ICAS evidence to HMRC’s evaluation of powers and safeguards
By Susan Cattell, Head of Tax Technical Policy
20 March 2020
Susan Cattell explains the review HMRC is currently undertaking of its implementation of powers introduced since 2012. ICAS has submitted evidence, which also covered some broader issues arising from HMRC’s exercise of its powers.
Evaluation of Powers and Safeguards
ICAS gave evidence to the House of Lords Economic Affairs Committee for its 2018 report - The Powers of HMRC: Treating Taxpayers Fairly. One of the proposals in the report was that there should be a review of all powers granted to HMRC since the conclusion of the Powers Review in 2012.
The Financial Secretary to the Treasury announced in July 2019 that he had concluded that a full review of HMRC powers was not necessary because the powers granted to HMRC since 2012 were properly scrutinised before being granted by Parliament - and the government considered that they remained necessary and proportionate. However, he did ask HMRC to evaluate the implementation of powers introduced since 2012 in relation to the powers and safeguards principles, engaging with stakeholders, including taxpayers and their representatives.
Implementation Evaluation Forum
It was originally intended that the evaluation would be published early in 2020 but the review process was delayed by the general election, so publication is now scheduled for the end of May. HMRC established a forum to provide expert support for the evaluation.
ICAS is represented on the forum along with other accountancy, tax and legal professional bodies. HMRC has only worked with the forum and did not make a call for evidence from the wider accountancy, business, tax or legal community, so ICAS liaised with the ICAEW and CIOT to ensure that all the main accountancy and advisory firms and some business organisations were offered the opportunity to give input. We also flagged the opportunity on CA Connect and to ICAS committee members.
ICAS evidence to the review
A list of powers ‘in scope’ for the review was provided, alongside a questionnaire to be used to submit evidence. HMRC’s original intention was that a separate questionnaire should be completed for each power respondents wanted to provide evidence about. However, the powers on the list were not generally those which ICAS members encounter on a day to day basis; some of them (for example, the GAAR or the Serial Tax Avoiders Regime) affect limited numbers of taxpayers and others have not so far been fully utilised by HMRC (for example, Promoters of Tax Avoidance schemes).
Feedback we receive from members indicates that many of the issues they regularly experience, arising from HMRC’s exercise of its powers, are common to several powers or groups of powers (some of which are pre-2012 powers), for example HMRC’s approach to reasonable excuse.
ICAS therefore agreed with HMRC that our evidence would take the form of a ‘themed’ response. This included comments about some specific powers on the list – particularly about the need for better HMRC communications to taxpayers affected by new powers. However, it also allowed us to provide input on more general issues, such as HMRC’s approach to behaviour and penalties (particularly reasonable excuse and taking reasonable care), which affect both pre- and post- 2012 powers. We also made other suggestions, including:
- A new consolidated Taxes Management Act to bring together tax management and administration provisions in one place – and to update some parts of the legislation which are no longer fit for purpose due to developments in digital processes.
- HMRC clarification of the meaning of ‘deliberate’, in view of concerns raised by a recent Court of Appeal case. We believe this should include confirmation that for behaviour to be ‘deliberate’ a taxpayer should have intentionally submitted an incorrect return or other document i.e. should have acted dishonestly.
During March, HMRC is holding a series of ‘deep dive’ meetings to discuss some of the powers on the list in more detail.
ICAS Meeting with HMRC
We were pleased to be able to arrange a meeting with a member of the HMRC Powers team on 26 February in Edinburgh, to discuss the review and issues encountered by our members. This was attended by ICAS committee members and other members working in practice. This helped to put our written evidence in context for HMRC.
Let us know what you think
The HMRC Powers forum has two further meetings scheduled in April and May, so let us know if you have any comments on how HMRC exercises its powers. Email tax@icas.com or login to the CA Connect forum, an area exclusive to members. Here you can share your thoughts and engage in discussion with fellow members.