The chair of the House of Lords Economic Affairs Finance Bill Sub-Committee has written to the chancellor recommending the ‘unnecessary and undesirable’ provisions extending the time limits for HMRC to issue assessments relating to offshore tax matters be removed from the current Finance Bill.
In a letter sent to the chancellor on 6 November, committee chair Lord Forsyth of Drumlean outlined the sub-committee’s interim conclusions on the draft Finance Bill 2019. The sub-committee has been considering the two themes of making tax digital (MTD) for VAT, and HMRC powers, since its appointment on 4 September and will publish a report on each theme in the coming weeks.
The sub-committee’s inquiry found ‘deep and consistent opposition’ to the measures extending to 12 years the time limits for making assessments involving offshore matters (cls 79 and 80). The justification given in the consultation document for the extension was that offshore matters are complex and take a long time for HMRC to resolve. However, Pinsent Masons observed that the new powers would apply even where there was no complexity and very little tax at stake. There was a feeling that the effects of the measure would not be confined to high net worth individuals, ‘at whom one might expect it was targeted’.
In trebling the normal four-year time limit for compliant taxpayers and doubling the six-year limit for those who fail to take reasonable care, the measure ‘would remove the distinction between fully compliant and careless taxpayers’.
The ATT has suggested amending the legislation to exclude taxpayers who have provided HMRC with all the relevant information at the appropriate time. The committee saw ‘no logic’ to the exclusion currently contained in cl 79, which applies in cases where overseas tax authorities have suppled information enabling HMRC to make assessments within the normal time limits, while no exclusion is permitted where the same information has been supplied by the taxpayer.
Jon Stride, co-chair of ATT’s technical steering group, said: ‘Treating taxpayer-provided information in the same way as information received under automatic exchange would produce a win-win scenario: taxpayers would have a strong incentive to make a full and early disclosure of relevant information, and HMRC would benefit from the earlier receipt of that detailed and specific information, speeding up the assessment and collection of the tax due’.
The letter said that some witnesses to the committee’s inquiry had suggested that cls 79 and 80 were ‘indicative of a system where the balance of powers has started to tip in HMRC’s favour’.
The sub-committee has therefore recommended that the government withdraw these clauses from the Bill and begin a ‘fresh dialogue’ with the tax profession ‘to consider how offshore tax matters can be managed more effectively’.
On a more positive note, the sub-committee praised HMRC’s consultation process for design and development of the penalty and interest provisions for MTD, which the government has decided to leave out of the current Bill. Further comment on MTD will be contained in the sub-committee’s full report.
The chair of the House of Lords Economic Affairs Finance Bill Sub-Committee has written to the chancellor recommending the ‘unnecessary and undesirable’ provisions extending the time limits for HMRC to issue assessments relating to offshore tax matters be removed from the current Finance Bill.
In a letter sent to the chancellor on 6 November, committee chair Lord Forsyth of Drumlean outlined the sub-committee’s interim conclusions on the draft Finance Bill 2019. The sub-committee has been considering the two themes of making tax digital (MTD) for VAT, and HMRC powers, since its appointment on 4 September and will publish a report on each theme in the coming weeks.
The sub-committee’s inquiry found ‘deep and consistent opposition’ to the measures extending to 12 years the time limits for making assessments involving offshore matters (cls 79 and 80). The justification given in the consultation document for the extension was that offshore matters are complex and take a long time for HMRC to resolve. However, Pinsent Masons observed that the new powers would apply even where there was no complexity and very little tax at stake. There was a feeling that the effects of the measure would not be confined to high net worth individuals, ‘at whom one might expect it was targeted’.
In trebling the normal four-year time limit for compliant taxpayers and doubling the six-year limit for those who fail to take reasonable care, the measure ‘would remove the distinction between fully compliant and careless taxpayers’.
The ATT has suggested amending the legislation to exclude taxpayers who have provided HMRC with all the relevant information at the appropriate time. The committee saw ‘no logic’ to the exclusion currently contained in cl 79, which applies in cases where overseas tax authorities have suppled information enabling HMRC to make assessments within the normal time limits, while no exclusion is permitted where the same information has been supplied by the taxpayer.
Jon Stride, co-chair of ATT’s technical steering group, said: ‘Treating taxpayer-provided information in the same way as information received under automatic exchange would produce a win-win scenario: taxpayers would have a strong incentive to make a full and early disclosure of relevant information, and HMRC would benefit from the earlier receipt of that detailed and specific information, speeding up the assessment and collection of the tax due’.
The letter said that some witnesses to the committee’s inquiry had suggested that cls 79 and 80 were ‘indicative of a system where the balance of powers has started to tip in HMRC’s favour’.
The sub-committee has therefore recommended that the government withdraw these clauses from the Bill and begin a ‘fresh dialogue’ with the tax profession ‘to consider how offshore tax matters can be managed more effectively’.
On a more positive note, the sub-committee praised HMRC’s consultation process for design and development of the penalty and interest provisions for MTD, which the government has decided to leave out of the current Bill. Further comment on MTD will be contained in the sub-committee’s full report.
