Weekend press review: HMRC in the spotlight

The Financial Times carries a story to lighten the heart of anyone who’s ever been hit with a HMRC penalty for the late presentation of a self-assessment form. Or perhaps we should call it an “I told you so” moment. It seems that HMRC has been coming under some heavy-grade fire for what’s being portrayed as an incompetent scatter-gun approach to the imposition of these penalties.

The FT reports that lawyers Clifford Chance have extracted a freedom-of-information confession from HMRC that 270,000 late penalty notices were cancelled in 2016 – and that the numbers in 2014 and 2015 had been an even more eyebrow-raising 400,000 and 610,000 respectively. (That represented a third of all penalty notices, apparently.) So what’s going on? There are two versions of the tale, it seems.

The freedom of information request had been made after a Clifford Chance partner had been wrongly issued a £100 fine after making his 2016/17 tax return with a month still to go before the 31^st January deadline. His appeal duly succeeded, but it came with a finger-wagging admonition to “make sure that you send in your tax returns and pay the tax you owe on time in the future……If you do this, we won’t charge any penalties.”

The implied accusation that it was still his fault, even though it had been the Revenue’s error, was like the proverbial red rag to a bull, which is something you really don’t want to do to a lawyer. It also cut right across HMRC’s own protestations that penalty notices are only imposed where there are no mitigating circumstances.

But on a wider level, the article says, the increasing volume of penalty notices appears to be due to a fatal collision between HMRC errors on the one hand, and a fully-automated default mechanism on the other that does not look closely enough before sending out the penalties. Sometimes, it says, HMRC has accidentally issued two code numbers to one individual and then penalised him for not completing forms for both of them.

So how did the penalty cancellation figures shape up for 2017? It seems that HMRC now has stopped recording them, “due to costs and a lack [of] a business need”. Funny, that.

Money Mail starts the new tax year with a feature on the Alternative Investment Market – which, it says, can benefit even a not-particularly-affluent investor. Not just because of the tax breaks (capital gains, IHT exemption after two years of holding), but also because of the more dynamic nature of smaller companies. The growing popularity of AIM ISA funds (and also the ability to hold AIM shares in an ordinary ISA) has significantly altered the landscape for those who may not have considered the smallcap sector at all.

Sensibly, however, the article draws attention to the high risk of AIM investing, and to the possibility of a share getting wiped out. It also reminds the reader that many AIM shares pay no dividends, or very small ones. What to do?

The author provides five specific suggestions for potential AIM investments; but what grabs the attention rather more is the chart which shows that the FTSE AIM index grew by a remarkable 9% in the year to end-March, at a time when the FTSE-100 was falling by nearly 4%. (But returning meaningful dividends, of course.) And let’s not forget that the AIM index’s 4% decline during the first quarter of 2018 was only half of the 8% drop experienced by the Footsie.

There’s little here that would teach an IFA very much, but the figures alone are instructive, don’t you think?

The Sunday Telegraph Money section leads with a look at the very serious problem facing those who are self-funding their care in care homes, who end up paying a lot more for their care than local authorities are charged when funding residents for exactly the same service. In the report, one commentator suggests that local authorities pay a whopping 44% less.  With many care homes now facing increasing costs, concerns are raised that fees for self-funders will have to rise still further if the facilities are to be maintained. There are arguments about the risks of a two-tier system coming into existence. The article quotes that, according to analysts LaingBuisson, the average weekly cost for those who pay privately is now £845. Another commentator warns that some care homes may end up having to leave the publicly funded care market or go out of business. It makes for troubled reading.

Writing in The Sunday Times Money section, Ian Cowie uses the increase in personal contributions into auto-enrolment schemes as the trigger for his plea to readers to get into the savings habit. There’ll be no argument from the esteemed readership of IFA Magazine to that.  When it comes to younger workers perhaps contemplating cancelling their auto-enrolment contributions, he describes that as being a “terrible mistake”. However, the DWP expect the opt-out rate to rise from around 9% now to 21% after the rate rise. That is not good news. Progressing with more words of wisdom, Cowie then encourages readers to start by investing in a global investment fund such as F&CIT, Scottish Mortgage or Witan, to make sure they review things regularly and to let time “do the heavy” lifting for them.  His warning extends to those in invested in unfunded or underfunded pension schemes. He reports ONS calculations that the total value of promises issued by Britain’s pension schemes is £7.6tillion, however quotes Sir Steve Webb as saying “Britain only has about a third of that money sitting in pensions”. There is clearly danger here, and it is possible that clients will be seeking reassurance from their advisers on how to ensure that their retirement is as worry-free as possible.

Refreshingly, there is also a call to readers to use their ISA allowance early in this new tax year. Hoorah we hear you cry again! And it’s not only in the Sunday Times does that message get promoted.

However, there certainly will not be any loud cheers in response to the troubles brought for thousands of Aviva customers following their recent move to a new online platform which has caused all sorts of tech issues for advisers as well as clients.  The Sunday Times talks to a few advisers who express concerns about the tech problems causing issues for end of tax year matters and whether clients may have been disadvantaged.

Writing in The Financial Mail on Sunday, Jeff Prestridge echoes the same ISA call to readers as the Sunday Times – not to wait until the end of the year, get in early and use ISA allowances to get the best value from them. He proceeds to highlight the value of making regular contributions, asking numerous advisers for their tips on which funds they like for such a purpose. If you particularly want to see the details, then just read the article.

The fund focus for the MoS is the Utilico Emerging Markets Trust, which last week saw its shares listed on the London Stock Exchange after 13 years as a fund domiciled in Bermuda. As Jeff Prestridge reports, Utilico is not a conventional emerging markets trust. Though it invests in a spread of markets and companies operating in emerging economies, the trust has a strong bent to utilities, communications and transport. The London listing should make it easier for people to buy the trust’s shares.