About Us

Attendees

Dave Hartnett, Chair, Stephen Alambritis, Philip Baker QC OBE, Roderick Cordara QC, Teresa Graham OBE, Penny Hamilton, Mike Hardwick, John Hasseldine, Liz Lathwood, Anthony Leonard QC, Adam Little, Chas Roy-Chowdhury, Edward Troup.

HMRC: Simon Norris, David McIntyre, Linda Whewell, John Shuker.

Apologies

David Cruickshank, Richard Excell and Francesca Lagerberg.

Contents

Procedural Issues

The size and scope of the committee’s task was discussed along with its timetable. Priorities for FB2006 would be removing impediments to the effective operation of HMRC and the protection of taxpayer’s rights. Other measures would be in FB2007 and possibly 2008. The committee will be consulted on identifying priorities. Changes made in FB2006 must take into account the longer term direction HMRC is moving in.

The committee will be consulted on powers and safeguards. There are very important issues to be discussed and a once in 10 or 15 year opportunity to get things right.

Action Point

future draft agendas will be circulated in advance to give members a chance to comment/make suggestions.

Action Point

a process and programme for the committee’s work will be agreed over the next couple of meetings.

Action Point

a list of possible priorities for FB2006 will be circulated for the committee to consider.

A Code of Conduct for tax practitioners is probably not within the scope of the committee’s work although any legislation required would be. Although committee members will have views on “bad advisers” time would probably be too tight for them to consider this in detail.

Some inconsistencies in the approach to debt management were discussed. HMRC is looking into this and may ask the committee to consider it. In some US States the taxpayer has a right to agree a schedule of payments with the tax authorities.

Action Point

HMRC will look into this.

Security of Papers

It is important that committee members can consult colleagues where necessary. Where a paper contains confidential material it will, if possible, be put into an annex so the rest of the paper can be circulated freely amongst colleagues.

Action Point

It was agreed that a rewritten note on security would be circulated taking into account the committee’s comments.

Responses to Consultative Document

There have not been many responses yet so it is hard to identify themes. The majority of responses are expected near the time limit of 13 June. If there is a very disappointing response HMRC will consider how to encourage more.

Underlying Principles and Objectives

Committee members discussed principles and objectives and gave their responses to the broad questions in the Consultative Document.

The strategic aim of a risk-based approach leading to compliance work concentrated on the non-compliant with a light touch for the compliant is supported. Non-compliant businesses are a source of unfair competition and action to tackle them is widely supported by the compliant. People also have a strong sense of what is fair – they want equal treatment and do not like to think some are getting away with evasion.

Although it is hard to reward people for obeying the law (they should do that anyway) the scope for incentives should be explored. This could include taking account of past “good behaviour” in reduced penalties for a breach of the rules, or a “holiday” from future inspections for a period if a business has been inspected and found “innocent”.

The current powers tend to differ depending on whether they are ex-Revenue or ex-Customs and Excise powers. Better bases for distinctions might be between powers for frontier work and powers for tax compliance, or between powers needed to oversee goods based regimes (like excise and customs duties) and those needed for taxes on profits or turnover.

One approach to the question of identifying necessary powers would be to “deconstruct” them and look at what needs to be done. Powers would be required to do A, B and C and they need to be able to cope with situations requiring urgency, uncertainty etc. This could lead to a core set of just 5 or 6 powers to be used across HMRC’s responsibilities, especially for different taxes (generic powers). Additional, or adapted, powers might be needed to cope with particular issues, for example smuggling. The general view was that where possible the ideal would be a set of generic and consistent powers.

Some thought it might cause problems if the same officers were dealing both with taxes and issues like drug smuggling. Another view is that it may not be appropriate to differentiate between drug smuggling and taxes work. The appropriate distinction may be between civil and criminal cases – tax fraud is a crime as is drug smuggling and the same powers can be needed to combat it. It has to be recognised that tax fraud can be very serious with very large amounts of money at stake.

HMRC’s powers to seize goods and their subsequent forfeiture was mentioned as an area that needs to be looked at and reformed. This might be an issue to be addressed through introduction of a new tribunal system.

Better Safeguards

Considering safeguards is a large task and it will be necessary to examine each power individually to see what is appropriate. The growth of taxpayers’ charters is being looked into and a paper will be prepared. A number of ideas were mentioned including awarding costs for unduly long enquiries, simplifying systems so people can comply more easily, changing procedures to make unsuccessful legal challenges by HMRC less likely, HMRC explaining the reason for an enquiry, and considering changes to the softer side of safeguards (making forms more readable, education, guidance etc). Behavioural change is also important, for example getting HMRC staff to understand taxpayers’ difficulties in complying.

The following additional principles were suggested for safeguards;

  • Taxpayers should be told what their rights are when powers are exercised – how to object etc.
  • Powers should be proportionate. If they are intrusive approval should be necessary, the more intrusive the higher the level of approval.
  • In principle taxpayers should have a right of appeal against any significant decision by HMRC.

Criminal Investigation Powers

This was seen as a helpful introduction to this area. Using annexes for detail is a good approach; a separate page summarising any questions might be helpful. Action point – it was agreed that additional papers will be prepared on how this work is organised in HMRC, the training of the officers involved and the way cases are handled. EC law issues will also be included if not covered elsewhere.

One approach to these powers would be to consider what an officer of HMRC conducting an investigation might need to do and then construct appropriate powers and safeguards so it can be accomplished. The powers might cover, for example, surveillance, obtaining documents and arresting and detaining people.

There was broad support for HMRC using the general powers available for criminal investigations where possible (if necessary by amending the legislation). In particular the Police and Criminal Evidence Act 1984 (PACE) is seen as a very good piece of legislation, it is generally well understood, and its use leads to very few procedural challenges. PACE should be used wherever it provides what HMRC needs – as it is accepted and understood why duplicate its measures in tax legislation?

Action Point

It was agreed that HMRC would look at the different situations faced and see where, if anywhere, PACE powers would be lacking for HMRC.

The role of the police and Crown Prosecution Service (CPS) in prosecutions was also discussed, as was the need for tax expertise when dealing with tax fraud, and the need to review offences to see if they could be de-criminalised.

Writ of Assistance

Some of committee members thought retaining this power was not justified. Action Point - HMRC will prepare a paper detailing when the Writ is currently used and the options in this area.

Other Papers

Action point

a number of papers requested at the preliminary meeting are being prepared and will be sent to members when ready. The papers cover;

  • EU law constraints on HMRC’s powers
  • human rights constraints on HMRC’s powers
  • taxpayer’s charters/bills of rights
  • a list of international standards or domestic law rules which could impact on the powers of HMRC
  • The Keith Committee Recommendations section for the Criminal Investigation Powers paper

Next Meeting

Next meeting - Wednesday 6 July (9.30 – 12.30). Members can telephone or meet separately with the HMRC team if they cannot make any meeting.