Modernising powers, deterrents and safeguards

Meeting of the Consultative Committee 2 April 2009

Attendees: Dave Hartnett (Chair), Derek Allen, Chas Roy-Chowdhury, Ian Menzies-Conacher, Peter Gravestock, Penny Hamilton, Mike Templeman, and Maria Richards (Secretary)

Invitees: HMRC and HMT: Simon Norris, Patrick Clarke, Jim Ferguson, Huw Stephens, Martin Stribblehill and Tony Zagara

Apologies: Stephen Alambritis, Philip Baker QC, Roderick Cordara QC, David Cruikshank, Mike Hardwick, Professor John Hasseldine, Francesca Lagerberg, Tina Riches and Lawrence Longe

Minutes and action points from 5 November 2008 meeting

1. The minutes were agreed with no outstanding action points.

Responses to consultation

2. HMRC introduced a paper on responses to the November 2008 consultation documents. Chapter 2 set out the principal changes made to the proposals and draft legislation following comments made during the consultation process on Compliance Checks: the next stage; Meeting the obligations to file returns and pay tax on time; Working towards a harmonised regime for interest; Payment, Repayment and Debt: the next stage.

3. HMRC highlighted some of the key changes that included for:

  • Compliance Checks – the move away from the proposal to have a statutory record-keeping requirement for inheritance tax.
  • Penalties for failure to file returns and pay tax on time – to initially pursue penalties (and interest) arising on late paid employers’ in-year PAYE on a manual risk assessment basis, having taken on board concerns raised around admin burdens.
  • Payment, repayment and debt – consideration of how managed payment plans could be extended to those who did not file online.

4. HMRC confirmed that for managed payment plans they were exploring how electronic payment methods other than direct debit for example standing orders could be offered. They would also be looking at how payment instalment schemes could be extended to new businesses in the future.

5. The committee were concerned that views expressed at individual meetings with representative bodies had not been included unless a formal written response had also been submitted. HMRC explained that the main purpose of the meetings was for discussion of the proposals to allow the representative bodies to be able to submit a more targeted and informed response to the consultation. In the future HMRC would ensure that any comments made at meetings were taken into account where a written response did not follow. However for the recent consultations there had been such broad agreement they felt that the responses document covered the issues raised at the numerous meetings.

Excise: Moving forward

6. HMRC explained that the consultation document on Excise would be in two parts and a draft would be sent to the Committee in May.

7. The first part would look at the scope to modernise and simplify the excise admin processes to reflect the different ways in which businesses now work.

8. HMRC would consider:

  • the pros and cons of a single registration system
  • unified warehousing rules, at least for alcohol, in line with EU holding and movement directive 08/118
  • whether there is still a need to require ‘entry of premises’ – a very detailed list of vessels, plant and plans of the floor area
  • the need for them to impose their own health and safety requirements on excise goods traders
  • the scope for a single return for alcohol duties

9. The second part would look at extending the compliance checking powers to excise regimes (Alcohol, tobacco, oil, gambling and Air Passenger Duty).

10. Much of the Excise legislation is based in Customs and Excise Management Act 1979. It contains discrete civil and criminal powers, sometimes both in a single section. CEMA may need revising as a result of the Community Customs Code due for 2013, ahead of that HMRC will look at the scope for providing further clarity around the civil powers.

11. The Committee recognised that due to the specialist nature of Excise they may not be best placed to comment in detail on the proposals. HMRC said that they intended to set up a project board to involve trade specialists.

Bulk information powers

12. HMRC introduced a paper on bulk and specialist information powers. The paper asked for views on the powers that allow HMRC to ask questions about unnamed taxpayers. The paper considered bulk information powers that for example allow HMRC to ask banks about interest paid without deduction of tax. It also looked at specialist powers and how to apply Schedule 36 Finance Act 2008.

13. The Committee made the following main points:

  • Current powers allow HMRC to ask for large volumes of information that they may be unable to use. HMRC should carry out more targeted reviews and only ask for information that was proportionate and needed.
  • HMRC should avoid one-off requests for information which are more expensive and more difficult to provide within 90 days than routine requests. Information requests need to be known a minimum of 18 months to 2 years before the start of the tax year to allow systems to be put in place.
  • HMRC needed to set out more clearly why the powers were needed and how the information would be used constructively. HMRC needed to show that they were aware of the costs involved in sometimes onerous requests for information and that these were proportionate to the benefits HMRC would derive from using the information.
  • The paper should perhaps be in two parts, the first looking at current powers, penalties and safeguards, and the second a detailed review of each power, considering why it should be kept along with areas powers could be expanded into and a modernisation of the whole approach.
  • The aim should be to have the minimum amount of powers needed for HMRC to do their job, with the maximum amount of safeguards.
  • HMRC should look at the overlap between the different powers for different taxes.

Next meeting: 3 June 14.00 – 17.00 in Boardroom 1 HGR