with issues?

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Stephen Quay
By squay
14th Sep 2015 15:28

Risky Business

Its always risky telling a sole trader to treat the accounting profit as his taxable profit. We all know this is only the starting point but most sole traders, especially start ups, wouldn't have a clue. Add backs and capital allowances, to name but two, still have to be processed to arrive at the taxable profit. Does HMRC make it clear there's a difference? Doesn't sound like it from the OP. We always explain this to clients in our SAR covering letter.

Tony M from the ICPA 's is quite correct to point out any shortcomings with HMRC for the benefit of the profession and long may he continue to do so.

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By keithas
14th Sep 2015 15:35

@ James Reeves

The same way as a post with one sentence can be wrong in so many ways?

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Chris M
By mr. mischief
14th Sep 2015 17:02

Topical!

I have just spent 10 minutes on the phone explaining to a new client why a tax "bill" for 2014-15 for £2,700 results in a payment of £1,050 on 31 January 2016 and another of £1,350 on 31 July 2016.  The reason being that profits are down a little so he has already paid £3,000 on account.

I have this same conversation on average twice per month EVERY single month.  Those in December - see my other posts as to why I have practically no clients filing in January - can be very fraught.  Telling someone who expected to pay around £10k that in fact it is £15k is rarely a pleasant conversation.

I agree with Tony.  HMRC should focus their time on answering the phone in less than 20 minutes, and answering a letter in less than 3 months.  And if they are going to put up drivel like this ready reckoner, they should be just as prepared to accept the consequences of errors arising from it as we ourselves would be.

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By the_Poacher
15th Sep 2015 16:44

The simplification agenda
Come on guys we all know the truth. GDS churns out this rubbish to try and convince people that this government is simplifying tax when it is making our more complex all the time. New dividend tax, more NIC letters, rental income profit changes - the list goes on.

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