Commenting on today’s publishing of a Treasury Sub-Committee report called Disputing Tax, John Cullinane, CIOT Tax Policy Director, said:
“We agree with the sensible recommendations in the Treasury Sub-Committee’s Disputing Tax report, although many of them are preempted by the announcements by the Financial Secretary to the Treasury last week of a series of measures designed to strengthen public trust in HMRC’s exercise of their statutory powers. Taken together, they should give confidence to individual taxpayers and professional bodies that there is a determination to have an ongoing and dynamic oversight of HMRC.
“We welcome the recommendation that HMRC works with the professional bodies to consider whether their standards are sufficiently clear about conduct relating to all stages at which our members may be called upon to provide advice on tax avoidance, including stages leading up to settlement of a tax dispute. Professional Conduct in Relation to Taxation (PCRT) has long set out professional and ethical standards which require more of the members of professional bodies than the letter of the law demands, and rightly so. The Government supported the publication of the updated PCRT. HMRC have also acknowledged that the updated guidance is an acceptable basis for dealings between members of the bodies and HMRC.
“We have been highly critical of the extension of time limits on tax investigations because the case for such a large and broadly applied increase has not been made and risks resulting in unfairness for taxpayers and perverse incentives toward the care taken with tax returns. We welcome the suggestion by the sub-committee that proper regard be given to the potential impact of the use of extended time limits by HMRC. Specifically, we agree with MPs on the sub-committee that HMRC must ensure that it leaves good time to ensure that enquiries are opened and, where necessary, assessments made or amended.
“The loan charge is causing a great deal of debate online and in Parliament. Naturally, strong feelings about the loan charge are voiced by some of those affected. We have previously expressed our view that the loan charge has a retrospective feel. Such measures should only be used very rarely and where proportionate. We believe that many users of the arrangements covered by the charge were aware they were involved in tax avoidance, and the measure is certainly appropriate in such cases. However, the measure is a blunt instrument, catching taxpayers who will have a very wide variety of individual experiences and circumstances. Taxpayers who are caught up in this should continue to engage with HMRC, and many of our members are seeking to assist taxpayers to resolve their liabilities.
“The constant flow of new and strengthened powers to HMRC over the last seven years has not allowed for anything like sufficient evaluation of their overall efficacy. There is need for early and full consultation on new measures and for effective and routine post-legislative review of whether measures are achieving their objectives. The balance of power lies decisively in favour of HMRC making effective oversight of how it uses those powers essential.”
Notes for editors
- The report concludes that:
- HMRC should give vulnerable taxpayers involved in tax disputes better guidance about tax law and more support to understand their rights
- In offering time to pay arrangements to people who want to settle their involvement in contractor loan schemes, and undertaking not to make them bankrupt or force them to sell their family home, HMRC is now taking a sensible administrative approach
- HMRC’s delay in clarifying this approach and sending settlement calculations to contractors has caused widespread anxiety and distrust
As well as accepting written evidence from CIOT, the sub-committee held an oral evidence session with Ray McCann, then President of the Chartered Institute of Taxation, on 10 December 2018.