PwC Releases Guidance On New HMRC Powers

by Robert Lee, Tax-News.com, London

30 March 2009

Taxpayers should be prepared for significant changes to HM Revenue & Customs’ (HMRC) powers from April 1, 2009, warns PricewaterhouseCoopers (PwC).

In less than a week’s time, HMRC will have new legislative power to check the ‘tax position’ of any individual or company at any time, even where no tax return has been made and in a return period which has not even closed. It will also have a new power to inspect a taxpayer’s business premises - and can even turn up to make an inspection unannounced.

Simon Wilks, tax partner, PricewaterhouseCoopers, said:

“No one can afford to stick their head in the sand and think that these changes won’t impact them. All taxpayers need to understand how HMRC’s new powers will affect them and review how they keep records of their tax affairs from now on; so if HMRC were to come knocking at their door next Thursday, they’d be ready.”

PwC highlights some of the other major changes to HMRC’s powers from April 1, 2009:

• Expect more co-ordinated working from HMRC across corporation tax, VAT and PAYE because HMRC information powers will be the same for these taxes.
• Appeals against notices are much more difficult under the new regime – there is no appeal possible, for example, in relation to a request for statutory records. HMRC has an absolute right of access to statutory records.
• The new powers make it easier for HMRC to carry out systems audits. Taxpayers will be obliged to provide reasonable assistance to HMRC when looking at computer records for the purpose of checking a tax position.
• HMRC will use its new powers to charge penalties in relation to any tax position which gets adjusted where the taxpayer cannot show that reasonable care was taken in making the return.
• There are now statutory bandings for penalties and much of the discretion currently exercised by HMRC not to charge penalties (or to charge low penalties) has been removed.
• There will be many more situations where penalties are chargeable as a consequence of technical changes, such as the removal of group relief from the penalty calculation and the introduction of cash penalties for adjustments to losses, and for timing differences.
• The new penalty regime for corporation tax, VAT and PAYE applies to return periods starting after March 31, 2008 where the filing date is after March 31, 2009. Other taxes will be affected from April 1, 2010.

Four more proposals with further changes to HMRC’s powers are expected to be confirmed in the UK budget. These cover:

• Penalties for late filing;
• Compliance checks regime for the ‘other’ taxes;
• Interest on overdue taxes;
• Payments, repayments and debt.

“While most of the proposals are sensible enough, there is still some room for improvement. For example proposals on payments, repayments and debt seem to be all about HMRC’s collection of money and ignore speeding up repayments. Penalties for late filing, while reasonable on the surface, need capping as they add up too quickly to significant amounts.”

“We’ll also wait to see if HMRC meets its promises to provide adequate safeguards for taxpayers in light of these new powers with the Taxpayer’s Charter,” concluded Wilks.

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