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Budget 2020: Retroactive HMRC powers

At first glance, this Budget appeared not to include a significant extension of HMRC’s powers, but as always, the devil is in the detail.

12th Mar 2020
Tax Writer Taxwriter Ltd
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Budget HMRC

There are two separate provisions which will change the tax law with retrospective effect due to correct perceived deficiencies in the Taxes Management Act 1970. There will also be measures to tackle the hidden economy, where businesses operate without bothering about tax compliance, and a suggestion that HMRC will take on the regulation of tax advisers.

Retroactive law

This is the term that HMRC uses when a law change is deemed to always have had effect. It tends to happen when HMRC has failed to comply with the law and loses cases at the tax tribunals. Parliament then concedes to HMRC’s request to change the law to what it thought it said.

Statutory notices

This was trailed with an announcement on 31 October that notices and penalties automatically issued by the HMRC computer will be valid notices.

The Finance Bill will “put beyond doubt” HMRC’s proposition that any act which the tax legislation says should be done by or under the authority of an officer of HMRC can instead be done automatically by a computerised process. The budget notes confirm that “this measure will apply prospectively and retrospectively” 

The Upper Tribunal’s decision in Nigel Rogers has already settled this argument in HMRC’s favour for any appeals going forward. Which means there now seems little real point to including this in the Finance Bill (other than to save HMRC’s face following its crass and ill-received technical note of 31 October).

Tax returns for LLPs

There has been some confusion since limited liability partnerships (LLPs) came into being some 20 years ago, as to how the income tax rules should apply to them. In particular, how the LLP tax return can be amended after an enquiry.  

The law will be changed prospectively and retrospectively in Finance Bill 2020 to put beyond doubt that LLPs should be treated as general partnerships under income tax rules. This will ensure HMRC can continue to amend LLP members’ tax returns where the LLP operates without a view to profit.

Hidden economy

As far back as 2008 the National Audit Office chastised HMRC for not doing enough to encourage people to stop hiding from the tax system and formalise their tax arrangements, but it has been a hard nut to crack. In 2016 HMRC consulted again on how to tackle the hidden economy, focusing in particular on the sharing economy such as Airbnb.

The focus has now moved to a joined-up approach with regulatory bodies that issue licences for taxis and scrap metal dealers. From April 2022, renewal of licenses to drive taxis and private hire vehicles, or to deal in scrap metal, will be conditional on the applicants completing checks that confirm they are appropriately registered for tax.  

Regulation of tax advisers

Buried deep in the Budget notes is a paragraph titled: “Raising standards in the market for tax advice”. The government says it wants to “give taxpayers more assurance that the advice they are receiving is reliable.”

Tax advisers are understandably alarmed that this may mean some sort of regulation of their work by HMRC. This a sore point with members of the professional bodies, who  feel that tax agents who are not members of those bodies don’t work within the same tight ethical standards as are imposed by the Professional Conduct in Relation to Taxation (PCRT). 

The government will publish a call for evidence about providers of tax advice, the current standards upheld by tax advisers, and the effectiveness of the government’s efforts to support those standards.



Replies (2)

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By Trethi Teg
13th Mar 2020 14:56

The law is no longer the law in the UK, the law is what HMRC say it is.

Can nobody see what is going on. Those that can see don't care as it doesn't effect them.

Our politicians seem to be in awe of HMRC and or are complicit in this.

Lets start saying that the law on motor offences and speeding isn;t what the law says but is what the local chief constable says. And by the way he can retrospectively change his mind and go back 10 years and prosecute thousands. Let's see what people say then.

Thanks (1)
By jennycoleman2
16th Mar 2020 09:22

I have happily had broker accounts with various companies for years. One got bought up by Firstrade.
After 6 months they starting sending me paper statements – and charging a lot for the privilege! They ‘claimed’ (and cannot provide any proof) that the emails werent getting through… after some fighting they they took everything ?!?!?!?!?!
Claiming i had not told them why i moved house 30 (yes that is correct, THIRTY) years ago. Which they refuse to refund !
so yeah – THIEVES and CROOKS. Luckily for. Me was able to have all of my funds recovered through Geminihacks -.- com they are the absolute best.

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