Sam Mitha
Assistant Director
PAYE, SA & NICs Group
Room 1E/09
1 Parliament Street
LONDON
SW1A 2BQ
Mr J. Oakley
Tel
mailto:[FOI #15611 email]
Fax
www.hmrc.gov.uk
Date
4 November 2009
Our Ref
FOI 1926/09
Your Ref
________
Dear Mr Oakley,
FOI 1926/09: REQUEST FOR AN INTERNAL REVIEW
On 30 July 2009 you made a request under the Freedom of Information Act
You have asked for an internal review of our reply of 4 September 2009.
I apologise for my delay in replying.
On the 30 July 2009, you asked:
Could you please advise me the reasons behind the rule that states
that a tax payer wanting to offset expenses against tax has to fill in a
self assessment form if the expenses exceed £2500 in any tax year?
Can you also please advise me why the staff at Dorchester Enquiry
Office laughed at me when I asked this same question?
Could you also advise me as to what HMRC does with the information
relating to the expenses incurred?
Could you also inform me as to how a tax payer is expected to know
that they need to fill in a self assessment form to abide by this rule?
Information is available in large print, audio tape and Braille formats.
Type Talk service prefix number – 18001
Who is expected to inform who about this rule and when does this
communication need to take place by.
On 25 August 2009, Martin Delnon wrote to you:
I am writing to advise you that HMRC does not expect to complete its
search for the information you requested on 30 July until next week.
I am sorry that I will be unable to respond to your request sooner.
You say that the staff at Dorchester Enquiry Office laughed at you
when you asked how taxpayers are expected to know that they need
to fill in a self-assessment form to claim to offset expenses of £2,500
or more against tax. If you wish to make a complaint about the
conduct of staff at Dorchester Enquiry Office you can find HM
Revenue & Customs' guidance on how to make complaints on our
website at http://www.hmrc.gov.uk/dealingwith/complain.htm.
I will write to you again as soon as the search has been completed.
On 4 September 2009, Martin Delnon wrote to you:
Further to my letter of 25 August, I am responding to the requests
that you made in your e-mail of 30 July.
You asked for the reasons behind the rule that states that a taxpayer
wanting to offset expenses against tax for expenses or professional
subscriptions of £2,500 or more has to complete a personal tax return
(self-assessment return).
The figure of £2,500 was increased from £500 with effect from April
2004 as one of a series of initiatives in response to recommendations
made by the Treasury Select Committee in connection with the self-
assessment system for individuals. The Committee recommended
that the then Inland Revenue take steps to reduce the number of
individuals required to complete personal tax returns with particular
emphasis on pensioners and the lower paid.
I have been unable to find any document that records why the figure
of £2,500 was chosen. However, the size of the increase from the
previous limit would have significantly reduced the number of
individuals required to make claims for expenses by completing a tax
return.
HMRC captures and processes the information on tax returns and tax
becomes due or repayable in accordance with the return information
and the taxpayer’s self-assessment. HMRC then conducts a risk
assessment as part of the process of checking the return. The risk
assessment may identify obvious errors which can be corrected or
other matters that may require more detailed explanations for which a
formal enquiry will be necessary. Information about expenses will be
considered with the other return information as part of that risk
assessment.
You also asked how a taxpayer affected by the £2,500 limit for
expenses is expected to know that they need to complete a tax return,
what they need to do and by what time. The changes made in 2004 in
response to the recommendations made by the Treasury Select
Committee included the publication of the criteria that HMRC uses for
deciding whether a tax return is needed. These can now be found
under “Do you need to complete a tax return?” at
http://www.hmrc.gov.uk/sa/need-tax-return.htm. A taxpayer who
has incurred expenses that they wish to set against tax will need to
contact HMRC. If those expenses are £2,500 or more, the HMRC
officer should explain what is required including whether the taxpayer
will need to complete a tax return. A PAYE taxpayer who needs to
complete a return has five years from the 31 October following the end
of the tax year to require HMRC to give him or her notice to make a
return.
Finally, I explained in my previous letter about the steps that you
should take if you wish to pursue a complaint about the conduct of
staff at Dorchester Enquiry Office.
On 4 September 2009, you requested an internal review:
Please pass this on to the person who conducts Freedom of
Information reviews.
I am writing to request an internal review of HM Revenue & Custom's
handling of my FOI request 'Expenses offset against tax.’
A full history of my FOI request and all correspondence is available on
the Internet at this address:
http://www.whatdotheyknow.com/request/expenses_offset_against_t
ax
Can you please review the information and correct the mistakes made
before re-submission. Can you please check your response against the
information provided by yourselves to employers and especially
payroll bureau's regarding the processing of expenses and the
offsetting of expenses against tax.
On 29 September 2009 you provided a clarification to your request for an
internal review:
Contractors pay Payroll Bureau's (PB's) to handle ALL of their Pay and
Tax affairs for the work that they carry out. HMRC issues the rules
and guidance to PB's which must be adhered to by the PB. PB's are
audited by HMRC on a regular basis. If their is any other HMRC
requirement of the contractor then the responsibility lies with the PB
therefore any guidance provided by HMRC to the PB must make
reference to self assessment for contractors who offset more than
£2500 per year against Tax.
Contractors are not expected to research into what other HMRC rules
that they are expected to comply with, the risk of missing something
is too high.
My review
I have carefully considered the information that you requested and the HM
Revenue & Customs (HMRC) responses.
I can confirm that HMRC has conducted a thorough search for the
information that you requested including our paper and computer records
and questioning our staff who had an interest in the review of individual’s
obligations under the self assessment regime. I can confirm that HMRC has
provided all the information that you asked for on 30 July 2009, to the
extent that it is held by the Department.
I see that Martin Delnon’s letters of 25 August 2009 and 4 September 2009
did not tell you about how to request an internal review of HMRC’s response
or how to contact the Information Commissioner if you are not happy with
the outcome of an internal review. I am sorry for this omission.
The Information Commissioner
If you are not content with the outcome of this internal review, you may
apply directly to the Information Commissioner for a decision. The
Information Commissioner will not usually consider a case unless you have
exhausted the internal review procedure provided by HMRC. He can be
contacted at The Information Commissioner’s Office, Wycliffe House, Water
Lane, Wilmslow, Cheshire SK9 5AF.
Your clarification of 29 September 2009
In your email of 29 September 2009, you raise questions that were not part
of your Freedom of Information request of 30 July 2009. I will therefore
reply to those questions outside the terms of the Freedom of Information
Act.
I can find no errors in HMRC’s responses to your request for information. I
am therefore taking your comment as an expression of dissatisfaction with
our response to your question about how a taxpayer is expected to know
that they should complete a tax return if they wish to claim for expenses of
£2,500 or more. However, your email of 30 July 2009 suggests that there
may be some confusion between an employer’s Pay As You Earn (PAYE)
obligations and an employee’s obligations as an individual subject to income
tax.
When you say “contractor” I am taking that to mean an individual who
provides his or her services through a personal service company. The
contractor, through the personal service company, may choose to use a
payroll bureau to handle the company’s PAYE and National Insurance
obligations. However, the service company as an employer and the
employee as an individual continue to have separate obligations. It might be
helpful to set out these separate obligations as they relate to an employee’s
expenses because they may answer your concerns about the guidance
HMRC provides to payroll bureaux.
As you know, an employer is responsible for reporting to HMRC details of
the expenses paid to its employees on forms P11D.
On the other hand, an employee is an individual subject to income tax and
therefore has separate obligations. These include an obligation to complete
a tax return where the employee claims expenses of £2,500 or more against
their personal tax liabilities.
HMRC’s guidance mirrors these separate responsibilities. HMRC’s guidance
for payroll bureaux covers the employer’s obligations in relation to expenses
it pays to its employees. The guidance does not cover the employee’s
obligations in relation to expenses and their personal tax liabilities because
it is not relevant to the employer. HMRC’s guidance for employees who wish
to claim their expenses against their tax liabilities is therefore provided
separately.
SAM MITHA
