PAYE - Precisely As You'd Expect?

So, the recent PAYE fiasco has brought The Smart Frog prematurely out of hibernation. How could such a debacle go by without comment?

To summarise:

Almost six million people are embroiled in the biggest tax blunder for years.

About 1.4 million will have to fork out an average of £1,500 after underpaying through absolutely no fault of their own. Some will face far higher bills, though the Treasury insists no immediate repayment will be required if the sum is more than £2,000. Let's wait and see, shall we?

For 4.3million, the news is better. They will be told they are owed money by the taxman after having too much deducted from their earnings. The total in overpayments is £1.8billion, meaning an average rebate of £418.

For those who owe tax, there is an option. It's a little-known (certainly not in the general public-domain) rule called "official error" which broadly works to write-off tax which is owed under certain circumstances. Have HMRC publicised this? Have they heck.

The irony behind all this is that almost all of those affected are employees and therefore unrepresented and will, in all probability, know nothing about the "official error" rules and their rights.

Whatever eventually happens, The Smart Frog thinks that one fact is now glaringly obvious - the management of HMRC is grossly incompetent. Isn't all this just precisely what we've come to expect? They stagger from one crisis to another. Tax bills are wrong. Confidential data is routinely lost. The tax credit system is a total farce.

Should their management really be getting bonuses and appearing in honours lists or should they be dispatched to the nearest job centre? In the real-world outside the comfy arms of the Civil Service they wouldn't survive a minute.

Rant over. Night night.

OK, so what d'ya reckon, Mr Small Business Man?

So, were there any presents in it for you? This was never going to be a tax cutting budget, but it wasn't really that bad, was it?

The Smart Frog quites like the Annual Investment Allowance, an allowance which enables 100% of certain capital expenditure to be set against business profits (hithereto only available at a maximum 55%). The increase in the AIA to £100,000 (previously £50,000) will affect a relatively small number of businesses (those with capital expenditure between £50-100k) but they may well be a crucial sector in the economy. It may actually enable genuine investment by that minority of small businesses who want to invest and grow.

When the Smart Frog was told that the Chancellor might double entrepreneurs’ relief from Capital Gains Tax he assumed that also meant CGT rates were going up, but no they didn't. A nice little surprise there, then.

This of course allows the Chancellor to hold himself out as a champion of small business, as the Tories are talking about cutting the main rate of Corporation Tax and abolishing the AIA – which of course helps big business. The Smart Frog suspects this is the big idea here, because nobody wants to go into an election tagged as a friend to the banks.

Very importantly (and despite rumours to the contrary), the business tax payment support service (designed to help small business pay their tax by installments through the current difficult economic climate) is to continue. An independent review is to be required, but only where debt exceeds £1m. Not a problem for small business, then.

Usefully, the extended trading loss carry back provisions (for both income tax and Corporation Tax) will be extended for another year. Hopefully that takes them close to the end of their useful lives – anyone still making large losses by then is likely to have gone out of business!

The abolition of the 'furnished holiday lettings' provisions will still be going ahead, despite protestations by The Smart Frog, as well as the various accountancy bodies. Expected clarifications have not yet surfaced. This will be a mess.

Overall, though, there was no harm done to small business, and even some improvements. What d'ya reckon?