Simon Sweetman on fiscal fear

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Simon Sweetman
Tax Consultant
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I know a lady – a former colleague in fact – who worries incessantly about her tax affairs and phones me up about income tax or inheritance tax, neither of which is going to cause real problems, explains Simon Sweetman.

She also phones HMRC where she confuses the unfortunate call centre staff and collects a variety of not quite correct answers, or answers to a slightly different problem, and then comes back and bounces them off me. It doesn’t stop her worrying.

Now I know that in her case the worry is caused by having worked as an accountant with some acquaintance with tax matters, knowing enough to worry but not enough to see the solutions. But life as a tax adviser to small businesses and smaller accountancy firms has taught me that many people are effectively paralysed by a fear of tax and of HMRC, a fear that is in many cases wholly irrational. That is not the fear of confusion, it is the fear of dreadful punishments. Many people faced with an HMRC enquiry actually are afraid that they will be sent to prison, and no amount of reassurance can allay that fear. We know that it takes a lot for HMRC to launch a prosecution for tax fraud, but other people do not.

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02nd Jun 2012 07:55

Ordinary people are afraid of HMRC because HMRC instils fear...

Many people faced with an HMRC enquiry actually are afraid that they will be sent to prison, and no amount of reassurance can allay that fear.

Having read numerous letters regarding enforcement and distraint proceedings over the years the letters sent out by HMRC do send unnecessary fear into the hearts of the general public.

As professionals we have become inured to the often very badly written letters put out by HMRC. How many times have you had a client practically in tears in your office over a letter threatening proceedings over some trivial matter.

Equally, when a pensioner with multiple sources of pension income fails to respond to HMRC (out of fear) and things rapidly escalate to threats from the knuckle-draggers in the HMRC debt recovery office or even worse the outsourced debt collection agents.

Admittedly, most of these problems are caused by taxpayers failing to respond to HMRC and matters being automatically escalated by computerized workflow control systems.

Most taxpayers don't read (or fully understand) a lot of letters sent out by HMRC, just picking up on key points such as "penalty" or "proceedings". This can make such letters appear more threatening than they really are.

In short, many taxpayers are genuinely afraid of HMRC and it is not irrational, although in many cases it is exacerbated through taxpayer ignorance.


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04th Jun 2012 12:02

Exaggerated reports

You have to bear in mind that many reports and claims are exaggerated and may even be untrue. Unless I see the letter for myself, and know the full history behind it, then I do tend to be a little sceptical. With few exceptions, the reasons for the strong letters are usually pretty clear once you know the full story.

Inefficiences within HMRC must be just as frustrating to their few dedicated staff as they are to us. The call centres are a joke, and the guy in the pub probably gives better advice than they do.

In defence of HMRC, they don't have the funds, or the manpower, to find out the personalities of the people they are writing to. It could be (as said above) someone who is too scared to correspond with HMRC. Equally, it could be someone who wouldn't bat an eyelid unless very strong threats were made.

Logic tells me that HMRC have to deal with a lot of nutters and headcases. Unlike Lord Sugar (and accountants) they cannot say 'You're fired', and get rid of the problem!

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06th Jun 2012 11:08

P46 problems

Many of our client's have come to us because they have received huge bills and cannot understand it as they have always been PAYE.  Mostly it turns out they have retired and gone back to the same or another job and ticked the wrong box on the P46 as they didn't read it properly.  Some have a company car and for whatever reason it is not in their tax code (usually the employer has completed the P11d incorrectly).  Occasionally it is HMR&C's fault but 9 times out of 10 it is down to the client's lack of understanding of the system which started the problem.

Hopefully the launch of real time next year should solve a few problems but I won't hold my breath.

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07th Jun 2012 12:49

enforcement and distraint proceedings/possesion orders

Happens to everyone except those who can pay high fees and either offshore their income or subcontract out to the government(if they happen to be a public servant) and only pay tax in terms of transfer payments(out of one public sector pot and into the other)

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