Tax Returns? What Tax Returns?

So, 31st January has been and gone. The first year of filing online and oh what a joy!

In years gone by, The Smart Frog has hopped down to the local tax office before midnight on 31st January, frantically shoving last-minute Tax Returns through the already-jammed tax office letter-box. Not this year though. Oh no. This year went by without hitch, all thanks to the seemingly effortless way that the HMRC online filing system has worked. Credit where credit's due - it's fabulous and never once let us down. There are a small handful of clients for whom we just couldn't submit their Returns, but these are those who presented their papers to us at the 11th hour and they understood that they might be late.

Only a week has gone by since the Tax Return deadline, yet it seems like a distant memory. Work which was put on hold during January has surfaced to bite us all on our tail-less bums. We're not complaining, though. Without it we would be sitting here twiddling our webbed-fingers wondering what to do with ourselves - or we would were it not for Mr Taxman setting constant deadlines for us to plan for; the next big one is obviously the end of the tax year (5th April) where tax planning keeps us occupied. Can't wait.

Until then, The Smart Frog team have noticed a large increase in queries recently from clients about 'Residence'. It seems that many are off to sunnier climes and want to know how it affects their tax position in the UK (it does, by the way, greatly affect it). Is this a knee-jerk effect because of the recent spate of arctic weather, or to get away from the sliding economy? With the £ faring badly against the Euro I am not sure that taking time out in Europe will have the desired financial effect, but I can imagine the warmer climate will ease the burden somewhat. Personally, I like to stay hidden from the sun - it has a nasty effect of turning my lovely green skin a light shade of yellow. Yuck!

3 hours or 3 minutes? Your choice...

In the lead up to the 31 January Tax Return deadline The Smart Frog becomes more popular than usual amongst friends. Friends who need help with their Tax Returns at the last minute. That's not a problem, of course, because The Smart Frog does like to help out whenever he can.

This week a friend had been trying to complete his Tax Return online using HMRC's 'intuitive' online software and, boy oh boy, what a pullava. Suffice to say, he eventually gave up and so sought my help. After 3 hours online, being thrown out several times in the process, we finally finished what would have taken 3 minutes using our own specialist Tax Return software.

Preparing a Tax Return is easy when you know the tax law inside out and prepare Tax Returns day in day out. But for a layman doing it once a year it is a completely different story. I hadn't appreciated this quite so much until I actually tried to help my friend this week and all I can say is that I wouldn't want to be a non-expert trying to grapple with the ever-increasing complexities of the UK tax system and accompanying tax forms. And god forbid anyone who actually gets it wrong - penalties galore for non-compliance or for getting it wrong.

I shouldn't complain. The more complicated the tax system and the Tax Return process then the more The Smart Frog is in demand, and it does keep the wolf from the door. But, please, please Mr Taxman, give us a break and tidy up your online sysems a bit. We all have better things to do with our time.

Chaotic Commotion at Christmas

23 December - The office Christmas party. A little respite from the hard work we've all put in during December. We all know what January has in store for us, so the office party is always filled with mixed emotions - a time for letting our hair down, but always with a cautious eye on what's to come. Enjoy the fun whilst it lasts, guys - January is just around the corner.

22 December - The final countdown to ... the end of the month before the Tax Return filing deadline. The tax team are as serene as swans, gliding gracefully through their work (while paddling furiously below the water line!). I just hope they manage to keep their heads above water. So far so good, and everyone is fit and well. There is this flu bug going around though, so fingers crossed that we all manage to avoid it. The last thing we need now is a mass reduction in manpower for January.

21 December - The usual challenge is to get the remaining work in next month. And to get the signed Tax Returns back. Thankfully our excellent personal tax software has been kept up to date by the tax team so we know exactly where we are by running the tracker reports. Next month I'll be getting almost daily update reports telling me, for example, how many returns are still not started and how many are out for signature but not returned. The aim, as in previous years, is to have no late returns except those where the clients have decided themselves to be late (possibly by resisting all attempts to be contacted by us, I should add). I don't see why we shouldn't achieve that again this year.

Impeccable timing as always!

Why oh why does the taxman do it? December and January are notoriously the busiest time of the year for accountants and tax advisers and yet, despite constantly shoving the "do it online" message down our throats, problems ALWAYS, ALWAYS arise with their online filing systems at Christmas and the New Year.

This year has been no exception. Actually, yes it has been an exception - it has been WORSE THAN EVER!! New clients for whom we have submitted 'authorisation codes' don't show up as our clients on their online system. Tax Returns submitted online for established clients don't show up as having been submitted, so we've no way of knowing if they've been received by HMRC. Then you call their helpline and a teenager (probably spotty, but that's the beauty of telephones - you don't have to look at the oik at the other end of the 'phone!) utters some nonsense about not being a tax specialist, but instead he's an IT geek who really wants to go home and play on his XBox, so you go away feeling you're nowhere closer to resolving the problem.

My tax assistant has brought Issue 33 of Working Together (a publication issued by HMRC's so-called Public Relations department) to my attention. Since June 1996 we have received copies of our clients' Self Assessment statements every six months. In January we usually devote quite a bit of time to checking our agents copies and telling clients if they're correct or not. But not this year "because of tighter data security requirements across all government departments", whatever that means. In fact, tax agents won't be getting any more SA statements until after October 2009.

So, advising clients on how much tax to pay at the end of January is going to be fraught this year as I anticipate that, as usual, quite a number will receive incorrect statements. How many will have tax liabilities unexpectedly coded out through their PAYE coding? Or were expecting to have tax coded out but will then receive an unexpected bill? The snag is, we may not know unless they tell us and if they don't tell us then we have absolutely no way of knowing what's going on. By October it will be too late to avoid the late-payment interest and surcharges for client's for whom HMRC have got it wrong. It will be like the blind leading the blind! Arghhhh.....

Must go - got to call the taxman and have a moan. I wouldn't want to be him.

How complicated can it be?

It annoys me when the taxman introduces new rules, designed to offer tax breaks, but doesn't publicise them enough for the man on the street to know about them. More annoying is when the new rules are so complicated that even accountants find them difficult to understand, let alone Joe Bloggs. A typical recent example is the wholesale changes made to the Capital Allowances system for businesses.

Huge numbers of businesses are losing out on tax breaks when they buy and sell land and property, and when they spend money doing up property they already own. Many, or perhaps even most, owners of commercial premises are missing opportunities to save tax, and the amounts at stake can be staggering.

The reason these tax breaks are being missed is that many accountants (even some of the big firms) misunderstand the rules. A survey of around 6,000 accountants, carried out at the start of 2006, showed that many are struggling to understand the rules and are failing to make adequate claims. But is that their fault? In recent years the tax system has become so complicated that you really need to be a specialist in order to keep track. Accountants in general practice have enough on their plate keeping upto date with the myriad of changing rules in auditing (don't yawn), let alone other areas such as tax and VAT.

Capital allowance claims can produce tax savings running into tens of thousands of pounds. A rule of thumb is that the tax savings can typically be up to ten per cent of the cost of the premises. Buy a site for £500,000, for example, and you could be saving £30,000 or £40,000 or £50,000, or even more. But relief is only given if a proper claim is made and the rules for claiming can be so complicated that people are put off at the first hurdle!

Changes introduced from April 2008 have increased the percentage of expenditure qualifying for tax relief. It may sound too good to be true, but in reality this is a completely legitimate tax break and claims are being made every day using the old, defunct rules. Businesses (or, more importantly, their accountants), need to bring themselves upto speed with the new rules before the strict time-limits in which to amend their claims have passed, because the opportunity of increased allowances will then be lost forever. Call me an old synic, but perhaps that's why the taxman doesn't publicise the rules as much as he should. It wouldn't surprise me.

Hello Darling...

Today the Chancellor proposed a series of measures in his Pre-Budget Report which are, apparently, going to turn around the Great British Recession of 2008.

Some might have assumed that the Right Honourable Gordon Brown was to give this speech - after all, he has made every other comment on the economy in the past 3 months and no doubt he wrote it (according to some). Darling is, after all, just his puppet spouting it out (according to some). Many people are saying that the person who caused this mess and promised no more boom and bust should have stood up and accepted the blame.

As for the VAT announcements, then doesn't cutting VAT, then adding the saving back on to fuel excise duty, mean that zero rated food in the shops will be more expensive? So how does that stimulate more spending elsewhere? Also, and maybe I am an old green cynic, but all I can see with a box of £4.19 washing powder falling to £4.10 is that it will still be £4.19, and the retailer will simply take an extra bit of profit!

On the plus side, there is to be no 'Income Shifting' legislation introduced into the 2009 Finance Bill. At least the Government seem to have recognised that this nasty piece of proposed-legislation is unfair and is simply another way of attacking Family Companies in the wake of some high profile tax cases in recent months. I can hear the wiping of sweat from the foreheads of many Family Company Directors as I type. But for how long will this respite last? Who knows? To quote "The Government will instead keep this issue under review". So, more uncertainty for Family Companies, but at least today's announcement has given a temporary lifeline for some.

There will be National Insurance changes too. But can't anyone see that the only way to stave off the recession is to create more employment opportunities? Increasing the rate of secondary Class 1 NICs is not the way to do that. Abolition of secondary Class 1 NICs and the myriad of other regulations that waste the small businessman's time and money is required; but it won't happen because nobody in Government has the foggiest idea of how the backbone of the economy actually works (according to some).

There was some talk today too of helping out company tax debtors (i.e. companies who can't afford to pay their tax bills). So I called the deferment helpline and they didn't have a clue. There is apparently no new guidance - it just seems to be a new phone line that redirects you to the old system of being unable to pay. Poor chap didn't seem to have a clue what was going on although he tried really hard to find the guidance for me, before deciding there wasn't any. I just hope he was just the work experience lad and not the real deal.

The next few days whilst all this is analysed are going to be very interesting. Very interesting indeed. Until then, this little green amphibian is going to take a long deep breath, relax, and sleep. Tomorrow it will all seem like it was just a bad dream.