VAT Office tells caller to ring the Tax Advice Network

When people call us they are normally put through either to the Tax Advice helpline or to whichever of the tax advisers they have chosen from our website.

Around 4.30 today a caller (Tina) was put through to me as my assistant was unable to determine what she required. Tina offered to quote her enquiry number to me. I thought maybe she had called us by mistake. Perhaps our number is very similar to an HMRC office. But no, she had called the number she'd been given by the local VAT office!

(Given the rate at which HMRC are shedding staff at the moment I wonder if the day will come when there are more tax advisers within the Tax Advice Network than left in HMRC?!)

Once we had established what had happened, Tina was equally confused as to why HMRC had given her our number. She thought it was because no one at HMRC was able to resolve her enquiry and they wanted to get rid of her.

This seems unlikely to me. Tina is a bookkeeper for a client in the catering industry and wanted clearance as to whether certain supplies were zero registered. She'd been told to go to a specific page of HMRC website but had been unable to find the relevant contact details thereon. It took me less than a minute to do so. Why had the person she spoke with at HMRC been unable to assist her? Maybe they don't have access to a computer?

I also questioned whether the clearance facility was really what Tina wanted. I suggested that she might get faster and more reliable advice through our Tax Advice helpline. Equally if she wanted help with a formal letter or anything that involved more than a few minutes on the phone, she should speak to one of the VAT specialist members of the Tax Advice Network.

I'm not complaining - indeed I'm thrilled - that HMRC are directing people with complex tax problems to the Tax Advice Network. Thank you to whoever it was and by all means do it again.

Quickies from the Budget

Almost against my better judgment I was posting tweets* during the speech and immediately afterwards, quoting the #budget09 hashtag link that enabled others to follow an aggregation of everyone's tweets* on that subject.

For the record here is a selection of the comments I tweeted* (most recent is at the bottom)

(* If you don't know what I mean when I refer to tweets etc, you may find this article about twitter on my other blog helpful)

Darling claimed that tax cuts announced in PBR are helping people now. Not true for self employed who won't benefit until 31/1/10 #budget09

Darling claims that retail price index will be NIL next year. So will standard VAT rate stay at 15%? #budget09

Darling has evidently accepted the loss relief he announced in PBR was overly restrictive. A good move. Shows he listened. #budget09

Darling will consult (hooray) as to how to achieve a reduction in tax relief for pension cont'ns for those with incomes > £150k #budget09

Will high earning public sector workers (>£150k) be equally penalised re pension provision paid for by their employers? #budget09

Darling claimed the £50k pa investment allowance introduced 2 yrs ago to be increased. No one has had a penny relief from it yet. #budget09

Why does he think that changing cap allowances for the current year will help NOW? Tax relief won't flow through until late 2010. #budget09

Misleading to suggest that anyone has seen tax go down this month. PAYE changes will first apply in May. And for the s/e 31/1/10 #budget09

Increasing taxfree limit of ISAs won't help many as interest rates are so low the tax charge is of little impact. #budget09

And the trap for the Tories. Labour puts up top rate of tax to 50% - to force a comment as to whether it will be kept or reduced. #budget09

Starting to go through the 93 Budget Notices. I think a BIG issue has been overlooked. #budget09

While I look for the BIG one, note that the increased 40% first year capital allowance will not affect tax cashflows until 2011 #budget09

VAT registration threshold is only up to £68k - not the £100k implied in @BookMarkLee April Fool Budget leak. No surprise. #budget09

NB:Budget effectively encourages entrepreneurs. Don't draw high earnings - Build business for the future; Tax will be just 18% #budget09

Budget tax changes can't help self employed until 2012

Although written in advance of today's Budget I can predict with reasonable confidence that most tax changes announced later will have NO IMPACT on our pockets until January 2012. That's right 2012 (twelve).

Let me explain:

The current tax year (2009/10) started on 6 April 2009. It ends 5 April 2010. There is almost no prospect of the Chancellor changing the rates of income tax that we pay in the current year. The new rates and allowances that took effect from 6 April were announced last year.

In any event, although employees pay tax each week or month through the PAYE system, the self employed pay tax in 3 instalments. If the rate of tax payable for the current year were to change this will only impact the tax paid by the self employed on 31 January 2011.

If, as is more likely we are told of tax changes that come into effect from 2010/11 - then the impact will not be felt by the self employed until 31 January 2012. This is when they will be liable to pay the balance of their tax bills for 2010/11.

The same dates are relevant for Capital Gains Tax. Thus:
For capital gains made in the current tax year - the tax will be payable on 31 January 2011.
For capital gains made after 6 April 2010, the tax will not be payable until 31 January 2012.

Hope that helps clarify things. Now let's see what Mr Darling has in store?

Two dozen tax changes this year announced BEFORE today's Budget

Let's see now. What's more relevant to hard pressed taxpayers struggling with the impact of the recession? The announcements that the Chancellor makes later about FUTURE tax changes? Or the tax changes that are impacting the tax payable THIS year?

I have explained in a separate blog that there is invariably a long time lag between Budget announcements and the time that they actually impact the tax bills payable by the self employed.

With due credit to the ICAEW Tax Faculty, (who first collated a list) here's a list of 24 tax changes that will have more of an immediate impact than almost anything the Chancellor might mention during the Budget later today. (NB: Tax rates and allowances for 2009/10 appear at items 1 and 2 of the second list 'From 6 April 2009'):

From 1 April 2009:

1. New powers and safeguards covering PAYE, VAT, Income Tax, Capital Gains Tax and Corporation Tax. I've blogged about these here and here.
   
2. New time limits for tax claims and assessments. Many are now 4 years rather then the 6 years they were previously.
   
3. New two-tier system of tax tribunals - a 'first-tier tribunal' and an 'upper tribunal'. General Commissioners, Special Commissioners and the VAT & Duties Tribunal no longer exist.
   
4. Corporation tax rates were to change but will now remain 28% (main) and 21% (small) for Financial Year 2009.
   
5. The Corporation Tax Act 2009 (CTA 2009), produced by the Tax Law Rewrite project, received Royal Assent on 26 March 2009. It came into force on 1 April 2009 and has effect for corporation tax purposes for accounting periods ending on or after 1 April 2009 and for income tax and capital gains tax purposes for the tax year 2009/10 and subsequent tax years. Although, the CTA 2009 does not change the effect of the law it does correct some minor anomalies. It also incorporates two extra-statutory concessions and one statement of practice. Particular features include the removal of references to 'schedules' and 'cases 'and the amalgamation of profits arising from UK and non-UK sources.
6. New rules for tax relief for business expenditure on cars (Corporate) – capital allowances will be dependent on emission levels. Hire charges for cars will only be restricted for cars emitting over 160g/km using flat rate of 15%. The new rules for cars are that those with:

• Emissions below 160g/km go into 20% pool
• Emissions over 160g/km go into 10% pool
• 100% FYA still available for cars not more than 110g/km

7. Headline rate of Industrial/Agricultural Buildings Allowances falls to 2% (was 3%).
   
8. Amended loan relationship rules for accounting periods beginning on/after 1 April 2009. Where one company releases a trade debt owed by another, the debtor will not be charged on the amount released. As before, the creditor company does not get relief for the amount written off.
   
9. Changes to simplify the entry and leaving rules for small businesses using the VAT flat rate scheme, see PBRN25, 2008 Pre Budget Report Notes. The entry test requiring total business income to be less than £187,500 is removed completely. Eligibility to join the flat rate scheme will be determined solely by the turnover of the business.
   
10. VAT staff hire concession ends (announced in Budget 2008). This had allowed employment businesses supplying temporary staff to charge VAT only on their own fees and not on wages paid by the client to workers.
    
11. Turnover ceiling for using a published VAT retail scheme is raised to £130m, , see PBRN24, 2008 Pre Budget Report Notes.
    
12. Newly rated premises qualify immediately for small business rate relief.
    
13. For 2009/10 only empty premises with rateable value below £15,000 are exempt from business rates.
    
14. Expenditure incurred on or after 1 April on restoring long term derelict land may qualify for land remediation relief.

From 6 April 2009:

1. New rates of tax free allowances for 2009/10: eg: personal allowance up from £6.035 to £6,475
   
2. Income tax rates and bands for 2009/10 eg: basic rate of 20% (unchanged) will now apply to incomes upto £37,400 (previously £34,800)
   
3. Employers with 50 or more employees have to file their employee starter and leaver notifications and similar pensions notifications online.
   
4. Mandatory e-filing of PAYE end of year returns by small employers (<50>
5. A new A4 version of the P45 form replaces the old style A5 form.
   
6. Changes to form P46 (Car), used for reporting the private use of cars supplied by employers.
   
7. Benchmark rates for day subsistence introduced - HMRC have introduced a set of benchmark scale rates that employers can use to make certain day subsistence payments free of tax and NI to employees who incur allowable business travel expenses. Employers do not have to use the benchmark rates. They can reimburse their employees' actual expenditure or apply to HMRC to agree a scale rate appropriate for their business needs in a dispensation.
   
8. Only earnings up to ‘upper accruals point’ of £770 per week will accrue entitlement to the income related S2P. Earnings between UAP and upper earnings limit incur additional NIC but for no extra pension. Upper earnings limit rises from £40,040 to £43,875, giving an increase in annual NIC payable by many higher rate taxpayers, of £383.
   
9. Leaflet IR20 replaced - Booklet IR20: Residents and non-residents – liability to tax in the United Kingdom has been replaced by booklet HMRC6: Residence, domicile and the remittance basis. Any practices associated with IR20 – whether overtly expressed or not – will not apply from 6 April 2009, unless provided for outside of IR20 (in statute law, in case law, in a published extra statutory concession, or in a guidance note).
   
10. New rules for tax relief for business expenditure on cars (unincorporated businesses) as for companies, see above.

Budget night summaries - worth the effort?

My summary is better than your summary. Actually they're all pretty similar. So similar in fact that I see little point in devoting time and effort to producing an overnight Budget summary.

Over the years I was in practice I often worked as part of a team (and latterly even led the team) that worked late into the night attempting to produce a unique Budget night summary. I never felt it was worth the effort - even when we moved to web based copy rather than printed summaries. In almost every case such summaries did little more than regurgitate what was in the Budget day press releases. There is rarely time or space for informed comment.

Some firms defend their attempts on the grounds that clients like them. Really? Or are they just being kind. Are they really of any value? The papers will invariably contain more detailed summaries, analysis and comment than any one firm's overnight Budget commentary. And within 48 hours it's often out of date as more related documents are published by HMRC and Treasury revealing more details of the announcements contained in the Budget. And in time some of the least well thought out ideas will be modified (if we're lucky) before new rules come into force. I'm quite sure this will happen, for example, as regards the taper provisions related to the 45% top rate of tax announced last year - which causes an unintended rate of 60% on some income bands between £100k and £150k.

If you really feel it's necessary then, in my view, it's much more cost effective to buy in a Budget summary from a commercial source - and to share this with clients and contacts in a branded cover. This approach allows you to satisfy the (supposed) client demand whilst allowing you to focus on key elements of the Budget that might be of immediate relevance to key clients. In recent years there haven't been many such issues as most tax changes are now announced so far in advance. The reduction in VAT from 17.5% to 15% last year is the exception that proves the rule! ;-)

This year of course even more attention than usual is being focused on the Budget. But how clear will the commentaries be as regards the impact of the tax changes that Mr Darling announces? ie: When will the tax changes actually hit taxpayers' pockets? I'll post a separate blog about this.

On past performance most commentators will only have time to replicate the headlines and spin that are contained in the main Budget press releases. I'm happy to let others do that. I'll explore and explain the TaxBuzz over the coming weeks and month as further details and implications become apparent.