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THE TOTAL LACK of any real consultation in advance of the proposed change to a 30 November final deadline for submitting tax returns was the most aggravating thing about it, coming as it did on top of a failure to consult, or to listen to the results of consultation, in other areas. However, Paul Aplin's article two weeks ago ('No winners here', Taxation, 13 April 2006, page 27) alerted me to one area where consultation on this subject is to be permitted — the Regulatory Impact Assessment (RIA). In para 60 it says:
'This partial impact assessment is just the start of a collaborative work with all the groups who will be affected by the proposed changes. We would expect to have ongoing meetings and discussions over the next two years with representatives of all the groups affected by the changes including: businesses both large and small; individuals; trusts; agents and payroll providers; and IT and software providers.'
Great expectations?
It is important not to raise expectations here. The intention is not to consult on the basic principle of bringing back the filing deadline — that is taken as fixed. The very next paragraph says 'The main proposals will be introduced, subject to the right “building blocks” being in place, between April 2008 and April 2010'. The building blocks concerned are things like the ability to include attachments with returns filed by internet.
However, one of the questions to be answered is whether the cost and resource implications for advisers have been accurately estimated. Since the costs are only assumed to be transitional, the answer is going to be pretty clear to most practitioners. Here is what the RIA says in para 33:
'The change to the SA filing dates will be a significant change that potentially impacts all SA taxpayers and their agents. Although the costs of completing a tax return should not change it will be essential that the new deadlines are well communicated to all SA taxpayers and we will be working with professional tax agents to achieve as smooth a transition as possible.
We also recognise that in the first year the new deadlines will pose a significant challenge for tax agents, as they will need to compress the work currently done over 10 months by at least two months.'
The November nightmare
Two main queries arise in my mind out of this. First, even on the basis of the information set out in the RIA, why is there this emphasis on the impact in the first year? Yes, it is true that 'in the first year' agents 'will need to compress the work currently done over 10 months by at least two months.' But they will also need to do the same the following year, and the year after that, and the year after that. Just because the returns for 2007-08 are completed by 30 November 2008 doesn't mean that the returns for 2008-09 can be started before April 2009.
Second, why do they think this is just about communication and that 'the costs of completing a tax return should not change'? Yes, you can educate clients over the coming two years that the tax return deadline is now 30 November. The best that one could hope for is that all of those who used to submit their information in November and December (or even January …) would send it in during September and October (or even November). There's no hope of them sending in during August because they are on holiday, and even if they did, all your staff are on holiday too.
So personal tax departments which used to be working hard by September and flat out with overtime by late November will, at best, have to run flat out with a lot of overtime from September to November. At worst, they will have to hire additional staff for that busy period. Yet this isn't meant to increase costs? Of course it will increase costs, and that needs to be put across to HMRC in no uncertain terms.
And the same to you
Even more of a problem for the regulatory impact assessment, however, is what it will mean for the Revenue. As practices begin to gear up for the changeover, there are two obvious changes that they are likely to make.
Year ends
The Revenue fought for a long time to try and impose a mandatory 5 April year end when self assessment was introduced. When this failed, they managed to get an overlap relief system of such complexity, and which built up such a ticking time bomb for taxpayers who chose year ends shortly after 5 April, that most taxpayers gravitated towards 31 March or 5 April anyway. That is a significant cost saving for the Revenue, because checking that overlap relief has been properly calculated takes time and therefore costs money.
The inevitable logic of moving the filing date forward by two months is to make year ends early in the tax year more attractive. The accounts preparation and the preparation of the self-employment pages can therefore be carried out earlier in the year, and the rest of the return can be completed later. Of course, there will be added cost for the client, because the information will effectively be requested in two parts (the accounts and the personal return); pension premiums paid from the business bank account will have to be collected from two separate accounting periods' records, and so on, but it will at least be possible to find some time to sleep in the days leading up to the deadline. It will make the Revenue's job more difficult, but hey, what goes around comes around …
Provisional return
Second, unless the legislation is significantly amended, there is nothing to stop returns being submitted with provisional figures, including provisional figures for self-employment income. The Revenue's practice prior to October 2001 of rejecting such returns as unsatisfactory ran into the formidable obstacle of Robert Maas and his celebrated attempt to take them to the Special Commissioners, which ended with the Revenue virtually begging Robert to allow them to withdraw the case, so I doubt they would want to try that again without changing the law.
So, a quick chat with the client elicits the information that business was about 5% better than last year, and estimated figures based on last year multiplied by 1.05 go onto the tax return, together with a clear statement that they are estimates and should be revised by a particular date, which might be something like 31 January, for the sake of argument. This is not, of course, a binding date, and unless the Revenue start issuing formal notices for the details there is nothing they can do to enforce it. Moreover, although the estimate can go in online, the amendment can only be processed manually at present. Suddenly the estimated savings for the Revenue of between £10 million and £30 million begin to look a bit suspect.
Act now
So what can you do? First, if you haven't already, fill in our 'No to November' form, reproduced this week on page 97. Make sure you include your email address, so that we can tell you about any progress. In particular, we are considering how to collect information from readers about the extra costs that this would impose on their businesses, and the increase in provisional returns which they would expect to have to file, thus increasing the costs for the Revenue. Finally, if you want to write directly in response to the RIA, you should send your comments to Carolyn Parmeter at review.online-services@hmrc.gsi.gov.uk . Send a copy to us too at taxpoll@lexisnexis.co.uk. If we can show how wrong the figures in the RIA are, this measure may still be defeated.
