Archive for February, 2010

So you thought your taxes were settled?

Wednesday, February 24th, 2010

HMRC have had yet more success in moving the goalposts – and back-dating the move. This would play havoc in the football league. It could play havoc with tax payers generally. Tax liabilities for past years, which are thought to be agreed and settled, may yet be recalculated because of a change in the accepted interpretation of some of the rules. It is bad enough that HMRC can make ‘discoveries’ (of errors) to upset tax for earlier years, but their apparent ability to have a re-think and thereby change the basis of calculation some years in the future is a worrying trend. There should and must be better certainty than that.

The present matter concerns a businessman, Robert Gaines-Cooper, who has been treated as non-resident (in the UK) for many years. He has relied on spending no more than 91 days in the UK in any one year, which has been the accepted test for residency for some time.  HMRC have recently disputed this basis and the courts (so far) have agreed and allowed them to back-date the ruling. HMRC have successfully claimed that the tax-payer has not been non-resident because he had not cut his ties with the UK.  He retained a large estate in Berkshire, where he grew up, and other aspects of his life indicated he remained resident and ordinarily resident in the UK, despite abiding by the ’91 day’ rule.

It is too early to say what approach HMRC will take with this ruling and how they will try to apply it in other cases – but we must all be aware that HMRC’s powers are changing and their ability to change the rules retrospectively is difficult, if not impossible to guard against.

I suspect that HMRC’s intention is to stop people trying to manipulate tax rules with tax avoidance schemes in the knowledge that the schemes are likely to be overturned retrospectively. Schemes are often arranged in the certain knowledge that their life-span is limited. The schemes will have little point if their life-span is nil as a result of back-dated legislation or interpretation. I think I would applaud that – but whose judgement determines what is effective tax-planning and what is tax avoidance? And who gets caught next with an unexpected back-dated tax bill? (and lawsuit?).

Married Single Other

Wednesday, February 24th, 2010

Is it only me that really doesn’t care which category Cheryl Cole fits into?  Why all the fuss?

As for the new ITV comedy drama by the same name (‘Married Single Other’ – not Cheryl Cole) – it did it for me.  The proper critics are being critic snobs.  Whether or not the script was predictable, whether or not the characters resemble anyone we know, whether or not the young lad’s script seemed plausible – it worked.  I’ve never met any child like those in Outnumbered – but are they entertaining?  It may not be Shakespeare! – of course, there’s the rub.

Scandal waiting to happen?

Thursday, February 18th, 2010

Health and safety and child protection will be the ruin of us. In both cases their aspirations are beyond question but I would suggest that the new registration scheme for people working with children is the next scandal waiting to happen. How long does it take to check the integrity of hearsay and unsupported accusations? Delays will be blamed on shortage of staff, bad decisions on excessive workloads – not dissimilar to the problems associated with social workers. We would all welcome an effective solution to preventing the abuse of children and other vulnerable members of society, but is this it?
Did banning the possession of guns eliminate (or even reduce) gun crime? No, because it doesn’t eliminate the problem. People are the problem and no measure of registration or banning this or that will eliminate the people with ill intent. Having a registration scheme gives the impression that the problem is solved – something is seen to be done – a box can be ticked – but a registration scheme can only identify someone who has already committed an offence or has been identified in some other way. Clearance will still be given for people who have yet to be caught or are yet to transgress.
How much safer will everyone feel? It will be fine until the next scandal – when someone crawls out of the woodwork for the first time. Then what? It will be someone’s fault. Someone will be to blame. The system will be seen as flawed and another, bigger sledgehammer will replace the old one. Paranoia will return, but the nut(s) will be the same size as before.
Blame will be aimed at the body responsible for certifying people as ‘safe’. For this reason alone they will be ultra-cautious. It will need a brave decision to issue clearance for someone where there has been any suggestion or rumour of questionable behaviour – whether proven or otherwise. Everyone, for this purpose, is regarded as guilty before proven innocent. People’s lives will be ruined if they are refused clearance on the basis of false or malicious accusations. I accept that children’s lives will be ruined if they are subjected to abuse – and if a registration scheme were capable of preventing that, I would applaud it, but it won’t.
Who (especially males) would want to work with children? You are under suspicion throughout. Potentially you are at the mercy of any child or person who points an (falsely) accusing finger. I used to help with Cub Scouts – I would have been mortified if I had not been considered trustworthy enough, – without a certificate. I have to think carefully these days, when I’m walking the dogs, about whether I should smile or speak to anyone under the age of eighteen, for fear that I may be considered a pervert (or need a certificate). Whatever happened to judgement? Doesn’t involve ticking a box, does it? Society has enough problems with social interaction without adding to them.
As children (many years ago) we were taught not to accept ‘sweets’ or lifts from strangers. The potential problem was recognised all those years ago. It is not new, and it will not be banished by a registration scheme. If child abusers exist, then tragedies will occur (and child abuse is a tragedy), just like burglars will burgle. Similarly, despite all the efforts of health and safety, accidents will happen. We may be better equipped to deal with life’s problems when we accept that it’s not possible to eliminate all threats in life – to children or otherwise – accidents or otherwise.
Is it not more appropriate to make children clearly aware of the dangers? They will react in their matter-of-fact way. Children will not panic, unless panic is instilled in them. They will even learn how to cross the road and surf the Internet ‘safely’ if the perceived dangers are discussed openly. Children will be much better equipped to recognise abuse and tell others about it if the dangers are out in the open. Nothing will remove the problem completely. Mistrust, guilty until proven innocent, fear of anything and everything in case it might happen, pretending that we can be protected from all ills, is in serious danger of ruining society, and it still won’t protect the children.

Wild? I was livid

Tuesday, February 9th, 2010

Another big mistake in the script/strategy in Wild at Heart at the weekend – they shot the lion! – as it was about to attack the vet (Stephen Tomlinson).  I call it a missed opportunity.

It was interesting to see the return of Amanda Holden, albeit looking much younger – must be some magic cream?

Tax doesn’t have to be taxing – but back-dated?

Sunday, February 7th, 2010

H. M. Revenue Customs (HMRC) has recently won a case in the High Court against a scheme used by many IT contractors to avoid substantial amounts of income tax. The case was based on a piece of legislation (in the Finance Act 2008) that changed the rules – retrospectively, and the ruling opens the door for HMRC to pursue claims back-dated many years.

The tax scheme in question made use of rules in the double tax agreement with the Isle of Man. Rules that were designed to prevent paying tax more than once on the same income. Those same rules have been exploited to avoid paying any tax at all. A number of similar schemes have been used for many years.

The importance of this case is that it permits the back-dating of changes in tax rules. MPs will be familiar with this concept. Is it right to re-calculate tax for past years based on rules introduced later?

Anyone using the schemes has been well aware that a substantial part of their earnings has escaped tax solely by artificial means. This concept may be viewed differently because it involves ordinary people paying (or not paying) tax, but it has a moral dimension not dissimilar to the ‘inventive’ expenses claims of MPs. They knew it wasn’t right – but if others are getting away with it, ‘I’d be a fool not to, wouldn’t I?’

These and other schemes are sold on the basis that they have been ‘accepted’ by HMRC. Indeed, HMRC have been aware of them and for many years did nothing about them. Doesn’t this give the schemes credence? It was certainly one of the attractions to so many contractors and almost satisfies the moral argument as well. If it’s good enough for HMRC, it must be OK. Should there be an element of sympathy for the taxpayer when the taxman asks for proper contributions for earlier years? Which may mean bankruptcy in some cases?

Beware! If you are making use of any scheme that unduly reduces your tax, however legitimate you are told it is, the chances are you are living on borrowed time. You’d be well advised to save – hard. They are coming to get you.

HMRC have given an indication of aspects of schemes that will attract their attention:

Sounds too good to be true
Artificial or contrived arrangements
Very complex compared with the facts
Includes secrecy or confidentiality agreements
Said to be vetted by a top lawyer/accountant but no details of opinion provided
Said to be approved by HMRC
Delays taxation of income or accelerates tax deductions
Disproportionate benefits to the commercial activity
Involves off-shore companies or trusts for no reason
Pension funds are used inappropriately
Contains exit arrangements designed to sidestep tax consequences
Involves money going in a circle back to where it started
Involves the scheme promoter lending the funding needed

Meerkat syndrome?

Sunday, February 7th, 2010

Company directors sometimes confuse a notice to file an annual return (from Companies House) with the (annual) tax return that has to be filed with HMRC (H M Revenue and Customs).

The notice from Companies House is often ignored, thinking that their accountants will have a copy and be dealing with it automatically. Agents do not receive copies of notices issued by Companies House. Correspondence from Companies House should not be ignored. Forward it to your accountant straight away.

Annual return        Companies House
Annual tax return  HMRC

Simple #!meerkat