After a year of development and testing, HMRC has introduced its range of Self Assessment tax toolkits for agents.
The toolkits highlight the common errors that attract HMRC's attention and the steps that can be taken to reduce those errors. They can also be used to help demonstrate that 'reasonable care' has been taken. They consist of a checklist, explanatory notes and links to further guidance. Whether to use them or not is entirely voluntary, HMRC said.
The first toolkits to be released were:
- Capital Gains Tax for Trusts and Estates
- Marginal Small Companies' Relief
- Capital Allowances for Plant and Machinery
- Personal and Private Expenditure
- Capital Gains Tax for Land and Buildings
An Inheritance Tax toolkit was originally included in HMRC’s plans, but failed to make its public debut alongside the other five. With the possibility of a much higher IHT threshold, perhaps the development team decided to wait until the dust settles before tackling that one – although Conservative pledges to reform capital allowances didn’t hold up the plant and machinery toolkit.
The toolkits will be updated to reflect new legislation and HMRC said it planned to develop more.
HMRC has been very open about developing the toolkits, which grew out of its compliance reform forum with tax agents. The toolkits have been tested during the past year with group of agents including AccountingWEB.co.uk Tax Editor Rebecca Benneyworth, who reviewed the CGT land/property and Personal expenditure programs in November.
The concept behind each toolkit is to focus on the issues where HMRC sees the highest risk of mistakes occuring. Each toolkit starts with an introduction, followed by a detailed checklist and supporting guidance.
“In some cases the explanation will show HMRC's view of the correct treatment, which may be an interpretation of the law rather than a simple statement of law,” she noted, “but at least you will be able to identify where you are at odds with HMRC.”
In spite of this caveat, she gave the toolkit a thumbs-up. “I think these add real value by lowering risk for the client,” she said. “HMRC are willing to share their risk model in a limited way with agents.”
Agents will be able to use the toolkit to satisfy themselves before a return is submitted that they have addressed the key risks HMRC would look at in any compliance check. The toolkit should reduce the number of overall errors and support the department’s strategy to ease off on those who want to pay the correct amount of tax so it can target its compliance efforts on those who deliberately underpay.
Businesses and agents using the toolkits would be able to demonstrate they were taking more care with their tax so even if a return was subsequently found to be incorrect, no penalty could apply if they used one of HMRC’s tools.