Jon Sherman (JS) (HMRC) - Chair
Steve Webster (SW) (HMRC)
Paul Oakes (PO) (HMRC) - Secretary
Elaine Gibson (EG) (IPP)
Simon Sweetman (SS) (FSB)
Derek Allen (DA) (ICAS)
Tina Riches (TR) (CIOT)
David Membrey (DM) (CFDG)
Adrian Thomas (AT) (UK 200 Group)
John Hemming (JH) (CTG)
Danish Chopra (DC) (BERR)
Arjan Geveke (AG) (BERR)
Mervyn Woods (MW) (CBI)
Peter Faherty (PF) (HMRC)
Steven Effingham (SE) (HMT)
Andrew Edwards (AE) (HMRC)
Jen Little (JL) (HMRC)
Keith Hickey (CFDG)
Anne Redston (IACEW)
Chas Roy-Chowdhury (ACCA)
Brian Sloan (BCC)
Frank Haskew (IACEW)
Mike Templeman (IOD)
JS welcomed everyone to the meeting.
JS apologised for the late delivery of the draft minutes for the January meeting. He asked the committee to take a look at the draft and to let PO know of any changes by Friday 2 May. Subject to any changes the minutes would then be published on the HMRC site.
Contact Points in HMRC: The committee were advised that responsibility for producing contact lists now lies with the individual directorates within HMRC. A CT&VAT list was available and would be circulated to the Committee.
Agents Letter SA250: SW said that the better regulation team would be involved with the review of the SA250 in June 2008.
HMRC Surveys: SW reported that the majority of surveys are carried out by third party organisations and, if challenged, the contractor should provide the name and contact details of an HMRC contact responsible for the work whilst at the same time clearly identifying their name and their organisation. If the person contacted doubted that the call was genuine they should ring the HMRC contact.
IPP Survey results: JS informed the committee that he now has the survey results and would distribute them in the coming days.
JS gave a brief summary of the simplification measures announced at this years Budget. JS also brought to the attention of the committee a recent article on this by Anne Redston (who was unable to attend this meeting) which welcomed what it saw as a new positive flavour to the Budget.
JS introduced PF from the CT&VAT team in HMRC.
PF started by saying that the emphasis of the review was to make it much easier for smaller businesses to sort out their tax affairs.
PF went on to say that if the review found ways to simplify the tax affairs of smaller companies then one could envisage that similar changes might also apply to those who are self-employed. The scope of the review included considering the scope to tweak some of the existing rules, as well as looking at the feasibility of more radical changes. Peter explained that there would be interaction with the accounting bodies as the aim was to look at the scope to simplify the accounting as well as tax rules. The review team would be happy to listen to ideas and proposals and to arrange for further discussions with interested parties as necessary.
TR made the point that for smaller companies the biggest burden was quite often PAYE, rather than Corporation Tax (CT). JS responded by saying that HMRC was committed to reducing admin burdens across the board, including PAYE, and had hard targets in order to achieve this. And the CT review was just one strand (albeit an important one) of the Government’s simplification agenda.
TR thought that there was a great deal to be gained from aligning accounting profits with tax profits. AT raised the point that a large percentage of the Taxes Acts are not actively used by professionals acting for small companies and that a scaled down version for SMEs would be desirable. PF agreed that this was an important point and it was informing the work that was being done to identify simplification options.
JH suggested that, as a general approach, small companies below a certain threshold should be eligible for a range of simpler regimes. A simpler system would be welcomed by everyone involved with small businesses. AT thought that some kind of flat rate scheme (like that for VAT) might be worth exploring.
TR asked PF if the simplification review was liaising with the Carter team especially on the issue of XBRL (Extensible Business Reporting Language). PF said that HMRC were still some way from working out new processes for this. TR hoped that if this came about small business would be allowed to plug into XBRL. PF said that one approach which could be considered was the possibility of HMRC providing software in this area. AT added that for electronic filing it was crucial that the software worked off-line.
JS concluded the discussion encouraging BRCC members and their organisations to continue to contribute actively to the review. Updates would be given at future BRCC meetings.
JS introduced AE from HMRC and SE from Treasury. JS referred to the email from Mike Templeman (who was unable to attend the meeting) which suggested that the process had got off to a bad start but thereafter the consultation had been exemplary. His conclusion had been that the Government should consult and work the issues through before rather than after announcing key decisions.
AT thought that a better outcome would have been achieved if the Government had began by asking for advice from practitioners in this area on the best way to achieve its policy objectives and achieve a fair outcome, rather than going straight to legislative proposals. AT also pointed out that he had not received a response to queries he had raised during the consultation. SS and TR agreed that there should have been better consultation. AT and TR thought that there were people who were actively thinking of leaving the UK because of the uncertainty and because they no longer saw the UK as welcoming them.
AE and SE made the point that it was inevitable that the proposals would be unpopular with some of those who would pay more tax as a result. But they had had to spend a great deal of time responding to press stories that simply were not true. It was important that people focused on what the Government was actually proposing rather than on inaccurate reports. The relevant clauses in the Finance Bill were still being finalised and were still open to representations.
AE said that this had been a very active consultation and a great many people had participated in it. He had received hundreds of emails, for example. AE and JS recognised the importance of consultation but made the point that there will inevitably be areas where Ministers need to make policy decisions with consultation being on the implementation and legislation rather than the policy itself. SE asked, looking forward, what would make the process easier for stakeholders, bearing in mind the requirements of the PBR and Budget cycle. AT said that early sight of draft legislation was crucial.
MW said that he had kept in touch with developments on residence and domicile since the 2002 consultation but was surprised at what he saw as the suddenness of the announcement in the 2007 Pre Budget Report. AE responded saying that there had been discussions and listening sessions prior to the PBR announcement. MW felt strongly that the 2002 consultation should have been followed through more thoroughly.
JS thanked the Committee for their views. Both departments recognised the importance of good consultation and he thought BRCC could continue to play a valuable role on tax consultation.
JS introduced JL from the VAT Improvement Team.
JL began by saying that HMRC had been fully aware of recent failings in dealing with VAT Registrations and had treated putting this right as a key priority. These problems had now been addressed and we now had a far more robust system in place for handling registrations. The aim was to process each registration form that is correctly completed and does not require further risk checks within 14 days of receipt. 20 per cent of the forms were incorrectly completed and a further ten per cent required fuller risk checks as part of the process of ensuring that the system is secure against fraud.
In April 2007, only seven per cent of forms received were dealt with within 14 days. This figure now consistently exceeded the target of 70 per cent. The problems had been caused mainly by ongoing IT and staffing issues, alongside the need to maintain stringent anti-fraud checks. However, the Improvement Plan was working and we had seen month-on-month progress since August 2007. March 2008 saw 83 per cent of applications processed in 14 days.
JL added the caveat that cases considered to be in a higher risk category did take longer to process: HMRC had a target of 42 days maximum for these cases. JL said that VAT registration was regularly discussed at the Joint VAT Consultative Committee but she would welcome suggestions from BRCC members and other stakeholders to further improve the process.
Committee members asked if steps were being taken to identify traders who applied for registration in 06-07 but were not processed. There was a concern that some people may have effectively been left in limbo and therefore would have been forced to trade without being registered. People in this position should be given the benefit of the doubt and penalties should not be charged, recognising that they had tried to register in the first place.
JL advised that any traders in this position should be aware of the need to operate VAT - they should account for VAT in their records but not charge for it. In practice she was not aware that there was a widespread problem. Going forward, she was confident that there would not be any further serious delays. AT suggested that in future, if we were expecting delays, we should issue a press release to warn people.
JL explained that the registration form had already been made significantly simpler and this had reduced error rates on completion. But work was ongoing to further simplify the form and a new online form would be available in July 2008. This should help further bring down error rates.
It was agreed that PO would organise the next meeting for early October.
JS advised the committee that SW would be taking up a new post in early May. JS thanked Steve for his contribution both to the Better Regulation programme in general and to BRCC in particular. These sentiments were seconded by members of the committee.
It was agreed that AG (Better Regulation Executive) would lead a session at the next meeting on Better Regulation and Impact Assessments, alongside colleagues from the HMRC Better Regulation team.
