Tax professionals positive about HMRC review

Thursday 21 May 2015

A group of tax professionals is feeling positive about a comprehensive review from HM Revenue and Customs (HMRC) on tax penalties; an issue that could affect a range of taxpayers including limited company contractors, umbrella company contractors and sole traders.

Responding to the consultation, The Association of Taxation Technicians (ATT) has welcomed the review but says that suspended penalties need to be used more efficiently to encourage long-term compliance. It also says that the consultation on tax penalties is much needed as it offers a chance to look at how various penalty regimes can be improved.

The ATT said that it is important that penalties are proportionate and says genuine mistakes that are uncharacteristic of a taxpayer should be treated differently to cases where failures are persistent. This is an idea that was also put forward by the Chartered Institute of Taxation (CIOT), which also posted its response recently.

The ATT adds that because HMRC is going increasingly digital, there is the potential to be able to identify unintentional non-compliance earlier and to correct it. The taxman should also be more able to help taxpayers better understand their own history when it comes to tax compliance, according to the ATT, and could possibly also explore the self-assessment of penalties.

Natalie Miller, President of ATT, said: “This consultation is very wide-ranging. It looks at how penalties might apply in situations as different from being a day late with a return ‘because life got in the way’ to deliberate under-declaration of income. In our response, we have made over 20 recommendations and suggestions – from bringing VAT Default Surcharges into line with other late payments regimes to considering the possible merits of tax awareness courses in place of monetary penalties – and we have emphasised the need for transparency and consistency in the application of penalties.”

Ms Miller added that the ATT particularly focused on suspended penalties, which were introduced six years ago. She pointed out that there is not much information about how widely these penalties are used and says there is evidence to suggest that there are cases where suspension should be used but isn't.

Suspended penalties are intended to incentivise taxpayers who receive them to become compliant, Ms Miller explained. She suggested that the suspension facility be used more if it is more likely to get people to be tax compliant in the long term than collecting a tax penalty. In the case of the latter, she suggests it could cause people to resent the tax system.


By Victoria McDonnell

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