Minutes of Consultative Committee Meeting
of 17 October 2005

Attendees

Dave Hartnett (Chair), Philip Baker QC OBE, David Cruickshank, Mike Hardwick, Penny Hamilton, Francesca Lagerberg, Liz Lathwood, Chas Roy-Chowdhury, Teresa Graham OBE, Adam Little.

HMRC: Mike Eland, Roy Clark, Robina Dyall, Gordon Smith, Euan Stewart, Beth Smith, Simon Norris, Tom Evans, Frank Jones, David Pruden, John Burey, David McIntyre, Helen Latham (HMT), Simon Galloway (Secretary).

Apologies

1. Anthony Leonard QC, Edward Troup, Stephen Alambritis, Roderick Cordara QC, Richard Exell OBE, John Hasseldine.

Contents

Presentation by Robina Dyall – A new Management Act

RD presented emerging thoughts on the shape of possible work on a new Management Act.

HMRC took note of the committee’s comments and their wish to be kept in touch with progress of this work.

Taxpayers’ charter

The committee had considered this subject previously, but had asked for further discussion and debate.

The committee supported the idea of a document summarising taxpayer rights and, possibly, obligations as well. However there was no consensus as of yet on the form and shape this document or these documents might take.

It was agreed that a Taxpayers’ Charter (that is, a declaration issued by HMRC) could be a useful aspirational document to improve the relationship between HMRC and customers. But concern was expressed that not having rights specified by statute might mean they could be eroded or even discarded over time.

In contrast, the main advantage of a legislated Taxpayers’ Bill of Rights (TBoR) was that rights of taxpayers could be enshrined in legislation. A difficulty with a BoR however, was that there was no certainty on what the behavioural consequences might be.

A number of committee members suggested that they would like to see an aspirational document in the form of a Taxpayers’ Charter, and to have this underpinned by some specific rights laid out in legislation.

The possibility of imposing sanctions on HMRC in the event of the department breaching a TBoR was also raised although it was accepted that a practicable mechanism could be difficult.

The general point was made that any documents should support the agent-client relationship. In this context it was also suggested that a HMRC concordat with representational bodies might help.

The committee were asked whether they would be comfortable with a document that was bilateral – that laid out taxpayer obligations as well as rights. The committee saw no difficulty with this, suggesting that complexity of some aspects of the tax system might mean that a document explaining in simple terms the scope of taxpayer obligations might be useful.

The committee considered the shape and detail that a TBoR or a Taxpayers’ Charter might take.

The committee added that many countries that have a TBoR also have a ‘taxpayers’ advocate’ who can examine individual cases and refer them for investigation if breaches of the TBoR were discovered. HMRC were asked to consider this.

HMRC were also asked to reflect on the point that a number of rights were fundamental to taxpayers, and did not just result from meeting their obligations. HMRC agreed the importance of this point and that this would continue to be reflected in work going forward.

HMRC agreed to return this issue to the committee once some further thinking had been done around the subject.

Presentation on criminal investigation of tax fraud

ES gave a presentation on the nature of the cases that are subject to criminal investigation by HMRC.

Interventions

This discussion explored the possibility of a limited statutory power to allow HMRC to carry out joint interventions for direct and indirect tax matters in the form of visits to business premises.

HMRC proposals were for a limited trial to explore the potential benefits to the department and to customers, with the power to carry out these visits possibly being limited by a sunset clause in legislation.

The committee responded that it did not fully understand the reasons for proposing this trial, asserting that there was insufficient explanation from HMRC as to why this would be useful to the department or the taxpayer.

The committee observed that small businesses would prefer to be visited by officials who had expert knowledge in taxes and could answer questions on the spot in order to offer help and guidance. It was not clear that the suggested trial would have this result given the absence of those trained fully in both ex-HMCE and ex-Revenue matters.

Concern was also expressed over the trigger that would lead to this visit. If these visits were to be carried out in a trial, the committee felt that it would be more appropriate to have them as enabling visits – advising on record keeping – rather than as part of a formal investigation.

The committee pointed to the different powers for inspection of records in relation to PAYE and VAT to illustrate the difficulties in making joint visits an investigations tool for anything other than risk assessment. By way of a general observation going forward, the committee preferred the more ‘consensual’ approach to powers and legislation evident in relation to PAYE.

The committee briefly discussed the power of inspection in VAT matters to enter premises without a prior appointment, and whether this raised Human Rights Act concerns relating to judicial supervision.

HMRC agreed to work up a more detailed proposition taking into account the committee steer.

Debt Management – presentation and background paper

GS thanked the committee for the opportunity to advise them on the progress made by HMRC in relation to Debt Management & Banking (DMB) and priorities for the work ahead.

A great many aspects of the merged departments needed to be harmonised, rationalised and integrated. Work was ongoing in relation to these areas- including IT, operational policies and infrastructure.

HMRC recognised that interest rates, surcharges and penalties combined to penalise those who avoided making payments to HMRC. But the department recognised that a balance needed to be struck so that they did not penalise those who genuinely struggled to make payments.

AOB

None

Next Meeting: Wednesday 30th November 2005