HMRC defends exclusion of P14 returns from the scope of ESC A19
A tax barrister has warned that proposed changes to an HMRC concession will prevent its use by ‘the very taxpayers for whom it was designed’. A petition launched last weekend by Keith Gordon, titled, ‘HMRC: Do not change ESC A19’ has attracted just over 100 signatures.
HMRC launched a consultation in July exploring ‘the option for a revised version’ of extra-statutory concession (ESC) A19, which sets out how HMRC may exercise its discretion, where it is has failed to make timely use of information received, not to collect income and capital gains tax that is lawfully payable. The consultation was intended to explore ‘how HMRC may be able to improve the clarity of this particular concession ensuring it continues to be applied appropriately’.
HMRC proposed the introduction of a 'taxpayer responsibilities' test that would require taxpayers to have 'a certain basic level of knowledge' about their tax affairs. The revised concession would not apply to capital gains tax, because ‘the requirement for individuals to self-assess for capital gains makes ESC A19 redundant’.
Gordon, writing in this week’s issue of Taxation, described the existing concession as a ‘get-out-of-jail free’ card to would-be compliant taxpayers: ‘In some ways, it provides safeguards similar to those inherent in the discovery assessment rules, but applies them to taxpayers who are outside the scope of self assessment. In other words, if a taxpayer reasonably thinks that his or her tax affairs are up to date, HMRC will waive any tax that subsequently proves to be due. The main condition for this concession is that HMRC must have failed to use information at their disposal in a timely manner.’
Gordon argued that under the existing concession some HMRC officers had taken the view that an employer’s end of year return P14 was excluded, so that a failure to act on the P14 would not trigger the concession. He warned that if HMRC's current intention is to legitimise this ‘unjustified’ approach, then ‘the current draft is extremely dangerous and should be abandoned without delay’.
He said it appeared that the proposed new version of ESC A19 was ‘a flagrant attempt to emasculate the present concession’. The consultation closes on 24 September.
Mike Warburton, Director at Grant Thornton, has said the concession should largely be left untouched. It fulfilled ‘a vital function in our over complicated tax world’.
Writing in Tax Journal in July, Warburton said use of the concept of ‘taxpayer responsibility’ rather than ‘reasonable belief’ inevitably meant that HMRC would ‘attempt to apply an objective measure on how much taxpayers should be expected to understand about the way the tax system works’.
He added: ‘Does this mean that we are then going to categorise taxpayers according to their age, educational achievement or lifetime experiences? I think this move would represent a backward step.’
An HMRC spokesman told Tax Journal today: ‘We do not expect everyone to have the same level of knowledge as a tax professional, and look at individual circumstances on a case by case basis. This consultation is about working towards a better understanding for taxpayers of what we expect of them but also what they can expect of us.’
On the P14 issue, he pointed out that while the concession allows HMRC to remit arrears in certain circumstances where it has ‘failed more than once to make proper use of the facts we had been given about one source of income’, the PAYE Manual at PAYE95055 ‘clearly states that forms P14 cannot be considered as “information received” for the purposes of ESC A19’.
PAYE95055 reads (under ‘other information’): ‘Any other information which shows evidence of employer contact or correspondence which would affect a taxpayer’s code, received during the year can also be considered [for ESC A19]. But, this does not include receipt of forms P35 or P14 which are employer end of year returns.’
HMRC said this was ‘due to the fact that end of year returns (forms P14) are – in most instances – automatically “posted” to an individual’s computer record without any manual intervention and thus any errors will not automatically be recognised until that particular year’s liability is reviewed’.
The spokesman added: ‘In other words “information” for the purposes of ESC A19 is something we receive during the tax year that would allow us to change someone’s tax code during the tax year in question. A P14 does not come in to HMRC until the 19th May following the end of the tax year to which it relates.’
He added: ‘We welcome all contributions to the ESC A19 consultation.’
HMRC defends exclusion of P14 returns from the scope of ESC A19
A tax barrister has warned that proposed changes to an HMRC concession will prevent its use by ‘the very taxpayers for whom it was designed’. A petition launched last weekend by Keith Gordon, titled, ‘HMRC: Do not change ESC A19’ has attracted just over 100 signatures.
HMRC launched a consultation in July exploring ‘the option for a revised version’ of extra-statutory concession (ESC) A19, which sets out how HMRC may exercise its discretion, where it is has failed to make timely use of information received, not to collect income and capital gains tax that is lawfully payable. The consultation was intended to explore ‘how HMRC may be able to improve the clarity of this particular concession ensuring it continues to be applied appropriately’.
HMRC proposed the introduction of a 'taxpayer responsibilities' test that would require taxpayers to have 'a certain basic level of knowledge' about their tax affairs. The revised concession would not apply to capital gains tax, because ‘the requirement for individuals to self-assess for capital gains makes ESC A19 redundant’.
Gordon, writing in this week’s issue of Taxation, described the existing concession as a ‘get-out-of-jail free’ card to would-be compliant taxpayers: ‘In some ways, it provides safeguards similar to those inherent in the discovery assessment rules, but applies them to taxpayers who are outside the scope of self assessment. In other words, if a taxpayer reasonably thinks that his or her tax affairs are up to date, HMRC will waive any tax that subsequently proves to be due. The main condition for this concession is that HMRC must have failed to use information at their disposal in a timely manner.’
Gordon argued that under the existing concession some HMRC officers had taken the view that an employer’s end of year return P14 was excluded, so that a failure to act on the P14 would not trigger the concession. He warned that if HMRC's current intention is to legitimise this ‘unjustified’ approach, then ‘the current draft is extremely dangerous and should be abandoned without delay’.
He said it appeared that the proposed new version of ESC A19 was ‘a flagrant attempt to emasculate the present concession’. The consultation closes on 24 September.
Mike Warburton, Director at Grant Thornton, has said the concession should largely be left untouched. It fulfilled ‘a vital function in our over complicated tax world’.
Writing in Tax Journal in July, Warburton said use of the concept of ‘taxpayer responsibility’ rather than ‘reasonable belief’ inevitably meant that HMRC would ‘attempt to apply an objective measure on how much taxpayers should be expected to understand about the way the tax system works’.
He added: ‘Does this mean that we are then going to categorise taxpayers according to their age, educational achievement or lifetime experiences? I think this move would represent a backward step.’
An HMRC spokesman told Tax Journal today: ‘We do not expect everyone to have the same level of knowledge as a tax professional, and look at individual circumstances on a case by case basis. This consultation is about working towards a better understanding for taxpayers of what we expect of them but also what they can expect of us.’
On the P14 issue, he pointed out that while the concession allows HMRC to remit arrears in certain circumstances where it has ‘failed more than once to make proper use of the facts we had been given about one source of income’, the PAYE Manual at PAYE95055 ‘clearly states that forms P14 cannot be considered as “information received” for the purposes of ESC A19’.
PAYE95055 reads (under ‘other information’): ‘Any other information which shows evidence of employer contact or correspondence which would affect a taxpayer’s code, received during the year can also be considered [for ESC A19]. But, this does not include receipt of forms P35 or P14 which are employer end of year returns.’
HMRC said this was ‘due to the fact that end of year returns (forms P14) are – in most instances – automatically “posted” to an individual’s computer record without any manual intervention and thus any errors will not automatically be recognised until that particular year’s liability is reviewed’.
The spokesman added: ‘In other words “information” for the purposes of ESC A19 is something we receive during the tax year that would allow us to change someone’s tax code during the tax year in question. A P14 does not come in to HMRC until the 19th May following the end of the tax year to which it relates.’
He added: ‘We welcome all contributions to the ESC A19 consultation.’
