With Theresa May’s no-confidence vote monopolising the news agenda, it’s not surprising that important matters are getting overlooked, ignored or dipping beneath the radar.
While the accounting/tax media homed in on the House of Lords’ recent comments about HMRC, it still strikes me that this issue may be edging into the above territory. It’s certainly worth revisiting.
In its report titled ‘HMRC Powers: Treating Taxpayers Fairly’, the economic affairs committee is basically calling for a wholesale review of the UK tax authority. The report concludes that recent powers given to HMRC undermine the rule of law and hinder taxpayers’ access to justice.
It’s serious stuff.
Widening the role
These are the key findings of the committee…
- The government should consider widening the role of HMRC’s Adjudicator or increasing HMRC obligations to respond to and act on Adjudicator recommendations.
- HMRC should urgently review all loan charge cases where the only remaining consideration is the individual’s ability to pay, and establish a dedicated helpline to give those affected by the loan charge advice and support. Such action should take place well in advance of the loan charge coming into effect in April 2019.
- The government should withdraw clauses 79 and 80 of the Finance Bill, which would extend HMRC time limits to assess offshore matters to 12 years.
- The government should withdraw its proposal, for which consultation closed in October, to remove oversight of the tax tribunal from HMRC access to information about taxpayers from third parties.
- Penalties associated with General Anti-Abuse Rule and Follower Notices restrict access to justice and should be abolished.
The government should legislate to give the First-tier Tribunal (Tax) the power to conduct judicial reviews. - The Treasury should assess whether HMRC is adequately resourced to fulfil its charter obligations in the next spending peview.
And this is what the committee’s chairman Michael Forsyth had to say on the matter. “HMRC is right to tackle tax evasion and aggressive tax avoidance. However, a careful balance must be struck between clamping down and treating taxpayers fairly.
“Our evidence has convinced us that this balance has tipped too far in favour of HMRC and against the fundamental protections every taxpayer should expect.
Taxpayer safeguards
“Since 2012, perhaps due to reduced resources, HMRC has been granted some broad, disproportionate powers without effective taxpayer safeguards. High penalties, designed to deter some taxpayers from continuing appeals against tax liabilities, are a tax on justice.
“Some of these powers disproportionately affect unrepresented and lower income taxpayers. We took some disturbing evidence on the government’s approach to the loan charge.
This is devastating the lives of middle and lower income individuals, from the private and public sector (including the National Health Service) who used disguised remuneration schemes, in many cases being required to do so by their employers.
“The charge is retrospective in its effect, claiming tax from years which should be closed to enquiry. We have included some of the personal accounts submitted to us as written evidence as an appendix to our report.
“Clauses 79 and 80 of this year’s Finance Bill would introduce another disproportionate power. Extending HMRC’s time limits for assessing offshore matters to 12 years would place an unreasonable burden on a disproportionate number of taxpayers, who would be required to retain records for two or three times longer than currently.
“We need to work together to build new principles for the tax system, taking a tough approach to tax avoidance while treating taxpayers fairly. We recommend a new review of HMRC powers, and an independent review to consider new oversight arrangements for HMRC.”