.png)
.png)
KEY POINTS
- Many changes made since Finance Bill debate.
- Charter modelled on Australian approach.
- Improved presumption that taxpayer is honest.
- The need for respect between taxpayers and HMRC.
When I last wrote about the taxpayers charter (The hidden charter), I complained that MPs had been allowed to see the revised draft, but that you and I had not.
It was possible, however, from the Finance Bill debate to see what changes had at that point been incorporated into the draft.
Now that the final proposal has been published, it is clear why there was a reluctance to make the interim version public – it has again been significantly revised before publication, sometimes reverting to the original.
In an earlier article, Wrong turn, I criticised the major changes made between the draft issued with the pre-Budget report in November and the one issued in February.
I concluded that ‘we need real statements of principle about fairness [and] assumptions of honesty’.
I also added ‘minimising tax collection’, which is not what I meant at all – that should have read ‘minimising the costs of tax collection’. Much of this seems to have happened in the final version of the charter.
Taxation and others pointed out the virtues of the Australian charter, which is based on some simple statements that are each backed up by more detail.
That is the model which HMRC have now adopted. It squares the circle of getting the main charter on to one page of A4, but giving enough detail to make it useful.
Beginnings
To start at the very beginning, what is it to be called? Having originally concentrated on it being for their ‘customers’, HMRC scored a spectacular own goal back in February by proposing HM Revenue & Customs Charter.
One imagines that there have been endless brainstorming sessions since, covering the walls of 100 Parliament St with Blu-tacked flipchart sheets. They have eventually settled on ‘Your Charter’, underneath the HMRC logo.
The other problem was the initial description of HMRC’s role, which they were very keen to align to their ‘Vision’ statement.
The February 2009 version of this paragraph was widely criticised, but the subsequent version given to MPs at the Finance Bill debate was even worse.
The final draft is more or less the February version, but with the sentence about making the system easy to use replaced by a commitment to a service that is even-handed and accurate, based on mutual respect, and making it as easy as possible to get things right.
The response document makes it clear that at least one faction within HMRC is determined to keep the charter linked to the Vision.
Although many of the concepts still come from the vision statement, they have, however, been edited together into a format that is a lot more user-friendly.
Respect you
The charter then gives nine rights and three obligations. The first right is simply that HMRC will ‘respect you’.
The detail behind this refers to courtesy and consideration, listening, understanding the taxpayer’s circumstances and communicating appeal rights.
This last point was said to be very brief in the draft that MPs saw. It is now covered in two separate points.
Respect was apparently the top concern received from the special online youth consultation, though this could have been a reaction to the website which was a dad-dancingly patronising attempt to ‘get down with the yoof’. It is matched by an obligation for HMRC staff to be treated with respect.
The February draft was based on the ‘golden rule’; treat HMRC staff as you would expect to be treated. The final draft adds specifically that rude or abusive behaviour will not be tolerated.
This was apparently very important in the responses from HMRC staff, understandably so. One would hope that agents do not need to be told to respect HMRC staff.
However, there is sometimes an undercurrent in the way some agents speak about HMRC which, even if it does not result in them being rude themselves, could encourage their clients to be rude or abusive when they are contacted direct.
Tax advisers have legitimate complaints about service levels within HMRC, and occasionally need to let off steam with a group moaning session, but that should never result in disrespectful conduct towards HMRC staff by either agents or their clients.
Honesty
The charter retains the promise that taxpayers can expect HMRC to treat them as honest.
This is backed by a more detailed statement that ‘unless we have a good reason not to, we will:
- presume you are telling us the truth;
- accept that you will pay what you owe and only claim what you are entitled to;
- explain why we need to ask you questions and why we have decided to check your records; and
- only question what you tell us if we have good reason to.’
This could be an important section for countering excessive use of HMRC’s powers.
In particular, if information is requested under FA 2008, Sch 36 para 1, and the taxpayer wants to claim that it is not ‘reasonably required’ by the inspector, it surely would be relevant to raise the issue of whether the presumption that the taxpayer is telling the truth has been breached.
This would be particularly appropriate in the sort of case where the agent feels that all reasonable questions have been answered and the inspector simply won’t let go.
A similar argument could be made during an application under TMA 1970, s 28A(4), but with the added difficulty for HMRC that the onus of proving that there are reasonable grounds for keeping the enquiry open falls on them.
Relentlessly pursuing
One of the most criticised parts of the February draft, again taken from the HMRC Vision, was the promise to ‘pursue relentlessly those that break or bend the rules’.
Quite apart from the threatening language and the elision of evasion and avoidance, why was it in the part of the charter that was supposed to give the taxpayer safeguards?
The consultation response documents say that this attracted the most comments from the profession, and that ‘It was found by some to be emotive and aggressive’.
It is still in the same section, but it now reads: ‘Tackle people who deliberately break the rules and challenge those who bend the rules’.
The accompanying explanation makes the valid point that this protects those who do act honestly from the effects of people who deliberately break the rules, and adds the assurance that genuine mistakes, acting without reasonable care, and deliberately misleading actions will be treated differently.
One might quibble that a mistake made because of not taking reasonable care is still a ‘genuine mistake’, but on the whole this is good.
The detailed promises make even more progress. As well as the distinction drawn in the main text between tackling evaders and challenging avoiders, there is a promise to ‘distinguish between legitimately trying to pay the lowest amount and bending the rules through tax avoidance’ – in other words, an acceptance of the role of legitimate tax planning.
Finally, though very importantly in the light of the debate over powers, there is a promise to ‘use our powers reasonably’.
Although to some extent that is built into the legislation, there are some provisions where there is no explicit test of reasonableness in the statute, so this is a welcome acceptance that it is still required.
Other promises
That is three of the nine rights which taxpayers can expect: what about the other six?
Taxpayers can expect HMRC to ‘help and support you to get things right’, where the emphasis is on clear information giving taxpayers as much certainty as possible.
This can also be linked to the promises to keep the cost of dealing with HMRC as low as possible and for HMRC to be professional and act with integrity.
The consultation document reveals that the discussions on the February version of this provision resulted in calls for these specific promises to be introduced.
The next is a promise to treat taxpayers ‘even-handedly’. This contains an interesting promise to ‘act within the law and our published guidance’, a provision which would have been quoted in relation to the apparent abandonment (in the eyes of most advisers) of the IR20 guidance on residence in recent years.
The final two promises are to protect your information and respect your privacy; and to accept that someone else can represent you.
Obligations
The obligations on the taxpayer, in addition to ‘respect our staff’ are to be honest and to take care to get things right.
The last of these has eight separate obligations attached to it, which might seem a bit like overkill, but to be fair most of them simply repeat provisions that are in statute, such as completing tax returns and making payment on time.
The hackles of some agents may rise when they see ‘respond in good time if we ask you to do something’, particularly since there is no corresponding promise from HMRC to do so (although the charter does cross-refer to the service standards for ‘more information’).
The obligation to be honest is a quid pro quo for the stronger right given to taxpayers referred to above. HMRC saw this as making it a ‘two-way relationship’.
Conclusion
There are still things wrong with the charter, not least the fact that the way it has been embedded in law does not help the taxpayer who is trying to use it in the tribunal.
Overall, however, what we now have is a good document. It has taken us a long time to get there, and all sides will have to live up to the promises made, but it is good to have, once again, a document that sets out some principles and values about the way that HMRC, taxpayers and their agents should interact.
