To answer the basis question "What was 'Back Duty'", it was the name the old Inland Revenue gave to all enquiries into under-reported income. "Duty" of course was tax, and the "back" meant that it was due for earlier years. Most back duty enquiries related to undeclared bank interest and were settled quickly by TOHGs (Tax Officers (Higher Grade)) rather than by Inspectors.
There was a series of forms in the '8' series which payers of interest had to send to the tax office when they credited interest over a certain amount to any depositor. The most common version was 8(CB), the form used by clearing banks. On receipt, the bank's tax office passed the form to the tax office dealing with the depositor's home address and they in turn wrote to the depositor asking for his tax or employment details, and if he replied they passed the form on to the depositor's tax office who would then check his tax returns to make sure he'd declared the interest correctly.
A lot could go wrong in this lengthy process, and I suspect only a small minority of the notifications were ever acted upon. But back in the 1970s, if you were unlucky enough to be subject to one of these and ended having to pay a back duty settlement of £40, it was a lot of money and it hurt.
Our sympathies tend to lie naturally with the taxpayer. But when it's a fat cat who used an aggressive scheme to avoid liabilities the rest of us have to pay, and then every delaying appeal to fend off the day of reckoning, I find myself a floating voter. Since it all seems to have hung on a test case that wasn't settled until 2015, HMRC don't seem to have been quite as dillatory as a quick reading suggests. Didn't Montpelier keep him up to speed on what was hapening and tell him he was going to have to pay?
Wouldn't it be lovely if instead of having to go through all the tedious, timewasting identity verification stuff, we could get straight down to business because our voice had been recognised and automatically verified by the equipment at the other end?
Delicious! The company acknowledged that the payments were taxable and the only point of contention was whether tax should be deducted at source. HMRC put up detailed arguments and the company attempted (and failed) to refute them. But the Court looked at the bigger picture and found that both sides had addressed the wrong question and that there never were any payments.
We need more judges like this.
I recall 50 years ago as a new recruit in the Tax Office being bemused by an expenses claim from a lady physical education instructor. I couldn't quite figure out why she was claiming for a jockstrap!
Thanks for everything, Simon, and all the best.
But I've got news for you - retirement is a myth. Friends, relatives and friends of relatives still expect their free tax advice and a helping hand with their tax returns. My experience 10 years on from R Day is that some of the work I used to do in the evenings can now be done during the day, leaving evenings a bit less busy. But an amazing number of my contemporaries and elders are shuffling off so that about one day a week seems to be needed for funeral duty. Sometimes they bring executorships with them, and they can be quite time consuming. So in 10 years, I've not made many inroads into my list of things I'm going to do when I retire.
But it's lovely to watch neighbours setting out to fight their way through the traffic jams to and from work every day.
The worked example has a change occurring at the beginning of the tax year, but HMRC not hearing about it until after month 7. So, from month 8 the employee must:
a) Pay extra tax on his ongoing benefit
b) Pay off the arrears he built up through not paying the extra tax in months 1 to 7.
This results in his tax going up by about £196 per month for the final 5 months of the year, made up of:
a) £83 per month on the ongoing benefit and
b) £113 per month (to pay off 7 months' arrears over 5 months)
From the start of the following tax year, he should have no arrears and will pay only the ongoing £83 per month on his benefit.
Under the old system, the arrears would have been spread over the 12 months of the following tax year (at an extra £48 per month) instead of over the final 5 months of this year (at an extra £113 per month). So the old system was a bit more humane.
What really causes the damage here is the late notification by the employer, allowing 7 months of arrears to build up. If the employer notified promptly and HMRC acted promptly, then there should never be more than one or two months' arrears to pay off. But in the real world, delays happen.
I'd worry if, say, 10 months' arrears were being collected in the final 2 months of the tax year. Is there built-in protection to prevent unreasonably heavy deductions?
HMRC's calculations will also depend upon prompt application of the new code by the employer, and this won't always happen, so that people will still end the year with underpayments
Seems clear the accountant ought not to have filed a return he believed to be wrong and in particular should not have taken the initiative in doing so.
The HMRC handling was odd, but it often is! Many years ago, my (then new) client achieved transient notoriety over an illicit sexual relationship and was labelled a 'love-rat' in the tabloids which said he'd sold his story to another tabloid for £100,000. He assured me he'd received nothing and his return went in declaring a very modest income. A few days after the enquiry window closed, I received an enquiry notice. I objected that it was out of time. HMRC wriggled a bit but eventually conceded the point. By this time, the next year's return had gone in, reporting no income whatsoever. The client had lost his job and said he was living off his girlfriend and non-taxable benefits. This time, the enquiry notice came almost immediately and two inspectors travelled up from London to interview the client at my office. The meeting lasted less than half an hour, they declared themselves satisfied and went away again, with the closure notice arriving a few days later. It seemed to me that they were just going through the motions, and it can hardly have been cost effective, though the inspectors doubtless enjoyed their jaunt upcountry..
Dave Hartnett - The Wrong Target
I understand that when the HMRC Chairman resigned suddenly, Dave Hartnett took over briefly on a caretaker basis. When a permanent replacement was appointed, Hartnett was appointed to the new post of Second Permanent Secretary for Tax, with responsibility for Tax Professionalism, He was never CEO and Ms Hodge was lambasting the wrong man - but then she's a politician. I believe this gives her the protection of Parliamentary Privilege allowing her to make as many inaccurate and unfair accusations as she pleases without exposure to legal repercussions from her victims.
Gosh! Does this mean I can now register a company called The United Kingdom National Registration and Regulation Authority Ltd and start sending out letters to everybody I can think of, inviting them to pay me their annual registration fee? Will I have to register it for VAT if it's not actually supplying anything?