HMRC brings ESC A19 back from the brink

HMRC responded to lobbying from the profession and this week announced it was dropping plans to revise the extra statutory concession (ESC) that applies when the department fails to act on information provided by the taxpayers.

Under ESC A19, HMRC can opt not to collect tax due if it did not deal properly with information submitted by a taxpayers and so contributed to the shortfall. As part of a wider review of ESCs, it proposed last year to revoke ESC A19 and to put it on a statutory basis, with different criteria.

Proposals were put out for consultation in July 2012 that would have ended concessions for those who had a “reasonable belief” their tax affairs were in order, and where exceptional circumstances cropped up within the tax year. Instead, it proposed that taxpayers should be responsible for getting things right - even if they authorise someone to act on their behalf.

While HMRC presented the amendments as a way to make ESC A19 more “user friendly” and objective, the reaction from accountants was irate. Keith Gordon launched an online Save ESC A19 petition that attracted more than 970 signatures and urged accountants to lobby against the change. His call was supported by numerous AccountingWEB members, and contrary to sceptics’ claims, appears to have had an effect.

In its summary of responses (480k PDF) to the ESC A19 consultation, HMRC noted that it received 72 written responses, including 20 from accountants and eight from representative bodies. Sixty-five of the responses raised concerns about removing the reasonable belief condition.

In response, HMRC said it had listened to respondents’ concerns over replacing the ‘reasonable belief’ test with the more objective ‘taxpayer responsibilities’...

Continued...

» Register now

The full article is available to registered AccountingWEB members only. To read the rest of this article you’ll need to login or register.

Registration is FREE and allows you to view all content, ask questions, comment and much more.

Comments

How is this going effect our clients

refs8 | | Permalink

We currently have three cases ongoing where we are claiming ESC A19 HMRC are resisting our claims, one is before the adjudicators office, the other two will end up there and these are a nightmare and annoyance. HMRC won't back down neither will we, as we believe we have a case. 

They are claiming P60s don't constitute under ESC A19 HMRC - we think this is absurd, and we are gathering information through the Data Protection act. It is a clear failure to deal with the information correctly.

We will see where it goes !

 

 

 

Thank you    6 thanks

k.gordon | | Permalink

The result is a win for common sense and a credit to the entire tax profession.  Similarly, those officials at HMRC who initially took an entrenched position should be congratulated for accepting that their proposals were flawed.

The proposals did bring to the fore the rather unreasonable stance being taken by HMRC concerning the status of P14s.  As I have written elsewhere (in Taxation), their justification for ignoring P14s is hardly tenable and suggests wishful thinking as opposed to anything more substantial.

With electronic filing in recent years and NPS and (going forwards RTI) the issue is likely to be of historical relevance only.  But I still urge HMRC to face up to reality and to do the honourable thing in respect of earlier years.  It might cost the country some money in written-off taxes - but taxpayers are entitled to rely on HMRC guidance and, when one takes this guidance into account, the taxes are not in fact payable. 

Furthermore, leaving aside the potential cash costs, alienating law-abiding taxpayers is hardly a sensible strategy.  But that is precisely what HMRC are doing.

Keith Gordon

Atlas Tax Chambers

 

 

I wonder where this leave us on earlier years?

refs8 | | Permalink

I wonder where this leave us on earlier years? and those in dispute?

Jon Stow's picture

In theory this is great news...

Jon Stow | | Permalink

...and I speak as one of the 39 individuals who responded. In practice HMRC have for the last two years been rejecting every claim under ESC A19 regardless of merit and their interpretation of reasonable belief (totally unreasonable) is their main tactic.

I congratulate Keith for leading the charge, but unless, as he suggests, HMRC do the honourable thing in allowing sensible claims, we are no further forward.

ESC A19 of no use anyway!

taxguru | | Permalink

Jon Stow wrote:

In practice HMRC have for the last two years been rejecting every claim under ESC A19 regardless of merit and their interpretation of reasonable belief (totally unreasonable) is their main tactic.

Completely agree. If the rejections are any guide this ESC is a totally useless one, particularly given that there is no appeal. Here is a very recent case where the taxpayer had to foot the bill for HMRC's mistakes.

 

Inconsistency

TaxMatters | | Permalink

I have had two ESC 19 claims in the past year. One concerned a lady of pensionable age who was charged to tax on a pension after two years. The Revenue had all the information they needed but had not acted. The problem was not win or lose but who pays? If we had taken it forward there would have been chargeable time involved and that is an unknown quantity which could easily have outweighed any benefit gained. In my view the Revenue recognised the position and dug their heels in - hardly reasonable. In the second case I rang the appropriate office of the Revenue and discussed it with the agent. In a couple of minutes it was settled. What can one make of that?