The View from No 50

 

 

 

 

May 2017

 

K P Bonney & Co

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby Road  Menston

Ilkley  LS29 6JA

Tel:  01943 870933

Fax:  01943 870925

Email:  keith@kpbonney.co.uk

www.kpbonney.co.uk

 


 

 

 

YOU COULDN’T MAKE IT UP

 

Back in November 2016 two tax gurus informed HMRC that its tax calculations for 2016/17 produced incorrect results in certain circumstances.  HMRC accepted the gurus were right.  Unfortunately, it either didn’t have the resources or the will to fix the error in time for the 2016/17 self-assessment reporting season.

 

If you are one of the people affected by this glitch, the first you will know about it is when you or your agent tries to file your 2016/17 return online.  It will be rejected.  HMRC’s recommended workaround?  File on paper!!!

 

The normal deadline for filing a paper return is 31 October.  Given that taxpayers will not know they have a problem until they try to file online and given this could be after 31 October that is a bit of a bind.  Happily, HMRC has done the decent thing and confirmed that taxpayers who find themselves in this situation can file their paper return at any time up until 31 January.

 

The blame for this cock-up lies with successive chancellors who have (a) made our tax system so complicated that even HMRC cannot get its calculations right and (b) pared HMRC’s resources to the bone such that it can’t provide a proper service to us, the taxpayers.  What a mess.

 

Doesn’t augur well for Making Tax Digital does it?

 

 

 

PUBLISH AND BE HANGED

 

In March, John McDonnell, the shadow chancellor said that Labour would make those with income of more than £1m publish their tax returns.  He believes such a measure would dissuade individuals from taking part in tax avoidance and tax evasion.   He believes that if we can see these people’s tax returns our trust in ‘the establishment’ will be restored. 

 

Does this reasoning make sense to you?  Please explain it to me if it does.

 

 

 

On his first point, surely it is not what is on people’s tax returns we should be concerned about.  It is what is not on people’s tax returns.   How does publishing help?

 

On his second point, irrespective of who we are, we are entitled to expect the state keep our personal data confidential.  Of course, any self-publicist who wants to show the world their tax returns can do so.

 

There is an important principle here.  How do you strike the right balance between protecting the privacy of the individual taxpayer on the one hand and ensuring that tax law is applied equally and is seen to be applied equally across all taxpayers on the other?

 

See how you react to the one about the actor.

 

 

 

THE ACTOR

 

Disputes arise frequently between individual taxpayers and HMRC.  If the parties cannot resolve matters between themselves they go to the tax tribunal.  At this stage proceedings become public.  There are sometimes compelling reasons to hold a case in private.  These include public order and national security.   If there are no such reasons, proceedings are held in public.

 

Very recently an actor, a household name, who had undergone cosmetic surgery, sought to claim tax relief for its cost.  His claim was denied by HMRC.

 

When the matter went to tribunal the actor asked for proceedings be held in private as, in his opinion, a public hearing could cause him reputational damage.

 

In order for justice to be served and to be seen to be served, was it important that we know the identity of the taxpayer?

 

Whether the expense is deductible or not is a question which can be answered on the facts.  It is not necessary that we know the name of the individual.

 

 

So the tribunal did not spend its time considering the deductibility of the expense.  It considered whether the actor’s anonymity should be preserved in order to protect him from reputational damage.

 

In the end the tribunal held that the public interest of justice being seen to be done trumped privacy and reputational damage. 

 

And it published its decision and we are all free to see the name of the actor concerned.  Hmmm.

 

The actor has dropped his claim for tax relief because the cost of appealing the decision exceeds the amount of tax at stake and his name is out there anyway.

 

I really don’t know what to think about this.  On the one hand it is good that no taxpayer, regardless of privilege or wealth, can sidestep the rules by which we are all bound.  But on the other hand the tax point in dispute was one which could have been decided on the facts without the need for us to know the identity of the individual concerned.

 

In the short term it is hard for me to see any winners here beyond the gossip mongers.  I suppose, as a taxpayer, I am re-assured that nobody can have their tax disputes resolved behind closed doors.

 

In the long term, taxpayers might be disinclined to claim for expenditure which is properly deductible because they fear the damage they might suffer in the court of public opinion. That is not a good thing.

 

If nothing else John McDonnell will be pleased.

 

 

 

VAT ON CAR FUEL

 

If you are registered for VAT and if you choose to reclaim the VAT on your car fuel and if any of that fuel is used for private motoring you must pay a fixed amount of VAT, called the car fuel scale charge, to HMRC each time you make a return.

 

The scale charges are updated every year to reflect changes in fuel prices.  The new 2017 scale charges apply for the first VAT return period beginning after 30 April 2017.

 

To check you are using the right scale charge see the table on my website.

 

 

 

 

 

 

OWZAT?

 

Dickie lives near Headingley cricket ground.  Each year he receives £1,000 from letting cricket fans park their cars on his drive.

 

Dickie dutifully declares this income on his tax return.

 

Dickie is delighted to learn that from 6 April 2017 this income is covered by the £1,000 property income allowance.  He no longer has to declare it and he no longer has to pay tax on it either.

 

There is a similar £1,000 allowance for income from trading.

 

The point of these allowances is to reduce the compliance burden for small traders and property renters and to relieve HMRC of the nuisance of having to pursue insignificant amounts of tax.

 

A very sensible measure.  Unfortunately, like the Making Tax Digital one, it got shelved in the pre-election wash up.  Let’s hope this one makes an early re-appearance.

 

 

 

LAST REQUESTS

 

An Englishman, a Scotsman an Irishman and a Welshman are facing a firing squad.  The captain of the guards grants each a last request.

 

“I would like to hear ‘God Save the Queen’ sung by the London All Boys Choir with Morris Dancers prancing around to create the atmosphere of home,” says the Englishman.

 

“I would like to hear ‘Flower of Scotland’ sung by Susan Boyle accompanied by the Massed Pipe Bands of the Scottish Army and with Highland Dancers leaping,” says the Scotsman.

 

 “I would like to hear ‘Danny Boy’ sung in the style of Daniel O’Donnell with Riverdance performers skipping gaily around,” says the Irishman.

 

The Welshman says “I’d like to be shot first”.

Copyright:  K P Bonney & Co LLP 2017.  All rights reserved.  No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers.  Disclaimer:  The publishers have taken all due care in the preparation of this publication.  No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.

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