Modernising powers, deterrents and safeguards

Meeting of the Consultative Committee Thursday 15th March 2007

Attendees: Dave Hartnett (Chair), Stephen Alambritis, David Cruickshank, Mike Hardwick, Francesca Lagerberg, Philip Baker QC OBE, Peter Curwen (HMT), Tina Riches, Ian Menzies- Conacher and Angela Roach (Secretary).

Invitees: HMRC and HMT: Simon Norris, Patrick Clarke, Tom Evans, George Auterson and Juliet Roche.

Apologies: Roderick Cordara QC, Peter Gravestock, Professor John Hasseldine, Penny Hamilton, Chas Roy-Chowdhury, Mike Templeman, Derek Allen, Anthony Leonard QC, Lawrence Longe and Richard Exell OBE.

New Member

1. DH Welcomed Tina Riches, CIOT Technical Director – Cross Cutting, as a new member of the Committee.

Minutes from 15 February Meeting

2. An amendment to the apologies list was made.

Safeguards for Taxpayers

3. HMRC thanked the Committee for reading this large document and welcomed their comments.

4. The following comments were made:

  • The Committee emphasised that a lot of thinking had gone into the document to ensure the right approach was being taken and this had been achieved.
  • The Committee said the list of safeguards was commendable and suggested that this should become a working document which was regularly reviewed.
  • The Committee questioned whether it was appropriate to include HMRC guidance as a safeguard - what procedures would there be if it were not followed, as judicial review was not appropriate? HMRC said they would prefer to keep guidance in the document, making it clear that it was not a safeguard in the same sense as the rest of the material.
  • The effectiveness of the safeguards in dealing with particular failures should form part of the consultation.
  • The Committee added that a set of principles were important and should guide HMRC: there was a case where public bodies should avoid sailing close to the wind in respect of the European Convention of Human Rights (ECHR). HMRC should bear in mind the direction that EU litigation appeared to be taking the interpretation of the HRA. The list of Safeguards was comprehensive but their effectiveness and usefulness needed to be tested as people should not be forced to seek judicial review because of gaps. Another issue which should be considered was how expensive it would be to trigger the Safeguard

5. HMRC thanked the Committee for helping them to settle on the right approach to this work which had turned out to be a difficult process and reassured the Committee that the consultation document would have open questions. The catalogue of Safeguards may be floated off as a
working document for taxpayers and HMRC.

6. HMRC asked for views on Informal Disputes Resolution:

  • The Committee highlighted that HMRC guidance could not be used in Court and wondered whether it would work in contentious cases.
  • The Committee said the small business sector would be more likely to approach their MP rather than the Ombudsman or Adjudicator. It was emphasised that there should be more accountability and HMRC should apologise if they had got anything wrong. It was suggested that HMRC add this to internal guidance which should be published.
  • The Committee asked if the acceptance of Ombudsman and Adjudicator recommendations were mandatory and suggested that any statistics would be useful to include.

AP1: HMRC would take into account the Committee’s comments.

Compliance Assurance

7. HMRC introduced the presentation by explaining that they wanted to find a robust and aligned framework for compliance checks which would stand the test of time. This work would be informed by any trials which had been or would be carried out by operational colleagues within the time scale of the review. Taxpayers, agents and HMRC staff had expressed similar views about what they wanted changed in the current regime.

HMRC explained the work had been broken down into a dozen components and the common themes were:

  • Acceleration of the compliance checking process without jeopardising taxpayer safeguards
  • Creation of flexible processes across all taxes. But for now the Review was concentrating on VAT, PAYE, NIC and SA.

8. The Committee doubted that non-SA taxpayers kept records in systematic form and if this was going to be a requirement then a lot of education would be needed. The Committee stressed that strong evidence was needed for this change. HMRC accepted that more work was required.

9. The discussion moved onto ‘seeing business books and records’ and the following comments were made:

  • A Committee member had attended an Intervention workshop about how agents/HMRC work pre-return assurance processes and there were concerns that regulations would be put in place through the back door. But after discussions with the HMRC organiser they had been encouraged that the scoping of the project was better. But it was stressed that the pre-return assurance process needed to be handled properly.
  • The Committee asked if this would mean agents being asked about what processes the taxpayer had undertaken and would HMRC expect 3rd party reports on whether the taxpayer had got the process right? HMRC emphasised that the agent was at the front-line of compliance and if the taxpayer wanted the agent could be the first point of contact.
  • The Committee were concerned that there should not be an extra level created which added to the admin burden with no benefits. HMRC reassured them that the aim was to reduce the overall compliance costs otherwise any new regime would not be work effectively.
  • HMRC mentioned a small business event where they were asked if HMRC were considering making single visits to businesses to cover different areas of tax. Views were that this would help small businesses who found the tax system complicated. HMRC said this would be a new challenge and a huge culture change to prepare staff across the different systems if this happened. It was emphasised that HMRC staff would need to have an understanding of business plus a broad understanding of the relevant taxes.
  • With regard to large business the Committee said there were various levels of risk assessment and, therefore, the business activity levels should be looked at. HMRC reassured the Committee that they would look across the different business activity.

AP2: HMRC agreed that a paper would be worked up by the Review team for discussion at the next Committee meeting on the issues raised.

Next meeting: Wednesday 25 April 2007 14.00 until 17.00 in HM Treasury Boardroom: 1 Horse Guards Road.