Modernising powers, deterrents and safeguards

Consultative Committee Meeting - 7 September 2006

Attendees: Dave Hartnett (Chair), Stephen Alambritis, Penny Hamilton, Derek Allen, Peter Gravestock, Francesca Lagerberg, Philip Baker QC OBE, Chas Roy-Chowdhury, Lawrence Longe, Mike Templeman, Ian Menzies- Conacher
HMRC and HMT: Simon Norris, Tom Evans, Arnold Ridout, Tracey Pickin, Gordon Smith, Georgina Halligan, Paul Heggs, Chris Davidson, Jeremy Schryber, Juliet Roche, Angela Roach, Shiona Riach, Elena Williams, Simon Galloway (Secretary)

Apologies
Mike Hardwick, Richard Exell OBE, Anthony Leonard QC, Roderick Cordara QC, John Hasseldine, Peter Curwen, David Cruickshank

Minutes and Action Points from 24th July Meeting

1. Both outstanding action points were picked up by virtue of the meeting agenda.

New Intervention pilot - update

2. HMRC provided an update to the Committee on how the pilot exercise for new interventions had been progressing in response to a request for this to be placed on the agenda by a Committee member.

3. A summary of the main points were as follows:

  • Trials had been small scale to reflect the fact that the department had been trying new things – the first new interventions for 30 years.
  • The trials had explored a range of possible new forms of interventions, graduated and pitched in accordance with risk.
  • The department had learned a lot already and hopes to learn a lot more.
  • Unrepresented customers had been particularly receptive and there had been a high participation rate for this sector in the pilot. However, recently that participation has begun to fall because of adverse press coverage.
  • For the represented sector, some agents were actively participating. Others, however, have been issuing blanket responses refusing to do so.
  • Support material had been in need of improvement as the original letters were not found to be informative enough about the trials so HMRC would provide additional helpsheets. In the future HMRC could ensure the letters themselves were better, provide more clarity and balance the need to check details with customers against the need to help and support them when doing so.
  • Much of the feedback from agents had centred around uncertainty as to what the pilots mean. There were communication lessons for the department there.
  • Generally, most advisers had been in favour of the department seeking to resolve problems quicker. But many had felt that these interventions should be on a more formal footing and the issue of safeguards had been raised. HMRC recognised that there was more work to be done here and if any of the pilot interventions were to be taken forward, there would be a significant amount of work to do on safeguards.
  • Agents had also raised concerns that HMRC was on “fishing expeditions” with these pilot exercises. HMRC strongly rejected this inference. The teams involved in the pilots had all been trained with particular emphasis on the cultural change and new ways of working.

4. PG asked HMRC to confirm that where interventions inferred that HMRC had knowledge that implied a return was incorrect or incomplete, this was actually the case. HMRC was happy to do so.

5. FL noted that HMRC had done a lot to get this project off the ground and it was good to see the first public facing change brought about by the review. However, ICAEW members had encountered problems and they were as follows

  • The helpsheets issued demonstrated that HMRC had not sufficiently thought through the proposals.
  • ICAEW was not surprised that unrepresented taxpayers are participating as they “did not know that they shouldn’t.”
  • The statistical validity of any results would need to be examined.
  • Tax Faculty members had suggested that some of the information used in some interventions had been inaccurate. The Faculty wanted to see more checks in place.
  • If the new interventions are rolled out across the UK then safeguards needed to be carefully considered.

6. DH thanked FL for this feedback and reassured the committee that interventions claiming to have information on a taxpayer’s affairs were backed up by that information and that the interventions were entirely risk based. He called for any evidence to be passed on that supported doubts on the department’s integrity.

7. The Committee then discussed the speed of the interventions and concluded that the trials were resolving issues. It was generally agreed that the faster treatment was a good result in principle.

Avoidance

8. HMRC outlined the approach the department was taking to avoidance, which it considered to be a risk to the Exchequer, and asked the Committee for their views on how the Review might help take things forward.

9. HMRC pointed out that they had been concentrating on three issues around avoidance and how they had been developed in recent years:

  • Lack of Transparency

  • Opportunities

HMRC has increased it’s avoidance scrutiny of new legislation. The department has also consulted more on legislation.

  • Downsides

The risk of detection and challenge is now greater as HMRC have a better understanding of motivation and have changed the approach to case resolution.

10. HMRC suggested two areas where they could do more in the area of powers and asked for the Committee’s views;

  • Improving methods for investigating suspected avoidance
  • Increasing the downsides

Debt Management and Banking

11. HMRC presented possible new approaches for the future , which would have the following features and asked for the Committee’s views;

  • A smaller organisation.
  • An approach based on the entirety of a customer’s dealings with HMRC
  • One that offered instalment payments of amounts due before due dates to help with business cash-flow.
  • A modern direct debit facility for payments and debts

12. FL offered the following observations

  • Training would be hugely important.
  • If HMRC considered accepting credit card payments this needed to be explored with caution so as to protect against exacerbating existing taxpayer debts.
  • Joint-owned assets would similarly require careful thought.
13. HMRC agreed that credit card payments would need careful consideration as there was a need to help protect people. HMRC was aware that the DWP and DVLA already accepted credit card payments so they would be contacted in order to explore the issues and considerations that arose in making their decisions.

14. HMRC and the Committee also discussed debit card payments. It was suggested because banks typically examine, and sometimes stop, large irregular payments a dialogue with the banks might prevent this problem.

15. HMRC and the Committee agreed that there were potential complications with different interest rates for different types of debt and that the department would need to consider this in this process.

16. The Committee advised HMRC that voluntary payments on account would be welcomed but mandatory arrangements would be more difficult.

17. Safeguards

18. HMRC introduced this issue in order to update the Committee on progress since the last discussion. HMRC hoped to return with a paper to Committee in late 2006 or early 2007.

19. The Committee made the following observations on existing powers and safeguards generally;

  • The approach to fines subject to appeal in VAT cases seemed wrong in principle and should be changed.
  • A system which required the department itself to review a complaint case was flawed as there was no mechanism “ to take a complaint out of the system and deal with it quickly.”
  • Scottish law allowing a criminal suspect to be detained 6 hours prior to receiving representation should not be exploited.
  • Accountants seem to be discriminated against by the law on Legal Professional Privilege (LPP).
  • The need for transparency was considerable.
  • Ex-parte hearings in relation to S28A Taxes Management Act 1970 should not be held.
  • HMRC should publish booklets giving guidance in a timely fashion rather than delay publication beyond the stated date.
  • The appeal against seizure of goods needed specific examination, as it might not be obvious to a customer as to whether they were appealing against seizure or simply for restitution.
  • Setting off repayments against amounts of assessment under appeal was unacceptable.
  • The work going forward should challenge the difference between principle and practice.
  • European Community law should be considered as a safeguard.

20. HMRC thanked the Committee for these early comments and agreed with the Committee that these were specific areas for consideration but that HMRC’s approach was generally acceptable.

21. The Committee welcomed the opportunity to consider this issue at a very early stage as it gave them an opportunity to influence the direction of the work. The Committee further suggested that the work should bring out;

  • Safeguards that were inadequate or outdated.
  • Areas where customers do and do not have a right of appeal.

22. Finally, it was suggested by some Committee members that a Taxpayers’ Bill of Rights or equivalent might be an appropriate vehicle to enshrine some of the principles relating top safeguards.

Next meeting: Monday 16th October 2006