.png)
.png)
AS I SAID a few weeks ago ('Flatly incredible', Taxation 14 July 2005, page 406), 'someday I will start a campaign for HMRC to note each page of each manual on their website with the date it was last changed'. This is that day, but the more I have thought about it, the deeper I feel the problem goes.
Let's take an example. Suppose you have a family company as a client which has been running a chemist's shop from the same premises for the past 150 years, although it is now operated under the name of a well-known national franchise. The chairman of the company, who is no longer working full time in the business, has for some years been organising and archiving the company's records to produce a company history, and in 2004 had the assistance of a part-time researcher paid for by the company. A story has appeared in the local paper, and the chairman has been to speak to the local history society and to the Women's Institute. Two local schools have also asked for some information as part of a project on the Victorians.
When you prepare the accounts and submit the corporation tax self- assessment return in April 2005, you consider the tax deductibility of the researcher's salary and the other incidental expenses of maintaining the records, giving the talks and providing the information to schools. You look for any official guidance but cannot find any, so you consider it from first principles. The purpose of the expenditure seems to be historical research for its own sake, and any business benefit seems to be incidental, so on balance you disallow it.
The management is not happy about this, and asks another firm to give a second opinion. At the end of June, its report says that, while the position is arguable, BIM42501 deals specifically with the cost of maintaining a business archive and says that revenue costs are allowable. The paragraph also says that revenue costs of access to archives and educational services are generally undertaken to bring the company to public attention, so are allowable apart from exceptional circumstances where the archive is a personal hobby. While you might want to argue that it is a hobby of the chairman, it has to be said that this guidance changes things — had you known about it you would have claimed the expense. So why didn't you find it when you searched? Because it wasn't there in April 2005.
Can't trace time
When you know that the guidance must have changed very recently, it is easy to look at the 'Recent changes' page on the manual, where you will find that this page was included as part of a revision on 26 May 2005. If the change may have happened some time ago, there is an alternative to wading back through all the listed changes. In a recent 'Feedback' item (Taxation 28 July 2005, page 471) we noted that there is a published date of issue or last amendment for each page of the manual, but that it is hidden in the underlying source code. To find it, you have to click on View/Source in your browser, and find the meta name tag 'DateIssued' in amongst the computer gobbledygook. This also discloses that the page was either issued or last amended on 26 May 2005, although you would still need to go back to the 'recent changes' section to find out what the change was.
So you can defend yourself against a claim for negligence, but is that enough? How were you supposed to know about the change? There are dozens of Revenue manuals — are you supposed to monitor each one on a weekly or monthly basis to see if any of the guidance has changed? And even if it has, how are you supposed to know precisely what the change was? Many commentators have been saying for some time that if you give guidance based on what the manual says, print out a copy of it and put it in the file behind the letter, as that is the only way you can show exactly what you were relying on.
There is also the question of whether the 'recent changes' lists all the changes. In pursuing the issue of part disposals and taper relief, we have been told that the relevant page, CG17959, had in fact changed subsequently to 10 December 2004, the date shown in the meta tag and in the recent changes. It may be that both of these show only major updates.
Then there is the question of major changes to guidance that are not in the manuals. Paul Soper's article 'Curiouser and curiouser' (Taxation 2 June 2005, page 244) pointed out some serious errors in the pre-owned asset tax guidance. This was corrected on 9 June; a note to this effect was put into the 'What's New' section, and there is a reference to it in the 'Latest News' section of the guidance, but the page itself has no reference to the change, and the source code does not include a value in the DateIssued meta tag.
Immune to consultations
Back in 2002, the CIOT held discussions with other professional bodies and with some of the major tax publishers, and then sent a memorandum to the (then) Inland Revenue asking that the date that each manual was last updated should be shown either on the pages themselves or in the introduction. The Revenue appears to have chosen the latter course, indicating the latest changes in a separate section at the front of each manual. That, in practice, has not proved to be enough. In addition, we need each page of the manual to show when it was updated (an easy enough task, since by definition the text on the page is being changed at the time), and ideally for a copy of the previous page to be kept as an archive copy, accessible from a footnote.
We also need the changes to be announced via the 'What's New' page on the website, with at least a brief explanation of the significant changes rather than a bland assertion that changes have been made. This was also requested in the CIOT's memorandum. In the Revenue's defence, this does happen sometimes, but more often than not there is no notification. The memorandum was specific in saying that a notification should be given 'when ANYTHING changes' and it was right to be so specific.
Finally, the same process needs to apply to the other major sets of guidance on the website, in particular the various sets of frequently asked questions.
This adds up to a significant amount of extra information for tax practitioners, but to very little extra strain on resources for HMRC. The existing page is already available, and simply needs to be moved to a different 'address'. The page is already being changed, so it adds very little to the workload to change a date and to add a link to the previous version of the page.
Still don't know
The CIOT's memorandum back in 2002 started with a positive recognition of the Revenue's decision to allow the manuals to be published:
'The professional bodies find the Revenue's manuals very useful. The publication of these manuals represented a major step forward.'
However, the decision to publish the manuals was not the first time that the Revenue had agreed to let internal guidance be published. Back in the mid 1980s the Inland Revenue agreed to publish the Business Notes used by Inspectors of Taxes when investigating the accounts of traders. These notes explain — often in some detail — how businesses in a particular trade operate; so, for example, the published note on driving instructors explains the structure of a typical driving lesson, and that dead mileage is minimised by having pupil A drive to pick up pupil B at the end of A's lesson, and then B drives A back home as the first part of B's lesson.
Concerns grew that Inspectors were quoting gross profit ratios and other statistics in investigations as if they were set in stone. In many cases these had come from Business Notes, and were given as illustrations or with caveats. One of the most infamous was the number of portions of chips that a fish and chip shop could expect to get from a 25 kilogram sack of potatoes, a figure which depends on a great many variables.
As a result, the Revenue agreed to publish the notes as 'Business Economic Notes', after first updating them and removing any confidential information. The first four BENs were published in February 1987, with a promise of more to come. By the end of 1987 eight had been published. Then the process ground almost to a standstill. There was roughly one a year for the next three years, then a sudden burst of six in October 1990. So it went on until in 1997 BEN 26 was published, since when there has been silence.
This coincides with the introduction of self assessment, but there is no obvious reason why that should have changed the need for detailed background information on the economics of particular trades. They certainly did not cease because all the previous internal guidance had been published — I well remember, as an Inspector in training, learning how to run a book from the note on bookmakers; but that has never been published.
Time may change
Even the notes that are already published are getting more and more out of date. BEN 20, for example, dealing with insurance brokers and agents, was issued in 1994 and talks about the industry being regulated by FIMBRA and LAUTRO. BEN 18 is entitled 'Catering — Fast Foods, Cafés and Snack Bars' and was issued in 1990. It talks about pizzerias as 'relative newcomers' and the description of coffee shops predates the explosion of 'Seattle-style' chains.
So it would appear that one of two things is happening; either Officers of Revenue and Customs do not have a source of up-to-date information on the way that the businesses they are investigating operate, and are reliant solely on their own experience and the knowledge of immediate colleagues; or they do have such a source of information, but it is not being made available to tax practitioners, in contravention of the spirit of the agreement to publish the BENs. Both alternatives are unacceptable.
