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HMRC consultation leads on from Powers Review

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HMRC’s new consultation on modernising its tax administration powers and safeguards discusses reforms including introducing a single set of powers that apply across all taxes.

15th Mar 2024
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The latest in a series of engagements that can be traced back nearly 20 years, the Tax Administration Framework Review: enquiry and assessment powers, penalties, safeguards was published by HMRC last month. The consultation invited views on how those aspects of the tax administration framework might be reformed and improved.

It has been prepared taking account of a set of objectives and design principles that were initially identified during the review of HMRC’s powers, deterrents and safeguards known as the “Powers Review”, which ran from 2005 to 2012. These objectives and principles aim to help shape the design of powers, obligations, sanctions and safeguards within the tax system.

The government built on the Powers Review with the Evaluation of HMRC’s implementation of powers, obligations and safeguards, which were introduced in 2021. As part of this evaluation HMRC made 21 commitments to help build and maintain public trust in the tax system.

This current consultation forms part of HMRC’s work to progress commitment one of that evaluation, namely that HMRC will “consider what further work on powers and safeguards should be taken forward during the review of the tax administration framework”. This is part of a 10-year programme of works that commenced in 2020.

Call for evidence

Both the government and HMRC believe that reforming the enquiry and assessment powers, penalties and safeguards has the potential to simplify and modernise aspects of the tax administration framework, provide greater certainty and consistency, bolster compliance and, ultimately, help to support the trust in the tax system.

This is a clearly an ambitious claim, so what does this consultation actually include?

The consultation covers 46 pages, introducing 22 “opportunities for reform” and asks 31 questions. It is being conducted at stage 1 of the consultation process, which means that its purpose is to seek initial views on the policy reforms before consulting later on specific proposals that may be taken forward. This allows interested parties to have an early opportunity to express their views and any concerns they might have about the ideas and proposals contained within the document, as well as having the chance to help shape the way in which the reforms develop before any decisions or implementations are made.

In detail

The consultation is broken down into essentially three major themes.

  1. HMRC’s enquiry and assessment powers – six reforming opportunities

There are various obligations placed on taxpayers and intermediaries to notify liability to tax and to submit information to HMRC alongside paying any tax due. HMRC has a range of powers enabling it to check the accuracy of this information and to address non-compliance.

This section discusses the potential opportunities and risks of streamlining HMRC’s powers by looking at whether there are areas of the tax system that could potentially benefit from HMRC taking a different approach. Reforming opportunities under this heading include whether HMRC’s powers and its ability to raise assessments should be consistent and aligned across all tax regimes.

  1. Penalties – 10 reforming opportunities

The tax system includes a range of penalties, which can be broadly grouped into financial penalties, non-financial penalties and criminal sanctions. This consultation explores opportunities to reform the design of financial penalties.

This section discusses the benefits and challenges to increased alignment of penalties across different tax regimes, whether there are specific penalties that could be simplified, and the role of penalty escalation for continued and repeated non-compliance within the design of tax penalties.

  1. Safeguards – six reforming opportunities

Safeguards are included in the tax system to ensure that taxpayers and intermediaries are treated fairly and in accordance with the law. While there are challenges associated with the provision of safeguards, this section looks at the opportunities to reform them through the potential for alignment of the appeals processes for direct and indirect tax appeals, expanding the use of both statutory reviews and Alternative Dispute Resolution (ADR), and making greater use of digital appeal routes.

Best practices

The consultation also provides some examples of enquiry and assessment powers, penalty regimes and safeguards in place in other jurisdictions. HMRC is looking to take the best practices from a multitude of jurisdictions to create a tax administration framework that is appropriate for the 21st century.

HMRC want a variety of responses from interested parties ranging from the accountancy, tax and legal professions through to software providers and taxpayers. The consultation closes on 9 May 2024, and respondents are requested to email their views and comments to [email protected].

Replies (3)

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By FactChecker
15th Mar 2024 21:19

If your idea of heaven/nirvana is designing and then twiddling with bits of procedure, then you should have been born 50 years ago and got a job in O.R. If you missed out, then this is your next best bet.

For everyone else, you may well find that your initial enthusiasm (as you trip over constant use of words like 'public' and 'trust') ebbs rather quickly, as you strike out for the firmer ground of day-to-day practicalities.

By the time that the average taxpayer is unfortunate enough to find themself having to consider these procedural niceties, they are likely to have lost any trust they once had in HMRC - for the simple reason that almost every interaction (human or technological) is often broken and generally inconsistent.
If those aspects were fixed, then the Enquiry/Penalties procedures wouldn't be under such stress - and might then be worth re-assessing (as above).
There's a thing called Priorities ...

Thanks (4)
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By johnjenkins
18th Mar 2024 11:00

WOW, a single set of powers right across all taxes. Who would have thought. Wait for it.................................................... A single set of penalties across all taxes????????????????????????????

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By mdoodney
18th Mar 2024 12:40

If HMRC are going to make more use of statutory reviews they are going to need to upskill a number of their reviewing officers sharpish as I've seen some absolute horrors coming out of HMRC Sols. Reversing the burden of proof in a penalty case and ignoring precedent setting case law on the basis that 'the facts don't align' whilst seeking to rely on an FTT decision (where the facts also didn't align) to support the case owner's conclusion are a couple of recent examples that really irk me. Add in a current review turnaround time of 70-90 days against a legislative target of 45 days and this is an area under pressure, probably best to fix current issues before expanding it.

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