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05 February 2007
Categories: News , Income Tax
HMRC policy on PAYE Online Filing Incentive; Self assessment stats;

Now you see it …

On 31 January, HMRC issued a press release detailing a change to their policy on the PAYE Online Filing Incentive. In March 2005 the regulations for the incentive were amended, with the intention of excluding claims from employers which were established, employed employees, or made payments of PAYE income, wholly or mainly for an 'impermissible purpose'. This included the establishment of a small employer to obtain 'an advantage in relation to income tax, corporation tax or National Insurance contributions'.
HMRC initially stated, in Tax Bulletin 76, that they did not intend to deny incentive payments to businesses incorporated mainly to take advantage of wider tax breaks (presumably referring to issues such as the 0% corporation tax rate).
The 31 January press release said that, following legal advice, this policy was 'not consistent with the intention and scope of the anti-avoidance regulations', and that the interpretation was therefore withdrawn. However, the press release itself disappeared from the HMRC site within 24 hours, and had not yet reappeared as Taxation went to press.
Peter Penneycard, of PKF, said that 'the way this announcement is worded, stating that HMRC “will withdraw or prevent payment” of the incentive, suggests that payments already made will be clawed back. If the Government does not like the tax laws that govern small companies, then it should change them — not make petty attacks that move the goalposts after the match has started'.
Taxation will return to this next issue, but meanwhile notes that the amending regulations, SI 2005/826, do indeed list an employer being established, employing employees, or paying PAYE income, for an impermissible purpose as the three triggers for the regulations to apply (para 6(5)). However, they only appear to define an impermissible purpose for the purposes of establishing an employer — there is no definition of an impermissible purpose for the other two triggers. It is possible, therefore, that the problem has arisen because the regulations were defective, and did not achieve their original intention. We will pursue this issue with HMRC.

SA stats

149,754 self- assessment returns were received in the 24 hours running up to the self assessment 31 January midnight deadline. During the filing peak, the HMRC website was processing more than 6,000 returns each hour, more than 100 every minute, almost two per second. In the five days running up to the deadline, 489,141 returns were filed online, of which 356,219 were filed by agents.
Altogether 2,895,482 people filed their returns online this year. The corresponding figure for 2005-06 was 1,989,927. HMRC also say that Internet filing by agents has increased by approximately 50% from last year. Some two million paper returns were received in the two weeks leading up to 31 January, but the total number of self- assessment returns filed both on paper and electronically will not be known for several weeks, as paper returns are logged manually.
A recent written question in the House of Commons concerned the number of HMRC staff deployed on processing self assessment tax returns, and the related salary costs. These were given by Dawn Primarolo as follows for the last three years:



Cost £










In addition, Ms Primarolo said that the total amount of income tax, Class 4 National Insurance contributions and capital gains tax collected under income tax self assessment in the year 2005-06 was £27.998 billion and £4.533 billion was repaid.
HMRC press release dated 2 February 2007 and Hansard, 24 January 2007, vol 455, no 32, col 1855W


Categories: News , Income Tax
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