Working Together issue 17
- Agent Telephone Calls – Security Questions
- Notifying Tax Advisers of Employer Compliance Reviews
- Contacting the Revenue
- Online Filing of Employers Annual Returns and Electronic Payment Handbook
- Tax Returns – Completion of Box 18.2
- Inward Expatriate Employees
- Giving Through the Tax Return
- 2002-03 Tax Returns – Penalty Notices
- Tax Credit Prosecutions
Agents Making One Telephone Call About Several Clients
When people telephone the Revenue, we ask verification questions to provide reasonable assurance that the caller (in this case the tax adviser) is who they say they are. We can then deter and prevent bogus callers from obtaining confidential information by deception (see Working Together issue 11 - “Why Do We Ask Security Questions When We Hold Your Client’s Authority For You To act?”). The Revenue’s caller verification guidance was drafted to accommodate telephone calls from agents phoning on behalf of individual clients. It was not originally designed to provide for a single call about several clients.
We know from agents’ feedback that being asked the same verification questions in respect of each of the clients being dealt within a single telephone call, when we have already established that they are the authorised agent, is causing difficulties. We have therefore revised our guidance to staff. We should be able to obtain reasonable assurance during the first verification check when the agent has provided us with details about themselves and their (first) client. There should be no need to ask any further verification questions about subsequent clients discussed during the same conversation providing that we hold evidence of customer consent for the agent to act in every instance.
Agent Telephone Calls Being Handed From One Revenue Office to Another
When an Inland Revenue telephone adviser needs to hand an agent’s telephone call over to another office and that agent has already satisfied the caller verification checks, there should be no need for further verification questions to be asked by the other Office. This has always been the case but following feedback from agents, we have reiterated our guidance to staff.
Until April 2004, Employer Compliance Teams sent notification of an impending Employer Compliance Review to the employer but did not notify the authorised tax adviser. This was a matter of concern for tax advisers who raised the issue at local Working Together meetings.
We are pleased to confirm that with effect from April 2004, Employer Compliance Teams will send simultaneous notifications of an Employer Compliance Review to both the employer and the authorised tax adviser.
The notification to the employer will include the following
‘ I have notified your professional adviser(s), ……………………….who you have authorised to act on your behalf that we intend to review your records’.
In response to requests from various Area Working Together meetings, we have produced below the latest list of the current Taxes Contact Centre Priority Lines for agents.
|Taxes Contact Centre
and phone number
|Hours of Business||Old Service
0845 302 1436
0845 300 3948
|Mon – Fri 8am to 8pm
Sat 8am to 4pm
|Worcester and Hereford||01253 503209|
0845 300 3939
0845 302 1478
|Mon – Fri 8am to 8pm
Sat 8am to 4pm
|0151 471 3003|
|Mon – Fri 8am to 5pm||Bournemouth 1
Bournemouth CT &
Weston super Mare
|Bristol & N Somerset Area
Bristol & N Somerset Area
Dorset & S Wiltshire Area
|01202 585 008|
0845 300 3949
|Mon – Fri 8am to 8pm
Sat 8am to 5pm
South Wales Area
|02920 324 008|
0845 0703 703
0845 302 1410
|Mon – Fri 8am to 8pm
Sat 8am to 4pm
|Centre 1||01355 358 090|
0845 302 1434
|Mon – Fri 8.30am to
Leicester & Northants
Oxon & Bucks
|0116 265 1405|
0845 302 1448
0845 302 1452
|Mon – Fri 8am to 8pm||
0131 453 7220
0131 453 7230
0131 453 7230
0845 300 0627
0845 302 1463
|Mon – Sun 8am to 8pm
Sat 8am to 4pm
East Cheshire South
0161 266 7007
0161 266 7007
0845 300 0628
0845 302 1400
|Mon – Fri 8am to 8pm
Sat 8am – 4pm
East Hampshire and Wight
|023 9270 3003|
|Mon – Fri 8am to 8pm||
W Lancs & W Cheshire
|01744 621 007|
0845 302 1456
North East Metropolitan
|0191 541 1010|
We are currently working on making this information available via a link from the Working Together pages of the website at www.inlandrevenue.gov.uk/workingtogether/index.htm.
We will announce the release of this information via the Working Together ‘What’s New’ page.
A full list of helplines and orderlines is available.
The list provides information on
- what service each provides
- the telephone number
We have put together a detailed handbook about online filing and electronic payment for employers and agents.
“ Do it Online: Online Filing and Electronic Payment Handbook” includes:
- the background to online filing
- how to register for PAYE Online for employers
- sending a complete employer’s annual return
- how to use our on-line services
- electronic payment
- information for agents and software developers.
Every employer with 50 or more employees was sent a copy last month. Letters we sent with the handbook were addressed to the Payroll Manager.
Small employers (fewer than 50 employees) already have our other much shorter guide, “Do it Online - Your Guide to Filing PAYE returns and Paying Electronically”, which gives them all the basic information they need. But they may also find the handbook useful, especially if they use a payroll agent or want to know more about registering for online services and using the secure mailbox.
A copy of the handbook is at www.inlandrevenue.gov.uk/employers/doitonline.pdf and on the Employer’s CD-ROM 2004 (Budget edition). Paper copies of the handbook and the shorter guide are also available from the Employer’s Orderline on 0845 7 646 646.
The legislation for online filing and electronic payment is part of the Income Tax (PAYE) Regulations 2003 (SI 2003 No. 2682) from April 2004. This replaces the legislation introduced in October 2003, so the references quoted in the last edition of the Working Together are now out of date.
The full list of amended references for:
• making a return
• filing online
• getting a tax-free payment
• splitting a payroll, and
• paying electronically
are on page 51 of the handbook.
Qualifying for the Tax-Free Incentive Payments
Working Together issue 16 explained that small employers can get up to £825 tax-free over five years for filing online.
We know if an employer is “large”, “medium sized” or “small”, because every year we count how many employees there are for each employer’s PAYE reference. We did our count for the 2004-05 tax year on 26 October 2003, and told employers in November 2003. A new employer reference set up after the count is “small” until the next count. So, a new employer reference set up in May 2004 will be “small” for 2004-05, no matter how many employees there are.
Sometimes employers set up a new reference because they want to split their payroll. This is okay where the split helps the employer to operate PAYE more efficiently. And each new reference would get a tax-free payment for successful online filing if “small”. But we can refuse to split a scheme if the only reason the employer is doing it is to avoid online filing or to claim the tax-free payment.
A P14 must be sent with the P35 when an employer files online. And there must be a P14 for at least one employee where the employer needs to keep a Deductions Working Sheet (P11 or equivalent). That includes where all employees are paid at or above the Lower Earnings Limit for National Insurance, or a code number is issued, or the employee gets Working Tax Credit.
The return must meet the Inland Revenue Quality Standard (see Working Together issue 16).
We will credit the tax-free payment to the employer’s PAYE payment record when a return has been successfully filed online, even if filed for them by an agent. For example, the payment will be credited to the 2005-06 PAYE account if the 2004-05 return is sent online in May 2005.
Employers can set the tax-free payment against tax and National Insurance due to us later in the year. Or they can claim it as a refund by cheque if they contact their Inland Revenue Office. (They can use form R38 to tell us if a refund should go to their agent.)
Changes to Form P35 for 2004-05
Working Together issue 16 gave details of how employers can send their 2004-05 return in parts. The design of the 2004-05 P35 will be changing to include an extra box to show the number of P14 parts an employer is sending. Employers sending the P14s and P35 in one go will also need to use the new version of the P35 from 2004-05. A pdf version will be on our Internet site in the summer.
The P35(MT) for Electronic Data Interchange or magnetic media users will be replaced by the new version of the P35 from 2004-05.
A different version of the P35 must be used for employers who cease in 2004-05, which can only be sent on paper. A copy of this P35 is at www.inlandrevenue.gov.uk/ebu/pnforms.htm . Cessation returns can be sent online from April 2005. “Large” or “medium-sized” employers will face a penalty for not sending the cessation return online. And small employers will get the tax-free payment if they file their cessation return online.
We only send employee information (like P6s and P9s) to one payroll agent for each employer’s PAYE reference, whether sent online or by paper. Sending a return in parts does not change how employers need to manage employee information sent by us.
We ask for authority from a client (in this case an employer) that an agent can act for them. We get that authority either on a form 64-8 or an FBI2 where they are using the PAYE Online for Employers Internet service or where the employer uses the “Add Agent” function online. (See www.inlandrevenue.gov.uk/efiling/paye/fbi2.pdf for a copy of the FBI2).
Some employers use more than one agent to help them with payroll. A payroll agent might deal with staff wages, and a company’s accountant handles the directors. Or the monthly paid staff are dealt with by a different payroll agent from the weekly-paid staff.
Employers using more than one agent need to nominate one of them to get employee information from us. That nominated agent would be responsible for sending information on to anyone else helping the employer with payroll. Agents getting the information online may need a facility to download messages from their secure mailbox and send them on. Employee information can be transferred from the mailbox as a csv (comma separated value) file direct to payroll software without needing enter the details manually. Or the employer could decide to get the details on paper.
Employers need to think about whether confidentiality prevents their nominated agent from getting information for all employees. If it does, the employer could ask us to send the employee information to them instead and pass it on. But if an agent is already getting the employee information online for them they must arrange with Electronic Business Unit for this to stop. This would not stop agents from sending us information for the employer.
Or splitting their PAYE scheme might be best way to manage information sent from us. An election to do this must be made by the start of the tax year on a form P350. This will mean extra returns at the year-end. Dispensations and PAYE settlement agreements will only be renegotiated for new references when there is a change to what is already in place.
Employers are still responsible for ensuring the integrity and privacy of employee data whatever way of managing employee information they choose.
This only covers payroll. We will carry on talking to other agents on things other than payroll, if we have the authority to do so. So we would write to the company’s accountants about Corporation Tax if we had a 64-8.
Remember that you must register and enrol for online services to send or receive information for your clients online.
We published an article in Working Together issue 6 entitled “SA Cases - Estimated Underpayments from April 2002”. This article introduced a change to the way we treat estimated underpayments arising during the year for SA taxpayers. We have been asked to further clarify how this affects any entry in box 18.2 of the SA Return.
When a PAYE code is reduced during the tax year, it will normally be operated on a week 1/ month 1 basis and an estimated underpayment will arise. The estimated underpayment is an estimate of the extra tax due on the reduced code from 6 April to the date the new code is operated. Since April 2002, where a case is identified as being within SA any estimated underpayment will not be automatically collected through the following year’s PAYE code. In these cases the PAYE Coding Notice (form P2) for the year in which the estimated underpayment arises will include a note that this will be collected through the Self Assessment balancing payment.
Where the estimated underpayment is not included in the following year’s PAYE code any entry in box 18.2 should be nil.
Where exceptionally the estimated underpayment is included in the following year’s PAYE code (for example, as a result of a request to do so) then any entry in box 18.2 should be the amount of the estimated underpayment.
In issue 14, we told you that we were creating five specialist teams to work on the tax affairs of inward expatriate employees and related employer issues. As promised, we are now providing some further information about these teams.
Who Will the Teams Deal With?
Where the employer has a dedicated PAYE scheme for its expatriate employees then we will deal with that PAYE scheme and all the individuals in that scheme.
Many multinational employers do not have separate dedicated PAYE schemes for their expatriate employees. But where such an employer tells us that it regards any employee as on assignment or secondment to the UK, then we will deal with that individual’s tax affairs.
We are also using our own systems and records to identify other people with whom the teams will deal. They will generally be people who come to work wholly or mainly in the UK for multinational businesses on terms and conditions of employment (or under arrangements) that are different from those which would normally be available to someone who was recruited in the UK to work for a UK-based employer.
We recently wrote to employers we identified as having these employees. However we may not have identified all concerned. We are inviting employers who think they may be affected to contact us – if they haven’t already heard from us. There has been a brief article about this in the most recent Employers’ Bulletin and we would welcome the help of professional advisers in encouraging employers to contact us where appropriate.
Where Are the Teams Based and How to Contact Them?
The specialist teams are organised regionally so your contact telephone number depends on where the Inland Revenue PAYE office for the employer concerned is based.
Southern England 023 9285 8343
(based in Portsmouth)
Central England } 01978 297809
Wales (based in Wrexham)
Northern England (West) } 0161 261 3398
Northern Ireland (based in Salford)
Northern England (East) 0191 490 3843
(based in Gateshead)
Scotland 0131 519 7194
(based in Edinburgh)
Please do not use these telephone numbers for calls that are not about inward expatriate employees or related employer issues.
Full postal addresses can be found on our Internet site – use the “contact us” link at the top of the home page and then the “Look up one of our Specialist Offices” link.
A small team based in London will support the other five teams by carrying out some Employer Compliance review work with a London connection.
How Else Can You help?
For individual employees who are dealt with by an Expatriate team, it would be very helpful if you could ensure that completed Self Assessment Returns are sent direct to the Expatriate team.
Self Assessment Returns for 2003-04 include a new facility for individuals to give all or a specified amount of any tax repayment to charity. The relevant boxes are at question 19A of the Return. A flier included in the Return pack highlights the new facility and explains how it works.
We have been asked to clarify some of the detail of how the scheme will operate.
The taxpayer can choose a charity from a list published by Inland Revenue. See: www.inlandrevenue.gov.uk/charities/charities-search.htm). Charities wishing to participate in this scheme have signed up with the Inland Revenue and each has been allocated a unique code. The code is what the taxpayer needs to enter on their Return to identify the charity. Where the taxpayer does not have Internet access they can call their Tax Office or the SA Helpline to obtain the code. The list of charities will be updated on a quarterly basis, with the first update on 1 June 2004.
There is no obligation to donate the whole repayment. Indeed many taxpayers will not know with any certainty the amount of the repayment that will be due when they complete their Returns. So the Return gives an option to specify the maximum amount to be given. If the repayment is more than the amount specified then the balance of the repayment in excess of the specified amount will be repaid to the taxpayer or their nominee. If the repayment is less than the amount specified then the total repayment will go to the charity. Tax advisers might wish to encourage clients to specify the maximum amount to be donated if there is any uncertainty about the size of the repayment due.
There has been some concern about what would happen if repayments were made incorrectly to charity. The scope for the wrong charity to receive a donation has been minimised by the use of unique code numbers. The code has built-in checks that prevent minor errors in entering the code on the Tax Return resulting in a repayment being made to the wrong charity. Where a code is not recognised, the repayment will go to the taxpayer who can, of course, make a tax efficient donation to the charity. Where a repayment has been donated to a charity and that repayment arose because of a taxpayer error, the Inland Revenue will recover the excess repayment from the taxpayer. This is in line with current practice where an excess amount has been repaid to a nominee. Where because of a mistake by the Inland Revenue, a repayment is sent in error to a charity, the Inland Revenue will request return of the payment from the charity. The individual will not need to take any action.
Donations made this way can be made under Gift Aid, which allows the charity to claim basic rate tax on the donation. A Gift Aid declaration is incorporated in the Return form. As with any Gift Aid donations, the donor must pay at least as much Income Tax or Capital Gains Tax as the charity reclaims on the donation. For the purposes of this scheme the legislation treats the donation as made when the repayment is passed to the charity by the Inland Revenue. The taxpayer will receive a repayment notification which shows the sum paid to the charity. In most cases, the payment will be made during the tax year following the one to which the Return relates.
This scheme allows anonymous donations to be made using Gift Aid for the first time. Since the donor makes the Gift Aid declaration on the Return, the charity does not need to have the donor’s details. Details will only be passed to the charity if the taxpayer gives their permission on the Return.
It will not be possible for an election to be made under section 98 Finance Act 2002 in relation to these donations. Section 98 allows Gift Aid donations to be treated as made in the previous year of assessment and therefore relief is given earlier. Many taxpayers won’t know with any certainty how much the repayment will be. If they claimed relief on a higher amount in the Return giving rise to the repayment, the Return would then have to be amended. This would result in a further tax liability, as the amount of relief would be reduced. This would add too much complexity and potential for confusion. Instead the donation should be entered on the Return for the following year along with any other Gift Aid donations.
Some taxpayers and their tax advisers have contacted us, querying the receipt of a penalty notice for a late 2002-03 Tax Return. They have said that the Return was filed on time.
We now know that a number of these penalty notices were issued wrongly, and we want to apologise to you and your clients for the inconvenience and additional work we know that these errors will mean.
We have identified the cause as being individual processing errors, so we will be doing all we can to improve our procedures. If you have received a penalty notice and the Return was filed before midnight on 1 February please contact the office shown on the notice.
We will, of course, consider claims for compensation under Code of Practice 1, for any reasonable costs which have been incurred as a result of our mistake or unreasonable delay.
The Inland Revenue prosecution policy applies to all areas of Inland Revenue business including tax credits. The Board operates a policy of selective prosecution intended to bolster their overall enforcement strategy. The focus is on cases where prosecution will do most to promote compliance with the law by deterring tax, contribution and tax credits fraud.
For tax credits, as with other business areas,
each case is considered on its own merits, having
regard to all
the facts. The size of the alleged fraud is not
of itself the determining factor in considering
the more extensive and substantial the alleged
fraud, the more likely it is that the Board will
wish to prosecute.
Practitioners will know that the pursuit of criminal
proceedings by the Board does not preclude them
from seeking to recover, by civil means, any tax
as a result of the fraud.
Tax credits will involve the outlay of some £16 billion each year. With such a large amount of money involved it is important that fraud is not tolerated. So prosecution will be an important tool in the Revenue’s response to the risk of deliberate false claims. But prosecution should be seen in the context of a range of different actions and sanctions and comes at one end of the compliance spectrum. Compliance work is ongoing throughout the process of administering tax credits. Every claim must first pass verification system checks, and in the case of high-risk cases, other checks before being put into payment. Awards, when in payment, are risk assessed further and where higher risks are identified will be subject to examination or enquiry. Where these enquiries find deliberate attempts to cheat the system prosecution will become a possibility.
Where negligence has been identified, and has involved people receiving more than they are entitled, penalties are in point, rather than prosecution. Unlike more traditional DWP benefit payments, civil sanctions have been legislated as part of the compliance effort, and as with taxes this is where the Revenue shall see the bulk of its enforcement activity. Only the most serious cases of tax credits fraud will be passed to Special Compliance Office to consider prosecution. Again, this is the approach you will be familiar with in the Revenue’s tax compliance work.
It is early days for the new tax credits. The Inland Revenue expect to get tax credits cases to court quickly. This reflects the difference between tax fraud and tax credits fraud where the latter is usually much more straightforward to identify and prove. Practitioners may be aware that the DWP prosecute about 12,000 cases of benefit fraud each year and use criminal sanctions regularly as their preferred option to counter benefit fraud. Special Compliance Office applies the Board’s selective prosecution policy in criminally investigating tax credits fraud cases. Because of the Revenue’s different approach we do not expect to be prosecuting in the same numbers as DWP.
The Inland Revenue will limit its use of criminal prosecution to cases of serious tax credits fraud. This means that it will not be used in cases of error, negligence or, importantly, in cases of minor fraud. Criminal sanctions are clearly appropriate in cases of more serious frauds and those involving organised attacks on the tax credits system. Such attacks may involve the use of multiple identities, for example. And these sanctions are appropriate, too, when significant amounts of tax credits have been defrauded by blatant and deliberate acts, or cases involve those who are in a position of trust or repeatedly commit fraud against the public purse. We will give these factors a high weighting in the decision-making about whether to prosecute in such cases.
But we also need to take up a selection of other cases, which are perhaps opportunistic and lower level, to provide a deterrent effect across this area of the tax credits system. When aggregated, lower level fraud can represent a very serious risk. These cases will be a given a low weight in the decision-making process.
The three cases outlined below illustrate the type of tax credits fraud where prosecution has been used, demonstrating the Inland Revenue prosecution policy in action:
Case History 1
An escort agency operator in London claimed childcare expenses which she did not incur. The WFTC loss was £9,447 and the NTC loss was £6,370 making a total loss to the Revenue of £15,817.
Case History 2
A hotel receptionist in Bolton misrepresented her domestic circumstances, omitting her partner’s details from her applications for WFTC and NTC. The combined tax credits loss was £10,378.
Case History 3
A doorman, a car dealer and his common law partner conspired to carry out a multiple identity fraud in North London. They submitted numerous false claims to tax credits, involving a loss of tax credits of £114,730
Working Together is a partnership with the CIOT, ICAEW, ATT, ACCA, ICAS and AAT. Although the material in this publication obviously reflects discussion and consultation with these bodies, the Revenue is solely responsible for its contents and for the views expressed in it.
contact details & back issues
Back issues can be downloaded from our featured area on the Revenue website www.inlandrevenue.gov.uk/workingtogether/publications/index.htm. If you would prefer a paper copy, please write to or email the address below. Working Together is covered by Crown Copyright. There is no objection to firms copying the publication for their own use. Anyone wishing to re-publish Working Together or extracts more widely, should write for permission to
Greig Rattray, Working Together Team, 5S South West Wing,
Bush House, London WC2B 4RD
or email: Greig.Rattray@ir.gsi.gov.uk.