What tax guidance do you need?
HMRC are beginning to re-evaluate the content and scope of their guidance material, and Donald Drysdale hopes that ICAS members will come forward with suggestions.
Who needs help with tax?
Behind the scenes, much debate is taking place on the sort of guidance required by different parties who interact with the UK tax regime.
Taxpayers come in different shapes and sizes, with widely differing needs. Large corporate groups, including multinational enterprises, will typically have teams of in-house tax specialists. Some smaller businesses may have in-house tax capabilities, but most of them – and many individual taxpayers – rely on advice from independent professional firms of accountants and lawyers.
Those advisory firms need a detailed technical understanding of tax law as it may impact on a wide range of clients, usually spread across a multitude of industry sectors and private client circumstances.
Then, of course, there are the unrepresented – including the majority of individuals and many small businesses. Some of these don’t have the inclination or resources to engage tax agents, while others don’t appreciate that it might be to their advantage to do so. All of them are likely to need guidance, if only they knew it.
What sources of tax guidance currently exist?
For tax advisers in professional firms and in-house corporate tax departments, the legislation (as amended) forms a vital primary source of information. Sadly, the UK Government doesn’t always publish the amended UK tax legislation promptly in its updated form.
Fortunately, a number of leading tax publishers fill this particular black hole by offering their subscribers a current view of the legislation. The best sources can even provide a historical view of any statutory provision as it was at any particular time.
Private sector tax publishers also produce a wide range of books and online information systems which offer valuable support to specialists and general practitioners. Many such sources are authoritative; they may not always interpret provisions of tax law in ways with which HMRC would agree, but ultimately what matters more is the view that the courts would take.
HMRC publish some 290 manuals, including their internal guidance manuals designed for use by their own staff. Some passages in these are withheld because HMRC have taken advantage of exemptions in the Freedom of Information Act 2000 where disclosure might prejudice the assessment or collection of tax.
HMRC’s manuals are heavily qualified. Much of their content is procedural rather than technical. The guidance in them is based on the law as it stood when they were published and may not be comprehensive. HMRC update their guidance if there’s a change in the law or their interpretation of it, but in practice, this process may take many months. Where HMRC consider there may have been tax avoidance, their guidance won’t necessarily apply.
In spite of these shortcomings, practitioners generally find the HMRC manuals a valuable resource, providing useful insight into how HMRC are likely to view a particular subject.
In other cases, HMRC publish technical guidance specifically intended for taxpayers or their agents. They issue many bulletins and briefings, but it can be difficult to determine what guidance is available. Those who subscribe to receive all of these are likely to find themselves swamped with information overload.
GOV.uk, the Government’s multi-purpose website for communicating with ordinary citizens, offers tax guidance within its section on Money and tax. Although this ought to help unrepresented taxpayers and small firms of agents, it is fundamentally flawed – with its frequent errors and attempts to ‘dumb down’ complex tax rules resulting in seriously misleading explanations.
With the advent of new, devolved taxes, additional guidance has become necessary. It is particularly disappointing to find that practitioners regard guidance from Revenue Scotland as poor, especially when it only addresses two taxes that have been in existence for just over three years.
The internet and social media have generated new, valuable flows of information from tax advisory firms, often shared much more widely than their own client bases. However, many unofficial online sources of tax guidance are unreliable are even downright misleading. Stories of “what I got away with”, which may have been exchanged in the pub or at the golf club in past years, are now shared with tens of thousands of unsuspecting victims.
What needs to be done?
Taxpayers and their advisers need certainty. They should have free access to current UK tax law as amended. They ought to be able to rely on HMRC’s technical guidance, whether contained in the manuals, in other bulletins or briefings, or on GOV.uk.
Basic guidance on procedural issues and on all matters likely to affect unrepresented basic-rate taxpayers should be available free. It should be accurate and regularly updated, and it should be legally binding on HMRC.
While general guidance on more complex aspects of tax might not be legally binding, there should be adequate clearance procedures to allow any taxpayer or agent to obtain binding reassurance on how HMRC will interpret the law on any particular point. Perhaps, as in some other countries, this might be a paid-for service, and perhaps all such clearances should be published for the benefit of others.
Technology offers new opportunities for HMRC to develop interactive guidance, particularly on procedural points where a flowchart approach may be appropriate. Machine-learning techniques and artificial intelligence create new possibilities. However, automated tools should increase confidence and certainty; it is damaging when inaccuracies in their results undermine their advantages – as with HMRC’s CEST IR35 employment status tool. Furthermore, many interactive online forms created by HMRC have proved unduly restrictive, ignoring the realities of how taxpayers work with their advisers.
It would be unreasonable to expect the Government to prevent the sharing of incorrect tax advice on social media. However, by creating sound, reliable guidance material accessible to and understandable by the majority of citizens and their advisers, HMRC ought to be able to make tax less taxing for them all.
What will happen next?
The Office of Tax Simplification (OTS) regards the role of HMRC guidance as crucial in reducing ambiguity in the tax system and informing practitioners and taxpayers of HMRC’s approach in complex areas. However, tax is too complicated, and taxpayers are not getting the certainty they need.
The OTS has begun a new project to take a strategic look at the approach to taxpayer guidance, in collaboration with work HMRC are doing to overhaul their 290 manuals. ICAS intends to provide input to the OTS and HMRC as appropriate and would like to hear from you at firstname.lastname@example.org with your suggestions as to how guidance might be improved.
Article supplied by Taxing Words Ltd