Is the government's Tax Consultation Framework broken?
Recent experience causes Donald Drysdale to question the way tax consultations are being conducted.
The Tax Consultation Framework
The government’s Tax Consultation Framework recognises the importance of engaging fully with individuals, practitioners, businesses and other organisations in developing tax policy. It acknowledges that scrutiny of tax legislation, through early exposure of drafts, should help ensure that legislation is fit for purpose.
Subject to exceptions – for example, where advance consultation might put public revenues at risk – the government is committed to engaging with interested parties on changes to tax policy and legislation at each key stage. It has said it will publish draft Finance Bill clauses and substantive secondary legislation at least 3 months before they are introduced to Parliament, allowing at least 8 weeks for consultation, and allow 4 weeks for consultation on most other secondary legislation.
ICAS involvement in tax consultations
An important role of the ICAS tax team is to influence developments by responding to government consultations. Responses are based on deliberations of the ICAS tax committees and sub-committees, the wide-ranging experience of the in-house tax personnel, and (where feasible) views gathered more widely from individual ICAS members, ICAS Tax Professionals (ITPs) and member firms.
Such consultative activity has been a longstanding focus of the work at ICAS and other professional bodies. However, not all consultations proceed as they should.
Client notification regulations
Last Monday (1 February) a notice on the CIOT’s website explained that HMRC were inviting views on two documents they had just published.
These are draft regulations on client notification, amending the main Common Reporting Standard regulations, and draft guidance for those sending or receiving such notification. They will require financial institutions and relevant persons (including tax agents and financial and tax advisers) to write to certain clients and former clients about HMRC’s new sources of information on offshore accounts, the opportunities to come forward and make disclosure, and the consequences for those who don’t do so.
HMRC consulted informally on this in 2015 – no public consultation took place. Although certain bodies were invited to submit views and ICAS and others raised numerous objections, no summary of their responses was published. Thankfully the revised proposals appear to take on board some of the earlier objections, but HMRC are again consulting informally. They have not ‘published’ the latest documents – even ICAS, having responded previously, didn’t receive copies without specifically requesting them.
Individually addressed covering letters will be needed, using firms’ normal branding. In many cases they will have to be sent on paper rather than by email. They will have to include certain prescribed wording, and enclose an HMRC-branded attachment downloaded from gov.uk. The wording and HMRC attachment will be prescribed by the regulations, but are not yet included in the draft.
Because last year’s consultation was not widely publicised, many practitioners are only now realising the full impact of proposals which will encroach on their professional relationships with clients and could strain those relationships. HMRC are seen as offloading their responsibilities on to agents, who will have to undertake this work at the ultimate expense of their clients. Agents are becoming vocal in their opposition.
There are concerns that the consultations have been informal and inadequately publicised, the wording and attachment forming an essential part of the proposals have not yet been released, and nevertheless HMRC are inviting feedback by this Friday (12 February) – a consultation period of barely 10 working days.
Such disregard of the Tax Consultation Framework is unacceptable. If you have views which you’d like ICAS to share with HMRC, either on the proposals or the consultation process, please email email@example.com.
Court and tribunal fees
In July 2015 the Ministry of Justice (MoJ) issued a paper inviting views on proposals to increase various court and tribunal fees, and introduce fees for the First-tier Tax Tribunal and Upper Tribunal (Tax and Chancery). See an article about this here.
ICAS responded on two questions relating to tax, disagreeing strongly with the proposal to charge issue fees or hearing fees of any amount. The response stated that this would be wrong in any case where the citizen is contesting a decision of the state, either in relation to the charge to tax or its quantum or tax penalties, and especially inappropriate for the First-tier Tax Tribunal where many appellants are unrepresented taxpayers.
In December the MoJ published its response to the consultation. The consultation had elicited 40,532 responses, including 40,317 emanating from an organised campaign opposing fees for appeals against Freedom of Information (FoI) decisions. The remaining 215 came from professional bodies, law firms, businesses, barristers, local councils, individuals, the Judiciary and academic institutes, and the majority disagreed with the package of proposals.
The statistics are interesting. Over 99% of the respondents were against the MoJ’s proposals. Even excluding the feedback from the FoI campaign, two-thirds of the other respondents opposed the proposals and more than 76% were against the charging of fees for the First-tier and Upper Tax Tribunals.
In the face of overwhelming opposition, the MoJ decided to defer (but not abandon) a decision on fees for FoI appeals. More importantly for tax specialists, it recognised the strong opposition to fees for appeals to the First-tier and Upper Tax Tribunals but decided to proceed with these anyway, subject to one token adjustment -- reducing from £50 to £30 the fee for appeals against fixed penalty notices of £100 or less.
Was this consultation a sham? Had the MoJ already decided on its course of action in advance? Even disregarding the 40,317 organised campaigners, a further 215 individuals and organisations had invested time and trouble in responding, only for the majority of their views to be ignored. Will they feel that they successfully engaged with government?
Petitions and social media
As the MoJ discovered from the FoI campaign, the digital world is forcing public bodies to change the way they consult. Social media and online public petitions are creating opportunities for engagement.
Among recent high profile tax-related petitions on the UK Parliament website are “Introduce a tax on sugary drinks in the UK to improve our children's health” (over 154,000 signatures), “Reverse the planned tax relief restriction on ‘individual’ landlords” (over 60,000) and “Reconsider the new Dividend Tax for small businesses” (over 51,000). Tax even featured in “Make the production, sale and use of cannabis legal” which attracted nearly 237,000 supporters.
Digital tax accounts
Of particular interest to many tax specialists is the petition “Scrap plans forcing self-employed and small business to do four tax returns yearly”, opposing the introduction of digital tax accounts for businesses. This was supported by more than 110,000 signatories and resulted in a televised debate by MPs on 25 January.
HMRC’s planned implementation of digital tax accounts for small businesses is causing widespread controversy. Many practitioners welcome greater use of online working where it is appropriate, but are strongly opposed to digital being imposed mandatorily on the smallest businesses and on individuals.
The debate briefing ‘Tax reporting for small business and the self-employed’ prepared for MPs makes interesting reading. It was noteworthy that the Petitions Committee had sought input from interested parties via Twitter, and more than a quarter of this 35-page briefing came from that source.
The growing use of online petitions and social media has broadened public engagement with government. Let’s hope that the government is listening.
Article supplied by Taxing Words Ltd