Taxman has 'kept promises about powers'

Worries that the Revenue would abuse its swathe of new powers have been largely misplaced, according to the Chartered Institute of Taxation (CIOT).

In a newly published review of the taxman’s expanded powers regime, which was introduced a year ago, the professional body suggests fears about excessive and inappropriate use of the privileges ‘have not generally proved to be correct’.

‘It is clear that HMRC have kept to their promises and assurances about how the powers would be used,’ notes the CIOT. Predictions of ‘vast armies of tax officials carrying out inspections of private homes on the flimsiest of pretexts’ have not been realised.

However, the institute adds that while ‘changes on the ground have been introduced in a gradual, measured way’, experience of the new regime has been ‘limited’ for Revenue staff, tax advisers and their clients.

There are concerns about how the department’s fit together, with information requests ‘emerging mysteriously from random parts of HMRC, with no discernible logic’.

The CIOT also criticises the taxman for being reluctant to either impose high fines for deliberate understatement or accept there have been innocent errors. The department too frequently takes the ‘middle option’ of determining a failure to take reasonable care, says the trade body.

It is fearful of a lack of clarity about the process under which HMRC decide which particular form of intervention to use in any case: formal or informal use of powers, information notices or inspection powers.

The Revenue must recognise that ‘while the informal use of powers has a role, tax advisers will often want to put matters on a formal basis to ensure their clients are properly covered and [that] they cannot be challenged by clients for revealing information,’ says the CIOT report, which is based on a combination of discussions with practitioners and HMRC staff, together with a survey of tax advisers.

It sets out a series of recommendations that the institute believes will get the new powers regime operating more effectively while better commanding the confidence of taxpayers and their advisers.

CIOT president Andrew Hubbard remarked that the new system ‘is still bedding down’, and both taxpayers and the Revenue is ‘still getting to grips with the various powers and how they interact’.

He said: ‘The good news is there has been no big rash of horror stories so far… However, there are a number of ways… in which the new powers are not operating as effectively as we think they could.

‘There is a clear need for a route map showing taxpayers and their advisers how the various powers and sanctions fit together.’

Issue Extract

hmrc_powers_report_may2010.pdf

Categories: News , powers , Admin