by Richard Mannion, Head of Tax with Solomon Hare, Bristol: Article on information sources and help for the tax adviser published in the June 2002 issue of Tax Adviser.
The Inland Revenue wishes to be regarded as an enabling and customer facing organisation.It is interesting to observe a gradual change of culture taking place: particularly well shown by its providing information that assists its customers to comply with their obligations to return income and pay the correct tax. This article reviews the information and guidance provided by the Revenue authorities, and available elsewhere, and considers what the required standard is for a practising member in 2002.Access to information
On my first day in the profession I was handed a copy of Tolley’s Income Tax and it quickly became my first point of reference. Just for the record Tolley’s Income Tax is still my first port of call for income tax questions and no, I do not own any shares in Butterworths Tolley!
As I became slightly more experienced it became apparent that when I was arguing with the Inspector of Taxes I was unable to refer him to Tolley’ s Income Tax and for that level of debate reference to the Yellow Tax Handbook was needed. For some time that was my main library, supplemented by the weekly edition of Taxation.
But, as the years have gone by, the speed of technology has increased exponentially and these days there is much more information available – most at the click of a button. Now if you are to deal with anything reasonably complicated you need to check the Inland Revenue Manuals, either by using Books on Screen or going directly to the Revenue website. It should be noted that Books on Screen’s version of these manuals can be months out of date, although access to manuals is easier.
The Revenue supplement their manuals’ guidance by regular Tax Bulletins and these should be regarded as compulsory reading, even though they tend to be very heavy going. Recently the Working Together bulletins have been initiated and issued by the Revenue’s Working Together team. They cover less weighty matters than the main bulletins and concentrate on procedural matters rather than policy and technical interpretations.
While it is extremely helpful to have the Revenue’s interpretation of the law, it’s also vital to get a balanced view and to be aware of the views of academics and other practitioners by reading professional journals.
I have always considered taxation to be an extremely interesting and satisfying job, but the downside for me is the need to continually refresh your knowledge in the form of technical reading. I tend to store my reading up for long train journeys and hope that no-one noisy sits near me.
Increasingly the present and the future have an e-focus and subscription to a weekly tax news service like TaxZone which gives the latest news in bullet points with access to the internet for the detailed story is invaluable. It is possible for Chartered Institute of Taxation members to access TaxZone free of charge via the members’ website.
Frequently asked questions
It may have been because IR35 was perceived to be the information technology (IT) contractors’ tax, but it was interesting to see how the Revenue used its website as the main means of communication for the detailed rules of IR35 with the new dimension of frequently asked questions (FAQs). Indeed the website seems to have overtaken the old system of Revenue Press Releases.
I have written so far about the availability of Revenue interpretations and the views of other tax specialists, but I would suggest that one of the best sources of information is the library of precedents lying in your own firm’s files. Somehow you need to build a system for logging and indexing the various rulings and clarifications that you receive along the way and to ensure that this information is available for sharing with colleagues. I keep a hard-copy database of precedents indexed by subject matter although my firm is currently looking at the possibility of archiving this onto our Books on Screen system.
From time to time I am asked to act as an expert witness in taxation matters. No two cases are ever the same, but one of the most common shortcomings I see is the failure to keep an ‘audit trail’ on the file showing how the particular conclusion was arrived at, with the supporting back-up information. The legal test goes something like ‘Would a reasonably competent tax adviser have gone about things this way?’. Quite often the error took place some years previously and my line of approach is to find out what level of information was available at that time and to look for evidence that the agent had made efforts to establish what represented current best practice.
My own view is that—when in the future a client accuses his agent of having been negligent now in 2002 – there will be an expectation that the agent will have carefully analysed the position by reference to the legislation and the Revenue’s interpretation, and will also have considered legitimate planning opportunities referred to in specialist textbooks and magazines.
Availability of guidance
Code of Practice 10
In the early 1990s the Revenue indicated that they would no longer give rulings, but then in 1994 it became possible under the Open Government rules to obtain a ruling on certain matters, by paying £15 for it. More recently the rules of the game have been codified into Code of Practice 10 and it’s worth keeping a copy close at hand.
Requests for a post-transaction ruling on a specific transaction of an unusual nature can be made once it has taken place and the Revenue will be bound by that ruling, providing a full disclosure was made of all relevant facts.
Advice from the local area office
Code of Practice 10 says that a taxpayer can discuss his tax affairs or get information at any Tax Office and the Revenue will give information to help with returns, claims to relief, etc. This is something less than a ruling, but fits with the Revenue’s new customer facing/enabling role.
Following the introduction of self-assessment (SA) the Revenue set up a SA helpline aimed at individuals who were preparing their own tax return and who needed guidance. Subsequent research suggested that a number of agents were using this helpline with regard to their clients’ affairs. However, rather than taking umbrage, the Revenue are currently giving some detailed consideration to the possibility of setting up helplines dedicated to agents.The outcome is awaited with interest.
Open Government Leaflet IR141
It is still possible to get a £15 ruling on certain points under the Open Government rules. IR141 says: ‘In particular, we will generally meet requests for information on our interpretation of the tax law where
- We have a settled view
- Disclosure would not assist tax avoidance or evasion.’
Guidance on VAT
That’s the position for the direct taxes – what about value added tax (VAT)? Here the principal source of published guidance for many years has been the series of public notices. They explain the departmental ‘party line’ in the interpretation of VAT law and case precedents, but unfortunately they are often out of date and are aimed at businesses rather than practitioners. Some notices represent effective VAT legislation and so are required reading for practitioners.
We have open access to Customs & Excise manuals that explain the rationale behind guidance in the public notices and describe internal procedures.
Customs issues a number of publications:
- Press Releases and Business Briefs are reported in most tax periodicals, as are the more technical Information Sheets; and
- VAT Notes is sent out with VAT returns.
The Customs website has recently been re-launched with a new look it’s (slightly) more user friendly than the last version and is another good source of departmental information.
Pre- and post transaction rulings
Obtaining pre- or post transaction advice or rulings from Customs has until recently been a straightforward matter and local VAT offices have usually given an opinion when requested. Unfortunately the centralisation of Advice and Registration Centres, has led to many businesses and practitioners experiencing severe delays in obtaining sometimes crucial information. Nevertheless, Customs is usually willing to give a ruling or opinion on most transactions.
I referred earlier to the spectre of professional negligence claims and the required standard for a tax adviser giving advice in 2002. The CIOT’s Professional Rules and Practice Guidelines make it clear that professional advisers should not stray into areas where they do not have the necessary skill or experience. Members are encouraged to consult with fellow professionals when giving advice. In my own firm it is a rule that any advice which is remotely technical should be reviewed by a suitable tax specialist before it is issued and that areas of known difficulty, i.e. capital gains tax (CGT) retirement planning, roll-over relief and enterprise investment scheme (EIS) are prescribed areas that must be managed by certain named tax specialists within the firm.
Clearly that is more difficult for smaller practices and sole practitioners. But the requirement to consider seeking second opinions is equally relevant for two very good reasons:
- the Professional Rules and Practice Guidelines require it, and
- getting sued is never a pleasant experience.
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June 2002 by