Phoning HMRC Cost Taxpayers £97 Million in a Year

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Last year, waiting on the phone to HM Revenue and Customs (HMRC) cost taxpayers millions, according to spending watchdog the National Audit Office (NAO). Thanks to long wait times, people calling the taxman spent a collective £10 million in call costs while on hold and waiting to speak to an adviser, the NAO said.

Over the span of 18 months, starting in 2014, the NAO said that HMRC’s standards of service when dealing with telephone queries “collapsed.” Over that space of time, the Office claims, the time that customers spend waiting to speak to an adviser tripled and many calls went unanswered. While HMRC has claimed that the majority of incoming calls now get an answer within six minutes, the NAO says that the time spent waiting on hold with HMRC last year could be up to an hour.

In the course of its recent investigation into the standards of HMRC’s service, the NAO calculated the amount that these lengthy calls had costs taxpayers. The cost of phone calls, the organisation reports, was £10 million in total, and the NAO believes that much of this is a result of long waiting times.

The NAO also included the value of people’s time in the calculations, averaging this at a rate of £17 per hour. On this basis, the organisation estimates that taxpayers spent a total of £66 million worth of their time just waiting on hold to speak to an adviser, and a further £21 million while talking to HMRC after their call is finally answered. This brings the NAO’s estimate for the total amount lost to taxpayers on calls to HMRC, including both call charges and time spent on the phone, at £97 million.

One of the key causes for the drop in standards for HMRC when it comes to dealing with phone queries, the NAO claims, is staff cuts. Specifically, the organisation points to the fact that the tax authority drop 11,000 of its staff as part if its drive to increase the number of tax returns completed online, on the assumption that this would result in fewer phone calls to be answered. These cuts took place in stages between 2010 and 2014.

Seemingly recognising this as a misstep, HMRC has since increased the number of staff available to answer helpline calls by 2,400. These extra staff were brought in last autumn, after typical waiting times for calls to HMRC peaked at 47 minutes.

In response to the NAO’s report, HMRC director general for customer services Ruth Owen said: “We recognise that early in 2015 we didn’t proide the standard of service that people are entitled to expect… We have since fully recovered and are now offering our best service levels in years.”

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Millions of Tax Returns “Unnecessary,” say Critics

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Critics are claiming that millions of people across the UK are filling out tax returns that are just not necessary. It is claimed that a large portion of those filling out tax returns are required to do so despite not owing HMRC any money at all.

At present, an annual tax return is required of roughly a third of taxpayers across the UK. Nearly a quarter of them (24%) owe very little – less than £50 for the entire year – and two thirds of these (16% of the total number who must fill out a tax return) owe nothing to HMRC at all.

Some of those who must complete a tax return are sole traders or owners of businesses which have not turned a taxable profit – in which case a tax return is necessary to show HMRC that profits have not reached taxable levels. However, many others are required to complete a tax return for entirely different reasons. For example, company directors and employees earning over £100,000 per annum must complete a yearly tax return even if they have no additional, undeclared income whatsoever. Furthermore, recent changes to the administration of child benefit mean that one parent or guardian often finds themselves with the need to submit a self-assessment tax return even if they do not owe HMRC money.

Others, however, may register for self-assessment voluntarily even if no money is owed to HMRC. For those in some unusual and specific financial circumstances, tax returns can serve as useful records to assist with things like applications for loans.

HMRC has defended itself from these criticisms, however. A spokesperson said that the organisation “[doesn't] want anyone to fill in a tax return unless it’s absolutely necessary.” For this reason, he claimed, HMRC automatically takes 400,000 people out of the self-assessment process each year.

The spokesperson also insisted that HMRC goes to great lengths to ensure that the self-assessment process is as easy as possible for those who do have to complete an annual tax return. In particular, he pointed to the organisations’ “bringing in short tax returns and online self-assessment, and we are taking this much further by introducing the new digital tax accounts.”

Indeed it is hoped that new online tax accounts, which will be regularly updated with information about people’s income, could almost completely eliminate the problem of people filing unnecessary tax returns. Fully rolling out this new process, however, is likely to take some years.

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Boost Your Business with Better Bookkeeping

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Too often, small businesses and sole traders see bookkeeping as a boring obligation. It’s something to get done (eventually) and use for the necessary evil that is the tax return then file away in a dark cabinet. In other words, it’s important as record keeping but has no use outside of working out your obligations to the taxman.

In fact, your business’ books can be a powerful and valuable tool to help your business operate at full efficiency. Maintaining your books carefully and regularly looking over them, preferably with the help of your accountant’s expert opinion, can help you better run your business in a number of ways.

Predicting the Future

Your books are the closest thing you have to a crystal ball when it comes to making forecasts about your several important aspects of your business. In some areas, the best way to work out what will happen is to look at the past. True, past performance is certainly no guarantee of future performance, but in some areas it can be a very useful tool to predict what is likely to happen.

In particular, if your business is at least a few years old, your books from previous years can help you get a good idea of seasonal trends. This means you can be prepared for “famine” periods and better prepare for them in “feast” periods. It also means you can be prepared to take steps to mitigate periods of slow trading and capitalise on seasons or events which boost your business.

Tax Compliance and Efficiency

Another benefit of paying close attention to your accounts is that you are simply more likely to keep them in thoroughly good shape. Small expenses, especially the kind that represent crumpled and half-forgotten receipts, can easily slip through the net if you make the mistake of just going through your books in a single blitz once every few weeks. Similarly, discrepancies and compliance issues are more likely to appear, and even if you spot these in time it will be harder to investigate them if you don’t see them until weeks or even months after the fact.

For this reason, your business will be a lot healthier and run far more smoothly if you keep a closer eye on your books and deal with them more regularly. You should set up regular sessions for dealing with your books and getting your latest records in shape, with short intervals in between. Weekly sessions are ideal.

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Gender Opinion Difference on Tax

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In particular when there are hard economic times, who pays what and how much into the ‘system’ in terms of tax etc can be quite a controversial topic.  A new survey suggests there are even differences in opinions regarding tax between gender groups, let alone other more obvious groupings such as age and economic standing.  The survey, WalletHub’s ‘2014 Tax Fairness Survey’ had more than a thousand participants, and was designed to be representative of US groupings for gender, age and race.

Corporate taxes are in the spotlight currently as more US companies reincorporate abroad to earn profits without the necessity of having to pay US taxes.  They do so via the purchase of foreign companies or merger deals, one of the most recent attempts being the drug giant Pfizer’s over $100bn merger bid for its British rival AstraZeneca.  The government hope is to make the 35% that the US takes more competitive, as it is one of the highest rates charged by the developed world.  Directly in opposition to this – where surveyed almost two thirds want corporate tax to be higher – the percentage of women who want this are at 73% compared to 55% of men.

The main findings included that 80% of people thought the tax system was either ‘complex’ or ‘extremely complex’, though the gender differences for this were minimal (education level was the biggest variation factor, with the more educated finding the tax system more complex).  This reflects the rise in using free tax calculators online.

On the question of what matters most in a tax system, taxes for economic growth, to foster equality or to foster fairness, 61% believed fairness comes first.  Men were more likely than women to say tax equality comes first.  To enable a less complex and a fairer taxation system, many think less tax deductions are the way forward: 48% of men, compared to just 36% of women.

Overall less than a quarter of all those surveyed want a flat tax system opposed to the system most countries have of progressive taxation.  Proportionally 29% of men and only 20% of women.

Further research is to be conducted in order to analyse what these differences may mean in terms of gender differences, finances and society.

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Managing your payroll online

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For many small businesses and contractors, one of the biggest administrative burdens is managing the payroll.  Large amounts of time can be spent on the payroll processes, when in business terms this time would be better invested in working with customers and developing commercial ideas.  For this reason alone, the payroll activity is frequently outsourced, but there are also other good reasons for managing the payroll online and through an external agency.

What an umbrella company does

One of the solutions that many contractors and entrepreneurs turn to in managing their payroll administration is an umbrella company.  The essence of an umbrella company is that it provides a payroll service to contractors by processing the payroll while enabling business expenses to be set against tax, and eliminating the need to deal with IR35 legislation. The umbrella company acts as an intermediary between contracting parties to collect all the relevant data in respect of the contracts, and to process this so that payment and taxation are competently and comprehensively handled.


The benefits of payroll solutions through an umbrella company

Contractors and small businesses that choose to handle payroll and contract invoicing through an umbrella company can glean a number of advantages.  The first of these is the general benefit that persuades many small businesses to outsource administrative components of their work. Namely, the umbrella company reduces the bureaucratic burden on a contractor or entrepreneur and frees time for operating and growing the business. Next, as a specialist in payroll and taxation issues, the umbrella company can potentially save the business money by effectively using valid taxation principles to balance expenses against taxation and reduce the overall tax bill.  In addition, the umbrella company, by gathering all the necessary data, ensures that contracts are properly fulfilled in terms of invoice payment and financial settlement.


Tips on choosing an umbrella company

After deciding to use an umbrella company, there are a few tips for contractors and entrepreneurs concerning what to look for when choosing the right umbrella company for their needs.  As with any business transaction, the primary means of assessing the suitability of an umbrella company lies in the clarity and level of fees to be charged.  Fees at any stage of the business relationship should be fully transparent and listed in detail, so that fair comparisons can be made between companies to ensure that there are no nasty surprises at any stage.  In addition, a track record that shows high levels of expertise and sound, wide-ranging experience is to be preferred. Full liability and indemnity insurance cover is also essential.


In addition to these more common sense points of comparison, it is also good to choose an umbrella company that provides a simple and personal online service.  The management of data online should be clear and easy, and it should be possible to contact a competent representative in person, if the need arises.  Furthermore, the umbrella company should be able to show that it operates procedures in expenses and taxation that are both transparent and comprehensive, in line with current tax requirements set out by HMRC.


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NOKIA Faces Bigtime Tax Issue

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Nokia’s Chennai factory, one of Nokia’s biggest facilities, was raided by Indian Tax officials who are seeking to recover tax payments totalling as much as £340m. This incident happened just days after UK’s Vodafone was asked to pay back more than $2bn in back taxes.

According to Nokia, they never fail to observe proper laws and rulings in any parts of the world they operate. That is, they are in full cooperation with the Tax officials to ensure that all of their issues get sorted and all of  their enquiries will be fully taken care of.

As a result of the raid in India, the shares of Nokia fell considerably to more than 6% to 3.07 euros in Helsinki. As expected, the incident greatly affected the performance of Nokia in the market.

Nokia’s Chennai factory in India plays a very important role in making Nokia the world’s number one in phone manufacturing. India is known to be the fast growing phone market in the world and is considered as the key to Nokia’s success.


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