HMRC Interventions - Real help or a quicker way of collecting money?
Starting this month (July) HMRC are trying out new methods of approaching taxpayers who HMRC think might not be doing everything right in relation to their tax affairs. In explaining their prospective approach in a consultation document HMRC have used comforting words like “coaching” and allowing HMRC to “advise business on any changes required to their procedures”. Should taxpayers co-operate? The answer is, it is too early to say.
An outline of the new approaches (‘interventions’) was mooted as a possibility in HMRC’s recent consultation document Powers deterrents and safeguards at Annex B.
These interventions can take one of many forms – checking the taxpayer’s record-keeping; inviting taxpayers to carry out ‘self-audits’ with ‘coaching’ by HMRC; correcting a tax return and explaining to the taxpayer why the correction has been made; ‘health checks’ where HMRC believe there may be risks of non-compliance. They may be conducted by telephone, by letter or by HMRC inviting themselves round for a chat.
Risks for unrepresented taxpayers
LITRG has a great many concerns about these so-called ‘interventions’.
- HMRC are rushing the trials through before they have had time to consider the consultation results, casting some doubt on the real wish to consult.
- The rights or safeguards for taxpayers embroiled in them are uncertain.
- They could well involve cost and expense on the part of the taxpayer.
- There is already a well-used framework for end-of-year enquiries which could be used to better effect by being conducted in a less cumbersome and bureaucratic way. A formal enquiry by HMRC can be a worrying event (see our 'How to survive an enquiry...' guide ), but at least it has protections for the taxpayer which are laid down by the law and which have to be followed.
- There is no evidence that the teams conducting the interventions are looking at the taxpayer’s affairs in the round. It is entirely possible that any adjustments agreed during or after an intervention will have adverse consequences for tax credits, pension credits or for entitlements such as education maintenance allowance.
- Participation in the interventions is billed by HMRC as primarily ‘voluntary’ and it is not clear what powers they will need or what information they will hold as to taxpayer failings before conducting an intervention.
- It is not clear how the information gathered voluntarily will be passed to other government agencies.
There are too many unknowns and unrepresented taxpayers are being put in a very difficult position.
It is only now that some of the detail underlying these approaches is emerging. It is not looking good so far.
At the very least we would want to see HMRC:
- Advising taxpayers of all the ramifications of their approach including the possibility of the individual speaking to an independent adviser (for example, a professional tax adviser, the charity TaxAid or Citizens Advice) before answering questions or agreeing to an adjustment.
- Covering all the relevant taxes/claims appropriate to the approach. This would, for example, include tax credits and national insurance issues as well as income tax and VAT.
- Ensuring that a holistic approach is taken by helping taxpayers where, perhaps, they may have underclaimed expenses or tax credits and not just concentrate on omissions in HMRC’s favour.
- Explain what happens if they find something wrong and make an adjustment. Will that be the end of all of HMRC involvement in relation to that matter or will another bit of HMRC approach the same individual in a few months’ time and go over the same ground because they are from another part of the HMRC empire?
We are asking for urgent clarification and asking for a halt to these pilots until we are sure that the interests of the unrepresented low income taxpayer are adequately protected.
Watch this space.
Should any readers of this website suffer an intervention then we should be pleased to hear of it through our Contact Us page.
Contact: John Andrews (Tel: 0844 579 6700 Fax 0844 579 6701)