OTS sets out vison for HMRC guidance

The OTS has made 12 main recommendations for an overhaul of HMRC’s guidance for taxpayers, in a report which addresses the challenge HMRC faces of serving a large audience with different and conflicting needs, using an ‘enormous spectrum’ of published material.

Although the OTS has always made recommendations on guidance a significant feature of its reports on particular areas of the tax system, this is the first time it has devoted a whole report to the subject. HMRC is currently reviewing the structure and content of its 219 manuals and the OTS report is intended to complement that review.

Key recommendations include a ‘new model’ for guidance that makes greater use of technology and clearly identifies three levels of complexity: simple for the majority of individual taxpayers; more advanced for businesses; and technical for tax advisers.

HMRC should consult on the extent to which taxpayers ought to be able to rely on published guidance to escape liability to interest and penalties, similar to the Australian model.

Current use of the word ‘guidance’ ranges from general guidance for the public, which assumes no prior specialist knowledge, through to technical guidance which assumes prior knowledge and would generally be aimed at professional advisers or others with a tax background. Technical guidance includes some material expressing HMRC’s opinion where taxpayers or advisers with a tax background might reasonably disagree. The OTS believes HMRC should distinguish more clearly in guidance between statements of its opinion, as opposed to areas it considers to be generally accepted.

The OTS notes there was a good deal of consensus among those it consulted on the areas of concern in relation to current guidance, and broad agreement on the areas where the OTS is making recommendations.

Problems identified with the current guidance include the following:

• users cannot easily find what they want;
• navigation quickly becomes difficult;
• there is a small amount of conflicting information, which damages users’ confidence in the material;
• it is not easy to quickly tell what type of user a particular page is aimed at; and
• the extent to which it can be relied upon is not clear.

The OTS’s ‘new model’ for guidance needs to clearly identify the level at which it is aimed. Three levels are suggested:

• level 1 – simple guidance, for the majority of individual taxpayers;
• level 2 – more advanced guidance, primarily aimed at more sophisticated taxpayers and others in business; and
• level 3 – HMRC’s technical manuals, primarily for tax advisers.

The OTS recognises that whether or not a taxpayer can rely upon the guidance can be a difficult legal question, but believes users ought to be able to know when and to what extent they can rely upon it. The report uses the Australian Tax Office (ATO) as an example. The ATO publishes two types of guidance: precedential guidance and other material. Precedential guidance is where the authority accepts it will be bound by the guidance, even if incorrect. The taxpayer may choose to apply the law if more favourable. The ATO does not accept it should be bound by other material, but it does accept that the taxpayer should not be liable for interest and penalties where they comply with the ATO views expressed.

The 12 key recommendations made in the report are:

• adopt a new model for guidance, building upon the current innovative programme that uses new ways of delivery, moving the emphasis to the taxpayer’s needs, away from the needs of HMRC officers;
• appoint a senior strategic head of guidance for HMRC, with remodelling guidance as a key departmental priority in HMRC’s operating plan;
• form an HMRC ‘advice and guidance panel’, consisting of senior HMRC officers, respected tax specialists and academics;
• clearly identify three levels of HMRC guidance so that users can immediately see the level of complexity of the material they are about to read;
• use technology to direct people to enter the guidance at a point appropriate to their needs and level of understanding of tax;
• produce a clearer statement of the respective responsibilities of HMRC and GDS, with GDS-managed guidance containing more links to HMRC’s comprehensive guidance;
• reassess GDS approach to publishing HMRC technical manuals;
• annotate sections in manuals swiftly to record that changes will be needed to reflect amended law, or the results of a tax case;
• introduce more feedback links into HMRC technical manuals, with dated pages, up-to-date contacts and improved links between specific parts of manuals and HMRC’s other guidance material;
• discuss and agree HMRC protocols with industry and representative bodies where these bodies are supportive of contributing to guidance, building on existing good practice;
• consult on the circumstances in which a taxpayer can rely on published guidance and the extent to which a taxpayer will be subject to interest, penalties and the tax in dispute where guidance is found to be incorrect; and
• indicate clearly when guidance is knowingly giving a statement of HMRC’s opinion rather than something it considers to be generally accepted.

See https://bit.ly/2IFUxug.