HMRC Consults On Modernising Tax Administration

by Robert Lee, Tax-News.com, London

23 June 2008

The UK tax authority, HM Revenue and Customs (HMRC), has launched a consultation on its proposals for a new taxpayers' charter, alongside two further consultation documents on modernising tax administration.

The charter consultation, announced by Chancellor Alistair Darling in the 2008 Budget, sets out ideas for the scope and shape of a taxpayers' charter, which will articulate, in plain language, the rights and obligations of customers when dealing with HMRC.

Responses received will help form the basis of a draft charter, which will be the subject of further consultation later this year.

The second consultation explores why taxpayers fail to file their tax returns, or pay the tax they owe on time, and how HMRC can help them to meet their obligations. It also discusses an aligned approach to penalties across the different taxes - to encourage timely filing and payment - alongside the appropriate taxpayer safeguards.

The third consultation considers the case for harmonising and simplifying the rules on interest charged by HMRC, both on tax paid late and on interest paid by HMRC on overpayments. It considers the principles that might underpin a modern interest regime that is clear, simple, and easy for taxpayers and their advisors to understand.

Commenting on the consultations, Financial Secretary to the Treasury, Jane Kennedy, stated that:

"The Government is committed to ensuring greater consistency across the tax system and making HMRC more efficient and effective."

"This powers consultation document and the interest harmonisation document represent the next stage in the modernisation of the framework of law and practice for both HMRC powers and taxpayers safeguards."

"It is also important that the tax system is usable and accessible. The new charter will provide a reference point for taxpayers, setting out both the standards they can expect from HMRC and the obligations they have when dealing with the department."

HMRC's Acting Chairman Dave Hartnett added that:

"The new charter will benefit all taxpayers by putting the relationship between taxpayers and HMRC on a clearer footing. This will undoubtedly have long-term cost and time benefits for both taxpayers and HMRC."

"It is also important that HMRC develops a modernised, simplified approach to late filing and payment, as well as interest charged and paid. HMRC's current powers in these areas - inherited from its predecessor departments - add unnecessary complexity and burdens to the tax system for taxpayers, their advisors and HMRC, and the proposals seek to address this."

The deadline for submitting comments on all three consultations is 11th September 2008.

As part of the review of Powers, Deterrents and Safeguards, HMRC has been developing ideas and consulting on how to modernise and align its civil financial penalties.

The first substantial measure, legislated in Finance Act 2007, was a single new penalty regime for incorrect returns for income tax, corporation tax, Pay As You Earn (PAYE), national insurance contributions (NICs) and value added tax (VAT) (the main taxes).

Provisions included in Finance Bill 2008 would extend this approach to penalties for incorrect returns for other taxes, and penalties for failing to notify new taxable activities. Therefore, the consultation on filing returns and paying tax on time represents the third stage of the review of HMRC penalties.

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