In July 2019, the Financial Secretary to the Treasury (FST) committed HMRC to undertaking an evaluation of the implementation of their additional statutory powers introduced since 2012 against the same powers and safeguards principles which underpinned the 2005-2012 powers review. In order to obtain external input, HMRC set up the Powers and Customer Safeguards Implementation Evaluation Forum on which CIOT is represented and which had its inaugural meeting at the end of October 2019.
Following a delay due to the General Election in December, the forum met again in January 2020 and identified eight specific post-2012 powers for detailed consideration. These eight powers, together with a list of all the relevant powers which are in scope for the review, are shown on the CIOT website.
During February, CIOT asked members to share their experiences (of how HMRC have implemented the powers) by completing a questionnaire provided by HMRC. We did not receive many responses (fewer than 20), which was not entirely unexpected. We believe that this was predominantly because a lot of the powers in scope operate in relatively specialist areas of the tax code (such as offshore tax non-compliance and the GAAR) and others are still in the very early days of being implemented by HMRC (such as the Corporate Criminal Offence) so experience of them being used is inevitably limited. The timetable to collect responses from members was also very short.
At the time of writing, sessions of the forum are due to take place during March involving HMRC and experts from practice, including some CIOT members, in order to take a closer look at the eight powers (mentioned above) and the feedback received on those particular powers.
The highest number of responses the CIOT received were about the Requirement to Correct past offshore tax non-compliance (RTC) (Sch 18 F (No 2) A 2017). In particular, there were concerns that:
- The publicity about the RTC failed to reach many taxpayers who as a consequence failed to come forward before the deadline of 30 September 2018;
- The level of the failure to correct (FTC) penalty is disproportionate, particularly as the cases seen have involved people who have failed to declare offshore income through ignorance of the correct tax treatment, rather than those who were deliberately trying to evade tax;
- HMRC’s decision to apply a minimum of 150% FTC penalty in ‘prompted’ disclosure cases is arbitrary and unfair;
- HMRC are adopting an inflexible and inconsistent approach to reasonable excuse arguments put forward by taxpayers;
- The punitive nature of the FTC penalty risks discouraging people to come forward and disclose in the future.
For taxpayers who were aware of the RTC and sought advice and contacted HMRC in time, the feedback we received was that the process was reasonably straightforward, and HMRC’s guidance was practical and relatively clear on what needed to be done, and by when. However, due to the rushed implementation of the power, which was caused mainly by the unexpected General Election in 2017 and so outside of HMRC’s control, this meant that insufficient consideration was given to the different situations taxpayers might find themselves in and a consistent approach / treatment was not adopted across HMRC.
We also received a few responses about Accelerated Payment Notices, in particular around the governance process, and Follower Notices, especially how HMRC are applying the 50% penalty.
Given the limitations of the review, we are concerned that it is simply too early to draw any firm conclusions into how HMRC are implementing their post-2012 powers. For this reason, we think a further review should be conducted in a few years’ time.
The Forum is due to publish its report at the end of May 2020.