Code of Practice on Consultation

 

Introduction

This Code of Practice is designed to encourage more effective consultation by setting out best practice for the Inland Revenue, Customs and Excise and Treasury ("the Departments") in handling consultation in the context of the Budget and Finance Bill, and for representative bodies and taxpayers in making representations on tax policy issues. Its three sections set out

  • Treasury Ministers' general approach to authorising consultation on tax policy proposal
  • how the Departments handle consultative exercises
  • how representative bodies and taxpayers can make their responses to consultative documents, and other representations, as effective as possible.
1. Ministers and consultation

The Government intends to consult on tax policy matters wherever it is reasonable to do so. The pre-Budget process allows consultation on some key issues which are likely to lead to measures in the Budget. However, the pre-Budget Report should not be taken as an indication of all the tax areas where the Government may choose to act.

The principal benefits of consultation are that it:

  • allows a national debate to take place on the major tax policy decisions of Government that, one way or another, affect us all;
  • enables everyone to have a better understanding of the likely impact of proposals on businesses and individuals;
  • enables Ministers and officials to consider the merits of alternative suggestions, or whether the Government's proposals can be improved in the light of comments made;
  • improves the quality of any resulting draft legislation, in particular by ensuring that it works in the real world.

However, not everything can sensibly be the subject of full and open consultation in the field of tax. There will be instances where Ministers choose to reserve the right not to consult, in the light of the circumstances relating to a particular proposal. Consultation may not be possible in areas:

  • which carry the risk of significant forestalling activity by existing or prospective taxpayers;
  • which are market sensitive; and where consultation could, of itself, lead to significant temporary distortions in taxpayers and market behaviours. For example, where consultation could create an unacceptable level of uncertainty, with a detrimental effect on major transactions and aggregate business activity until final decisions are announced and enacted;
  • where Ministers deem it necessary to act swiftly (eg to take anti-avoidance measures)
  • where policy develops significantly in the period between the pre-Budget Report and the Budget proper.

There may also be cases where a tax measure is likely to be so small, straightforward and non-contentious that Ministers decide full consultation will not be required, since they could not justify the use of scarce resources for that purpose.

Ministers intend, wherever possible, to consult both on the policy proposals themselves and the consequent legislation, though there may, at times, be constraints within the Budget and Finance Bill cycles that make it difficult to consult on both.

Ministers appreciate that consultation often involves the expenditure of a good deal of time and resource by all those involved in the process. They are grateful for this. This code seeks to ensure that that effort is as focused and effective as possible on the part of all those involved.

2. The Departments and consultation

The Departments - the Inland Revenue, Customs and Excise and Treasury - seek views, wherever possible, on matters relating to the tax system both through formal consultations and through informal contact and discussion between ourselves and others. Consultation is conducted both centrally and locally, over the full range of policy and operational matters. We attach great value to all these contacts .The following paragraphs, however, focus just on tax policy proposals. They seek to set out best practice once consultation has been authorised by Ministers in this area.

Methods of consultation on tax policy

Wherever consultation is to take place, we consider, for each issue, what would be the most appropriate method of consulting.

Coverage
First, we look to the targeting of the particular consultation exercise. In general the wider the implications of the proposals, the wider and more formal consultation is likely to be. But, we recognise that consulting the general public at large is particularly time-consuming and often not appropriate. Where proposals are confined to a particular area of finance or industry, we would normally look to consult only with the main representative bodies, or with individual companies within the sector. But, where Ministers have agreed to consultation on a particular proposal, we will issue a news release to that effect. This will allow any parties who have not been directly approached to register their interest.

Process
Second, we consider the most suitable medium for consulting, given the time available. These include:

  • simply inviting views on possible reform with a news release;
  • issuing a formal consultative document;
  • issuing a discussion paper to interested parties;
  • corresponding with interested parties;
  • arranging meetings or presentations with interested parties.

Interested parties would normally be the particular practitioner, financial, or industry groups or their representatives.

Different types of consultation will be appropriate for different areas of policy, the types of decisions that need to be made, and the appropriate stage in the process of policy formulation.

Copyright
During the consultation period, we will allow the whole, or parts, of any consultative document to be copied by bodies to whom it is sent, for the sole purpose of seeking the views of their members.

Timing of consultation
The time which can be allowed for consultation will depend on a number of factors including:

  • whether the consultation is on policy proposals or on draft legislation;
  • the number of people to be consulted; and
  • the Budget and Finance Bill timetable (see section 3 below).

We always aim to give the maximum time for consultation consistent with these factors.

Terms of Reference
We will make clear the terms of reference for the consultation exercise, so as to avoid doubt about what is being sought from those consulted. We will define the issue or subject matter, the scope and context of the exercise and its objectives.

Parameters
We will always set out the parameters to the consultative exercise. For example, in a particular case, a proposal, or any alternative suggestion from the consultation, may have to be revenue neutral. We will always make constraints like this clear in the terms of reference.

Feedback
We recognise that feedback is an important part of any consultation exercise.

In many cases, a news release will be the appropriate way of announcing the outcome of a consultation. In such news releases, we will try to explain why the outcome is the preferred option and why alternative suggestions were not adopted.

In some cases, time pressure might make it necessary to use scarce resources to take forward work on the issue, such as drafting legislation.

However, once the outcome of the consultation is announced, we will make available, on request, responses to consultative documents, unless any respondent has asked for his comments to be treated as confidential. We will also make available, again on request, any factual analysis of the responses which may have been prepared.

General checklist
A checklist which we use in considering consultation is at Annex 1.

3. Taxpayers' representations

Where we invite taxpayers or their representative bodies to respond to consultation documents, the questions on which views are sought and the timing of the responses will be set out in the consultation document. If representative bodies and individual taxpayers wish to make their own suggestions on tax issues they should write either to Ministers or to the Departments. Representations on policy or technical points can be made at any time to the relevant Division at our Head Offices. A list of addresses and broad areas of responsibility is at Annex 2. Some of these suggestions might be about policy changes and others might identify technical defects in existing legislation. In either case, the decision on what action to take, if any, rests with Ministers.

When considering whether to change the law or other aspects of the tax system in the light of responses to consultation, Ministers would normally want to know, amongst other things:

  • the likely effect on tax revenues
  • if there is a tax or other public expenditure cost, what benefits are likely to accrue from this expenditure
  • how many winners and losers there are likely to be and the amounts involved
  • whether there will be any behavioural changes
  • economic impact

and, where appropriate, the likely impact on

  • compliance
  • deregulation
  • simplification.

Budget and Finance Bill representations
If suggestions are made seeking action in the next Budget, timing is a major consideration. Work normally begins some eight or nine months in advance on looking at proposals which might be candidates for the next Budget.

Timing is therefore crucial. The earlier suggestions are made, the more chance they have of full consideration and possible action. Ideally, specific ideas for the next Budget should be sent in five or six months in advance. Suggestions which are received too late for inclusion in the Budget will still be considered and may be put forward as measures for the following year.

There are always more proposals for tax change put forward than can ever be included in a Finance Bill; indeed the various proposals sometimes conflict with one another. Ministers have therefore to decide which should be included, bearing in mind their own political priorities. So where a taxpayer or representative body is making a number of suggestions for action in the Bill, in addition to the points listed above, the following help in considering them:

  • prioritise suggestions (which are considered urgent and which are more long-term)
  • make the point as briefly and as clearly as possible
  • give real life examples of any problem you are seeking to address and its prevalence
  • which are seen as important and which are minor improvements
  • the likely costs and benefits involved.

Any information which you can provide on these questions will help in evaluating your suggestion.

Annex 1Department's checklist on consultation

Submissions to Ministers on policy and legislative changes normally consider whether consultations on the proposals would be appropriate. If Ministers decide that they wish to consult and there is time to do so, we will use the following checklist to decide the nature timing etc of the consultation.

  • Who should be consulted? - consider who are the affected parties.
  • How should consultation be undertaken? - consider which method or combination of methods is most appropriate.
  • Terms of reference - these should be spelled out clearly so that there is no doubt among those consulted what they are being asked to respond to.
  • Parameters - any constraints (eg revenue neutrality, confidentiality) should be made clear.
  • Alternative proposals - respondents should be given the opportunity to suggest alternatives that meet the terms of reference and any constraints.
  • Changes to the terms of reference, constraints - any material changes which are made in the course of the consultation should be exceptional and communicated to those consulted.
  • Time limits - these should be clear and as long as can reasonably be allowed.
  • Feedback - consider how best to provide feedback to those who have responded.

Annex 2

List of divisions and areas of responsibility

INLAND REVENUE

Personal Tax Division
Somerset House
Strand
London
WC2R 1LB

Income tax rates and personal allowances; Taxation of income from employment; National insurance benefits; Expenses and benefits-in-kind; Deregulation; Income tax/NICs alignment

Company Tax Division
Somerset House
Strand
London
WC2R 1LB

Companies; Corporation tax; Enterprise investment scheme; Capital allowances

Financial Institutions Division
22 Kingsway
London
WC2B 6NR

Taxation of banks, building societies and insurance companies; Financial markets; Foreign exchange

Savings and Investment Division
South West Wing
Bush House
Strand
London
WC2B 4RD

Savings (TESSAs, PEPs); Pensions; Venture capital trusts; Employee share schemes; PRP; Trusts; Charities; Stamp Duty; Mortgage interest relief

Business Profits Division
22 Kingsway
London
WC2B 6NR

Taxation of self employed; Income tax, Schedule A, D cases I, II and VI; Self Assessment; Computation of profits; Partnerships; Taxes Management matters;Tax Bulletin

Compliance Division
22 Kingsway
London
WC2B 6NR

Sub-contractors; Information, enquiry and enforcement powers; Interest & penalties; Tax avoidance

International Division
Somerset House
Strand London
WC2R 1LB

International aspects of direct taxation; Tax treaties; Oil taxation

Capital and Valuation Division
22 Kingsway
London
WC2B 6NR

Capital gains tax; Inheritance tax

HM CUSTOMS AND EXCISE

Subject Division addresses and areas of responsibility

VAT

Strategy & International Division
4th Floor
New King's Beam House
22 Upper Ground
London
SE1 9PJ

EC VAT issues, including common VAT systems; tax avoidance; VAT strategy and planning; communications

Supply Division
4th Floor
New King's Beam House
22 Upper Ground
London
SE1 9PJ

VAT machinery including supply and input tax; international services; transport

Commercial Division
4th Floor
New King's Beam House
22 Upper Ground
London
SE1 9PJ

Construction; commodity markets; financial services; land and property; partial exemption; utilities; insurance premium tax

Social Division
4th Floor
New King's Beam House
22 Upper Ground
London
SE1 9PJ

Charities; health; education; local authorities; government departments; clubs and associations; sporting and cultural services; food and drink; printed matter; young children's clothing

Collection Division
4th Floor
Queen's Dock
Liverpool
L74 4AA

Registration; special schemes; imports; exports; accounting and records; civil penalties

Customs

Strategy & International Group
1st Floor West
New King's Beam House
22 Upper Ground
London
SE1 9PJ

European Union; international negotiations;international assistance

Trade Policy Group
C E Heath House
61 Victoria Avenue
Southend-on-Sea
SS2 6EY

Duty liability; suspensory relief; group strategy

Criminal & Enforcement Policy
1st Floor Central
New King's Beam House
22 Upper Ground
London
SE1 9PJ

Drugs enforcement policy; import prohibitions; criminal justice and trade control enforcement policy; export licensing & sanctions

Excise

Excise Policy Group Division
3rd Floor West
Ralli Quays West
3 Stanley Street
Salford
M60 9LA

Excise duties on mineral oils; alcohol; tobacco and Betting and Gaming; Air Passenger Duty and Landfill tax; EC liaison; Holding and movement of excise goods

Any representations to Treasury Ministers should be addressed to

HM Treasury
Treasury Chambers
Parliament Street
London
SW1P 3AG

 

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