Administrative Burdens Advisory Board

Minutes of the meeting on 22 October 2008

11.00 am - 14.00 pm Boardroom, 1 Horse Guards Road

Advisory Board Attendees: Teresa Graham (TG), Andrew Hubbard (AH),
Roger Southam (RS), Ian Dewar (ID), Julie Kenny (JK), Francesca Lagerberg (FL),
Karen Thomson (KT), Simon Sweetman (SSw), John Whiting (JW), Steve Sharrat (SSh), Martin Jones (MJ), Russel Griggs (RG)

Apologies: Paul Aplin

HMRC Attendees: Stephen Banyard (SB), Roy Massingale (RM), Simon Woodside (SW), Sally Beggs (SBe), Ian Stewart (IS), Peter Faherty (PF), Mark de Brunner (MdB)

Apologies: Melanie Dawes

HMT Attendees: Simon Bor (SBo)

Secretariat: Jon Sherman (JS), Paul Oakes (PO)

Welcome and introductions

  1. TG welcomed everyone to the fourth meeting of the Board for 2008. The minutes of the meeting on 14 July 2008 were agreed. The action points had been discharged, were in hand or were on the current agenda.
  2. On AP1, Jon Sherman said he would explore whether the new Financial Secretary, Stephen Timms, would be able to attend one of the forthcoming meetings. On AP2, JS confirmed that information regarding the level of penalties being charged would be available but not until after April 2009. HMRC agreed to update the Board at a future meeting.

Item 1: Review of current priority areas

  1. Teresa Graham (TG) explained that the focus of the meeting was for the Board to consider what priorities it wished to pursue over the next 12 months. She added that from the list of current priorities some had run their course and should be dropped and new priorities needed to be considered. The session started with a consideration of the existing Board priorities.

CT simplification review - simplified accounting for small companies

  1. Peter Faherty (PF) updated the Board about EU developments. It is looking more likely that the Commission will bring forward a proposal to give Member States an option to relax accounting requirements for micro companies. This proposal will need Member State agreement but, if agreed, it is something that BERR are likely to look at positively in terms of options for the UK. A relaxation of EU accounting rules opens up a wider range of possible options for CT simplification for smaller companies. The next stage of the CT simplification review will be announced at PBR, with a likely focus on options to align accounting for very small companies with current tax requirements and to explore cash accounting.
  2. TG's view was that cash accounting would be a real simplification and a real benefit for smaller companies. Other Board members supported TG's view and thought the work being carried out under this review was very encouraging and looked promising.
  3. There was some discussion about timing of any change and whether it could be done more quickly if the size of company in scope was limited. PF explained that a commencement date sometime in the fiscal year 2011-12 was the very earliest (and that would require legislation in 2010). Ian Stewart (IS) emphasised that a change of this sort is not easy and would need extensive consultation and realistically timescale could be longer (and not affected by the size of the company). Board members supported the consultative approach and thought it was important to get it right. FL added that she would support a longer timescale to get it right. JW thought this was an ambitious proposition but was very supportive.
  4. TG felt there was a lot of support across business and other organisations for cash accounting and hoped the Government would commit to this. She offered to bring together a group of supportive representatives if that would help. The Board agreed that simplified accounting for small companies should remain on the Board's priority list and welcomed an update at the next meeting.

Fewer SDLT Returns

  1. Mark de Brunner (MdB) reported on the progress HMRC has made in reducing the number of SDLT returns (and consequently the admin burden of SDLT). Mark explained that a £40,000 notification threshold for making an SDLT return was introduced from March 2008. He recognised that the Board would like to see the threshold go higher and added that HMRC was committed to keeping this under review - although, it was difficult to fully evaluate the change in the current market conditions where there had been a significant reduction in the number of transactions. But HMRC would look at the evidence going forward and consider the case for future increases.
  2. The Board agreed that increasing the notification threshold further to deliver fewer SDLT returns should remain on the Board's priority list.

Voluntary Disclosure Thresholds for indirect taxes

  1. Sally Beggs (SB) updated the Board about the Budget 2008 announcement to change the threshold from £2000 to the greater of £10,000 or 1 per cent of turnover, subject to an upper limit of £50,000. This change was made as a result of the Board including it on their priority list and following consultation. TG confirmed that this was a success for the Board. The Board agreed that this could now be removed from the priority list.

Intrastat

  1. JS updated the Board on progress within the EU. A proposal is being taken forward to reduce coverage to 95 per cent on the arrivals flow (which would bring a significant reduction in the total intrastate admin burden) - with the long term goal of moving to Single Flow. The Board agreed to take Intrastat off their immediate priority list but want to keep a watching brief over EU developments, to ensure momentum is maintained for the long term goal.

VAT Annual Accounting

  1. IS explained that attempts to persuade more businesses to do VAT annual accounting had met with limited success. There were mixed views among Board members on annual accounting but RG said that he used the scheme and thought it was great. FL thought more research was needed and that many businesses did not really understand how it worked. JW agreed there was a fear factor to overcome.
  2. After discussion, the board agreed that this should come off the priority list (although Board members would still want to act as advocates for the scheme).

Employer Status Indicator (ESI)

  1. Roy Massingale (RM) spoke about the ESI. The ESI tool is now three years old and HMRC accept that it has not been as user friendly as it could be and that there have been constraints on HMRC's ability to update the tool. However, these constraints had now been overcome. RM also confirmed that the tool could now provide binding rulings which was another significant step forward. A short note explaining the improvements that have been made to the ESI is annexed to these minutes (Annex A).

    KT pointed out that she had not received any negative feedback from business relating to ESI, although she asked why the tool could not store decisions online. The Board agreed that the ESI tool itself should probably be removed from the priority list but queried its use by compliance staff. Since the meeting, HMRC have looked into this and can confirm that it is a requirement for compliance staff to use the tool to address the issue of inconsistent opinions.
  1. Board members felt that the key issue was the complexity of the tax system in the way it defined the boundary between employment and self-employment and discussed whether there was an approach that would make this easier (while recognising that this raised broader policy issues that went beyond the Board's remit). FL mentioned an approach used in Australia. HMRC agreed to consider whether there was anything more that could be done administratively and report back at a future meeting.

Benefits in Kind regime

  1. KT opened the discussion by raising her concerns about the Pay-Rolling Consultation Response document. KT said that the vast majority of businesses that she talks to support pay-rolling and the Responses Document seemed to be at odds with these views.
  2. RM explained that the majority of those responding to the consultation were against the idea in principle - and current analysis indicated that admin burdens would actually increase rather than decrease. RM added however that HMRC found the proposition attractive on both customer and operational grounds and emphasised that HMRC wanted to ensure that businesses truly understood what was involved with pay-rolling and to better understand the concerns raised in the Consultation.
  3. Julie Kenny (JK) explained that she was against mandatory payrolling because she thought it would be more expensive with money having to be paid earlier. JK was however, in favour of business having a choice. AH added that the rules for benefits and expenses are very complicated. The Board accepted that the £8500 threshold was off the agenda for time being. TG agreed that the Board should keep Benefits in Kind on the priority list.
  4. The Board gave their full support to HMRC's work to develop an interactive dispensation tool and thought it could be very beneficial in reducing admin burdens. RM said that Phase 1 of the dispensations tool was scheduled for release in mid 2009. The Board asked to be kept updated on progress and for it to be on their priority list under the Benefits in Kind heading.

ITSA Forms and Returns

  1. RM reprised the recent improvements HMRC has made to the SA suite of returns. He added that HMRC planned to look further with compliance colleagues at the case for pushing the 3-line account threshold up to the VAT turnover limit and examine the case for doing something similar with the land and property pages. TG added that the Board would be supportive of such moves and hoped to see action on this in the near future. The Board agreed to keep this on their priority list of issues.
  2. JW added that this was all very positive but raised some concerns about the additional items appearing on tax returns. He gave the example of the 'new' box for personal service companies. FL commented that reducing the size of the return was good, but additional boxes really were unhelpful. FL thought the communications were poor regarding the introduction of new boxes and that if new boxes were to be added to the return, they should do so only after passing through a strict sign-off process. RM said that there was internal pressure within HMRC not to increase the size of the return.

New ideas

  1. The Board made a range of suggestions about possible new things to prioritise in 2009. A summarised list grouped into themes is attached at Annex B. HMRC will be using this list and existing priority list to develop agendas for ABAB meetings in the next Financial Year.

Item 2: NAO Report and Administrative Burden Targets

  1. SBe updated the Board about the recently published NAO Report on the cross-Government admin burden programme. She opened by saying that HMRC was very pleased to see the Board recognised in the NAO Report as an example of best practice. She highlighted the positives and recommendations in the report. The Board commented on the differences in approach between government departments. SBe updated the Board on HMRC's progress against its two administrative burden targets.

Next meeting: Arranged for 20 January 2008 at 100 Parliament Street.

Annex A: Update on the Employment Status Indicator

A new release of the ESI was implemented on 11 December. This includes changes to the wording of some of the questions, an additional clarifying question within the area of 'equipment and materials' and, based on feedback from some external customers, changes to the home and conditions of use pages that will make the tool easier to use.

A new screen 'Materials II' has been introduced to clarify those situations where the worker does not provide all of the materials or supplies directly to the engager, but is paid an all-inclusive rate of remuneration that covers the cost of the worker's provision of substantial materials needed for the work.

Where the worker's trade is out of scope (currently 'Entertainer' or 'Film and TV Industry') the ESI outcome is automatically set to 'Unable to determine'. We have now suppressed the option to print a blank PDF letter in these circumstances.

The date shown for the start of NEW CIS under the 'What to do next' section of the PDF letter for 'self-employed' outcomes in 'construction industry' cases was incorrectly shown as 6 April 2006. This has been changed to 6 April 2007.

Annex B: New Suggestions from October meeting grouped into themes

Suggestions from October meeting
Key Themes Suggestions

Debt Management / Tax Payment

Reducing burden of debt management / introducing more flexibility onto tax payment processes
  • A blitz on paper. Too much paper for chasing debts of very small amounts. Costs often more than the debt itself.
  • Businesses asking for help about payment are asked a lot of questions and the information is often asked for in an inflexible way - need to make it easier for businesses to agree time to pay arrangements.
  • Flexibility about loss carry back
    Provisional losses
    Partnerships can't negotiate TTP

Benefits in Kind / Expenses

Reducing burden of dealing with benefits in kind / expenses (existing theme)
  • P 46 (CAR) and P11 Ds - duplication of information.
  • In appropriate figures from P11Ds coded in.
  • Changes to T & S Rules

Communications and Service Delivery
  • Improve quality of letters sent by HMRC (including templates used)
  • More centres of excellence
  • Improve helplines

New businesses

Need for greater certainty
  • Employment status
  • Income shifting
  • Raise thresholds

More online
  • Get existing system working well first
  • Electronic P60s
  • Electronic R40s
  • E-enable reconciliation figures between PAYE and NICs

Resident Management Companies

Reduce burdens
  • Standardised form rather than filing full accounts

Some other issues were raised which have not been prioritised as future ABAB themes because they are either already being taken forward through other forums or are pure policy issues:

  • More tax exemptions for small companies
  • Form 64-8 (agent authorisation)
  • Money Laundering Regulations
  • NICS - Rules for over 60s
  • Tax credits - more holistic view
  • VAT registration - still slow processing returns