HMRC needs to improve the quality and clarity of its guidance to ensure that taxpayers understand the extent of its powers and safeguards
In the latest report from the tax authority, it evaluates how powers, obligations and safeguards granted by Parliament to enable HMRC to administer the tax system, introduced since 2012, have been implemented.
The government has introduced over 100 reforms to the tax system since 2010 to help HMRC to prevent and tackle evasion and tax avoidance.
The commitments set out in this report align with HMRC’s strategy to promote compliance, prevent non-compliance and respond proportionately and even-handedly to non-compliance. Many of them are a direct result of this evaluation and the comments provided by external members of the Forum.
These commitments include:
• updating HMRC’s guidance to clarify taxpayers’ rights and obligations in relation to several powers, including Follower Notices and the Requirement to Correct non-compliance relating to income or assets held offshore;
• exploring ways to improve awareness of HMRC’s internal governance processes, to promote public trust in decisions on the General Anti-Abuse Rule, Accelerated Payment Notices, Follower Notices and the Diverted Profits Tax; and
• reviewing and updating guidance to clarify the range of factors that may contribute to reasonable excuse, including taking account of an individual’s personal circumstances. HMRC will support this work by building capability, confidence and consistency of approach where HMRC’s officers consider the application of reasonable excuse provisions.
HMRC has also committed to improve the quality of its compliance communications, especially the letters sent during an enquiry, so that these communications help taxpayers to understand their rights and obligations quickly and easily while minimising unnecessary worry.
There will also be efforts to improve the quality of HMRC’s guidance, including raising awareness of feedback processes so that more users can help HMRC make guidance as useful as possible.
The report states that ‘inevitably, HMRC do not always get everything right. However, alongside the considerable work already underway, including on other aspects of the powers and safeguards work programme, these commitments mark a significant further step forward in building trust in HMRC’s administration of the tax system’.
HMRC plans to continue to work with the members of the Forum to ensure that the implementation of any future powers reflects the learning and conclusions from this evaluation and broader commitments.
Plans to be completed by this summer are also set out, with HMRC stating that it will consult with agents and their representatives to consider guidance updates on coding out of debt (through the PAYE system) and Simple Assessment by summer 2021.
HMRC will also host a roundtable meeting to discuss opportunities to improve taxpayers’ experience where they correct their tax through the Worldwide Disclosure Facility in spring 2021.
HMRC is also considering the impact that the Covid-19 pandemic may have on a taxpayers’ circumstances, including how it may impact on their short-term profitability as a business or health as an individual and adapting the approach as appropriate.
At the start of the pandemic, HMRC responded to taxpayers' individual circumstances, giving people more time to respond where appropriate. HMRC also allowed people more time to provide information where compliance checks were ongoing, but if customers wanted compliance activity to continue – for instance, if they wanted certainty on their tax position – HMRC did so. HMRC has also extended the period to make an appeal to three months.
In conclusion, HMRC sets out a number of commitments to:
• update HMRC’s guidance;
• continuously improve HMRC’s officers’ technical tax and core compliance capabilities to meet the standards set out the Charter;
• provide appropriate support during an enquiry; and
• evaluate and improve HMRC’s compliance communications.
In addition, HMRC will work with taxpayers, agents and their representatives to update HMRC’s guidance, by summer 2021, on:
• follower notices (FNs) and accelerated payment notices (APNs), including to provide more clarity on HMRC’s view on the appeal ground that it was ‘reasonable in all the circumstances’ for a person not to take corrective action in response to a follower notice; and
• the requirement to correct (RTC) and the failure to correct penalty, including to help signpost HMRC’s core guidance on reasonable excuse.
Jeremy Coker, president of the ATT, said: ‘The commitments by HMRC in the report can improve public trust and confidence in the tax system.
‘Among the most significant promises made by HMRC are the focus on improving awareness and uptake of the statutory review process, updating HMRC’s guidance on what constitutes reasonable excuse for failing to meet a tax obligation, identifying ways to inform harder to reach taxpayer groups about tax obligations and supporting those who need extra help.
‘Each of these commitments has the potential to make a real difference in the relationship between ordinary taxpayers and HMRC.’