Article by John Kimmer, Past President, ATT, published in the July 2001 issue of Tax Adviser. Work of the ATT Technical Committee
The ATT Technical Committee is always working to remove practical problems in relation to the day-to-day work of our members, and taxpayers generally, in their dealings with the Inland Revenue. Most of our submissions to the Revenue have been well received and, hopefully, have produced improvements to the benefit of all. A recent example was reported in Tax Adviser for April in connection with the CG34 procedure.
We have recently been considering the sometimes difficult matter of obtaining information from the Revenue in relation to the tax affairs of clients, particularly when seeking information to assist with the completion of SA returns. Reproduced below is the full text of a submission on the subject of 'Secure Communication with the Inland Revenue'.
Purpose and Background
The purpose of this paper is to consider more rigorous procedures for agents and individuals to use when communicating with the Inland Revenue. These procedures must be able to cope with the information required by the agents and the increased security which needs to be enforced by the Inland Revenue. The recent Lord Levy case has highlighted the general issues relating to security and the ability of individuals to get hold of confidential information relating to other taxpayers.
As a further consequence of the above case, agents are finding it increasingly difficult to obtain straightforward information from the Revenue. The greatest extreme is data critical to the correct completion of a tax return which is proving to be frustrating to the agents. One situation which has been identified is the obtaining of information regarding under- and overpayment of tax that has been adjusted via PAYE coding notices. Thus the figures included in boxes 18.1 and 18.2 of the self-assessment return are often incorrect resulting in amended agents’ calculations.
It is understandable that the Revenue are reluctant to give out taxpayers’ information but the internal manuals do provide for cases in which staff are not satisfied as to the caller's identity. It specifies staff should ask for the caller’s telephone number to which they can call back and that number should be independently checked and the call then returned. If this procedure was used on a more regular basis this could prevent breaches of confidentiality.
In cases where the Inland Revenue will not provide the information because no form 64-8 or letter of written authority has been forwarded to the tax office then the onus should be on the agent to provide the completed form before the information is given. There should be an absolute rule that no information is given to agents if no 64-8 has been submitted.
This paper concentrates on three key principles: -
a) The ability of agents to obtain information from the Inland Revenue via telephone and the Internet without onerous requirements.
b) The need for individuals to have reasonable access to the information which the Inland Revenue hold.
c) The need for the Inland Revenue to maintain a high standard of security so that confidential and sensitive information is not divulged to the incorrect party.
Agents' access to information
There are a number of potential workable solutions to the above problems and these are considered below. The list is simply a number of options. Not all would be adopted but each seeks to deal with the above issues.
a) 64-8 and Agents Code
The form 64-8 is the main way in which taxpayers express their written authority that an agent is to act on their behalf. It seems that this would be the best way to build on the security concept. A database from the information on the form could be created which could then be called up on the Revenue screens in a user-friendly manner. The form 64-8 includes a section for the agents’ reference. If it was universally decided that all agents use their internal client reference as the agent’s code then the Revenue could ask for this code when verifying the identity of the caller. The code should be alpha numeric, with a minimum of four characters and at least one digit and one alpha. When an agent calls a tax office the Revenue should be able to call this information up on their screen and ask the relevant questions to the agent. To reinforce this the officer could ask for the client’s postcode. The provision of this information is unlikely to cause an extra burden to practitioners as the information is readily available and it provides extra security to the Inland Revenue when dealing with agents.
The existing 64-8 information which is already with the Inland Revenue could be updated as part of the self-assessment return, see point c) below.
b) New clients and 64-8s
When an agent submits a form 64-8 to the Inland Revenue for a new client the Inland Revenue should, as standard practice, send copies of basic information relevant to the taxpayer to the agent. At minimum this information should include a copy of the most recent tax return, a copy of recent coding notices, a statement of the client’s payments on account and details of any outstanding queries. This in turn would reduce the number of phone calls which the agent would have to make to the Inland Revenue to obtain such information.
c) 64-8 Substitute as part of self-assessment return
The self-assessment tax return could be amended on page 8 to show a section that includes details of the agent, the agent’s code and a box that should be ticked if the agent is the client’s ongoing agent. This information would then be scanned/input onto the Revenue’s system as part of the normal self-assessment return and would ensure that the information was available to all Inland Revenue staff.
This would also assist with the problems where an agent has acted for a client for a number of years and no form 64-8 was ever submitted or alternatively it is located in a ‘dead’ file. The taxpayer in signing the tax return in box 23.1 is agreeing that the agent mentioned is in fact his agent.
The 2001 tax return forms may have already been designed so this procedure, if used, is unlikely to take effect until the 2002 returns are issued.
d) Coding notices and self-assessment return
Following on from the above, a box could also be included on the self assessment return for the notice of coding to be sent to the Agent instead of the taxpayer should the taxpayer so wish. This would ensure that the Agent actually receives a copy of the coding notice and it should not increase the burden on the Inland Revenue as only one copy of the coding notice is issued. Alternatively the form 64-8 could be updated with a box that the taxpayer should tick if the coding notice is to be sent directly to the agent. As agents would have the required information for Boxes 18.1 and 18.2 of the tax return, this would subsequently reduce calls to the Revenue. With regard to the coding notices either of these solutions would be ideal. However, there is concern that the Revenue’s systems may be unable to despatch the notices to agents. As far as we are aware, the coding notices do not come from the same system as the other taxpayer information so this solution is best incorporated with an update of the Revenue systems.
e) Form 64-8 and Inland Revenue Records
To our knowledge, forms 64-8 are not centrally recorded so there may be cases where an agent has submitted a form but the particular tax office they are dealing with does not have a copy. If the agent has to fax a copy to the Revenue then this can result in the clients incurring additional (unnecessary) professional fees. With the amalgamation of the national insurance contributions office into the Revenue additional problems arise where an old style 64-8 has been submitted as the agent has not authority to obtain NIC information (other than Class 4). It is not practical for agents to submit new forms for all their clients. The inclusion of the 64-8 information on the tax return would eliminate the above problem.
f) Access to information on the Internet
The Revenue have recently introduced internet access for PAYE. The service is limited but they expect to develop it further in the near future. A similar service needs to be introduced whereby agents and individuals can have internet access. If agents could access the information required electronically via the Internet this would reduce the level of phone calls which are being made to the tax offices. In implementing such a system the Revenue would have to use a secure server such as that currently used for self-assessment registration. The self-assessment registration currently needs the unique taxpayer reference, the postcode and the national insurance number in order to register and then the taxpayer gives a password which only he knows and which he uses to access the system in the future. The taxpayer’s details cannot be accessed without this password. A similar system could be used for agents.
The agent would have to have a generic login and then for each taxpayer a unique login name and security code or password. This system could be set up on the Internet without the need to download any software to PCs. The form 64-8 should still be used so no agent could access information without the signed form.
g) Client information as security measure
A simple but yet effective security system would be to ask the agent a series of questions regarding the client’s previous tax return when they call up the Revenue to request details on a client. This could include any box on the tax return at random including blank, e.g.
- The gross interest figure – Box 10.4
- The gross dividend figure – Box 10.17
- The gross employment income – Box 1.8 (Employment Pages)
- The Self-Employed profit - Box 3.13 or 3.52 (Self-Employment Pages)
All agents should be made aware of the possible information that the Revenue could request. In addition to the standard information the Revenue should also request a random box.
In light of the Lord Levy case there needs to be a way in which individual tax payers can get hold of their information in a manner which is simple but yet has maximum security. Potential solutions are: -
a) To send out a generic form similar to that used for banks in which the taxpayer can register for telephone access. This would involve the taxpayer providing full name, address, national insurance number, unique taxpayer reference and their nominated password. This form should be sent to the Revenue accompanied by a photocopy of a passport and a recent utility bill. The individuals could then be registered on the Inland Revenue systems and when phoning to obtain information would go through a similar security process as with financial institutions.
This form could initially be sent out with all tax returns for 2001/02. For taxpayers who do not need to submit a tax return this form could be sent out on a case-by-case basis, as and when the taxpayer phones the Inland Revenue. This is a one-off procedure and amendments such as change of address could be made by telephone.
At first glance this would appear to be cumbersome and time-consuming, however in the long run it would ensure security and taxpayers would not mind completing a form if it meant increased security for access to their tax information.
Although this form would include information that the Revenue already have on their system it is necessary in that the correct passwords need to be allocated against the correct taxpayer and the detail in the form reduces the likelihood of errors arising.
The introduction of this system would increase security in cases where individuals phone the Revenue thus reducing the likelihood of confidential and sensitive information getting into the wrong hands.
b) Internet access
Currently there is a self-assessment registration procedure on the website. This enables individual taxpayers to log on to the Inland Revenue’s website and submit their tax return. This system operates via a secure server and requires a password. A
similar system should be in place to obtain general information such as payments on account, copies of further notices and outstanding queries. The taxpayer should only have to register once and this should suffice to access the self-assessment tax return and any other relevant information. As mentioned above internet access has been introduced for PAYE and similar access should be introduced for personal tax.
All the procedures outlined above will require the co-operation of both the Inland Revenue and the agents. If both work together to implement any of the above then both parties will enjoy the benefits.
However, if someone is determined to get information then they will attempt to break any security system whether these systems are in place for telephone or Internet security.
A drastic option would be to issue legal proceedings against any party which fraudulently obtains confidential information from the Inland Revenue on a taxpayer. If in obtaining the information by deceptive means the parties commit a criminal offence they might be dissuaded from trying.
I hope this submission will assist in easing the problems which are currently experienced by many practitioners when dealing with the Revenue. A future report will provide an update on this problem. However, if you have further ideas on this subject or any otheres affecting your day-to-day dealings with the Revenue, please write to me, John Kimmer, at 12 Upper Belgrave Street: the ATT Technical Committee will be pleased to consider your problems further.
020 7235 9381
July 2001 by