Working Together Issue 25 - May 2006

Contents

Working Together Publication

In view of the increasing use of the Internet amongst tax practitioners and the establishment of HMRC, we have decided that this edition of Working Together will be the last to be produced in paper form.

We will continue to publish Working Together on this website.

Moving to an Internet-only version of the publication will enable us to bring you more regular and up to the minute information. Please send any suggestions for features you would like to see to the editor at Greig Rattray

Facility to Provide New Employer Registration Details Online

Following a successful small pilot recently, HMRC has made available an online facility for new employers and agents to provide new employer registration details to request a PAYE scheme to be opened.

Until now, new employers or their agents (including payroll bureaux and other intermediaries) wishing to register with HMRC for a new employer PAYE scheme needed to telephone New Employer Helpline.

Both the telephone and online options are now available.

HMRC will issue an acknowledgement email to all online new employer registration details received.

Following successful processing of the details, the new employer PAYE and Accounts Office reference numbers will be issued by post, as now, usually within 3 working days. A Starter Pack will also be issued too, if requested.

Early feedback from agents taking part in the pilot is encouraging. For example they welcome the flexibility the online facility gives, to provide registration details at times to suit them, without having to spend time on the telephone.

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Local Agreements with Hoteliers, Tourist Associations and Tax Practitioners for Board and Lodgings Adjustments

Many guest house and hotel owners live on the premises. This means apportioning costs for the private use of accommodation, facilities and food. In the past a handful of Area Offices from the former Inland Revenue have agreed a fixed scale of add-backs with local hoteliers and tourist associations and tax practitioners, as a pragmatic approach. This has led to inconsistency across the country as each Area participating in these arrangements has set its own scales.

We will not disturb any arrangement that has been agreed for 2004-05 (Returns with a filing date of 31 January 2006) and earlier years. Area Offices which have entered into such arrangements with particular hoteliers, tourist associations or tax practitioners will write to explain that those arrangements are being withdrawn.

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VAT & Online Services

At present, a VAT-registered trader applying to use online services is asked a number of security questions, including his or her effective date of registration (EDR). Many traders, especially those who have been registered a long time, have forgotten the date they formally became registered and telephone the National Advice Service (NAS) for help. For obvious reasons of security and requirements under the Data Protection Act, NAS will not give out this information over the phone. However, this often leaves the trader unable to progress the application and so NAS has issued new guidance to their staff so that if they are asked for a trader’s EDR, they will offer to issue a new VAT 4 Certificate of Registration. This shows the EDR and will be sent to the principle place of business, usually within a few days.

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Complex Personal Return (CPR) Teams – An update

HMRC’s CPR teams deal primarily with individuals whose Self Assessment (SA) Tax Returns show high income or wealth and complex features. Examples of complex features include large amounts of foreign or trust income, residence and domicile issues, significant land and property income or significant capital gains/losses.

The CPR teams normally handle all aspects of the taxpayer’s personal tax affairs. This includes processing Returns, general correspondence and telephone calls from the taxpayers and their tax advisers, and HMRC enquiries into the accuracy of Returns.

Further information about the teams can be found on the HMRC Internet site and in earlier issues of Working Together (9,14 and 18).

This article tells you about three developments in 2006-07 as these may have an impact on tax advisers and their clients.

Westminster CPR team

The Westminster CPR team is closing. A new CPR team recently created in South Wales will deal with most of the Westminster team’s taxpayers. Some other taxpayers will be dealt with by one of the existing CPR teams. The CPR teams are writing individually to all taxpayers affected and their tax advisers. Most taxpayers affected will have the contact details for their new office on their 2005-06 Return (which was issued in April 2006).

This development is part of HMRC’s response to the Government requirement to move some work away from the South East of England. We are doing what we can to minimise disruption to customers and their advisers during the transfer - including a period of overlap when there will be CPR team staff in both locations. Taxpayers and tax practitioners can help by ensuring that they use the new contact details unless specifically asked to deal with Westminster team members. If you are using substitute Returns, the CPR team address may need to be amended.

Customers no Longer Needing the Attention of a CPR Team

As in previous years, there will be some transfers from CPR teams to other Offices during 2006-07. The CPR teams will identify customers with lower levels of total income and no apparent complexities that would warrant the continuing attention of a CPR team. By transferring responsibility for these customers to other Offices, the CPR teams will be able to accept other customers whose tax affairs are more likely to require the level of attention available from CPR teams.

The identification and transfer process includes a letter to each of the taxpayers and tax advisers concerned to explain that we are planning to transfer responsibility to another Office. There may be a few instances where customers and their tax advisers have more up to date information that might lead us to reconsider. For example, there may be high value transactions that will appear on the next Return. We would welcome the help of tax advisers in bringing this information to our attention.

For customers who are no longer dealt with by a CPR team, it would be very helpful if advisers could ensure that completed paper Self Assessment Returns are sent direct to the new Tax Office and not to the CPR team which issued the Return.

Identifying New Customers for CPR Teams

CPR teams are expecting to identify around 6,000 new taxpayers during 2006-07. As in previous years, identification will be by reference to high levels of income and/or wealth and some indication of actual or potential complexity about the customer’s tax affairs.

The transfer process includes a letter to each of the taxpayers and their tax advisers to explain that there has been a change in responsibility for their tax affairs. The letter will give the name and direct line telephone number of a caseowner, who will be the first point of contact for any questions.

For customers who are now to be dealt with by a CPR Team, it would be very helpful if practitioners could ensure that completed paper Self Assessment Returns are sent direct to the CPR team and not to the Tax Office which issued the Return.

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Bank Account Details on VAT 1s

A number of and tax practitioners have queried why VAT 1 forms submitted without bank account details are being returned to the applicant, delaying the registration.

The existence or otherwise of a bank account is one of the factors HMRC looks at when considering the validity of the application. Many newly-established businesses will not have their bank account details at the time the VAT 1 is submitted and to avoid the form being returned to ask why no such details are being provided, applicants should enclose a letter with the form, explaining why no account details are available, and including any available evidence (for example, a copy of a submitted account application). We are currently looking at how this information can be more widely communicated.

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Working Together with the PAYE Concentrations

The Working Together PAYE concentrations panel met on 16 March 2006. Topics covered at the March meeting included, coding out expenses, Contact Centre service to agents, SA Returns (Paper & Online) Amendments & repairs to Returns, Compliance Structure and recent moves of PAYE work out of the South of England to Large Processing Office (LPO). If you would like more details please request information via the LPO email window.

The email window provides an opportunity for agents who have dealings with the Large Processing Offices (see link above for list of offices) to be involved in the consultation process. We are keen to hear from you on anything that might improve our processes, solve common problems and find joint solutions. If there are any issues you feel should be discussed at the next meeting please let us know via the e-mail window which is now a permanent feature on the Working Together pages of the HMRC website.

The dates for future meetings are

7 June 2006
4 October 2006
7 February 2007

We look forward to hearing from you.

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Requests for Repayment of IT Liability Where Net CGT Liability Exists

Where a Self Assessment Return includes both a Capital Gains Tax liability and an overpayment of Income Tax, these elements are aggregated and not treated as separate liabilities when determining the overall SA liability payable or repayable.

We have received an increasing number of reports of requests being made for repayment of overpaid income tax even though there is an overall net SA liability "becoming due" for the year. As no overall repayment arises in these cases such requests will be refused.

The aggregation of IT and CGT liability elements in establishing the overall SA liability for the year is supported by the legislation in S59(B)(1) Taxes Management Act 1970.

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2005-06 SA Tax Return Guide - Business Use of an Asset

This article is to let you know about a correction to the 2005-06 Self Assessment Tax Return Guide. Example 11 on the Capital Gains Helpsheet IR279 is incorrect. The Internet version will be corrected as soon as possible. The revised text appears below.

Example 11 - asset used only part of the time as a business asset

You acquire a property on 16 March 1995. You sell the property on 5 April 2006 and make a gain of £20,000 on the sale.

The property was a business asset until 5 April 2002. Between 5 April 2002 and when the property was sold on 5 April 2006 it remained empty. The gain during this period will be treated as arising on the sale of a non-business asset.

There are seven whole years in your qualifying holding period for a business asset and eight years for a
non-business asset (being seven whole years and the bonus year as the property was acquired before
17 March 1998 and seven full years after 5 April 1998).

During the period of ownership falling after
5 April 1998 (6 April 1998 to 5 April 2006) the apportionments are:

  • business use proportion 1461 days (or) 50%
    2922 days
  • non-business use proportion 1461 days (or) 50%
    2922 days

Computation

First calculate the gain on the period while the asset was a business asset: £20,000 x 50% = £10,000.

The remainder of the gain will be treated as a gain on a non-business asset: £20,000 x 50% = £10,000.

So £10,000 of the gain qualifies for the business asset taper appropriate to a qualifying holding period of seven years. So 25% of this part of the gain will be chargeable: £2,500.

£10,000 of the gain qualifies for the non-business asset taper appropriate to a qualifying holding period of eight years. So 70% of this part of the gain will be chargeable: £7,000.

The aggregated chargeable gain is £9,500.

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Self Assessment Online Filing for Agents - an Update

Planned Changes for Filing 2005-2006 Returns

In addition to supporting legislative changes, we are constantly listening to suggestions from customers and looking at ways to improve our services. In response to customer feedback we are introducing several changes to our services next year.

Filing Only Status

From April 2006, agents using 3rd party software to create and file Self Assessment and company tax returns online for their clients have been able to do so without 64-8 authorisation (known as file-only). The client no longer needs to be on your Gateway Client list in order for you to file returns on their behalf. However, a full 64-8 authority will be required before an agent can discuss client details with HMRC Offices or view liabilities and payments and statements online.

We plan to introduce this facility for agents using our own Online Tax Return software at a later date.

HMRC Online Tax Return Software

We plan to improve navigation within the application by introducing a "Bookmark" so that customers can go straight to the page they were on at their last visit. We have also included a "Home" link from the application back to the landing page at the Portal.

Attachments to SA Returns

Self Assessment customers will be able to attach one or more pdf. files to their Online Tax Return subject to an overall size limit of 5MB. This feature is currently being developed and we hope to introduce it in Autumn 2006 in time for the "peak filing season" for 2005-06 Tax Returns.

HMRC’s software will support this enhancement and a test facility is available for 3rd party software developers to include the facility in their product. Please contact your software vendor if you require further details of when they will be taking advantage of the service.

Update on the Online Agent Authorisation service

The online authorisation is equivalent to a full 64-8 authority and allows HMRC to exchange information with agents about their clients. The new service has proven popular with agents, with over 20,000 authorisations already processed through our website.

From April 2006 the Online Agent Authorisation service has been able to accept Online Agent Authorisation requests from 3rd party software users.

Getting Help

Contact our Online Services Helpdesk

Minicom 01274 841278

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Redesigning HMRC Enquiry Centres to Improve Customer Service

Traditionally HMRC’s Enquiry Centres have offered a walk in and wait service. At busy times this has led to long queues in less than ideal conditions (for customers and staff) and no certainty for customers as to when they would be seen by an adviser.

Our Enquiry Centres are being redesigned to improve the service to customers. In our larger Enquiry Centres, floorwalkers will meet customers on arrival. These trained advisers will assist customers by quickly establishing their needs and identifying the most effective way of meeting those needs. Very simple issues will be dealt with on the spot by the floorwalker. Callers with less simple enquiries may be encouraged to use the telephones where speed dial links will take them through to our Contact Centre services where their enquiry will be dealt with. Callers will also be encouraged to use HMRC’s online services by using one of the computers with Internet facilities at the Enquiry Centre. Those callers who require a face-to-face service will continue to receive one. Callers with urgent issues will be seen as soon as possible. Callers with less urgent issues will be offered an appointment for a time that suits them. Appointments can also be made over the telephone by contacting the Contact Centres.

The majority of our other Enquiry Centres will also be operating an appointments system. In these offices, customers will be greeted on arrival by an adviser who will ascertain their needs and direct them to a phone (with speed dial access to HMRC Contact Centres) We believe that these changes will improve the service offered to Enquiry Centre callers.

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Including Non-PAYE Income in the Code Number

The PAYE Regulations were rewritten as part of the Tax Law Rewrite Project, with the intention of making them clearer and came into force in April 2004. The regulations on coding out non-PAYE income are at Regulation 14 of Statutory Instrument 2682 of 2003. We have always included amounts of non-PAYE income in PAYE codes as an administrative convenience - it avoids a separate tax bill for many individuals or leads to a reduction in the Self Assessment (SA) Balancing Charge. Whenever a customer or their agent objects, we remove the amount. (For clarity, a taxpayer or their agent cannot ask us to remove amounts that are PAYE income - for example benefits in kind). Some taxpayers prefer to have all or most of the tax due, collected via PAYE and in some cases this avoids the need to complete a Return. Where the taxpayer or agent objects to the coding out of non- PAYE income, we revise the code and make a note on the record which should mean that we don’t attempt to code out non-PAYE income in the future. The customer (or agent) should not have to contact us every year. We are aware that this has not been happening in some cases and we apologise for that. As a result of feedback through Working Together, the acting agent should also receive a copy of this letter. Again, we understand that this has not been happening in some cases: we are sorry for that and will reiterate our guidance to Area Offices.

There has been confusion amongst some agents about the purpose of Box 23.1 of the Tax Return. If this Box is ticked, we will not include the underpayment of overall liability in the PAYE tax code and it will be collected through SA. It has no effect on the amount of non-PAYE income to be coded out.

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Agent Authorisations and Form 64-8

Registering agent authorisations quickly and accurately on all appropriate systems is an important issue for our working relationship with agents. Since March 2005, the Central Agent Authorisation Team (CAAT) at Longbenton has received over 1.2 million 64-8s. We know that agents have continuing concerns about the speed with which our systems are updated, but turnaround times have reduced significantly and currently most 64-8s that CAAT receive directly are processed within a week of receipt. Some agents have understandably assumed that CAAT has not processed the 64-8 for a particular client because that client has not yet appeared on the online client list. There was a problem with the Government Gateway/HMRC website interface and the SA system that was causing a delay in the update of client lists, but this has now largely been resolved.

CAAT does not currently handle

  • 64-8s for individuals who are newly in SA (but not self-employed)
  • 64-8s for new partnerships
  • 64-8s for new trusts
  • 64-8s for companies (Corporation Tax cases)
  • 64-8s for claims cases dealt with in our Claims Offices
  • 64-8s for expatriate or complex personal return cases
  • 64-8s and CWF1s accompanied by CIS Registration Card applications

These forms/authorisations should be sent to the appropriate Area office, Expatriate or Complex Personal Return Team.

If you know the UTR (and NINO if appropriate), please ensure that you use them on the forms as this will help us process the information more quickly.

Please also ensure that all the requested information is completed including signature, the addresses of your client and your firm.

CAAT does not handle correspondence, so if you have to send us any of the following items with a 64-8 form, send both to the appropriate Area office so that they can be actioned quickly:

  • claims to repayment
  • tax returns
  • claims to reduce payments on account
  • complaints
  • notification of a client’s death or incapacity.

In November we launched an online agent authorisation service which allows agents to set up authorisations for the majority of their clients without the need for paper 64-8s or FBI 2s. The first release of this service does not include authorisations for VAT or for individuals who are not SA customers, but we plan to extend the service to these and others in the future. Thousands of agents have used this service successfully and it enables them to delete old clients as well as add new ones.

We are also redesigning the paper 64-8 so that it will enable agents to include VAT. That means there will be no need for them to submit a separate letter of authority for that client. The new form will be available in the next couple of months.

Editorial

Working Together is a partnership between HM Revenue & Customs (HMRC) and CIOT, ICAEW, ACCA, ICAS, ATT and AAT.

Letters on any article appearing in this publication should be sent to the editor, Greig Rattray, Working Together Team, 5S South West Wing, Bush House, London WC2B 4RD or email Greig Rattray or your professional body.

Back issues of these can be downloaded from our featured area.

Copyright

This publication is covered by © Crown Copyright. There is no objection to firms copying the publication for their own use. Anyone wishing to republish Working Together or extracts more widely should write for permission to the editor.

Contact details

One of the key objectives of Working Together is to improve two-way communication between HMRC and tax advisers. If you have any comments please contact the HMRC Working Together Team, or your Professional Representative (contact details are below). If you are contacting your professional body, please make clear that your comment is about Working Together) or via your local Working Together Group.

 

Organisation

Contact Name

E-mail address

HMRC

Greig Rattray

Greig Rattray

CIOT

Richard Mannion

bmarsden@ciot.org.uk

ICAEW

Richard Shooter

tdtf@icaew.co.uk

ICAEW

Susan Gompels

tdtf@icaew.co.uk

ICAEW

Jane Moore

tdtf@icaew.co.uk

ACCA

Peter Jennings

wt@accaglobal.com

ICAS

Derek Allen

tax@icas.org.uk

ATT

John Kimmer

WT@att.org.uk

AAT

Brian Palmer

WT@aat.org.uk

HMRC is solely responsible for the content of this publication and for the views expressed in it.