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HMRC consultations: Have they listened?

17th Dec 2014
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In what can only be politely termed as an “unusual rush of activity”, on 10 December HMRC published the outcomes of 15 of the 45 consultations undertaken during the 2014 calendar year, explains Jennifer Adams.

The rush allows consultations published during the year to be cleared before the start of another year. Of the five remaining ‘open’ only one can be said to be of interest to members, namely the Travel and Subsistence Review, which was first published in July 2014 and will close on 31 January 2015 at 11.45pm.

Over the year HMRC has invited views on a variety of subjects including the capital gains tax concession D33, loan relationships, the strengthening of tax avoidance disclosure rules, exchange of information, pensions, a minimum excise tax, CIS, the withdrawal of ESC’s, the employee benefits and exemptions system including the abolition of the £8,500 threshold and new measures to tackle offshore tax evasion.

AccountingWEB has monitored the progress of each consultation and has made members’ views known to HMRC either in a formal response or included in the submissions of the professional bodies.

It must be remembered that HMRC is only undertaking this consultation process because it is legally obliged to. Its sole concern is reduction of costs despite using the word “improvement” and beginning each paper with sentences such as “The Government is committed to making the tax system quicker, simpler and easier for businesses by reducing administrative burdens” and “The Government has been clear that one of its key objectives for the tax system is simplification”; the most used word in the entire library of HMRC consultation documents is “simplification”.

CIS outcome

Last year AccountingWEB members were specifically asked for their comments on the CIS proposals.

The proposals contained in this consultation were again towards “simplification”. The reason for the CIS system is well known and actually works. So the consultation was not an overhaul per se but a tinkering towards the main aim as given on page 14 of the outcome paper, namely the cost saving in the complete withdrawal of the main telephone service as from April 2017.

The proposals are valid and welcome. The requirement for mandatory filing is taken as read and the ability to be able to amend returns online will be of great assistance. Anything that means that you no longer spend “at least 18 minutes” hanging on the phone to speak to HMRC [Note: where did Which? get that figure from?]

The procedure covering nil return submission remains and although contractors will no longer be required to submit nil returns, if they are not submitted a penalty will still be raised. The change is that an online appeal must be submitted but as something will need to be done so why not submit a nil return in the first place?

Where HMRC has listened is in the agreement for agent access to the new online account and the revision of the obligations required for gross status. Again with a view to saving costs, the lowering of the threshold in multiple partnerships or directorship companies was going to happen with or without agreement but will be of benefit to many.

Employee benefits and expenses

The outcome report starts with the same words of “simplification” and “costs”. Every employer and their agents are aware that the P11D/ P9/trivial benefits rules have no reason to remain and should have been abolished years ago; thankfully, finally, they have.

Direct recovery of debts (DRD)

It was in the consultation on the proposals contained in this document that the impact of ‘customer’ dissent came into its own. It would have been thought that the importance of such significant changes would have merited a consultation period in excess of the standard ten weeks, even so, by the end of those 10 weeks 124 different organisations had made their views known such that on the front page of the outcome statement it is stated that, “The government has heard the concerns voiced during the consultation and is grateful for the constructive and informative suggestions it received”. The government might well have heard but the proposals were going to be implemented whatever the views of their customers and agents.

Set consultation procedure ignored

The main areas of concern is that there is supposed to be a set procedure in the consultation process as detailed in the policy paper ‘Tax Consultation Framework’  jointly issued by HM Treasury and HMRC in March 2011.

But HMRC would appear to have placed this paper under their archive section and forgotten it ever existed in their enthusiasm to implement the DRD proposals. They by-passed the initial fact finding and evaluation stage - stage number one,Setting out objectives and identifying options”. It could not have gone unnoticed that this lack of keeping to set procedure has happened previously with a similarly significant proposal – that of the closure of enquiry centres.  Taxation Magazine’s in their #APowerTooFar campaign strongly opposed the plans, AccountingWEB submitted a separate response such that in the end what could be termed a watered down version is the (welcome) result.

The fact still remains that the consultation process has been tainted. HMRC must have known there would be anti-response but possibly not from as diverse bodies as MPs, the National Farmers’ Union and the Civil Court Users Association.  A quote from the summary of responses reads: “Many respondents raised more general concerns about the policy itself. The Government has carefully considered all responses, including those that were outside the scope of the consultation”.  AccountingWEB detailed the consultation.

The new safeguards HMRC has been forced to implement will cost but with such large amounts of unpaid tax (£50bn according to the original consultation document) that cost will still mean a large net achievement. The safeguards include face to face meetings (presumably by the DMB), the establishment of a new, specialist unit, a dedicated DRD team and helpline, and allowing debtors 30 days to contact HMRC before any money is withdrawn.

Very telling is the comment made that HMRC will apply DRD to “a smaller number” of cases in the first year starting  April 2015 thus allowing the department to “gain experience and feedback” which means that they are now conscious of the need to be careful in implementation. Very worrying is the fact that it was the respondents to the paper who had to stress debtors’ privacy concerns when this should have been an automatic consideration. One victory for the customer is that banks will not be required to provide a debtors account history.

Although Paul Aplin, chairman of the ICAEW Tax Faculty Technical Committee, was pleased that ministers and HMRC had “listened, understood and acted” such that “We are now in a very different place”, the fact remains that the procedure was always going to be implemented.

Travel and subsistence review extended

This consultation will now close on 31 January 2015 having been split into two stages. Stage one was to enable the government to “improve its understanding of the commercial realities of travel and subsistence payments” and stage two will be to establish a “working group to assist in producing a new set of principles upon which the rules of a new travel and subsistence tax regime” (note the word “new”).

With these words it is clear that this consultation could be as significant as the decision to close HMRC offices or the DRB because, following the review and for implementation in the Budget 2015, any proposals will then undergo a “full consultation”.

Perhaps they have listened and learnt their lesson.

AccountingWEB will be asking for members’ views to the 2015 consultations and will submit separate responses as required.

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