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Issue:- 05 May 2011

HM Revenue & Customs Letters

THE HM Revenue & Customs this year have been putting out large stories in local and national media about clamping down on "self-employed tax credit cheats" so it is not surprising that people are under review. Sadly, HMRC is not communicating within its departments because of rules laid down by the previous government, and this has caused a lot of problems. In the last few weeks many self-employed people have been receiving letters asking for information about themselves. These letters are said to have been sent out at random to people who are self-employed, but the system has not been stopped from targeting people who have had recent problems or are still having problems with HMRC. This lack of communication has thus added extra strain on people who are already in a vulnerable situation which has often been very alarming for them. The questions, in the letters sent out, are very direct and extremely invasive in what they request and the tone of the letter makes it sound as if the recipient is undergoing a Formal Investigation by HMRC, because the format is a generic letter which is aimed to cover all sections of self-employment. Many self-employed people work extremely long hours and get little in return, due to the current climate, so Tax Credits have been recommended by the Tax Offices as an option to help them out. Unfortunately, this has turned into a long running disaster for some, yet for others it has been the makings of them. For those who are suffering bad experiences, receiving one of these letters can be very shocking. Many people don’t ponder the number of hours they work, as they are employed and have hour sheets For self-employed people however, it is not always as easy to provided evidence of hours worked when asked. This is not normally an issue, but for those claiming tax credits, it can be. Working Tax Credits are only awarded to people if they or their partner are working enough hours a week and their income is low enough. Also, you don't need to have children to qualify and on the face of it doesn't matter whether you are working as an employee or are self-employed. And this is precisely where the problem gets a bit more complicated. The number of hours you have to do to qualify for Credit depends on your circumstances. There are various ways that someone on low income, can qualify to receive Working Tax Credits. People who are 16 or over and work 16 hours or more a week, can get Working Tax Credit. They can also receive it if responsible for a child or young person. Also support may be obtained if you are 16 or over and work 16 hours or more a week, you are disabled and you receive a qualifying benefit. It is also open to you if you are 50 or over and you work 16 hours or more a week, as long as you were getting certain benefits for at least 6 months before you started work. Plus, on top of that, if you are 25 or over and you work 30 hours or more a week you may get Working Tax Credits, if your pay is low enough. In this situation you do not have to have a child in order to claim either. Lastly, if you work 16 hours or more a week and are aged 60 or over, you can apply, if your pay is low enough to qualify. So it sounds simple and on the face of it, it is! For some areas of self-employment a problem has been lurking for many years now. The question is, how do you prove the amount of hours you work? Some sections of self-employment are clear cut and have no big issues, like hair dressers, who do set appointments and can supply information at request, proving the hours they work; others might have problems doing this. One group affected by this are freelance photographers. If they have studios it can be very easy to show, but for others it is a very different matter, especially for journalists. The appointment books sometimes do not show what the hours are in reality. Same goes for leaflet droppers and even some sales people, who do cold calling. As we started to look into this we are shocked at how many people do not keep long term records of the hours they work, when freelance (self-employed). It is not necessarily something you automatically register, as you do with say financial records. So this comes as a massive shock to be asked for information. The letters read:- “Please let us have the information asked for below for the period 1 January 2011 ****** unless stated otherwise by ** May 2011. Your self-employment details. Type of work you do and or nature of your business. Your unique Taxpayer Reference Number. Summary / diary of bookings and/or appointments you have taken or made. Copies of advertisements placed. A breakdown of the hours you worked per week. Invoices for any work done. Statements from all your bank and building society accounts (including any joint accounts). Please send the original documents, we cannot accept photocopies. Any original documents sent will be returned to you securely.” The letters sent out give very little time to react to them and they do have a phone number on for help. But before we go on to that issue, another worry is how intrusive the request is, as many self-employed use personal diaries to keep business information in, and add to that even more use mobile phones and other electronic equipment to keep the appointments on. That is not just a small selection, but a massive cross section. The problems with many mobiles and other electronic systems are that you cannot print the appointments off and there are therefore no original paper documents! It does say:- “Summary”, but that is contradicted with it stating:- “original documents”. Also, they request you send them by recorded delivery, and that you will not get reimbursed for the sending of them. This raises an issue, as many on tax credits can ill afford such added expenses and what happens if they can’t print off the information? If you are a reporter as with some other jobs, sending out confidential information can be even more of an issue. Compound this with the fact that some occupations, tasks and appointments flow from one to another, so are difficult to record individually. HMRC demand original copies of your bank records, invoices, bills, etc. All this adds up in weight for postage, and time to put all together. And time is usually of the essence for the small businesses struggling to keep afloat. No wonder many consider it easier to give up and become unemployed! Ok, on the face of it, this sounds like an easy task, but think about it for a second. ...Continued...

..Continued...  All this detailed information it is not what you get asked for when supplying your tax returns and they have the financial information all ready. Also printing out online banking forms is not allowed in most cases as they require originals, so added expense is required to get extra copies from the bank, just in case they are lost!  Again this extra work means additional cost that someone asking for help can ill afford. Compound this with the fact that there has been a surfeit of bank holidays, so many are struggling to get back on track. Letters have been delivered late as a result, the banks have been closed which all adds to the stress of trying to meet very short deadlines imposed by the HMRC. Much of this could be easily rectified if the department conducting the reviews could talk to the other departments. And the diary problem would become less of an issue. The reason, we have been told, that they are asking for this is that they are trying to build up a picture of cross sections of self-employed people so they can check all receiving the credits are doing so fairly and are working the correct number of hours. That on the face of it is very understandable, yet the tone of the letter, the shortness of time requested for the recipient to respond is, for some, beyond a joke. When they tried to phone for advice or help, shock. The number did not work! One of the readers who contacted us about it said:- “I have received the tax credits questionnaire wanting to know information about me. I was pushed into self employment by Jobcentre plus and Inbiz under the government’s New Deal 50 plus, the training for doing my accounts was an excel spread sheet, supplied by the Inbiz advisor, and then instructions to enter each months’ receipts and work invoices into the spread sheet and then to put those receipts into an envelope marked with the month on it and file them. There was no mention of keeping hour by hour, day by day records? I am absolutely stressed out by what is happening and feel ill with worry. I have been unwell due to stress and unemployment benefit pays more than I get now and sickness benefit even more, I don't wish to go there, I want to keep plugging away at trying to make my business a success. This is added pressure I can ill afford. There was a number to contact if I had any queries, I have dialled it on that number, but got an unobtainable/disconnected tone. Thinking it was a Phishing Scam letter, I contacted Tax Credits directly who informed me that the compliance officer was not logged into the system so the number, which is individual, will not work. The tax credits adviser said they would email the officer to let her know that I wished to speak with them. Later in the day they rang me back and told me they had received an email reply and that I should ring the following day. I rang a number of times the next day, on the number supplied on the letter, only to be met by the same unobtainable tone? This only adds to my stress as I want advice as the deadline is only days off and I have only just had the letter.” Others phoned and were told that “The office must be on holiday this week.” and other excuses had been given to those with questions. We also tried to get in contact and our editor experienced the same problem. After contacting the HM Revenue & Customs press office in London, we eventually received a call from a very helpful officer, who explained that they had sent the letter out randomly and reassured us that the letters are not at this stage targeted. Sadly, they were unaware of other issues as they cannot communicate internally due to ‘Data Protection’ and as the letter was generic, they expected many calls for help. HM Revenue & Customs said in an official press statement to us that:- “We have had problems with the phone numbers at one of our offices in Leicester. Since becoming aware with this problem, we have tried to contact all our customers who received a letter quoting this phone number, to offer an alternative number. We apologise for the inconvenience and possible concern this may have caused any of our customers.” Unhappily for the staff on the Leicester number, the lack of communication from other departments to clients has resulted in many already worried clients getting even more anxious and stressed. This will only cause more problems for the HMRC staff who, when we got though, were very sorry about and embarrassed by the fault, and were extremely informative and helpful. Also with phishing on the increases, the fear is that many might have binned the letter and will ignore it? Our advice is if you did, or do receive such a letter, get in contact as soon as possible with who the Tax Credits Office who will help and advice you further. Also you can contact your Citizens Advice Bureau for more information and support, should you require help.

For advice about Tax Credits you can go to the 2 following links:-

HMRC 1  |  HMRC 2

The review of the system for Tax Credits has good intentions, and here at Southport Reporter, we agree to the ideas behind it. We also acknowledge that this is an unusual problem which has affected them, with the added problems of Easter, Bank Holidays and the phone line going down, but we do feel strongly that more communication within Inland Revenue might be advisable, for not only the sake of those ringing them up, but also for their own staff. We felt very sorry for the staff in Leicester who, no doubt, will be put under an unfair light as a result of this failure in communication, through no fault of their own, once we found out the true intent of the letters and the nature of the fault. Also the tone of the letters being sent out and the way they are sent out should, in our view, be looked into, and not just these letters, but many others sent out daily by HMRC. This, in our view could ease tensions and stress for all concerned, and could easily save lots of added costs on all sides as a result. We will be keeping an eye on this situation and passing any extra information on to Southport’s MP John Pugh. If you want to contact our news room please email us via and if you do not want to be quoted or identified, but just want us to know you have a problem, please state this clearly. Also if you want us to forward it to the Southport MP’s office, please state that clearly as well. We would like to thank both the London HMRC Tax Office and Leicester for helping us to ease the worries of quite a few of our readers.

Our related archived new reports:-  1, 2, 3.

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