SHOULD YOU MOVE YOUR BANK ACCOUNT?

I tweeted on 2 July that if the banking fiasco that has affected millions of customers of RBS, NatWest, and Ulster Bank had affected me I would be taking my business elsewhere. Was that a recommendation for others to leave those banks? And if so why?

The fundamental job of a bank is to accept money into our account, pay money out as instructed, and keep an accurate record of the balance. The three banks of RBS Group failed to do that from 20 June after an overnight failure of the software that updates accounts with the previous day’s changes.

As a result money destined for accounts was not correctly allocated, online banking was suspended, direct debits and standing orders were not paid. There were problems with the use of debit cards and many people could not take money from cash machines because their balance did not include credits of pay or pensions that had been made but were not recorded on their account.

For reasons that are not clear the RBS computers had no adequate back up procedure in place and the failure meant that some data was lost from the system. Retrieving that information involved manual inputting which took so much time that the updates for future nights were held in a queue.

The problems for customers continued as the data was corrected and checked and then the backlog was processed in chronological sequence. But the bank has now admitted that was done first for RBS accounts, then for NatWest accounts and only now is it getting round to Ulster Bank accounts.

“Unfortunately for our customers in Ireland, Ulster Bank payments follow in sequence after those of NatWest and RBS. This is because of the way the technology was set-up at the time the 3 banks were integrated.” (see http://group.Ulster Bank.com/media/press-releases/republic-of-ireland/2012/02-07-12.ashx)

Although RBS customers came first and NatWest second the Group will still not confirm – twelve days after the initial error – that the problems of all the 11.5 million RBS customers and 3.5 million NatWest customers have been resolved.

But it does admit that the problems are continuing en masse for the 1.9 million customers of Ulster Bank in Northern Ireland and the Republic who will have to wait longer to get accurate access to their own accounts. It now hopes it will be resolved by the week of 16 July:-

"It is our expectation that by the week beginning 16 July the vast majority of customers will return to a normal service, but some residual reconciliations may be required."

In other words customers of Ulster Bank will be without the correct balances on their accounts and access to money paid in for around four weeks. That will cover paydays on four Fridays and one month-end.

So yes, if I had an account affected by this shambles I would be moving my business to another bank. That would not be out of pique or revenge or just plain anger. But if a bank cannot do the basics – taking in money, paying it out and keeping an accurate balance – over an extended period, why should I stay?

Is that a recommendation that others should move? No. But they should consider their options carefully.

OTHER BANKS
Of course, moving your money to another bank is no guarantee you will avoid problems. It is not just customers of RBS Group who have been affected by its computer failure. The 100,000 customers of Thinkbanking, which banks with RBS, could not access their money until Friday 29^th and had another short outage on the morning of 7 July. Ten thousand current account customers of Cumberland Building Society were similarly affected – though they were all protected by the Society itself and had few problemssaw little of the problems. Many small business customers who use Streamline to process credit and debit card payments failed to receive their takings for 20, 25, and 26 June until the morning of Monday 2 July. And unknown numbers of people whose employer banked with RBS, NatWest, or Ulster Bank did not receive their money on time. Some are still waiting.

Even if you open accounts with several unconnected banks there is no guarantee that a failure in one will not affect you if that is the one which receives your regular payments of wages, pensions, or benefits.

Some tweeps have also told me they want to avoid banks that engage in so-called ‘casino banking’ – taking in our deposits and then betting them on the international markets. We know at least one – Barclays – tried to rig the very markets its traders were placing bets on. But RBS, HSBC, and Lloyds are said to be among dozens of banks implicated in the same shady business.

The Co-operative Bank does not engage in casino banking and has a published ethical policy. It looks set to grow when it acquires 632 branches of Lloyds. Three other small banks – Metro, Handelsbanken, and Virgin – do not use money in deposit and current accounts for gambling on the markets. You can read about these four banks here http://www.paullewis.co.uk/archive/saga/2012/20120301Works.htm

There are also five building societies which offer current accounts – Coventry, Cumberland, Leeds, Nationwide, and Norwich & Peterborough.

And 24 credit unions also offer current accounts - here is the list http://www.abcul.org/about/productsservices/cuca

Many of these smaller players still use a big bank as its 'clearing bank' and you may find that payments take longer to go in and out of your account than it would with one of the big five. 

This blog contains information not a recommendation. And remember that whatever you do with your money, if the computers of a major clearing bank go down you may still be affected.

DON'T TAKE AWAY UNIVERSAL BENEFITS FROM THE OLD

UPDATED 26 DECEMBER 2015

Let me declare an interest. I am old enough to get the £200 tax-free Winter Fuel Payment and free local bus travel anywhere in England. As I live in London my travel Freedom Pass extends to local bus and tube travel throughout London at any time of day and to local trains from 0930 on weekdays. I guess the whole package is worth £700 a year to me, tax-free. Though in fact if I paid for London travel I would claim back much of the cost from clients and customers.

So. That’s that out of the way. Well almost. I do not in the slightest need that money. If it disappeared tomorrow I would shrug and say ‘so be it’. It would not leave me freezing in the winter and cut off from family, friends or the local library. Or, come to that, work.

So I get it; I do not need it; and the amount is small enough in my personal financial affairs that whether I get it or not is neither here nor there. So that leaves me uniquely able to say unequivocally that it would be complicated, counterproductive, and wrong to stop Winter Fuel Payment and free bus travel in England for those over women’s state pension age (see footnotes). Here’s why.

First, complicated. Who would you take it away from? Everyone who admitted they didn’t need it? Everyone called Paul? Everyone who paid higher rate tax? That would be possible but it would create a cliff edge at an income of £42,385 – earn an extra £1 or your pension rises £1 a year and you would lose £200. And it would not save much. The Government has estimated that ending it for households with an income above £35,000 would save just £270 million out of the total cost of more than £2 billion. The administrative cost could be £25 million a year or more – the amount estimated for administering the child benefit tax charge which began in January 2013.

You would save more by following what one tweeter suggested to me recently. Go down the income scale and only give these benefits to those poor enough to pay no income tax. Then the cliff edge would move down to £10,600 in 2015/16 and £11,000 in 2016/17. That would save more but would certainly take it away from many who did need winter fuel payment to keep warm in winter or free travel to see family and friends and visit the nearest town. 

Another problem is that these are individual entitlements so the non-taxpaying spouse or civil partner of a higher rate taxpayer would continue to get it. The only way round that is to impose a joint means-test such as that now imposed on child benefit recipients - and which the theoretical savings above are based on.

The same problem would be found if the payment was taxed as income. Where two pensioners share a household the £200 is split in two - £100 each. So each partner would have to be taxed separately on it. And where one partner earned, say, £1,000,000 a year and paid 45% tax on the payment a partner may have no taxable income and pay nothing. So a household where many think the payment is not needed would still keep £155 of it. 

There would also be problems where the payment just tipped someone over from being a non-taxpayer to paying tax. How would the right amount be collected if, for example, winter fuel payment pushed an individual £50 above their tax threshold and owed £10 tax? Solving those problems would be expensive and a back of the envelope calculation suggests the tax take might be less than £200 million a year. 

Now, I know your next argument. It is one I have made myself. Surely, you are thinking, surely all that Oxbridge brain power in the civil service can come up with SOME scheme to rid me of these turbulent pensioners? Well, they might. They did come up with a scheme to tax child benefit at up to 100% where a parent has an income over £50,000. That seems to have gone quite well, though many may have slipped through the net. 

So that is the ‘complicated’ bit.

Now ‘counterproductive’. The thing about these universal benefits – ones that you get on grounds of age or condition – is that they go to everyone. Those who need them do not have to declare their poverty to get them. If they do have to take that step then many simply do not claim. More than two million older people fail to claim up to £5 billion in means-tested benefits they could get if they applied. Paying them to me is the price we pay as a society so that my neighbour Marjorie, too proud to claim means-tested benefits though she needed them, at least got her winter fuel payment and free bus travel – though she could use that very little in her last years. If you means-test free bus travel and winter fuel payment then poverty among pensioners would grow as many who needed them failed to claim what they could get.

And finally ‘wrong’. In a way this is an extension of counterproductive. Some countries call the government departments that run social security or health the Ministry of Solidarity. Because state benefits represent solidarity. Between the sick and the well. Between the jobless and those in work. And, of course, between young and old. There are times and circumstances in life when the state should step in and transfer money from one group to another. Just as the childless pay for schools. The law abiding pay for the police force and the courts. And those without solar panels on their roof pay for those who get cheaper power from them. 

In summary, taking winter fuel payment and free bus travel away from richer older people would save relatively little, cost a lot in administration, increase poverty among the old, and undermine solidarity between the generations. 

NOTES

Women’s state pension age
Winter fuel payment is paid to people if they reach the state pension age for women in the September before the winter. Qualifying birthdates are listed here www.paullewis.co.uk/statepensionage/WinterFuel_AS.pdf though of course it may not last for as many years as this theoretical table suggests! In England free bus travel begins at women’s state pension age – which will rise to 63 from April 2016. London Mayor Boris Johnson has brought down the age for free public transport travel down to 60 for London residents, though the individual does not join the national Freedom Pass scheme until they reach women's state pension age. Ditto Merseyside. The qualifying age is still 60 in Scotland, Wales, and Northern Ireland. The age for free prescriptions is 60 in England. In the rest of the UK they are free for everyone.

26 December 2015
version 1.5

GROWTH BOND TO TEMPT SAVERS

The Treasury is trying to work out how to tempt individual savers use some of the £500 billion cash they have in the bank to fund its ambitious National Infrastructure Programme.

If it can be done it would fulfil two key objectives. First, savers would get a bit more than the dismal 3% or so that is currently on offer even to active savers who move their money regularly. Second, it would get new money into roads, rail, trams, housing, telecoms and so on which would create jobs, help companies and boost the economy. And all without it being booked as Government debt.

But both parts are tricky. Savers with cash in the bank are cautious. They want to know that their money is safe. Even if it does not go up very much, cash uniquely cannot go down (and email me if you are thinking 'what about inflation?' it would take too long here). So any growth bond would have to offer a clear hope of a better return than cash but some sort of protection against loss.

And that brings us to the second tricky part. How to keep the loan - for that is what it is - off the Government books? It already has a debt of more than £1 trillion and is expected to borrow another £120 billion in 2012/13. The Coalition is committed to borrowing less not more. So is it possible to bypass the national accounts by getting savers to lend money directly for infrastructure projects? I am told by someone close to the process that it is this step which is proving very difficult. Especially if savers are to be given any sort of government guarantee.

A similar scheme is being developed by the UK's pension industry. The National. Association of Pension Funds will soon be piloting a Pension Investment Platform to pump initially £2 billion into infrastructure projects. Eventually it could be ten times as big. Like any professional investor the funds want certainty and a good return. One example might be road building or widening. The income stream would come not from a toll - too risky and the M6 toll road has lost money every year since it opened - but from a Government payment per vehicle. They hope for returns of 2% to 5% above inflation.

Retail investors might be tempted with rather less than that. Especially if the offer was sweetened by making returns tax free. There is nearly £400 billion in ISAs, half in cash, just on that promise. But to tempt cash savers with money in the bank the growth bonds would need some sort of protection against loss. And that has to be done without adding the loan to the Government's debt.

If that trick can be pulled off then an infrastructure programme funded by the public would fit in well with Liberal Democrat policy and the public statements of deputy Prime Minister Nick Clegg.

If it can't then growth bonds seem unlikely to leave the bright ideas box and enter the real world.

THE END OF FREE BANKING

The end of free banking in the UK was signalled on 24 May 2012 by Andrew Bailey.

If you wonder who he is, then have a look at a £10 note. His signature will be there as Chief Cashier. Andrew Bailey has now been promoted to Executive Director at the Bank of England. And from next year he will almost certainly be a deputy Governor of the Bank and Chief Executive of the Prudential Regulation Authority.

Never heard of the PRA either? Don’t worry it doesn’t exist yet. It is one of the two separate regulators that will emerge when the Financial Services Authority splits in two next spring. The other is the Financial Conduct Authority. The PRA will be able to intervene in the market if it feels that major financial institutions are not behaving in the public interest.

And on 24 May Andrew Bailey told us what he would like to do when (OK, ‘if’) he takes on that role.

“the reform of retail banking in this country cannot move ahead unless we tackle the issue of free in-credit banking, and have a much better sense of what we are paying for and how we are paying.”

And he warned “it may require intervention in the public interest, not least because it is a way to encourage greater competition.”

In other words he would use his powers to make banks charge us all for our current accounts.

The "myth" of free banking

Most people in the UK believe that they have ‘free banking’. If they keep their current account in credit then there is generally no charge for most of the services the banks perform for us including making and receiving payments, keeping our money safe and letting us have free access to our money through a network of 36,000 cash machines.

Those are valuable services and – free as they seem – someone has to pay. In fact we all pay the cost in two ways. First the banks lend out our money at a profit. Second they charge us heavily when we go overdrawn or travel abroad.

The Office of Fair Trading estimated that banks made £8.3 billion between them from personal current accounts in 2006 – more than they make from savings accounts and credit cards combined.  Most of that was made up of £4.6 billion from interest earned on our money (and charging us high rates of interest when we are overdrawn) and £2.6 billion from direct overdraft charges.

That is why Andrew Bailey believes free banking is a myth and that competition would be better if we paid openly for the valuable services the banks provide us with.

Why they don’t charge

The banks would love to charge us for our current accounts and the services they provide with them. And they all offer us the opportunity to pay for a current account – the charges range from £24 to £300 a year. But most people wisely turn down the offer of paying for a current account they could get without paying a fee. The banks bundle in an insurance policy or two – which most people do not need – and other benefits which – with the odd exception – are generally not worth the monthly cost.

But there is an insurmountable barrier that stops the banks charging all of us for the banking services on our 130 million current accounts.

If one of them started charging for all its current accounts then it would lose customers to competitors who continued to offer free banking.

But if they agree to do it together they will be guilty of anti-competitive behaviour and could be fined up to 10% of their turnover – potentially billions of pounds.      

So they are stuck with the present system. And that is why Andrew Bailey made it clear that he would like to cut that Gordian knot by intervening in the market to make sure they could charge. He would probably do that by saying that keeping the cost secret was anti-competitive and charging would encourage competition and that would ultimately be good for us.

Public reaction

If he does decide to intervene he faces several problems.

First, what do you do about the 9 million people who have a basic bank account? The banks agreed more than ten years ago to introduce these simple accounts with no overdraft facility. It was partly to reduce the number of people who had no bank account and faced higher costs and greater inconvenience in managing their money. The new accounts were also needed to help the Government’s own policy to pay state pensions and benefits directly into a bank account and scrap the costly system of paying them by giro or order book. The new Universal Credit, which will replace many benefits from October 2013, will only be paid through a bank account.

If there was a charge for all bank accounts some excerption would have to be made for people on benefits. And that would probably mean a tightening of the criteria for access to basic bank accounts – which currently are also used by those with poor credit records and on low incomes from work.

Second, public reaction from the middle swathe of society who do not go overdrawn and do not believe they pay for their banking would be hostile. Many are not on high incomes and would complain vociferously if the Government (as they would see it) forced them to pay for a current account which, through careful management, they currently keep free.

Third, a current account is now such an essential part of life that charging people to use one would seem like a tax on living. It would be particularly hard for those in low paid jobs whose employer insisted on paying into a bank account as most of them now do.

Fourth, would he ban any bank from not charging for a current account? If so, that in itself could be seen as the most anti-competitive move of all.

Andrew Bailey recognises some of these problems. He said “I know from last time I raised the subject that the reaction is mixed.”

But he warned that would not put him off.

“I am like a dog with a bone on this one, I don’t think we will have a retail banking industry that is properly serving the interests of the public until we tackle the dangerous myth of free in-credit banking. “

The official Bank of England line is rather milder. A spokesman told me “He was speaking to stimulate debate on an important topic.”

Sources

Personal current accounts in the UK, Office of Fair Trading July 2008

http://www.oft.gov.uk/shared_oft/reports/financial_products/OFT1005.pdf

The future of UK banking – challenges ahead for promoting a

stable sector, Speech by Andrew Bailey at Westminster Business Forum 24 May 2012 http://www.bankofengland.co.uk/publications/Documents/speeches/2012/speech574.pdf

The final paragraph is the relevant one.

SELLING OLYMPIC TORCHES

There was controversy this week as an Olympic torch apparently sold on eBay for £153,100. The seller, Sarah Milner Simonds, told BBC Breakfast "it's not me to keep a shiny trophy on the mantelpiece when you can do something good with the money". She says she is going to give the money to a community gardening group. But she may end up with a very large tax bill as well. 

Any Olympic torchbearer who sells their torch may be liable for tax on the proceeds, even if they give the money to charity.

If the price fetched is more than £12,360 the torchbearer will have to pay Capital Gains Tax (CGT). If they give the money to charity through Gift Aid they may also have to pay some extra income tax depending on their own income and how much they give. 

CAPITAL GAIN

Capital Gains Tax is due on the gain - which is the difference between the selling price and the cost of the item including any expenses of the sale. 

The cost of the Olympic torch is low to the torchbearer. Those who are sponsored by Coca Cola or Samsung can simply keep the torch - the sponsors pay for them. Other torchbearers who want their torch can buy it from the London 2012 organising committee (LOCOG) on the day of their run for £215. Some will have paid slightly less – £199 – if they bought the torch well in advance of the start of the relay. There is an extra charge for a stand. The uniform is free.

(Incidentally, the torches cost LOCOG £495 each which is almost £4 million for the 8000 that were made.)

If the torch is sold on eBay total fees are likely to be around £41.30. Some special promotions can reduce that cost or increase it slightly. If the item is listed initially as one from which the proceeds will all go to charity eBay will waive the fees. But giving all the proceeds to charity may not be a good idea.

THE TAX

The torch counts as a ‘chattel’ – a personal possession. No Capital Gains Tax (CGT) is due if the selling price is £6000 or less. If it is less than £15,000 then the gain is limited to 5/3 of the selling price above £6000. So if the sale was for £10,000 then the gain is (£10,000-£6000) x 5/3 = £6,667. On that amount no CGT would normally be due as everyone gets a CGT allowance of £10,600 this year. Effectively this means that a sale price of up to £12,360 is free of CGT because the gain would count as (£12,360-£6000)x5/3=£10,600 under the chattels rule. That is equal to the annual CGT allowance in 2012/13 and so no CGT would be due.

If the selling price is more than £12,360 then some CGT would be due. The tax is levied at two rates – 18% and 28% – on the excess above £10,600. The calculation is complex and depends on the individual’s taxable income.

If they pay higher rate tax on their income in 2012/13 then the whole of the gain above £10,600 is taxed at 28%. If their income is lower than that then the gain above £10,600 is put on top of their taxable income after the tax-free personal allowance has been deducted. The chunk between their income and the level of higher rate tax is taxed at 18%. The balance above that is taxed at 28%. On a gain of £100,000 the tax would be at least £21,595 if the individual had no other income and up to £25,032 if they did.

All these calculations assume the person has no other capital gains in the year.

Capital Gains Tax is collected through self-assessment. The individual has a duty to notify HMRC of a gain in this current tax year 2012/13 by 5 October 2013. HMRC would then send out a self-assessment form for 2012/13. The individual would need to fill the return it online by 31 January 2014, though that date can be extended if HMRC did not notify the need to fill one in until after 31 October 2013. Deadlines for paper forms are earlier.

CHARITY

Even if the proceeds of selling the torch are given to charity CGT will still have to be paid. Gift Aid has the effect of reducing the rate of CGT so all the gain is taxed at 18% rather than some of it at 28%. But it does not wipe out the CGT liability.

For example, someone with a gross taxable income of £30,000 who sold a torch for a net profit of £50,000 would normally pay £9784.50 in CGT. If they gave the proceeds of the sale to charity the CGT would be reduced to £7092. They could pay that by giving just £42,908 to the charity. The CGT charge would be the same which they could meet with the £7092 withheld from the proceeds. The charity will claim Gift Aid relief from HMRC so will get another £10,727 making a total of £53,635.

However, the Gift Aid relief can lead to an extra charge of income tax. A Gift Aid donor has to have paid at least as much tax as the relief claimed by the charity. The tax paid can be a combination of income tax and capital gains tax in the tax year the gift is made in. If the donor has not paid sufficient tax they must reimburse HMRC for the gift aid relief in excess of the tax they have paid.

So in some circumstances where income is low and the gift is large there could be extra tax to pay.

In the example above if the individual’s income was £20,000 rather than £30,000 and they retain £7092 to pay the CGT and make a gift of £42,908 the total tax they have paid is £7902 CGT and a further £2379 on their income of £20,000. That total is £9471. But the charity would reclaim £10,727 gift aid relief on the £42,908 donation and the £1256 difference between the two (£10,727 - £9471 = £1256) has to be paid in extra income tax. The charge could be avoided if the individual gave the charity £37,844. That would leave the proceeds of the torch as follows: to charity £37,884. To CGT £7092. And to self £5024. The charity then claims £9471 gift aid relief which is exactly the amount of tax the individual has paid. In total the charity gets £47,355.

CONCLUSION

Anyone who has sold a torch for more than £12,360 should see a qualified tax advisor or accountant whether or not they want to give some or all the proceeds of the torch to charity.

Anyone who is wondering if they would ever be caught should remember that  HMRC is already chasing more than 30,000 online sellers to get their tax sorted out and it monitors eBay and other online selling sites. It would be very easy for HMRC to identify everyone who sold an Olympic torch on eBay. And HMRC knows they were acquired for next to nothing.

Anyone who has not yet sold their torch but would like a charity to benefit can avoid all these problems by giving the torch itself to a registered charity and let the charity sell it. No CGT is then payable by the donor or the charity. Do not let the charity try to claim Gift Aid relief (an extra 25%) on the amount realised for the torch. That would involve the donor keeping ownership until the charity sold it on their behalf. The donor then gives the proceeds. So back to paragraph one.

To qualify for Gift Aid the organisation has to be a genuine charity. That is

•  an organisation in England or Wales registered with the Charity Commission
• an organisation in Scotland registered with the Office of the Scottish Charity Regulator  
•  a Community Amateur Sports Club (CASC) registered with HMR
• an organisation in the EU or Iceland or Norway accepted by HMRC as a charity for Gift Aid donations

If the organisation you want to give to is not a charity then Gift Aid is not possible. The CGT would usually be more. But you would of course be free to give the balance after tax to the organisation.

And what will Sarah Milner Simonds have to pay in tax if she gets her £153,100? Depending on her income and how much she gives to a registered charity her CGT bill will be between £25,000 and £40,000 CGT and she may have to pay some extra income tax as well.

NOTES

My thanks to the two accountants, the Chartered Institute of Taxation, and HMRC who all helped me understand this arcane nonsense. Any errors are entirely mine. Do not rely on this article to make financial decisions – always seek professional advice from a qualified accountant or tax advisor first.

HAS EUROPE RUN OUT OF OTHER PEOPLE'S MONEY?

8 May 2012 BBC Radio 4, Today Programme 

06:16

Jim Rogers co-founder with George Soros of Quantum Fund 

“The banks are bankrupt, Spain is bankrupt somebody has got to put up money or we have to acknowledge reality and declare bankruptcy.

“Our problems in Europe and in the world are not over yet. ...even the austerity plans have debts still rising in every country in Europe. That is not solving the problem that is making the problem worse. So whether it is this month because of the Socialists in France or next month because of a new election in Greece or next year because of German elections these problems are going to come back until somebody accepts reality, realises that these people have spent more money than they have and figure out a way to resolve the problem - either go bankrupt or cut spending with a chainsaw.

“The debts continue to go higher, nobody’s debt is going down. If you don’t face reality now you can face it in 2014 or 2016 and at that point nobody’s going to put up any money and at that point the chaos is going to be much, much worse. Somewhere along the line you run out of other people’s money.

“[Electorates] have rejected it. Everybody wants a free lunch. Somebody’s got to face this eventually. Eleven governments have been replaced in the last few years in Europe by electorates that have said we don’t like what’s going on. I don’t like it either. But the facts are these, governments for 30 or 40 years have been spending money they didn’t have. But eventually somebody’s got to come up with the money and there is no money any more.”

Hear it here www.bbc.co.uk/iplayer/b006qj9z/console at 16 minutes in.

CAN YOU GET SELF-ASSESSMENT FINE CANCELLED?

Her Majesty's Revenue & Customs is fining 650,000 people £10 a day. The new daily penalties began this month for anyone who has to complete a 2010/11 tax return but hasn't yet filed it. The fines go on for up to 90 days - a possible £900 - and are on top of the automatic £100 penalty for anyone who filed their return online after 3 February.
 
It is a nice little earner for HMRC bringing in £6.5 million a day from 1 May to potentially 29 July.
 
But HMRC has admitted that 12,000 of those who have been told they are clocking up the penalties should never have been sent the letter. And I believe there may be many more who can get the penalties quashed.
 
In March the Revenue wrote to all 10 million in self-assessment to remind them to file next year's return. With the letter was a leaflet printed in big red type saying that some people could be taken out of self-assessment altogether. It listed eight questions - such as are you self-employed, is your income above £100,000, do you rent out property? If you could answer 'no' to all eight you were invited to call the self-assessment helpline and see if you could be taken out of self-assessment and have all fines cancelled.
 
Altogether 130,000 successfully took that opportunity. But the Revenue rather spoiled things by writing to 12,000 of them by mistake and saying they were liable to the £10 a day fine. It has now apologised and is writing back telling them not to worry.
 
Those 130,000 who escaped self-assessment were the lucky ones. Thousands of others tried to call the Revenue self-assessment helpline but gave up. Even now I am getting accounts of attempts to get through lasting an hour or more before failing. But it is worth persisting.
 
The Revenue has told me that anyone who should not be in self-assessment can be taken out and have all fines cancelled. And the only way to get that done is to call.
 
The number is 0845 900 0444, wait for the main menu, press 3 and then 1. Lines are open 0800-2000 Mon-Fri and 0800-1600 Saturday.
 
Here are the eight questions you must be able to answer 'no' to:-
 
1.  Were you self employed or a partner in a business any time in 2010/11?
2.  Were you a company director?
3.  Was your income £100,000 or more?
4.  Did you get more than £10,000 in savings or investment income?
5.  Did you get more than £2,500 in untaxed income?
6.  Did you rent out property
7.  Did you get foreign income liable to UK tax?
8.  Are you an employee claiming more than £2,500 in expenses or professional subscriptions?
 
In addition to those eight questions HMRC might have added
 
9.  Are you a minister of religion (any faith)?
10. Is your state pension bigger than your tax allowance?
11. Are you over 65 with an income above £22,900 in 2010/11?
12. Did you have Capital Gains Tax to pay?
 
'Yes' to any of those may scupper your chances too. But if you have what my Dad would have called 'a nap hand' of 'no' to all twelve then you should not have been told to fill in a tax return for 2010/11 and you can come out of self-assessment and get all penalties cancelled.
 
Even if you answer 'yes' to the odd question or two it is still worth trying. And definitely worth looking at HMRC's guide to who has to be in self assessment http://www.hmrc.gov.uk/SA/need-tax-return.htm. It has more detail than the lists above.
 
If you stay in self-assessment and do not file your return the fines are not over yet. The £10 a day penalty ends on 29 July. But then another £300 is charged on 1 August and another £300 on 1 February 2013. By then of course the 2011/12 return will be late as well! Interest - currently 3% pa - can be charged on late paid penalties.
 
Those fines apply even if you owe no tax. So make that call and hang on. Remember it is cheaper to call 0845 numbers from a landline than a mobile - they may even be included in your price plan. If you are abroad you can call +44 161 931 9070 with apparently much less delay and annoying verbiage than on the UK 0845 number.
 
If you owe tax then those £300 fines are the minimum. If the tax due is more than £6000 then you will be fined 5% of that amount instead.
 
In addition there are extra penalties added to the tax you owe - 5% is added on 1 March, 31 July, and 31 January 2013. And interest - currently 3% pa - is charged on all tax due and on the late filing fines. Phew!
 
So if you cannot come out of self-assessment get that return filed as soon as you can.
 
FIDDLY BITS
The dates given above are the standard dates. They can be later if you were not sent a form or told to file a return in April 2011. See http://www.hmrc.gov.uk/sa/deadlines-penalties.htm for full details.
 
If you have not filed your return but have a reasonable excuse for not doing so then you can be let off the penalties. More details here http://www.hmrc.gov.uk/online/excuse-missed-deadline.htm if you were serving overseas in the armed forces at the relevant date that can also be a reasonable excuse for being late.