The government has responded to two reports published by the Lords economic affairs Finance Bill sub-committee in November: The powers of HMRC: treating taxpayers fairly; and Making tax digital for VAT: treating small businesses fairly.
In his letter dated 22 January, financial secretary to the Treasury, Mel Stride, told the sub-committee chair, Lord Forsyth of Drumlean, that HMRC will look to strengthen the effectiveness of taxpayer safeguards, including the adjudicator’s office, the new ‘customer experience committee’ and the ‘compliance reform forum’. Somewhat surprisingly, the letter also stated that the government had accepted ‘the majority’ of the Finance Bill sub-committee’s recommendations ‘in whole or in part’.
Responses to the report, The powers of HMRC: treating taxpayers fairly (bit.ly/2MRDI1p) may be summarised as follows.
On the approach to tax avoidance generally, the government did not accept the sub-committee’s suggestion that it should draw a clearer distinction between ‘deliberate and contrived’ tax avoidance and that which is merely the result of ‘uninformed or naive decisions’ by unrepresented taxpayers. The response states that taxpayers’ arrangements ‘are either effective or not under legislation passed by Parliament. The motives of those engaging in them does not affect that.’ However, HMRC does take taxpayer behaviour into account in relation to penalties.
Concerning new powers, the government rejected calls to:
Concerning the loan charge, the government accepted the recommendation that HMRC give more publicity to action it is taking against promoters of disguised remuneration schemes, by increasing awareness of its ‘spotlight’ publications and use of social media.
Other recommendations on the loan charge were rejected, including:
The government also refuted the sub-committee’s accusations of unreasonable delay by HMRC in communicating effectively with some users of such schemes, of delaying legislation and of failing to progress enquiries into individuals’ tax affairs. The response pointed out that, since November 2017, HMRC has written to over 40,000 individuals who may be affected by the loan charge.
Concerning taxpayer safeguards, the government accepted the sub-committee’s recommendation to publicise the statutory review process more widely.
It rejected other recommendations, including:
Concerning the tax policy process, the government ‘noted’ the recommendation to evaluate all powers granted to HMRC since the 2012 powers review and publish the findings. On HMRC specifically, the government accepted recommendations:
The government rejected the need for an independent review of HMRC resources and for a further powers review, since ‘there has been no fundamental change to the operation of the Department which would justify a further review at this time’.
Responses to the report, Making tax digital for VAT: treating small businesses fairly (bit.ly/2Gosdxn) may be summarised as follows.
The financial secretary’s letter of 22 January also contained a reply to a letter of 16 January from Lord Forsyth, asking for further information about the review of the loan charge prompted by the Finance Bill amendment agreed on 8 January. Lord Forsyth’s letter asked the minister to clarify the following details about the review:
The financial secretary confirmed that the chancellor would present his report ‘no later than’ 30 March, as required by the amendment.
Lord Forsyth also asked the minister to provide details of how individuals affected by the extension of offshore time limits and the loan charge will be able to give evidence to the review. Stride replied that: ‘HMRC engages with those affected by the loan charge as part of its normal business, and will continue to do so.’
The letter repeated the sub-committee’s view that Treasury ministers should be required to attend sub-committee evidence sessions ‘when there are issues that cannot satisfactorily be answered by officials’. Stride has declined several invitations from the sub-committee since October.
See Lords economic affairs committee publications at bit.ly/2SeRIIH.
The government has responded to two reports published by the Lords economic affairs Finance Bill sub-committee in November: The powers of HMRC: treating taxpayers fairly; and Making tax digital for VAT: treating small businesses fairly.
In his letter dated 22 January, financial secretary to the Treasury, Mel Stride, told the sub-committee chair, Lord Forsyth of Drumlean, that HMRC will look to strengthen the effectiveness of taxpayer safeguards, including the adjudicator’s office, the new ‘customer experience committee’ and the ‘compliance reform forum’. Somewhat surprisingly, the letter also stated that the government had accepted ‘the majority’ of the Finance Bill sub-committee’s recommendations ‘in whole or in part’.
Responses to the report, The powers of HMRC: treating taxpayers fairly (bit.ly/2MRDI1p) may be summarised as follows.
On the approach to tax avoidance generally, the government did not accept the sub-committee’s suggestion that it should draw a clearer distinction between ‘deliberate and contrived’ tax avoidance and that which is merely the result of ‘uninformed or naive decisions’ by unrepresented taxpayers. The response states that taxpayers’ arrangements ‘are either effective or not under legislation passed by Parliament. The motives of those engaging in them does not affect that.’ However, HMRC does take taxpayer behaviour into account in relation to penalties.
Concerning new powers, the government rejected calls to:
Concerning the loan charge, the government accepted the recommendation that HMRC give more publicity to action it is taking against promoters of disguised remuneration schemes, by increasing awareness of its ‘spotlight’ publications and use of social media.
Other recommendations on the loan charge were rejected, including:
The government also refuted the sub-committee’s accusations of unreasonable delay by HMRC in communicating effectively with some users of such schemes, of delaying legislation and of failing to progress enquiries into individuals’ tax affairs. The response pointed out that, since November 2017, HMRC has written to over 40,000 individuals who may be affected by the loan charge.
Concerning taxpayer safeguards, the government accepted the sub-committee’s recommendation to publicise the statutory review process more widely.
It rejected other recommendations, including:
Concerning the tax policy process, the government ‘noted’ the recommendation to evaluate all powers granted to HMRC since the 2012 powers review and publish the findings. On HMRC specifically, the government accepted recommendations:
The government rejected the need for an independent review of HMRC resources and for a further powers review, since ‘there has been no fundamental change to the operation of the Department which would justify a further review at this time’.
Responses to the report, Making tax digital for VAT: treating small businesses fairly (bit.ly/2Gosdxn) may be summarised as follows.
The financial secretary’s letter of 22 January also contained a reply to a letter of 16 January from Lord Forsyth, asking for further information about the review of the loan charge prompted by the Finance Bill amendment agreed on 8 January. Lord Forsyth’s letter asked the minister to clarify the following details about the review:
The financial secretary confirmed that the chancellor would present his report ‘no later than’ 30 March, as required by the amendment.
Lord Forsyth also asked the minister to provide details of how individuals affected by the extension of offshore time limits and the loan charge will be able to give evidence to the review. Stride replied that: ‘HMRC engages with those affected by the loan charge as part of its normal business, and will continue to do so.’
The letter repeated the sub-committee’s view that Treasury ministers should be required to attend sub-committee evidence sessions ‘when there are issues that cannot satisfactorily be answered by officials’. Stride has declined several invitations from the sub-committee since October.
See Lords economic affairs committee publications at bit.ly/2SeRIIH.