Tax Update- 21 February 2011

1. General

   1.1. HMRC to scan incoming post

   HMRC has announced that it intends to scan incoming post.

   Scanning will enable HMRC to create electronic images of the post received. The scanned material will be assigned to cases using electronic document management systems.

   Scanning will be introduced in phases. The first phase of the roll out will begin in March 2011 and will continue in phases during 2011/12.

   A single PO Box address will be used to identify the mail that is part of this process. HMRC will clearly state this address on outgoing correspondence.

   In addition to the PO Box address, HMRC will provide a reference on outgoing correspondence. This reference must be clearly stated on replies to them. The reference will be prefixed by one of the following letters listed below:

   CFS CFSS CFSC. If we wish to send replies for more than one customer in the same envelope, HMRC ask that we separate the documentation with individual covering letters ensuring the customer case reference is clearly stated on those letters.

   When HMRC receive our correspondence, they will scan and link it to the relevant case usually within 36 hours of receipt.

   Some original documents will be returned to us as a matter of course after they have been scanned. These include:

   P60's Birth, death and marriage certificates Passports. We must clearly state if we want any other supporting documents to be returned. If we do not ask for documents to be returned they will be securely destroyed, together with our covering letter, within 40 days of receipt.

   HMRC identify the benefits of scanning as follows:

   Scanning will ensure documents get to the relevant HMRC caseworker as quickly as possible. By assigning paperwork to cases electronically, HMRC avoid the need for manual distribution of letters and documents received to caseworkers. HMRC will be able to handle calls to the caseworker about the case, without the delay of locating original paper copies. The new process helps HMRC to handle post more efficiently. 1.2. Email scams update

   HMRC has issued the following warning to taxpayers to be vigilant following a surge in scam emails:

   "The email informs the recipient they are due a tax rebate, and provides a click-through link to a replica of the HMRC website. The recipient is asked to provide their credit card details. Fraudsters then try to take money from the account using the details provided. Victims risk having their bank accounts emptied and their personal details sold on to other organised criminal gangs.

   In the last three months, HMRC has shut down 99 websites that were responsible for sending out the fake tax rebate emails.

   As a matter of policy, HMRC will only ever contact customers who are due a tax refund in writing by post. If anyone receives an email offering a tax rebate claiming to be from HMRC, we recommend they send it to phishing@hmrc.gsi.gov.uk before deleting it permanently.

   HMRC thoroughly investigates phishing attacks and works with other law enforcement agencies in the UK and overseas. In the last 18 months, scam networks have been shut down in a number of countries, including Austria, Mexico, the UK, South Korea, the USA, Thailand and Japan.

   HMRC strongly advises customers to:

   Check the advice published at www.hmrc.gov.uk/security to see if the email you have received is listed; Forward suspicious emails to HMRC at phishing@hmrc.gsi.gov.uk and then delete it from your computer/mail account; Do not click on websites, links contained in suspicious emails, or open attachments; and Follow advice from www.getsafeonline.co.uk . If you have reason to believe that you have been the victim of an email scam, report the matter to your bank/card issuer as soon as possible. If in doubt, please check with HMRC at www.hmrc.gov.uk/security/fraud-attempts.htm ."

   1.3. Judicial review of case involving tax agent status.

   HMRC started a criminal investigation against a firm of tax advisers (CLAC) and searched the firm's premises in June 2010. In November 2010 HMRC wrote to the firm to say they were no longer prepared to deal with the firm as tax agents for several thousand clients. The Court allowed the firm's appeal against HMRC's decision on the basis that CLAC should have been given the right to make representations before the decision was taken. The Court also held that reasons should have been given to explain the termination of its agent status.

   The case report is interesting in so far as it sets out the background to the status of tax agents as follows:

   "4. Under Section 5 of the Commissioners for Revenue and Customs Act 2005 ("CRCA 2005"), the Commissioners are responsible for the collection and management of revenue, defined as including taxes, duties and national insurance contributions.

5. By Section 9 of the CRCA 2005 "

   (1) The Commissioners may do anything which they think –

   (a) necessary or expedient in connection with the exercise of their functions, or

   (b) incidental or conducive to the exercise of their functions."

6. HMRC has adopted the practice of dealing with agents on behalf of taxpayers in the exercise of its general statutory powers. There is no specific statutory provision which requires HMRC to deal with agents authorised by taxpayers.

7. HMRC's guidance on agents, posted on its websites, states, inter alia:

   i) Tax agents, advisers or accountants must be formally authorised by an individual or business to deal with HMRC on their behalf.

   ii) HMRC defines an "agent" as someone who is appointed to discuss, correspond or transact with them about matters they are responsible for.

   iii) Once an agent is authorised to act on a client's behalf, HMRC can discuss and exchange the client's personal and financial information with the agent, and send letters, forms or returns relating to their tax affairs.

   iv) Agent authorisation will not transfer a client's legal obligations to his agent.

   v) Under the heading "How long does the authorisation last?", the guidance states:

   "The authorisation will continue until HMRC are told that you or your client has withdrawn it or when your client dies."

8. HMRC has no formal procedure to deal with the termination of an authorised agency for suspected fraud or other serious misconduct.

9. HMRC Business Customer Unit issued a confidential Note to HMRC staff on 30 June 2009 giving guidance on dealing with agents.

10. The Summary of the Note states that it is:

    "designed to help HMRC staff identify agent conduct that falls below that which HMRC and the major agent representative bodies would consider appropriate in a professional relationship and sets out the reporting mechanisms to use when issues of this nature arise".

11. The Note identifies four main headings of poor agent behaviour:

    i) Suspected repayment fraud or evasion;

    ii) Abusive, threatening or discriminatory behaviour;

    iii) Technical ability that puts tax at risk;

    iv) Agent behaviour, which though legal, give HMRC cause for concern.

12. The Note sets out "general principles and guidance" to apply when HMRC is considering what can be done on a practical level when poor agent behaviour is encountered. Under the heading "Refusal to deal with an agent entirely – is this an option?" the Note states that HMRC should not refuse to deal with an agent completely other than in "the most exceptional and extreme circumstances", in which case legal advice should be sought. Under the heading "What can we tell our customers if we refuse to deal with their appointed agent?" the Note indicates that, generally, disclosure of information regarding an agent's behaviour is prevented by Section 18(1) of CRCA 2005 but "there are ... exemptions within Section 18(2) CRCA 2005 that would enable a necessary, relevant and proportionate disclosure to be made to our customer about the behaviour of their agent."" www.bailii.org/ew/cases/EWHC/Admin/2011/240.html "

2. Private Clients

   2.1. Self Assessment (SA) Autocoding and the National Insurance and PAYE Service (NPS) interface

   HMRC has written to us as follows:

   "I am writing to let you know that we will be switching on our new SA Autocoding functionality early in 2011-12.

   SA Autocoding will allow relevant information from an SA Return with a PAYE source to flow to NPS, and automatically calculate and issue revised codes. This will mean that the tax code will be more accurate and the right amount of PAYE tax paid.

   In advance of switching on the SA Autocoding functionality, we have been routinely updating tax codes when dealing with telephone calls and correspondence from customers.

   Where a tax code has been revised for 2011-12 following a contact from a customer with up to date information, SA Autocoding will not override that adjustment but it will continue to update the code with any additional relevant information from the return.

   Customers who file SA Returns will continue to receive their annual statement of tax due. Payment dates remain the same.

   We will continue to code established SA underpayments of up to £1,999.99. This is a separate interface and so not affected by the introduction of SA Autocoding.

   We will open the SA Autocoding interface early in 2011-12. This will be well in advance of returns being filed in any significant numbers, enabling 2011-12 codes to be updated as returns are filed. Should a return be filed before the interface is opened, the information in the return relevant to the coding will be stored and will flow to NPS once the interface is live.

   Those submitting their SA Returns early in the year will receive most benefit from a coding adjustment as the revised code will operate for a longer period.

   In many cases, customer's agents/representatives will submit SA Returns. Any revised autocoding will be sent to the customer. No copy will be sent to the agent/representative.

   Some Q&As about SA Autocoding (may assist in dealing with clients' queries)

   What sort of information will you use from my SA Return and include in my tax code?

   We will use information from your SA Return that will help...