The House of Lords Economic affairs Finance Bill sub-committee has published its report on HMRC powers: treating taxpayers fairly. This is the second report from the sub-committee’s inquiry into the current Finance Bill. See bit.ly/2RyZpFa.
The first report, Making tax digital for VAT: treating small businesses fairly, published in November, called on the government to delay the introduction of MTD for VAT.
The committee has already published correspondence with ministers on the disguised remuneration loan charge and extension of time limits for HMRC to issue assessments relating to offshore tax matters. The latest report follows this up and makes recommendations including:
widening the role of HMRC’s adjudicator, or increasing HMRC’s obligations to respond to and act on adjudicator recommendations;
an urgent HMRC review of all loan charge cases where the only remaining consideration is the individual’s ability to pay and opening a dedicated helpline well in advance of the loan charge coming into effect in April 2019;
withdrawal of Finance Bill cls 79 and 80, which propose extending HMRC time limits to assess offshore matters to 12 years;
withdrawal of the proposal, contained in consultation, to allow HMRC to request information from third parties without first seeking the agreement of the taxpayer or the tax tribunal;
abolition of penalties associated with the general anti-abuse rule and follower notices;
legislating to give the First-tier Tribunal (Tax) the power to conduct judicial reviews; and
the Treasury to assess, as part of the next spending review, whether HMRC is adequately resourced to fulfil its charter obligations.
Commenting on the report, committee chair, Lord Forsyth of Drumlean, said:
‘HMRC is right to tackle tax evasion and aggressive tax avoidance. However, a careful balance must be struck between clamping down and treating taxpayers fairly. Our evidence has convinced us that this balance has tipped too far in favour of HMRC and against the fundamental protections every taxpayer should expect.’
The CIOT has responded to a number of the report’s recommendations. Concerning offshore time limits, John Cullinane, CIOT tax policy director, said: ‘If the extended time limits are introduced they should only be applied to offshore matters involving “high risk” jurisdictions, those that have not agreed to share any tax information with HMRC. That would be a more proportionate approach’.
On the issue of HMRC resources, Cullinane said: ‘it seems to us that many of the changes we have seen have been determined by HMRC capacity. Lack of resources then leads to poor application of powers. This is unsustainable. Ultimately the risk is HMRC are seen as being “against taxpayers”, so undermining effective compliance’.
The committee also called on the government to consider establishing an independent body to scrutinise the operations of HMRC. John Cullinane advised caution, observing that greater scrutiny of HMRC is being demanded from two very different perspectives. While the Lords look to it as ‘a safeguard to protect taxpayers from an apparently overmighty tax authority’, others including the public accounts committee encourage HMRC to be ‘aggressive in its pursuit of big business seen as paying suspiciously low rates of corporation tax’.
Cullinane warned that any such body would need a very clear remit to prevent the risk of politics creeping into tax collection.
The House of Lords Economic affairs Finance Bill sub-committee has published its report on HMRC powers: treating taxpayers fairly. This is the second report from the sub-committee’s inquiry into the current Finance Bill. See bit.ly/2RyZpFa.
The first report, Making tax digital for VAT: treating small businesses fairly, published in November, called on the government to delay the introduction of MTD for VAT.
The committee has already published correspondence with ministers on the disguised remuneration loan charge and extension of time limits for HMRC to issue assessments relating to offshore tax matters. The latest report follows this up and makes recommendations including:
widening the role of HMRC’s adjudicator, or increasing HMRC’s obligations to respond to and act on adjudicator recommendations;
an urgent HMRC review of all loan charge cases where the only remaining consideration is the individual’s ability to pay and opening a dedicated helpline well in advance of the loan charge coming into effect in April 2019;
withdrawal of Finance Bill cls 79 and 80, which propose extending HMRC time limits to assess offshore matters to 12 years;
withdrawal of the proposal, contained in consultation, to allow HMRC to request information from third parties without first seeking the agreement of the taxpayer or the tax tribunal;
abolition of penalties associated with the general anti-abuse rule and follower notices;
legislating to give the First-tier Tribunal (Tax) the power to conduct judicial reviews; and
the Treasury to assess, as part of the next spending review, whether HMRC is adequately resourced to fulfil its charter obligations.
Commenting on the report, committee chair, Lord Forsyth of Drumlean, said:
‘HMRC is right to tackle tax evasion and aggressive tax avoidance. However, a careful balance must be struck between clamping down and treating taxpayers fairly. Our evidence has convinced us that this balance has tipped too far in favour of HMRC and against the fundamental protections every taxpayer should expect.’
The CIOT has responded to a number of the report’s recommendations. Concerning offshore time limits, John Cullinane, CIOT tax policy director, said: ‘If the extended time limits are introduced they should only be applied to offshore matters involving “high risk” jurisdictions, those that have not agreed to share any tax information with HMRC. That would be a more proportionate approach’.
On the issue of HMRC resources, Cullinane said: ‘it seems to us that many of the changes we have seen have been determined by HMRC capacity. Lack of resources then leads to poor application of powers. This is unsustainable. Ultimately the risk is HMRC are seen as being “against taxpayers”, so undermining effective compliance’.
The committee also called on the government to consider establishing an independent body to scrutinise the operations of HMRC. John Cullinane advised caution, observing that greater scrutiny of HMRC is being demanded from two very different perspectives. While the Lords look to it as ‘a safeguard to protect taxpayers from an apparently overmighty tax authority’, others including the public accounts committee encourage HMRC to be ‘aggressive in its pursuit of big business seen as paying suspiciously low rates of corporation tax’.
Cullinane warned that any such body would need a very clear remit to prevent the risk of politics creeping into tax collection.
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