Article by Richard Mannion, a partner and Head of Tax with Solomon Hare, Bristol. He is a former President of the Chartered Institute of Taxation.
Published in the December 2001 issue of Tax Adviser.
In my article in the April 2000 edition of Tax Adviser I explained the background to the formal Working Together agreement that was entered into by the Inland Revenue, the Chartered Institute of Taxation (CIOT) and the Institute of Chartered Accountants of England and Wales (ICAEW) in November 1999.
The formal agreement was later announced formally by Gordon Brown in the 2000 Budget Press Releases (Rev 10) Helping to get it right published on 21 March 2000:
‘From April 2000 the Chartered Institute of Taxation (CIOT), the Institute of Chartered Accountants (England and Wales) (ICAEW), and the Inland Revenue will launch “Working Together” – a scheme for strengthening local liaison between practitioners and Revenue offices. Building on established links they will introduce fast track mechanisms to identify issues at local level that could have a national impact. This will provide for quicker and more flexible resolution of problems.’
It also received a prominent mention in the Board's Annual Report for 2000:
‘Customer Support We began a new initiative called Working Together with the Chartered Institute of Taxation and the Institute of Chartered Accountants in England and Wales.
Working Together is about building on existing arrangements for consulting and liaising with tax practitioners, and making better use of the strong links already established between local offices and agents across the country. We want to use those contacts to help us identify problems which need to be addressed at a national level in order to make the tax system work better. We'll be using the scheme to pick up and run with problems the minute they are spotted.’
Over the past year the Association of Taxation Technicians (ATT), Association of Chartered Certified Accountants (ACCA), Institute of Chartered Accountants of Scotland (ICAS), the Northern Ireland CCAB and the Association of Accounting Technicians (AAT) have all signed up to the formal agreement.
The term ‘Initiative’ has recently been dropped from the title on the basis that this is now accepted as an integral part of the Revenue's activities and in particular part of its move towards a customer facing/enabling role.
It is the intention that regular meetings should take place between Revenue officers and local practitioners in all of the 60 areas which emerged from the Revenue's recent change management programme.
The minutes of the meetings are routed through to the Working Together team so that issues which are clearly national issues, or which are local issues but have wider implications, can be addressed at national level.
Register of Issues
All issues reported centrally to the Inland Revenue Head Office, – via area meetings, directly from practitioners or from the Revenue network, are placed on a provisional register. These provisional issues are then reviewed by the Working Together team.
Sometimes the nub of the problem is not entirely clear and further information will be requested. Sometimes it is clear that the problem was caused by human error or by a misunderstanding. In most cases the issue will be logged onto the main register of issues and allocated to a senior Inspector for attention. When the Inspector's response is received it will normally be communicated back down the line to the source of the initial report and where the matter is of wider relevance it will be considered for inclusion in the next Working Together Bulletin.
Once a matter has been cleared it is then transferred to a separate archive section of the register so that it will be possible to check later whether any particular point has previously been submitted and dealt with.
The register appears on the Revenue's website (www.inlandrevenue.gov.uk).
Working Together Bulletins
An issue that is reported in by an area meeting might well affect millions of taxpayers and thousands of agents. One of the early concerns was how messages could be passed back to practitioners as quickly as possible.
It transpired that the Revenue have a database of some 55,000 agents who act for five or more clients and the Revenue readily agreed that this should be used as the channel of communication. The result was a series of specially badged Working Together Bulletins which are intended to be very practical and somewhat less highbrow than the existing series of Tax Bulletin.
The Working Together Bulletins are produced by the Revenue, although the professional representatives on the Working Together team are involved in the editorial process. Originally intended as the mechanism for giving feedback on issues that have been reported centrally, the Working Together Bulletins have become a popular means for specialists within the Revenue Head Office to communicate messages to agents.
The bulletin is sent to the 55,000 agents on the Revenue's database and is available immediately on the Revenue's website (www.hmrc.gov.uk). It should be regarded as essential reading.
Examples of issues dealt with
The Working Together brief does not include getting involved in policy issues – there are well established routes elsewhere for consultation between the Revenue and the professional bodies. The aim is to identify those areas where the system is not working satisfactorily and to try to achieve a practical solution, as illustrated by the following real life case studies:
Provisional figures (Register of Issues 5.6)
Cases were arising where the taxpayer had entered a provisional figure on the return but it was not possible to supply the final figure until after the 12 month window for repairing the return. There appeared to be a gap in the self–assessment (SA) rules which meant that the taxpayer was unable to claim a repayment even though the final figure was lower than the provisional figure included on the return. In Working Together Issue 3 the Revenue clarified that the taxpayer was entitled to make an error or mistake claim within five years of the annual filing date for the year concerned. Where necessary – for example when the return is not under enquiry and can no longer be amended – an error or mistake claim can be used by the taxpayer to replace a provisional figure with a final figure once known. If the final figure leads to an increase in the SA, a discovery assessment can be made by the Revenue to collect the extra tax due.
Gifts of flowers (Register of Issues 9.5)
We drew the attention of the Revenue representatives to an article in Accountancy Age which indicated that local offices were seeking to charge tax where flowers had been sent to a sick employee. Subsequently the Revenue issued additional guidance to their network staff in February 2000 regarding the treatment of benefits that are trivial in nature; staff were encouraged to exercise discretion and a sense of proportion.
Discretionary trusts (Register of Issues 5.7)
We received correspondence from a firm which dealt with a large number of discretionary trusts pointing out that they were being asked to complete SAreturns for each one irrespective of whether the trust was in receipt of income or gains and this was leading to significant wasted effort. In Working Together Issue 3 the Revenue agreed to try to eliminate the issue of unnecessary annual returns to trusts with no income and no likelihood of income or gains. A new trust with no income or gains did not need to notify the trust district of the existence of the trust and in the case of existing trusts the trustees could ask either that the file should be closed or that tax returns should not be issued annually.
CG34 procedure (Register of Issues 7.2)
It was apparent from a number of sources that the CG34 procedure was not working well in the tax districts. Forms often went missing and when they were correctly submitted to the District Valuer or Shares Valuation Division there were often long delays. After the problem had been recorded on the Register of Issues we became aware that the ATT Technical Committee were preparing a detailed paper on the CG34 procedure and we asked that the ATT should submit their paper via the Working Together route in order to support our original submission.
The Revenue's response was published in Tax Adviser in April 2001. It said that the Revenue were revising their guidance to their network staff to emphasise more strongly that priority attention is to be given to the CG34 procedure and to ensure that a copy of the form CG34 is sent to the valuer. The Revenue also revised the guidance in the Capital Gains Tax (CGT) manual (para. CG15261 and CG16615) to make it clear that costs reasonably incurred in making any valuation or apportionment necessary for a CGT computation are allowable deductions and the costs reasonably incurred by a taxpayer in making any valuation or apportionment submitted for a post-transaction valuation check are also allowable.
Capital gains and aspect enquiries (Register of Issues 7.1)
We became aware that a substantial number of Section 9A enquiry notices were being issued because the information provided on the SA return in respect of capital gains tax seemed to be insufficient to enable the computer to decide whether a complete return had been made. As a result of these representations substantial changes were made to the CGT pages for the 1999/2000 SA returns which led to a substantial reduction in the number of aspect enquiries seeking additional CGT information.
Not all our representations are successful. The Revenue booklet SAT2 Self Assessment: the legal framework was issued free to tax practitioners in 1995. The practitioners on the Working Together team felt that it was an extremely useful booklet which included some very practical guidance and we suggested that it should be updated to include those matters clarified under Working Together. Unfortunately we were unable to persuade the Revenue that this was a worthwhile use of their resources and there are currently no plans for an update. We believe the Revenue would reconsider their position if a large number of practitioners were to indicate their support for an updated version. You could assist by e-mailing Greig.Rattray@ir.gsi.gov.uk along the lines of: ‘I support the call for booklet SAT2 to be kept up to date.’
Hot issues that have been reported in 2001 include the following:
Incorrect penalty notices
We were disappointed that there seemed to be a number of incorrect penalty notices issued where 1999/2000 returns had been properly filed before 31 January 2001. The Revenue are currently carrying out an investigation into specific cases, but also considering the whole system for issuing penalty notices.
Details of PAYE underpayment
A large number of problems arise in practice where the agent is unaware of the precise amount of Pay as You Earn (PAYE) underpayment that has been coded out in later years’ coding. We have asked the Revenue to consider whether it would be possible for this information to be provided automatically to agents by the Revenue. In the meantime the Revenue have indicated that they plan to offer duplicate PAYE coding notices to agents with effect from April 2002 which will go some way to solving the current problems.
Working Together on specific areas
Core activities include establishing local meetings, monitoring the Register of Issues and assisting with the Working Together Bulletins. However at national level the initiative is not just about trying to provide solutions to the practical problems arising at the coal-face. We have built a considerable degree of trust between the representatives of the professional bodies and senior officers in the Revenue as the result of which our opinions have been sought on major developments such as area management, SA enquiries and filing deadlines.
The latter point is of particular interest to the Revenue because their published Service Delivery Agreement for 2001/2004 states that a key indicator for measuring improvement in compliance will be a year-on-year improvement in the percentage of individuals who file by the due date.
There has been a growing recognition from the Revenue representatives that many of the procedural problems which end up on the Register of Issues are the result of over-complex legislation and the Revenue representatives have agreed to work with us to try to achieve some meaningful simplifications.
Bearing in mind that the project only really got off the ground in November 1999 much has been achieved in a sort space of time. Perhaps the most significant outcome is that the Revenue now appreciates the importance of agents as a group of customers.
The response of the Revenue has been extremely positive – there is a real desire to understand the problems and get them sorted out. The Revenue now have a dedicated team of five people working full-time on Working Together including David Earle who recently retired from the CIOT Council and who has taken a secondment with the Revenue with the specific aim of helping them with their response to Working Together. This team has the personal support of the Deputy Chairman Ann Chant and other senior officers at Head Office.
When things go wrong with a client's affairs it takes time to put them right. That time means money for everyone involved. A system that works more smoothly is therefore a prize worth striving for for the professional bodies, their clients and the Revenue alike.
You can make a difference by getting involved in meetings with the Revenue in your local area or by channelling examples of things that are going wrong directly to a member of the Working Together team. Please feel free to e-mail me and I will ensure that the issue is directed to the right person.
(This article is based on Taxline Planning 2001–2002, Ch.26. Copies are obtainable from the ICAEW Tax Faculty)
020 7235 9381
December 2001 by