HMRC’s approach to disputes worsens backlog, tax bodies say

HM Revenue & Customs seems eager to litigate rather than accept reasonable arguments in tax disputes, even when the prospects of success are “less than 50 per cent,” according to the Chartered Institute of Taxation. The “unwelcome trend” is adding to a growing backlog of appeals for tax tribunals, the CIOT said in response to the House of Commons Treasury Subcommittee’s inquiry into the conduct of tax investigations and the resolution of tax disputes.

My news story of July 6 for Tax Notes (paywall) is now reproduced in full with permission:

HMRC’s Approach to Disputes Worsens Backlog, Tax Bodies Say (pdf)

As I reported, HMRC officials and CIOT president Ray McCann were scheduled to give evidence to the subcommittee’s inquiry on July 9. The evidence session was postponed following the resignations of Brexit secretary David Davis and foreign secretary Boris Johnson over the July 6 Chequers agreement:

A personal tax roadmap would help address complexity, says OTS

Misunderstandings remain about UK taxation of savings income, but a personal tax roadmap would help address its significant complexities, the Office of Tax Simplification said last month.

A range of tax reliefs to encourage saving works well for most taxpayers, and 95 percent of people pay no tax on savings income, the OTS said. But the interaction between rates and allowances is so complex that HMRC’s self-assessment computer software has sometimes “failed to get it right,” the OTS pointed out in a 50-page report titled Savings Income: Routes to Simplification.

My news story of May 29 for Tax Notes (paywall) is now reproduced in full with permission: U.K. Office of Tax Simplification Calls for Personal Tax Roadmap (pdf).

Old versions of tax law on government website – an update

Last week HM Revenue & Customs apologised for linking to some very old legislation, in a guidance note on new criminal offences, and removed the offending links. HMRC guidance at GOV.UK does not normally include statutory references, but if that is going to change there is a clear risk that the same mistake will be made again.

Legislation.gov.uk is described as “the official place of publication for newly enacted legislation”. Great care is needed in relation to older tax legislation, including some of the major consolidation Acts.

For example, go to Income Tax Act 2007 and you’ll see a prominent warning about an apparently very large number of changes that have not yet been processed. Continue reading Old versions of tax law on government website – an update

HMRC guidance points to old tax law

You can find out about criminal offences relating to offshore income and assets in a new guidance note on HMRC’s website. But the guidance points to some very old tax law.

While HMRC guidance for taxpayers published on GOV.UK does not normally include statutory references, this guidance note has six.

At the time of writing, there are links to sections 7 and 8 of the Taxes Management Act 1970 as reproduced at Legislation.gov.uk, the “official place of publication for newly enacted legislation”.


UPDATE 22 March: HMRC has deleted the links to sections 7 and 8 and apologised for the error.


The problem is that while some progress has been made in processing changes enacted in annual finance acts, Legislation.gov.uk still presents the original versions of some of the key consolidation acts. The original TMA 1970, which turned 48 last week, is here. Continue reading HMRC guidance points to old tax law

Designing good compliance into the tax system

HM Revenue & Customs estimates the total UK tax gap, the difference between the tax collected and the amount that should be collected “in theory”, at £34bn. Just £1.7bn relates to avoidance (excluding international tax planning strategies such as profit shifting, which are being addressed slowly but multilaterally), and £6bn relates to interpretation of the law.

In contrast, criminal attacks account for around £5bn and evasion another £5bn, while £3.5bn is attributed to the “hidden economy”.

Read more: My article for AAT Comment, 12 January

HMRC will recruit up to 5,000 extra staff to prepare for Brexit

HM Revenue & Customs will recruit up to 5,000 additional staff in 2018, the UK government said less than a week after HMRC Chief Executive and Permanent Secretary Jon Thompson told a parliamentary committee that the department was planning to review its priorities in the light of uncertainty created by Brexit …

“Alongside the negotiations in Brussels, it is crucial that we are putting our own domestic preparations in place so that we are ready at the point that we leave the EU,” a spokesman for Prime Minister Theresa May said after [an October 31 cabinet meeting]. “Cabinet heard many of these will be needed even in our preferred scenario of a bold and ambitious deal — for example, implementing either of our proposed customs arrangements will require investment in new systems and customs officers by HMRC.” Read more:

My news story for Tax Analysts, November 1 ($)

UK tax gap update highlights evasion, legal interpretation losses

A shift in the public debate is needed to ensure that everybody sees tax evasion as unacceptable, a leading UK tax expert said after official figures suggested that avoidance accounted for £1.7bn of a £34bn tax gap.

HM Revenue & Customs estimated that evasion, criminal attacks, and the hidden economy together accounted for £13.8bn, and error and non-payment for £6.4bn. Losses arising from differences in interpretation of the law accounted for £6bn, and failure to take reasonable care accounted for £6.1bn …

My news story for Tax Analysts, October 30 ($)

HMRC: Measuring tax gaps

HMRC can’t guarantee Brexit-ready customs service, Thompson says

HM Revenue & Customs will review its priorities early next year and may need up to 5,000 additional staff to secure successful delivery of a new customs service if the UK leaves the European Union without a customs agreement, according to HMRC Chief Executive and Permanent Secretary Jon Thompson.

Announcing on October 12 an inquiry into Brexit and the future of customs, the House of Commons Public Accounts Committee noted that HMRC was due to complete a five-year program for a new customs declaration service (CDS) by early 2017. Delays have meant that the CDS will not be fully operational until January 2019. Significant work is still required to meet the revised target, a National Audit Office report found in July …

My news story for Tax Analysts, October 30 ($)

Public accounts committee, oral evidence: Brexit and the Future of Customs

Perception that ‘odds are stacked’ against HMRC drives evasion, report says

A perception that the odds are stacked against HM Revenue & Customs and in favour of business impedes the effectiveness of the tax authority’s anti-evasion efforts, according to research that identifies four “distinct profiles of evader” among small and midsize businesses in the UK.

For any intervention strategy to work there is a basic requirement for those evading to “believe that there is a real risk that the evasion will be detected and proven,” said Quadrangle Research Group, a London-based consultancy that conducted the research in April 2016. “The main barrier to effectiveness” is that this is not currently the case, Quadrangle said in a report published on HMRC’s website on September 29.

A new offence listed in the Criminal Finances Act, failure to prevent the facilitation of tax evasion, came into force on September 30. HMRC published guidance on September 29, inviting companies and partnerships to “report on their own behaviour”. Read more:

My news story for Tax Analysts, September 30 (paywall)

HMRC research report: September 2017: Understanding evasion by Small and Mid-Sized Businesses

HMRC guidance September 29: ‘Tell HMRC about a company helping people to evade tax’

HMRC press release September 30: ‘Stop facilitating tax evasion or face criminal prosecution, HMRC tells corporations’

UK tax advisers welcome new HMRC service for expanding businesses

Expanding UK businesses are to receive tailored tax assistance from growth support specialists at HM Revenue & Customs who will offer help with tax queries and support in accessing reliefs and incentives.

“Mid-sized businesses make a vital contribution to the U.K. economy and I want to see them grow, succeed, and prosper,” Mel Stride, financial secretary to the Treasury, said in a September 20 statement.

About 170,000 UK businesses with turnover of more than £10 million or more than 20 employees are eligible and can apply online, HMRC said. Industries that could benefit include manufacturing, information and communications, and professional services, including legal and accountancy services. Read more:

My news story for Tax Analysts, September 21 (paywall)

HMRC flags potential costs of Brexit contingency planning

Uncertainty over the outcome of negotiations on the UK’s post-Brexit customs arrangements may force HM Revenue & Customs and traders to incur expenditure that could turn out to be unnecessary, officials told the House of Commons Treasury Committee September 14.

Committee Chair Nicky Morgan asked Jim Harra, HMRC’s director general for customer strategy and tax design, when he would need to know the outcome of negotiations with the EU-27 countries, which have not yet begun, to be able to start “putting things in place.”

“We’ve been advising the Department for Exiting the European Union and advising ministers on what the choices are . . . and the future partnership paper has been produced,” Harra said. The UK government’s proposals for a future customs relationship with the EU, published August 15, outline two broad approaches … Read more:

My news story for Tax Analysts, September 15 (paywall)

HMRC large business unit reveals increase in ‘tax under consideration’

HM Revenue & Customs has revealed that its estimate of the amount of tax large businesses might have underpaid rose to £24.8 billion for the year ending March 31, an increase of almost 14 percent from the previous year, while the department stressed that the figure did not represent tax actually owed or unpaid.

HMRC released its estimate of “tax under consideration” to the law firm Pinsent Masons in response to a freedom of information request … “A £3 billion rise in the tax HMRC is querying shows that HMRC is broadening its horizons and putting a far wider range of transactions under scrutiny,” said Heather Self, a partner at the firm.

“Tax under consideration is not tax owed or unpaid, it’s an estimate of what might be at stake if we didn’t investigate,” an HMRC spokesperson said in an emailed statement. Read more:

My news story for Tax Analysts, August 31 (paywall)