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New tax penalties: Unrepresented taxpayers don't stand a chance

"Unrepresented taxpayers will not stand a chance under HMRC’s new penalty regime," according to Accountingweb.co.uk’s tax editor Nichola Ross Martin, after attending her institute's Tax Faculty’s London conference, The new HMRC powers and their effect on your practice. "Many accountants are in for a bit of a shock too."

She writes:
"It was an unhappy coincidence that shadow home secretary, David Davies happened to chose the same day to resign his parliamentary seat on account of “the insidious erosion of civil liberties in the UK”. A point not lost on some of the speakers at the Institute of Chartered Accountants in England and Wales (ICAEW) tax faculty conference yesterday.

The new tax penalty system allows abatements or reductions from a statutory maximum penalty by decreasing penalty charges according to taxpayer behaviours. Applying percentages to percentages, as the legislation requires, is complicated (one size cannot fit all, you know) but trying to judge and mark behaviour in the first place is highly subjective, as any school teacher will bear out.

Taxpayers will be expected to know if they need professional help or not in their tax affairs, and will then also be responsible for selection a suitably qualified accountant. A taxpayer who cannot afford tax advice seems ill catered for in the new rules. If an accountant make an error, the taxpayer will still be charged a penalty. It will be very difficult for unrepresented taxpayers who do not read HMRC’s Compliance Handbook to negotiate their own penalties successfully, and there is certainly nothing even vaguely intuitive about the new rules.

The ICAEW’s conference delegates were given a mock tax enquiry to determine penalties under the old and new regime which more than adequately illustrated the basic problems of the new rules.

Frank Haskew of the ICAEW explained that whilst the tax bodies have been working really hard on this, HMRC “is consulting but not actually listening” and worse still for taxpayers and agents, suggested that “there are diametric views as to what is actually a safeguard” within the department.

HMRC’s speaker meanwhile seemed to be blissfully unaware of the potential problems afoot - it’ll be alright on the night and suggested that the beauty of the new system is that it is just a matter of ticking boxes. They may be then rapidly unticked in practice, as this does not quite address the fact that because the new regime is all statutory taxpayers will have the right to appeal penalties."

Tax lecturer, Rebecca Benneyworth is covering the new penalty regime in a series of articles for Accountingweb.co.uk

Number of comments: 1

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Nick Graves, 16-Jun-2008

Is it any wonder
that with people downsizing cars, quitting smoking and pubs closing, the gov't has to fine - I mean find - a new horse to whip?

I'm glad to read that it's now being revealed that HMRC is merely paying ear service to consultation; I've long believed that these changes are usually bashed through as a fait accompli; and as a half-arsed one, usually.