Member Since: 5th Jan 2009
I've been a journalist for four years, writing on a wide variety of topics from business and finance to travel, culture and celebrities. I began my career as an editorial assistant for Palladian Publications, a B2B publisher specialising in technical magazines for professionals in primary industries. I later moved into consumer magazines as a staff writer for French Magazine, a monthly travel publication aimed at Francophiles, and was part of the launch team for The Traveller in France, a quarterly magazine produced for the French tourist board. I was also a regular contributor to online travel portal Homesworldwide.co.uk, and later worked with customer publishers Future Plus as a freelance production editor, before joining Sift Media in January 2009. I am currently Deputy Editor of AccountingWEB.co.uk.
Deputy Editor Sift Media
22nd Sep 2010
Clive Gawthorpe, Partner, at UHY Hacker Young:
“This is a huge increase in the tax gap at a time when the Treasury can least afford it. HMRC is already under immense pressure to bring in more tax. These figures will simply add to its woes.”
“HMRC now has a huge compliance burden on its hands. It recently indicated that it would contest fewer tax disputes in the courts, but whatever approach it adopts, it desperately needs to reduce the amount of evasion and avoidance.”
“The concern now is that HMRC will ramp up its compliance activity. This could mean more tax enquiries. Inevitably innocent taxpayers will get caught up as collateral damage.”
“Despite a raft of anti-avoidance measures during the last 13 years aimed at reducing corporation tax avoidance, HMRC appears to be losing the battle. With the recession having dented corporate profits, companies are looking for ever-more ingenious ways to reduce their tax liabilities.”
“You can’t help thinking that the labyrinthine complexity of the UK tax system, far from reducing non-compliance, has actually fuelled avoidance and evasion as well as genuine errors. This is something that the coalition needs to look at as a matter of urgency.”
21st Sep 2010
Richard Mannion, tax director, Smith & Williamson:
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"One of the factors that will undoubtedly have had an impact on the size of the tax gap in recent years is the massive reduction in HMRC’s headcount from approx 95,000 to 69,000, with more reductions expected. Moreover it would seem that HMRC has lost a disproportionate percentage of its more experienced staff. Bearing in mind that each trained inspector brought in extra tax worth many times their employment costs the decision to cut jobs seemed barmy.
"The impact of this loss of experienced staff can be seen in the various “tax amnesties” that have been offered in recent years. The bottom line is that whilst HMRC was in possession of warehouse loads of information about potentially undisclosed income it just did not have the staff to follow up, hence the decision to ask taxpayers to own up and do all the work themselves in return for a lower penalty.
"With that background it is interesting to hear that government now plans to spend £900,000 on setting up a new specialist enquiry team as part of their plan to reduce the tax gap by approximately 10% this year (£4bn) and there have also been anecdotal reports that Inspectors have been looking for some quick wins by being more inclined to reach pragmatic settlements to settle longstanding enquiries than before".
James Abbott, tax partner, Baker Watkin:
“I fear that Nick Clegg’s comments will find favour with the ‘average’ person on the street but genuine tax planning should not be frowned upon.
“Many of the tax breaks are available to encourage certain behaviours, such as entrepreneurial spirit or using green cars, for example.
“An accountant’s role is to make clients aware of the tax breaks available and assist their clients in making the most of them. There is nothing morally wrong with that.”
Cormac Marum, partner, Harwood Hutton Tax Advisory LLP:
“If our tax laws are not fit for purpose, it is the duty of Nick Clegg and his Coalition partners in government to make the changes they think are necessary and answer, in due course, to the electorate for their decisions.
“It is dishonest to blame accountants and tax advisers for the problem. We don't make the rules, we simply try to understand them and apply them in the best interests of our many and varied clients.”
20th Sep 2010
Understandably, this story has generated lots of comments, so I'll try and keep this updated as they come in.
You can catch up with what members are saying about it in this Any Answers thread. Below is a comment that popped into my inbox just now.
John Cassidy, tax investigation and dispute resolution partner at PKF, comments: “HMRC has built up a mountain of information on offshore account holders over the past three years, but has so far failed to investigate many of the individuals involved. To date, it has just relied on making vague threats and offering tax amnesties to encourage people to come forward voluntarily and pay up what they owe.”
"Past funding problems have meant that the teams working on data obtained from banks have been reorganised every few months resulting in little real progress against determined tax evaders. This new funding should enable HMRC to finally get its act together and aggressively pursue those who have spurned chances to use either of the past amnesties: the Offshore Disclosure Facility or the New Disclosure Opportunity.
“It remains to be seen how effective the new HMRC team will be. But if it collects anything like the £7billion in additional tax revenue that the Government is predicting, that means an awful lot of people who don’t take the chance to put their tax arrears right now will be paying very large tax bills – and, some of them will wind up in court.”
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16th Sep 2010
Sorry to hear you didn't get much value from this article. I'll put my hands up and say that we have republished this from one of our sister sites because I thought that although it's not specific to accountants, it had some good general observations about marketing. We do have more targeted marketing articles aimed specifically at accountants on the site as well. Check out the marketing tag page, where you'll find all the stuff we've got on the topic in one location.
8th Sep 2010
The comments on this topic keep pouring in. Today, we received an update from George Bull, head of tax at Baker Tilly, who offered the following insights:
People could be waiting until October 2012 to be notified:
“Will I hear from HMRC this week? Only if you’re one of the “lucky” 45,000 in the first batch. HMRC has a lot of letters to send and at the rate of 45,000 per week it would take until October 2012 to send out all 4.7 million letters. HMRC expects to have sent all the letters by Christmas (this year!). So if you haven’t heard yet it’s probably worth checking now whether you have overpaid tax.”
People who have overpaid should check their tax records:
“HMRC has only checked 2008/09 and 2009/10 but if you’ve overpaid tax you can claim back at least as far as 2006/07 and may be able to claim back as far as 2004/05 in certain circumstances. Four years is now the normal time limit for reclaiming overpaid tax but people who were not sent tax returns for 2004/05 or 2005/06 may claim back tax overpaid in those years as well.”
HMRC computers are to blame:
“HMRC official instruction PAYE 96201 makes it clear that, if the recalculation of the 2008/09 and 2009/10 PAYE underpayment reflects five or fewer factors, then the computer will simply churn out the P800 calculation which will be mailed to the individual without human checking. To those who think that the management of the HMRC computer system got us into this mess in the first place, that’s not good news.”
Be wary of tax scam emails:
“Equally unwelcome is this morning’s fresh flurry of tax scam emails with fraudsters apparently trying to obtain personal bank information from people who might be entitled to a PAYE repayment. HMRC has made it clear that it will not be contacting people about rebates or tax owed either by email or telephone. Nor will it ask for bank details. If you received an email which you think may be fraudulent, the HMRC website provides guidance on what to do.
Low-income groups likely to be worst affected:
“In his recent statement David Gauke, the Exchequer Secretary to the Treasury, explained that the Treasury simply could not afford to forgo collection of the unpaid PAYE tax totalling some £2 billion. With the dawning realisation that most of the PAYE underpayments are likely to relate to low-income individuals with two or more jobs, there have been calls for HMRC to exercise the discretion afforded to it by statute and to take a sympathetic view of individual circumstances.”
Problem stems from self-assessment:
“Those in the 1.4 million who are about to receive tax demands will wonder what else they could have done. Most will have reasonably assumed that, because all their income was received after deductions of income tax and NIC via the PAYE system, HMRC already had all the information necessary to get their tax right.
“However, technically, HMRC has both right and might on its side. While the current campaign to claw back around £2 billion follows HMRC computer and procedural failures, the roots are to be found in the introduction of Self Assessment in 1995/96. Even when Self Assessment was being introduced, tax professionals warned that unrepresented taxpayers were being exposed to the risk of under- or over-paying tax. Those warnings have now come home to roost with a vengeance.”
Welcomes the return of year-end checks:
“At first HMRC announced that it would not take any action to try to identify the cases where incorrect coding notices had been issued. Now, clearly the decision has been taken that the newly available computing power should be used to identify those cases where the PAYE coding system has fallen down as well as those for which the system cannot be expected to get it right: PAYE coding adjustments are often based on estimates of items such as benefits in kind, investments and other income, as well as deductions such as gift aid. There will always be the need for a year-end check to be made by somebody, either HMRC or the taxpayer.
“That HMRC has decided to institute a system of year-end checks should be seen as a welcome return to acceptance of responsibility on the part of officialdom. Assuming that annual reviews are here to stay, even in their current imperfect form, at least taxpayers will have a chance of catching up and getting their tax affairs in order.
“However, the problem does not stop with the latest two years. HMRC’s estimate is that the total amounts underpaid in 2009/10 are not significantly different from the total amounts overpaid but the coding fiasco of 2009/10 will have inflated the amounts underpaid. That opens the question whether HMRC was right not to conduct similar checks for earlier years.
“And let’s not forget people who have paid too much tax. Taxpayer ignorance and inertia have provided the government with a steady stream of income over the years since 1995/96 and those overpayments are now largely irrecoverable by taxpayers who mostly fall into the lower income bracket.”
7th Sep 2010
We've had a few comments in about this story. Here's one from the Forum of Private Business:
“For years small business taxation has steadily increased, so this reduction in NI for some firms has to be welcomed,” said the Forum’s chief executive Phil Orford. “However, if the government is serious about creating conditions for real economic recovery based on strong small business growth, it needs to introduce even bolder tax policies.”
He added: “Given the significant threats to cash flow and business growth from issues such as a lack of bank finance and increasing late payments, recruitment is likely to be slow during the first 12 months for many new firms. The scheme should be available for a longer period than just the first year they are in business.”
7th Sep 2010
Comments from around the profession
We've had lots of comments through about this, so I'll include a few of them below:
David Whiscombe, partner, BKLTax, and member of UK200Group tax panel
“While it’s always popular to knock HMRC for getting it wrong, this isn’t what’s happened in this case. The simple fact is that the PAYE scheme was never designed to cope with the complexity of today’s tax system. It’s been failing to do so for years and the systematic errors reported over the weekend aren’t new, it’s just that the introduction of a more sophisticated computer system has brought them to light for the first time.
“The question to ask is not ‘why does HMRC keep getting it wrong?’ but ‘how can we simplify a tax system which is collapsing under the weight of its own complexity?’. The first step has been taken with the creation of the Office of Tax Simplification, to whose deliberations the UK200Group is delighted to be contributing. The opportunity it offers to give us back a tax system which works must not be wasted.”
Anthony Harris, director, Critchleys
“Let’s take a positive look at this. HMRC have identified the issue themselves, albeit after an internal review. Normally in the past these issues have had to be discovered by the odd million tax payers who individually query their codings and are individually dealt with by Revenue officers.
“I do not condone the errors, but I am really pleased to hear that HMRC’s own systems have brought these to light and they are getting on and rectifying the issue in bulk without days and days of individual review of so many accounts being needed. In fact this is progress and should save HMRC costs in the year ahead.”
Will Abbot, partner, Randall and Payne
“The PAYE system was only ever designed to give an estimated tax deduction, which in most cases is fairly accurate, with the under or overpayments being corrected in later periods.
“In recent years HMRC has tried to remove people from the self assessment system by making more use of the PAYE system than it was ever intended for. So, for example, estimated amounts of private pension income, or savings income have been included in the codes. Finally, HMRC has been using the coding system to collect estimates of tax due on income such as property rent on a monthly basis, rather than collecting through the self assessment system.
"Of course interest rates have changed significantly over the past couple of years, so it is perhaps no surprise that these estimates are wrong. If you then add into the mix the changes in people’s circumstances, the deficiencies of the system are highlighted.
"However, I think the current furore over the system is what the Coalition wants to hear. It will strengthen their case for reforming the system, and I believe we are heading towards employers submitting monthly PAYE returns online, as already happens with the Construction Industry Scheme. This may lead to improved cashflow for the Treasury, as it is currently possible for employers to defer payment of some of the PAYE deductions until after the tax year. Would the Coalition go a step further and amalgamate national insurance and income tax into a single rate, in the name of simplification?
"It goes without saying that if individuals are concerned about their tax position, they should seek advice from a qualified accountant."
Jonathan Russell, partner, ReesRussell and vice-president UK200Group
“Whilst not being surprised as mistakes do happen it does seem to be one rule for the tax payer and another for HMRC. If HMRC had been provided with the correct information at the right time and in the right manner should it not be expected that they would handle it correctly?
“Under self assessment there is a general rule that the taxpayer should be aware and pay the correct amount of tax regardless of what is requested but for people who are on PAYE there is the presumption that if the correct information has been supplied the tax collected will be correct. It will be interesting if HMRC try to collect penalties under the new regime – after all, they would under the current rules be entitled to do so.”
9th Aug 2010
The winner of this challenge is Andrewmurtha. Here was the CIMA assesor's response to his answer:
"The CIMA study pack defines CSF as ‘The limited number of areas in which results , if they are satisfactory, will enable successful competitive performance’ . The assessor would expect sustainable advantage to be featured also.
The respondent offers a range of areas for consideration (see 1-4 below) however more depth and differentiation and a clear link to their stated strategy needs to be made. Is it pile them high or LBS that they are aspiring to?
Pass performanceMarket interestHigh staff/student satisfactionCourse type
KPIs should be metrics of a financial and or non financial nature that can be measured and come via the processes established to achieve these, based on forward looking strategy. Possibly they are considered in a vacuum in the sector – so do not specifically illustrate a clear answer based on strategy.
The answer shows knowledge of the sector but not of strategy and clearly related specific metrics".
9th Aug 2010
Solution from CIMA
Here's the official answer to the question:
Critical Success Factors (CSFs) are ‘those components of strategy where the organisation must excel to outperform competition’ (Johnson, Scholes and Whittington). It is implicit in the definition that any organisation will not have a great number of CSFs: six or fewer CSFs have been suggested as an appropriate number.
In the case of TDM, CSFs have to be identified which are specific to it and which are crucial for its success. The following CSFs are recommended:
CSF: Customer satisfaction
This CSF could be supported by such KPIs as:
Student satisfaction: most UK universities now carry out such surveys into this area and TDM could imitate this practice.Rate of repeat business: many of TDM’s students will be sponsored by their employers. This KPI will measure if employers continue to use TDM.
CSF: Employee attitudes
This CSF could be supported by such KPIs as:
Rate of staff turnover: a high rate of staff turnover is suggestive of dissatisfaction, a low rate of contentment.Rate of staff absence: a high rate indicates poor staff morale; a low rate suggests staff that are happy to come to work.
CSF: Product quality
This CSF could be supported by such KPI’s as:
Market share: TDM has consistently had the largest market share in its sector and both its absolute market share and trends in market share (Is it increasing? Is it decreasing?) are strongly indicative of success.Accreditations: TDM’s courses are open to scrutiny by professional and academic bodies. TDM could measure the accreditations it receives which reflect outside opinion as to the level of quality it is achieving.
CSF: Brand image
This CSF could be supported by such KPIs as:
Brand recognition: this KPI could be assessed by means of survey with its customers, past, present and potential. This KPI would indicate the proportion of customers who are aware of TDM’s brand.Brand reputation: as in the case of brand recognition, brand repute could be investigated to discover customers’ feelings about TDM’s brand. It could be that recognition and repute are contrary. It is possible for many people to know about your brand but not to like it. Alternatively, few people may know about a brand but those that do like it very much.
It is important that RCH knows how its customers feel about its services. As the CEO of RCH commented ‘...success is built on happy customers: we give them what they want’. TDM has to ensure that it is getting this aspect right if it is to continue to be successful. It is a truism that without customers TDM will not have a business. However, it appears to have had a production focus rather than a customer focus and has neglected this area in the past. One important indicator of customer satisfaction will be the students’ pass rates.
Employees are important in every business but this is particularly the case for TDM where its employees come into contact with its customers. It is vital that TDM’s employees continue to perform at a high level and so TDM should monitor their morale and the KPIs above will give an indication of this.
Customers will only continue to use TDM’ s services if it can demonstrate it is providing courses of a high quality. This can be measured, to an extent, by the endorsement of external bodies in the form of accreditations. It can also be tracked more immediately by the market share which TDM has gained. This KPI can be routinely calculated, perhaps at monthly intervals, unlike accreditations which will be granted intermittently.
TDM does not have a strong customer focus and it is in a market where there are continually new entrants. Although it has had satisfactory performance in the past, ‘it has constantly achieved its sales targets and its students achieve passes on a par with the national average’ it seems to be an introspective organisation. It may not be performing to the best of its ability. In order to counteract these tendencies, TDM could benefit from an awareness of how it appears to the outside world.
The answer in this section is not exhaustive, other CSFs and KPIs could be discussed. However, candidates will always be given credit for appropriate contributions,
6th Aug 2010
Ermintrude, I knew there were benefits to working from home but I have to say I hadn't considered that last one! Enjoy your trumping!
We've had some funny responses on Twitter to this one. One guy said his colleagues clip their nails at their desks, which drives him nuts, but the absolute worst one was a man who said he used to work with someone who dried their used tissues on the radiator! Deeeeeee-sgusting!