14/08/2014

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‘Very high’ risk of errors in direct recovery of tax debts

More than 1,000 people have signed Mike Truman’s petition in its first week. It calls on the government to withdraw proposals for direct recovery of tax and tax credit debts from people’s bank accounts.

Truman, editor of Taxation magazine, says the proposals should be withdrawn and “sufficient time given to carry out a wide-ranging consultation on the problem of deliberate non-payment and potential solutions”. The petition notes that the proposals have been widely criticised by representative bodies, charities and civil liberties groups.

Writing in last week’s Taxation, Truman cited “the best of the responses” to HMRC’s consultation on the proposals.

Last month, in an article for Tolley’s Company Secretary’s Review (CSR), I noted that the ICAEW Tax Faculty said in May that the proposals were “wrong in principle” and infringed “fundamental civil liberties that no one should access someone else’s bank account without their permission or under the supervision of a judge”. I also noted that a recent debate hosted by the ICAEW had reflected a range of views among tax professionals.

My CSR article set out the scope of the new power and the proposed safeguards, and I quoted HMRC saying that compliant businesses should not need to concern themselves with the new power.

But opposition voiced at the ICAEW event was based largely on concern for people who may be leading a “slightly chaotic” life. They may have stopped responding to HMRC, but what they need is help and support rather than having money taken out of their bank account.

Truman’s article brought together the various objections raised by professional bodies and others. Opponents say the power being sought is unconstitutional. The CIOT’s Low Incomes Tax Reform Group has pointed out that “there is no suggestion that the demand has to be correct before it becomes an ‘established’ debt and susceptible to [direct recovery]”. Others have argued that HMRC should use its existing powers more effectively.

“HMRC are playing with fire,” the ICAEW said on Twitter this week. The tweet linked to a blog post in which ICAEW chief executive Michael Izza said: “Experiences of our members show that HMRC frequently makes mistakes in collecting debts, often chasing debts that have been already paid or are not actually due.”

The consequences of errors in implementing direct recovery could be “dire”, Izza said, and could have a detrimental effect on the public’s trust in the tax system.

Practising accountants and tax advisers and charities such as Tax Help, who often have to deal with the consequences of HMRC errors, are well-placed to assess the likelihood of errors in the implementation of direct recovery. And this article on the website of Ross Martin Tax Consultancy raises some serious concerns, particularly those under the heading “Why does HMRC get it so wrong?”

Truman said the Chartered Institute of Taxation had argued that even if HMRC made very few mistakes the lack of independent oversight on the use of direct recovery “would still be unacceptable because of the potentially catastrophic effect, financially and emotionally, on any individual wrongly targeted or their household”.

The CIOT’s formal response to the consultation said: “HMRC say that these proposals will only apply to those people who are in a position to pay but choose not to, or delay payment for as long as they can, and to those who deliberately avoid engaging with HMRC. Unfortunately, we suspect those who are deliberately withholding payment will circumvent any new rules and the impact will mainly fall on those that are generally compliant, but who are not responding to HMRC’s attempts to communicate, for example because they are ill, because they have moved, or because their telephone number has changed.”

On the potential impact of HMRC error, the CIOT said: “[HMRC’s impact assessment] states that ‘This measure will have no impact on compliant individuals’ , ‘This measure will have no impact on compliant HMRC customers’ and ‘DRD will have no impact on compliant small and micro firms’. Clearly HMRC error would have an impact on compliant taxpayers affected by errors. Thus it appears that the potential effect of HMRC error … has not been addressed at all in the impact assessment.”

The risk of errors being made was “very high indeed”, the CIOT added.

I’m a little bit wary of online petitions and so-called clicktivism, partly because much of what I do is news journalism – so I may find myself reporting on this and similar issues where balanced reporting, and giving HMRC the right of reply, are more important than my own view.

But I have seen and heard enough to be satisfied that Truman’s call for a rethink is right, and I have signed the petition. You can follow discussion on Twitter at #APowerTooFar.

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13/08/2014

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Finance Act 2014: Tax reliefs, partnerships and VAT (AccountingWEB)

My third AccountingWEB article summarising the key measures in Finance Act 2014 sets out the main provisions relating to tax reliefs, the taxation of partnerships, and VAT, stamp taxes and inheritance tax. Links are provided to recent HMRC guidance. Read more at AccountingWEB.

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08/08/2014

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Tax professionals urged to monitor HMRC content at gov.uk (Taxation)

Tax professionals are being urged to monitor HMRC content on the gov.uk website after payroll experts suggested that some technical information transferred from hmrc.gov.uk may have been omitted or diluted in the “transition” to the new site and a Government Digital Service official conceded that navigating gov.uk is “hard”. Read more at Taxation (published 6 […]

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08/08/2014

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Finance Act 2014 summary: Corporation tax and CGT (AccountingWEB)

My second article summarising key measures in Finance Act 2014 provided a round-up of the main corporation tax and capital gains tax provisions. Read more at AccountingWEB (published 1 August).

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08/08/2014

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Consultation update (AccountingWEB)

A round-up of tax-related consultations. At the time of publication there were 24 open consultations – a further update will be published shortly. Read more at AccountingWEB (published 24 July).

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08/08/2014

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Finance Act 2014 summary: Income tax (AccountingWEB)

In the first in a series of articles summarising the key measures in Finance Act 2014, I set out the main income tax provisions. Read more at AccountingWEB (published 23 July).

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16/07/2014

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BEPS: Priorities and concerns (Tax Journal)

The G20/OECD project on measures to tackle base erosion and profit-shifting (BEPS) appears to be on track despite a very ambitious timetable. But the project is still in its early stages, and there are signs that expectations may be running a little too high. New Zealand revenue minister Todd McClay declared on 3 July that […]

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14/07/2014

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Tax transparency, public understanding and a shared purpose

The role of greater transparency in improving public understanding of tax issues and enhancing confidence in the system was the subject of an informative and good-natured debate at the House of Commons on 8 July, hosted by Mazars and the Association of Revenue and Customs and chaired by Margaret Hodge MP, chair of the Commons Public […]

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18/06/2014

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The state of the tax debate (2): The importance of constructive dialogue

This is the second of two extracts from my talk on “BEPS day”, part of the Summer Tax Programme at the Centre for Commercial Law Studies, Queen Mary University of London on Monday, 16 June. The wider tax debate continues, and like a lot of political debate, the tax debate is highly polarised. Terminology is […]

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18/06/2014

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The state of the tax debate (1): The BEPS project

This is the first of two extracts from my talk on “BEPS day”, part of the Summer Tax Programme at the Centre for Commercial Law Studies, Queen Mary University of London on 16 June. I’m going to talk about the state of the debate around BEPS and tax avoidance, and the role played by the […]

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09/06/2014

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A consultation: What is your company’s tax policy?

The tone of corporate tax policies has changed “to reflect the hostile climate to avoidance”, according to research conducted by the Financial Times. This morning the paper noted that a number of the companies with the biggest public sector contracts said they aimed to be viewed as “low risk”, saying that as government suppliers they […]

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20/05/2014

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Tax evasion and ‘shadow companies’

Richard Murphy’s latest report on the UK’s tax gap has been criticised by HMRC for its “highly inappropriate” methodology, the Financial Times has reported today under the headline “Evasion and hidden economy leave £40bn a year tax gap, says campaigner”. The report, running to 80 pages, has also been criticised by some tax professionals and […]

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