The View from No 50
K P Bonney & Co
Chartered Accountants and
Chartered Tax Advisers
Ilkley LS29 6JA
Tel: 01943 870933
Fax: 01943 870925
NOT SO SIMPLE
Pension / salary 8,500
Interest income 6,500
Dividend income 6,000
Total income 21,000
‘How much tax is payable on the above income in 2016/17?’ A member of the Institute of Chartered Accountants posted this question on the forum of the Institute’s Tax Faculty in June.
On the face of it this is a very straight forward case.
The experts at the Tax Faculty posted an answer showing tax payable of £75.
Another member disagreed and produced a calculation showing tax payable of £nil.
The correct answer is indeed £nil. To explain why would take up the rest of this newsletter and bore you to tears.
No criticism is levelled at the Tax Faculty for getting its answer wrong. Others who posted confessed to varying degrees of puzzlement. The forum post illustrates the fact that tax has become complicated even for taxpayers with relatively simple affairs.
As I have commented here before, chancellors feel compelled to do stuff. Being seen to do stuff gives the impression of being in control and having purpose. Unfortunately, this obsession has inflicted on us a horrendously complicated tax system. So complicated is it that even the experts get the calculations wrong. If only chancellors could be persuaded to leave stuff alone or, better still, simplify stuff, we could all enjoy the luxury of being able to understand our tax affairs once again.
Having levelled that criticism I must commend our recently departed chancellor on his practice of taking individuals out of the tax system. The introduction of the £5,000 0% starting rate for savings income, the £1,000 personal savings allowance for basic rate taxpayers, the £500 personal savings allowance for higher rate taxpayers, the £5,000 dividend allowance and the forthcoming £1,000 allowance for small businesses are all excellent measures which remove compliance burdens from the shoulders of individual taxpayers and free up scarce HMRC resources for deployment on more important matters.
It is on account of these measures that the individual in the above example does not have a tax liability and does not have to file a tax return.
Of course an individual earning a salary or pension of £21,000 and having to pay tax of £2,000 might not feel so well disposed to Mr Osborne.
WHEN IS REAL TIME NOT REAL TIME?
Andrew Halford submitted his 2013/14 tax return online on 30 January 2015. It showed he had tax to pay. The due date of payment was 31 January 2015.
Having filed his return Mr Halford logged back in to his account on the HMRC website. The account stated ‘You have nothing to pay’. He assumed this meant the tax was not due straight away so he logged out.
In February 2015 HMRC sent Mr Halford a reminder about the outstanding tax. He paid it a month later but, because the payment was more than 30 days after the due date, HMRC charged a penalty and interest.
Mr Halford appealed. He said he had paid late because of the ‘erroneous message’ on HMRC’s website. He had made every reasonable effort to check whether he needed to pay the tax and did so as soon as he received the reminder.
HMRC agreed that the online return system would have stated that the taxpayer had nothing to pay because it would not show the sums due until the return had been processed. This happened on 3 February. This explained why the ‘nothing to pay’ message on the website was correct at 30 January.
The First-tier Tribunal said that the due dates for payment of tax liabilities were set out in statute and on HMRC’s public website. There was no requirement for HMRC to notify a taxpayer of the due date for payment. The fact that the taxpayer understood the online message to mean no tax was due did not constitute a reasonable excuse. His appeal was dismissed.
I have some sympathy with Mr Halford. It is increasingly the case that information on websites is shown in real time. Sadly, HMRC’s website is not that dynamic. He will not be the only taxpayer to fall into this trap.
THE LATEST TAX SCAM
I have flagged up the danger of tax scams on a number of occasions. I am always pleased to hear from you when you receive suspicious communications from ‘HMRC’ because this tells me my warnings are being heeded. Almost without exception I find these communications are from chancers trying to deceive you.
HMRC has asked practitioners to make clients aware of the following threat.
“There is currently a telephone scam where a recorded message is left, allegedly from HMRC, stating that HMRC is bringing a lawsuit against the individual and is going to sue them. The recipient is asked to phone 0161 850 8494 and press 1 to speak to the officer dealing with the case. The scam is becoming widely reported and seems to be targeting older people. Please do not reply to the message.
HMRC takes security very seriously but you need to be alert. If you cannot verify the identity of the person making the call you should not disclose your personal details. You should report these incidents to Action Fraud via their website tinyurl.com/TX-ActionFraud or by calling them on 0300 123 2050 (please note this number will be charged at your normal network rate).”
There is more about current HMRC-related phishing and scams at tinyurl.com/TX-GovScam
HIGH INCOME CHILD BENEFIT CHARGE
The High Income Child Benefit Charge came into operation on 7 January 2013. In general terms the purpose of the charge is to deny child benefit to families in which at least one parent has income of more than £60,000. The charge does not apply if both parents have income of less than £50,000. It applies proportionately where the parent with the higher income has income of between £50,000 and £60,000.
Some families affected by the charge elected not to receive child benefit in the first place. This avoids the need to file a tax return provided a return is not required for other reasons.
For those families who elected not to receive child benefit, now is a good time to highlight the fact that they have two years from the end of the relevant tax year in which to revoke their earlier election. They might need to do this if their income proved not to be as high as they expected.
Claims to revoke elections can be made for 2014/15 and / or 2015/16 if appropriate.
For more information go to
JESUS IS WATCHING YOU
Late one night, a burglar broke into a house that he thought was empty. He crept through the lounge and was stopped dead in his tracks when he heard a voice say 'Jesus is watching you!'
Silence returned to the house. The burglar crept further forward. 'Jesus is watching you', came the voice again.
The thief froze. He was frightened out of his wits. Frantically, he looked all around. In a dark corner he spotted a birdcage and in the cage he saw a parrot. He asked the parrot, 'Was that you who said Jesus is watching me?'
'Yes', said the parrot.
The burglar breathed a heavy sigh of relief and asked the parrot, 'What's your name?'
'Ronald', said the bird.
'That's a stupid name for a parrot’, sneered the burglar. ‘What idiot named you Ronald?'
The parrot said, 'The same idiot who named the Rottweiler Jesus.'
Copyright: K P Bonney & Co LLP 2016. 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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