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Zugzwang 2

04 May 2006 / Richard Curtis
Issue: 4056 / Categories: Comment & Analysis , Admin
RICHARD CURTIS sympathises with those tax practitioners who have been on the receiving end of a 'zugzwang'.

LAST YEAR'S HOLIDAY abroad in May should have been fantastic, a week on a small island with no roads or cars and a week in a secluded villa — not a tax return or HMRC press release in sight! The only cloud on the horizon was whether the company's end of year PAYE return had been successfully filed online. On the basis that there were only two employees, I had thought that submitting the form would be a 'doddle'. In retrospect, perhaps it was foolish to have left the filing until the day before I went away, but is not the whole point of online filing its advantage of speed and ease? The reality was that I spent most of Saturday, 14 May 2005 trying and failing to file online and phoning various HMRC helplines. I recall that when I eventually got through to the online filing helpline and explained my difficulties, they helpfully advised me that I had a 'known problem' — unfortunately it was not known how to fix it.
In the end I packed my snorkel and swimming cossie, went round to an accountant friend, gave him all of the forms and information (with back-up signed paper forms P35 and P14s) and asked him to file online if he could or to simply post the forms if he could not. I flew away rather frustrated with my online filing experience, but otherwise (well otherwise than a lost £250) with not a care in the world. Until a week or so later that was — Monday, 23 May at 2.30 pm — when, happily driving along a Turkish country road, my mobile phone rang. Who on earth could it be, I thought, as I pulled over. It must be important — or at least I hope it is, as I am probably paying a small fortune for this call!

'Mr Curtis?'
'Yes … ?'
'HM Revenue and Customs here — Team 95, Newcastle Helpdesk. We wondered if you had managed to file the end of year form online, it's just that if you didn't the deadline has now passed!'

This led to a series of frantic phone calls to my friend who reassured me that he had been able to file online by 19 May. The ability of HMRC to throw one of life's 'curve balls' obviously knows no territorial bounds. I'd been 'zugzwanged'!

A problem shared

Perhaps this shows that, at Taxation, we are not totally removed from the day to day practicalities and niggles of tax life — we share your pain! And the response to Jonathan Hankinson's 'Zugzwang' article (Taxation, 30 March 2006) appears to show that there is a fair amount of pain out there in tax practice land.
Several of Jonathan's correspondents ask 'is there a collective voice for practitioners like us?' Taxation magazine can be that voice and welcomes further comments and feedback on the issues raised in his article. Please write or send an e-mail to the addresses on page 122 and we can then take these matters up with HMRC on your behalf. Following Lord Carter's review, HMRC's relationship with its 'customers' is obviously going to be of major importance. HMRC wish to reduce the burden on businesses of dealing with forms and returns 'by at least 10% over five years'. Responses from readers seem to indicate that this could easily be accomplished by addressing the 'zugzwangs' already mentioned in the comment article. As I have probably mentioned before, I cannot help but think that some of these instances are caused by the lack of an 'holistic' view of a taxpayer's affairs. The events below are a typical example of this.

A mislaid tax return

A reader has sent us copies of correspondence between his firm and HMRC, which are summarised below.

  • 1 December 2005. Letter from the agent to HMRC. 'We enclose for your attention in due course our client's 2005 tax return. We should be grateful if you would attend to the issue of the 2004-05 self assessment tax calculations.' (Attached to the copy letter sent to Taxation was a copy of the signed page 10 of the return.)
  • 22 February 2006. Late tax return penalty notice issued by HMRC. 'You were required to send in a tax return for the tax year ended 5 April 2005 but I did not receive it by the due date. As a result the penalty imposed on you under TMA 1970, s 93(2) is £100.'
  • 28 February 2006. Agent appeals against the penalty, the letter adding: 'Furthermore, according to our calculations, [our client] is due a repayment for the year ended 5 April 2005 ... and no penalty notice should be applicable anyway. However, we are surprised that a tax return submitted on 1 December 2005 has not actually been logged in until 14 February.'
  • 21 March 2006. HMRC reply to the appeal. 'Unfortunately, I am unable to accept this as reasonable evidence as we would expect a copy of your audit trail to prove the return was sent to us on time ... Please consider carefully what I have said and then decide whether or not you want to proceed with your appeal ... To help us improve our customer service, please quote our reference number and provide a daytime telephone number in any correspondence.'
  • 24 March 2006. The agent replied explaining that an audit trail was not considered necessary for a letter posted on 1 December, but he enclosed a copy of a contemporaneous audit trail note prepared for another client whose return was handed to HMRC on 30 January 2006. The agent again explained that 'this whole matter ought to be academic anyway, once the 2004-05 self assessment calculations have been amended in accordance with our earlier letter of 22 March, whereby a repayment arises'.

Hopefully for our reader and his client, this final letter will have put an end to this protracted correspondence and will have resulted in the penalty being discharged.

Working together

Here's a funny thing; who said 'agents are the key to making the system better. I can think of no better group of people to help us. ... My personal commitment is that I will do everything I can as a Board member to keep this moving'?
It was Dave Hartnett as reported in HMRC's Working Together — Issue 19 from November 2004 talking at a three-day workshop, which discussed ways of improving interactions between tax advisers and HMRC and reducing costs on both sides. Things seem to have deteriorated somewhat in the intervening period as one of the main themes of the responses received was HMRC's apparent 'lack of respect' for the tax profession. One reader quoted Mr Hartnett's statement to the HMRC Officer dealing with an enquiry — apparently it was not well received. Several of you wondered whether there was 'a plot to defer clients from taking professional advice'. This issue is represented by comments received such as:

'I am in no doubt that a key strategy of HMRC is to divorce taxpayers from their reliance and respect for their professional advisers, whom HMRC see as drivers/promoters of “unacceptable” tax avoidance'


'I have felt for some considerable time that there appears to be an underlying intention on the part of HMRC to drive a wedge between taxpayers and their advisers by an unhealthy trickle of insinuation and an intention wherever possible to bypass the agent and go direct to the client'.

'Uncooperative behaviour' was another theme, ranging from a refusal by HMRC officers to meet taxpayers and agents outside of the department's own offices to their role when dealing with the affairs of seriously ill taxpayers.

Consultation …

Or the lack of it was also a theme of the responses and has been evidenced in more detail by the response to the 'No to November' campaign.
There seems to be complete incredulity that such a major change, which will have a substantial impact on the working practices and procedures of many practitioners has been launched without any prior consultation on the underlying proposal with the profession.
To try to remain dispassionate about this, there may be an element of the natural human response that is resistant to change, but with the resources available to them one would have thought that some kind of consultation exercise that might at least have captured the 'hearts and minds' of the profession, would have been carried out, rather than the current approach which could possibly be described as HMRC having the profession 'by the short and curlies'. From the responses, all that this latter approach seems to generate is an attitude of potential non-compliance: 'perhaps it would take a campaign of civil disobedience by the professions to bring [HMRC] to their senses' says a reader.
There also seems to be some doubt as to the role of the professional bodies and whether the interests of smaller practices are being represented.

'Professional bodies should be pressing for [consultation on and scrutiny of new legislation] and threatening (with real intention to carry out the threat) a “work-to-rule”. That is, I accept, a bold step, but it just might make somebody up there realise that insulting tax advisers is bad “customer relations” and that without their co-operation the whole system would be in chaos within a short time-scale.'

One respondent compared the approach of the construction industry to the proposed new CIS deadlines.

Zugzwangs we know and love ...

In their purported effort to reduce the profession's workload, the responses that we have seen indicate that HMRC could usefully attend to the following points.

Forms 64-8

A common bugbear is the loss of these forms and the fact that correspondence is sent to clients after the submission of them to HMRC. Details of the exact role of the 'Quality Improvement and People' section that also operates from the Newcastle office were eagerly awaited by one reader.
Dealing with HMRC call centres rather than local offices was not welcomed unreservedly.

Minor amendments to tax calculations

When self assessment was first introduced, there were many instances of agents' tax calculations being amended for very small amounts, resulting in unnecessary correspondence and additional small payments and repayments. Unfortunately this practice seems to continue. One respondent quoted a 98 pence adjustment. Not only does this cause additional work for agents, taxpayers and HMRC, it implies that the agent has made a mistake, potentially damaging the relationship with the client.

Online filing difficulties

My experience of online filing was not a 'one-off'. One reader received a late filing penalty nine months after 19 May 2005, in respect of a form filed on 18 May. Another reports clients 'vanishing' from online lists.

PAYE code numbers and January

The issue of numerous PAYE code numbers in January — sometimes with amendments following like buses a few days later — causes additional work for accountants at a time when their energies are concentrated on the submission of outstanding self assessment tax returns.

Unnecessary correspondence

This could include some of the above points, as well as other instances that generate unnecessary correspondence and phone calls with both HMRC and clients; e.g. the coding out of unearned income without request, incorrect posting of tax return entries, problems with processing R40 repayment claims, problems with National Insurance Contributions Office, apparent discrepancies between dates on correspondence and receipt, and delays in processing forms P35. One reader has a new cost code and file for 'wasted time' and I understand that Dawn Primarolo can look forward to receipt of this at the end of the fiscal year.

An end to zugzwangs?

The foreshortening of the filing deadlines will put more pressure on agents to complete their annual tax return preparation cycle and it would be nice to think that, before that happens, HMRC will have removed these types of unnecessary occurrences, which eat into an agent's valuable time, from their systems. I am sure that if this could be done it would free up substantial time for HMRC as well.
An ex-Inland Revenue Inspector tells us that Taxation is widely read within the senior ranks of HMRC, so an official response to the points raised by readers could be a start and show that some of these issues are being addressed. This could be a great opportunity for HMRC to start a campaign to engage tax practitioners. As one reader says, 'It's surely better for HMRC to make advisers' lives easier, particularly when we are trying to help taxpayers through the ever-increasing complexity of the tax legislation'.

Such an approach could also help to turn back the tide of disillusionment that permeates some of the responses from practitioners who see their role in the tax system being 'zugzwanged' on a regular basis.

'Zugzwang' themes

  • Lack of respect for the tax profession from HMRC.
  • Lack of consultation as evidenced by the response to 'No to November'.
  • Uncooperative behaviour by HMRC.
  • Unnecessary forms and correspondence from HMRC.
  • Delayed post.
  • Unearned income being 'coded out'.
  • Dealing with call centres rather than local offices.
  • Late processing of self assessment and PAYE returns.
  • Online filing problems.
  • Minor adjustments to self assessment tax calculations.


Issue: 4056 / Categories: Comment & Analysis , Admin
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