Working Together-Issue 3

 

Contents

Welcome to this third edition of Working Together

Why am I, a tax specialist, writing this and what am I doing here with the Working Together Team?

As I happened to have a gap in my diary until summer 2001, I volunteered to spend part of each week working with the Inland Revenue on the Working Together initiative. They were keen to involve someone from the world outside in contributing to the project directly at national level.

Why am I doing it? If I were completely honest with myself probably because I couldn't resist working on the other side of the fence! But more importantly, having seen huge changes to the UK tax system in my career so far, I genuinely believe that Working Together can make a real difference of benefit to everyone.

What am I actually doing? Working alongside colleagues from the Inland Revenue who are trying to find solutions to the many issues on the Register and hopefully providing a (sometimes different) tax adviser's perspective.

What do I hope to achieve? In the short term obviously I hope we will be able to provide some solutions of real value to tax agents generally. For the first time we are being recognised by the Revenue as a group of customers who matter and whose views are worth listening to.

Longer term I hope that the lasting achievement of the Working Together Initiative will be a robust local liaison structure throughout the UK. This should provide early warning of any new national problems that arise enabling them to be sorted out sooner rather than later. Wherever you practice tax, you should have access to this through the various professional bodies or the Revenue's Network Offices. Not everywhere is covered yet but we are Working Together on it and will publish a report on progress in the next edition.

In the meantime, if you have an issue please do try and raise it locally either with one of the professional bodies or with the Revenue. But if you can't find anyone to listen and you think the issue may be important nationally, please do contact us here (contact details are given on the back page).

signature (1k)

David Earle

Chartered Tax Adviser

Self Assessment Tax Return Guides

Copies of the

  • SA1000 Self Assessment Tax Return Guide for individuals
  • SA1001 Self Assessment Partnership Tax Return Guide
  • SA1002 Self Assessment Trust and Estate Tax Return Guide

incorporating related forms, notes and help sheets, are produced and issued on an annual basis as a service to tax practitioners and Inland Revenue staff.

For 2000-2001 we'll be using the agent details held on the Self Assessment system for bulk mailing purposes. We'll send at least one copy of each of these Guides to any agent with more than five clients on the Self Assessment database.

If you had to order extra copies last time, our database will track any supplementary orders and the initial supplies you receive in March 2001 should match the quantity you ordered, in total, last year.

We've got new ordering and mail-out arrangements for 2000-2001 so if you need extra copies after your initial supplies have been delivered, you can order them by:

  • e-mailing (saorderline. ir@ gtnet. gov. uk), or
  • faxing your order to the SA Orderline on 0845 9000 604, or
  • telephoning the SA Orderline on 0845 9000 404, or
  • completing the tear-off re-order card that will come with your initial supply of the guides, and sending it to:

    SA Orderline
    PO Box 37
    St Austell
    PL25 5YN

Any additional orders must clearly state how many copies of each of the three guides (individual, Partnership, or Trust) are required and where they are to be sent. Please note: the SA Orderline will not be able to process any orders for Return Guides until after 6 April 2001.

We must stress that Inland Revenue offices will not hold copies of the SA guides for issue to agents. However, if you find that the name and address details shown on the initial distribution are incorrect, or if there is duplication, please contact the Agent Maintainer at your local office and ask them to correct the details held on the Self Assessment computer system.

We do not intend to do another print run so please only order sufficient guides to meet your needs. After 6 April 2001 you'LL be able to view the forms, notes and help sheets, and download them, from the Inland Revenue Self Assessment web page at www. inlandrevenue.gov.uk/sa

Tax Return Issue: No Guides Where Agent Acting

Currently, all taxpayers that are sent a paper return also receive the Tax Return Guide and a Tax Calculation Guide. If a taxpayer is professionally represented it is usual for them to pass the return on straight away to their agent. You have told us that it is a waste of paper to issue the Tax Return Guide and the Tax Calculation Guide to represented taxpayers since neither you nor your clients need them.

From April 2001 if a taxpayer is professionally represented and receives a paper return, we will issue only the Tax Return and any supplementary pages needed. We will not issue the Tax Return Guide and the Tax Calculation Guide. A note on the return will advise the taxpayer that if, exceptionally, they require these guides, they can obtain them from our Orderline on: 0845 9000 404.

SA Planned Issue Dates: December 2000

Many of you have asked for advance notice of the issue of SA Statements of Account and reminders. Here are the planned key dates for the remainder of the year.

Statements of Account-from 11th to 18th December

Filing and payment reminders-19th December to 8th January

All SA taxpayers should receive either a Statement of Account or a reminder before the 31st January. The Statement, reminder and the clients' account information sheets all incorporate payslips.

Clients' Account Information-from 5th to 18th December

The sheets issued to agents will show the state of clients' Self Assessment accounts. However they do not include any interest which may have accrued so please bear in mind that they are not true copies of the taxpayers' statements. We do our best to post the sheets to agents as quickly as we can but printing and paper-handling on such a large scale inevitably takes time. So you may receive the sheets some time after the date on which the snapshot of the Self Assessment account was taken.

Clients' Account Information

The next issue of what was previously referred to as `Self Assessment-Statement of Account Agent Details' is due to be issued in December. The details supplied are not a mirror image of the statements we send to your clients. They are a snapshot of each Self Assessment account at the time the information is extracted from the SA database. To make this clearer we have revised the covering letter to say `Self Assessment -Clients' Account Information'. It is particularly worth noting that unlike the Statement, the Clients' Account information does not include any interest which may have accrued to date on outstanding arrears.

The covering documentation for the December issue has also been expanded to include more information about how to pay and contains recommended methods of making payment. It will help us to ensure that payments are allocated quickly and securely to the right account if you follow the advice given. If you would like to see what the covering letter will look like before go to:

www.inlandrevenue.gov.uk/sa/forms/content.htm

Carry-back Claims: Sorry

In the July issue of Working Together we said we hoped to deal with “carry-back” (Schedule 1B) claims automatically from April 2001. At the moment all these claims have to be dealt with clerically after the return information has been captured on the SA computer system. This is a known source of errors and delays.

Unfortunately, the development of this enhancement has proved to be much more complex than we had first thought, so we will not be able to introduce it in April 2001. We are still working on it though with a view to bringing it in within the next 18 months. But in the meantime we are tightening up our procedures to reduce the scope for mistakes and delays.

SA Reminders

In previous years we issued a combined filing and payment reminder in December to taxpayers who would not be sent a statement before the 31 January filing and payment date. This included people who had already filed their return but whose return had not yet been processed. The receipt of a reminder caused confusion and generated a large number of telephone calls from taxpayers who had been worried by them.

The old reminder was a multi-purpose form acting as both a payment and return reminder and also providing a payslip on which to make payment.

Following improvements to the SA system we will be issuing two different types of reminders from December 2000. We are now able to separately identify those taxpayers who have filed their return and issue them with a reminder that only refers to payment by 31 January. The existing dual payment & return reminder will still be issued to those taxpayers who have not filed their return by mid December. If you would like to see in advance what they will look like, please go to:

www.inlandrevenue.gov.uk/sa/forms/content.htm

Late filing concession for incomplete returns resubmitted

Taxpayers who file their SA returns close to the filing deadline run the risk of incurring late filing penalties if their return has to be sent back because it is incomplete. In previous years we have operated an informal concession that allows 14 days for resubmission of the correctly completed return without risk of a late filing penalty, where the return is incomplete as the result of a genuine oversight.

This practice is still under review to decide whether or not it should be continued. In the meantime, we will still operate the informal 14 days leeway for resubmission, for the 31 January 2001 filing deadline.

Trusts with no income: Annual SA returns

We have agreed to try and eliminate the issue of unnecessary annual SA returns to trusts with no income, and no likelihood of income or gains. In these circumstances:

  • for a new trust with no income or gains, there is no need for the trustees to notify the Trust District of the existence of the trust
  • for existing trusts the trustees may request that either
    • the record for the trust should be closed by the Trust District or
    • that tax returns should not be issued annually

The Trust District will ensure that annual returns are not normally issued but the position may be reviewed periodically. If exceptionally the Trust District decides for any reason to issue a return then it must be completed.

This practice does not affect the trustees' legal responsibility for notifying the Trust District of chargeability to income tax and/or capital gains tax for any year for which no return is issued.

What is Area Management?

Area Management is about reorganising the management of our local offices and the work we undertake in them. It is designed to help the Revenue have more flexibility in how we organise our work, in what we do and the way we do it.

Through a phased reorganisation, all our local offices will be grouped into 60 or so management units or `Areas'. Organising in this way will allow us to:

  • Move work freely to people with appropriate skills. This will not only help us to manage our day to day work, but will also allow us to manage the impact of future changes.
  • Build a better understanding of our customers in an Area. This will enable us to make better use of information about the local economy, local businesses and the local community so that we can deliver a wide range of activities from education and support, to persuasion and enforcement.
  • Make more efficient and effective use of our resources. For example, by centralising our complex technical work we will be able to make the most of our professional resources, and by setting up dedicated telephone units we will be able to improve the efficiency and effectiveness of our local telephone services.

Area Management is not about office closures. We are retaining a presence in towns where we currently have an office, and by joining up with other Government Departments we will be able to provide services in new locations. Even though we may change the nature of some of the work undertaken in our local offices under Area Management, local offices will remain the focus of our local services.

SA Return: Pension Income-PAYE Reference

The SA tax return for individuals does not ask for the PAYE reference for any pension income returned . A recent article by Paul Hill (November 2000, Tax Adviser), following a visit to a Network Office as a representative of ATT, offered the following tip. It does help us if the reference is hand-written on page 4 of the return where it can be readily seen by Revenue staff during processing. Although we have no plans to require this information to be provided, including references helps us to trace the tax record more quickly.

Special allocation of SA payments

Generally, when an SA payment is processed by one of the Accounts Offices this will be done automatically and it will be allocated against the taxpayer's earliest debt first. The Accounts Offices are not organised to allocate payments any differently even where instructed by the taxpayer or their agent when sending the payment. If the Accounts Office receives special instructions on the allocation of an SA payment, they will refer them to the appropriate Tax Office to deal with. We recommend that if you have a request for a special allocation of SA payments, you send it separately, direct to the appropriate Tax Office where the request can be dealt with promptly.

Review of Income Tax Self Assessment (ITSA) Enquiry Work

We mentioned in the last issue of “Working Together” that we have been reviewing the law and practice covering ITSA enquiries. So far the Chartered Institute of Taxation and the Inland Revenue have worked together in carrying out a detailed research study of how ITSA enquiries are working in practice, what is working well and what might be improved.

The emerging findings were discussed at the end of September with a panel of outside representatives drawn from our Operational Consultative Committee. There was general agreement on the issues where further work is required.

The meeting concluded that some legislative changes were desirable to simplify the completion process at the end of an enquiry and to allow a specific technical point to be litigated during an enquiry (this would be particularly helpful for large companies or partnerships). However, such changes depend on ministerial approval.

There was also general agreement on the procedural aspects which are causing most concern: including when the Revenue should ask to see the taxpayer's private bank account statements and when we should ask for an early meeting with the taxpayer. We also had a helpful exchange of ideas on how we might build on the best aspects of faster working while abandoning the aspects which have proved difficult to work in practice. The Revenue has agreed to look in detail at its approach in these areas, in the light of the research findings. We expect then to have further discussions, with taxpayers' representatives and within the department, before deciding on best practice for the future.

On current plans we would hope to complete all this work before the next Budget.

By the time you read this we expect the report of the research findings to be published.

National Minimum Wage (NMW)

There has been confusion about whether company directors must be paid NMW. The Tax Faculty of the Institute of Chartered Accountants in England and Wales has published a guidance note dealing with the impact of NMW on directors etc (Taxguide 07/00, September 2000, available from the ICAEW website at www. icaew. co. uk). The text has been agreed with the Department of Trade and Industry (DTI) who have responsibility for NMW policy and legislation and includes the following statement:

“The DTI have confirmed that if there is no written employment contract or other evidence of an intention to create an employer/worker relationship they will not seek to contend that there is an unwritten or implied employment relationship between a director and his company. As the Inland Revenue administers NMW as agents for the DTI they will adopt this policy also.”

The DTI themselves have also published a new edition of “A Detailed Guide To The National Minimum Wage” (October 2000) which reflects this same view. This is a technical manual designed for those with a special or professional interest in how the rules work and is available on line at the DTI website (www. dti. gov. uk/er/nmw/).

Additional NMW information is also available there in a user-friendly interactive form.

This publication also includes guidance on voluntary workers. This confirms that those who provide their time and effort completely free are not subject to NMW. But some “volunteers” who receive some sort of payment or benefit could still count as “workers” subject to NMW.

Form P11 (Deductions Working Sheet) for 2000/01

A new version of form P11 was introduced for 2000/01 to reflect changes in the rules for National Insurance Contributions, and the introduction of Tax Credits and the Collection of Student Loans. The new format will also mean that a revised version of form P14 for 2000/01 will have to be completed at the end of the year.

However we are concerned that some old-style forms P11 are still being used. This means that we may not be able to process forms P14. It is important that all appropriate boxes on the forms P14 are completed, including the 4 boxes for earnings details from columns 1a to 1d of the form P11. If we do receive incomplete or old-style forms P14 for 2000-01, we will need to return these forms to employers and this could cause delays in updating employees' tax/NIC records.

Please check that the correct version of form P11 is being used. Or where a computerised payroll is used, that the software has been updated for 2000/01.

If the wrong stationery is being used, please order supplies immediately from the Orderline (0845 7 646 646) or via our Website. Guidance on how to complete the forms is on cards 8-11 of the April 2000 version of the CWG 1 or from the Employer's Helpline on 0845 7 143 143.

If a commercially available software package is used, if in doubt, please contact your software supplier to obtain the correct software.

Where in-house developed payroll software is used, information about the format for 2000/01 is given in Inland Revenue Notes For Payroll Software Developers; series 9, number 15. This is available from the Orderline or via our Website.

SA returns, provisional figures & error or mistake claims

In addition to the right to amend the Self Assessment Return within 12 months of the filing date (normally 31 January), the taxpayer is also entitled to make an `error or mistake' claim within 5 years of the annual filing date for the year concerned. The general rules for error or mistake claims, as set out in Section 33 TMA 1970, are otherwise unaltered from the pre Self Assessment position.

Where necessary e. g. when the return is not under enquiry and can no longer be amended, such a claim can be used by the taxpayer to replace a provisional figure with a final figure once known. If the final figure leads to an increase in the Self Assessment, a “discovery” assessment can be made by the Revenue to collect the extra tax due.

Voluntary Arrangements: A Partnership Approach

On 2 November 2000 the Trade & Industry Secretary Stephen Byers and Paymaster General Dawn Primarolo announced the creation of a single unit to deal with Voluntary Arrangements (VAs) across both Revenue Departments. This joint unit will be in place by 1 April 2001 at the latest and will be located in the Inland Revenue's Enforcement Office in Worthing.

A VA is a legally binding agreement, to pay outstanding debts, usually over a set period, while allowing a trade to continue through a period of financial difficulty. The arrangement must be accepted by the creditors owed at least three-quarters of the total amount of the debt and must be supervised by an authorised Insolvency Practitioner.

Last year, the Government set up a joint Treasury and Department of Trade & Industry review to consider how insolvency law and practice could be changed to develop the rescue culture and aid businesses that are facing financial difficulties. Separately, the Inland Revenue and Customs & Excise announced earlier this year that a joint Better Quality Services review would consider how we handle debt management. The team's report is due at the end of the year although an interim report covering the insolvency aspects of our work was presented to both Boards in August. One of the key recommendations was the establishment of a single unit to handle Vas

The creation of a single joint unit to handle all Vas is a key part of the package of reforms announced on 2 November 2000, to help rescue businesses in trouble. To fully satisfy this package, we will:

  • consider Vas in the same way as a commercial creditor. Each proposal will be considered on its individual merits and principally in relation to the likelihood that the approval of the VA will lead to an improved recovery of the Departments' existing debt and to a closer relationship to support the efforts of the business to meet future liabilities falling due once the VA is put in place.
  • introduce and publish tight turnaround targets for responding to proposals.
  • publish the criteria against which proposals will be judged.
  • encourage Insolvency Practitioners to obtain waivers of confidentiality so that the new joint unit can fully disclose its reasons when it decides to reject proposals. This way those reasons can be thoroughly examined and discussed.

A new forum, the Joint User Forum for Voluntary Arrangements will be created to bring Insolvency Practitioners and other customers and stakeholders into the heart of this area of our business so that we can share issues and achieve greater understanding. We want to promote an environment within this forum to explore the options available for customers and stakeholders to inform the performance targeting process and measure with us the effectiveness of our performance.

We are firmly committed to supporting government policy and to making a real contribution to the development of the rescue culture in the United Kingdom. Vas are about enabling people and business to get it right. If the arrangement succeeds then everyone benefits. The debtor avoids formal insolvency and continues to trade. The return of the creditors is enhanced thereby reducing their bad debts. Employees keep their jobs and just as importantly, the ongoing business is helped to ensure that in the future it files its returns and makes all payments on time.

If you want to know more about what we are doing; or how we are progressing in relation to the setting up of this joint unit; or how we are developing commerciality within our approach and a sharper focus on service delivery standards; please telephone Keith Stockman on 01903 701017 or Dick Ivory on 01903 701077.

Our 'attitude' to Debt

In Issue 2 we mentioned the workshop we were arranging with your representatives to discuss and review our policies and practices. Unfortunately, travel problems caused by the recent fuel shortages made it necessary for us to cancel the workshop we had planned to hold on 15 September. We are planning another workshop shortly and hope this will be arranged by the time you read this article. We will let you know the outcome in our next edition.

Register Of Issues

Shortly after you receive this edition of Working Together, we intend to publish the updated Register of Issues on our IR website at www. inlandrevenue.gov.uk/wti/index

Included on the Register will be details of any progress on the issues. If you would like a paper copy please write to the address on the back cover.

Open Government: IR Guidance Manuals on the Internet

Many of our internal guidance manuals available under open government have now been published on the Inland Revenue website www.inlandrevenue.gov.uk/manuals/index. htm.

We are actively working towards making all of them available in this way. The list of our manuals that have been or will shortly be published on the website is as follows:

Advanced Investigation Manual (To be published shortly)
Accounts Office Review Unit (AORU) Procedures Manual
Assessment Procedures Manual
Assessed Taxes
Banking Manual (To be published shortly)
CA Manuals (To be published shortly)
Capital Allowances
Capital Gains Manual
Collection Manual
Company Taxation
COTAX Manual
Compliance and Investigation Operating Manual (To be published shortly)
Debt Management Manual (To be published shortly)
Decision Maker's Guide
Double Taxation Relief Manual
Employer Compliance Manual
European Economic Interest Groupings
Enquiry Handbook
Enforcement Manual
Enforcement Manual (Scotland)
Employment Procedures Manual
Employers Section Manual
Employment Status Manual
General Examination Manual (To be published shortly and will be merged with Debt Management Manual) General Insurance Manual (To be published shortly)
Interest Review Unit Guidelines (To be published shortly)
Investigation Handbook
Inspectors Manual
Independent Taxation Manual
Insolvency
International Tax Handbook
Life Assurance Manual (To be published shortly)
Manufactured Overseas Dividends Guidance Manual (To be published shortly)
Movements Manual: Introduction: Advice to taxpayers
National Audit Group Instructions
National Minimum Wage Guidance Manual (To be published shortly)
Oil Taxation Office Manuals
PAYE Instructions (Collection)
Pension Schemes Office Manual (To be published shortly)
Personal Contact Manual
Profit Related Pay (To be published shortly)
Property Income Manual
PSA Handbook
Recovery Manual
Relief Instructions
Residence Guide
Repayment Claims Manual
SA Manual
SE Manual
Shares Valuation Division (To be published shortly)
Small Self Administered Schemes (To be published shortly)
Stamp Taxes Manual (PDF version )
Third Party Information Directory (To be published shortly)
Trust Manual

Mail Shot to Agents: Annual Packs

We will be writing out to accountants/employer payroll agents during the first week of December, asking you to let us know how many employer Annual Packs, etc you will need for your clients. This information will be used to prevent the unnecessary issue of multiple Annual Packs and will be passed on to Tax Offices so that our database of employer records can be updated.

We know that some of you receive more Annual Packs than you need because you get one for each of your clients. The December mailing will include a notification advice which needs to be returned to the address shown, giving the name and reference number of each employer for whom an Annual Pack is not required.

How to contact us

If you would like to contact the Working Together Team, please write to:

Working Together Team,
Inland Revenue,
Business Operations,
6N South West Wing,
Bush House,
Strand,
London,
WC2B 4RD

or e-mail: Greig. Rattray@ Ir. gsi. Gov. UK

Editorial

Working Together is a joint initiative with the CIOT, ICAEW, ATT, ACCA and ICAS. Although the material in this publication obviously reflects discussion and consultation with these bodies, the Revenue is solely responsible for its contents and for the views expressed in it.

Back issues

Issues 1 and 2 can be downloaded from our featured area on the Revenue website www. inlandrevenue. Gov. UK

If you would prefer a paper copy, please write to or e-mail the address above.

Copyright

Working Together is covered by Crown Copyright. There is no objection to firms copying the publication for their own use. Anyone wishing to re-publish Working Together or extracts more widely, should write for permission to Greig Rattray, Working Together Team, 6N South West Wing, Bush House, London WC2B 4th or e-mail: Greig. Rattray@ Ir. gsi. Gov. UK

 

© Crown Copyright November 2000

 
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