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MTD 6/7: Tax Administration

November 7, 2016

The consultation on “Making Tax Digital: Tax Administration” seems to me to be a huge missed opportunity.  It reminds me of when I was working comms for the introduction of the CIS (Construction Industry Scheme) in 2003 or 4 or so, and a colleague from the “door kicking” end of HMRC came to see me.  They objected to CIS, and particularly to the verification process for subcontractors, where subcontractors would provide their name and two numbers and have their status “verified” as eligible either for gross payment or payment under deduction.  Where are we going to get the evidence to prosecute fraudulent claims to gross status, my door-kicking colleague argued, since they would no longer be able to seize the cards that were previously issued to subcontractors and prosecute the holders of forged and stolen ones?

Those of you with long memories of CIS will recall that one of the points of the 2005 scheme was to “design out” the opportunities for fraud in the old scheme – in other words, putting my door-kicking friend out of work was a feature, not a bug!

So with the Tax Administration consultation, I see the dead hand of someone wedded to HMRC’s powers as they stand at present, unable to see that a radical new scheme is a chance to “design out” the quirks and infelicities of  the current rules of administration.

Yes, yes, obviously powers and safeguards have to go hand in hand, so if you fiddle with one you have to fiddle with the other.   And obviously there’s a sunk cost for accountants in learning how the existing rules work so the easiest way forward is to look at the existing rules for putting in a tax return and, essentially, file off the words “tax return” and replace them with “annual summary”.

But most small traders don’t have a clue how the current rules work (that’s why they have accountants, d’oh!) so if you are going to build a system where you’re trying to design accountants out of the process you might as well design them out of the administrative rules, too.

That isn’t what we’re doing, you say, HMRC?  Well make your mind up.  Do you want a system where it’s the poor bloody taxpayer who has to do their own bookkeeping on an app every day and press the “send the results to HMRC” button every quarter?  Or are you going to leave agents embedded in the system?  Because those who deal with clients currently entitled to put in three line accounts are likely to give you three line quarterly summaries and then produce a set of accounts when the requirement to “finalise” the entries kicks in.

What do you want, HMRC, and why do you want it?  It’s a poor show that we’re this far into the process and I for one have very little idea.

 

 

(And, on the impact assessment point again, look at question 6.1, below the cut, which essentially says “please do an impact assessment for us” and at 6.2, which might as well read “and please do an equality impact assessment too while you’re at it”.  For shame, HMRC!)

Question 2.1: Do you agree that compliance legislation should be amended to
replicate current enquiry powers into the Self Assessment return to the End of
Year declaration?
Question 2.2: Do you agree that current HMRC and customer safeguards
should also be maintained?
Question 2.3: Are there any other options for preserving HMRC’s current
enquiry powers in MTD?

Question 2.4: Do you agree with the proposed approach to replicate HMRC’s
compliance powers for determinations, corrections, information powers and
discovery assessments?
Question 2.5: Do you have any other comments on how compliance powers
need to change to transition to MTD?

 

Question 3.1: Do you agree that 12 months is an appropriate length of time to
allow customers to become familiar with the new obligations before the new
penalty regime comes into effect?

Question 3.2: Do you agree that the period to wipe the slate clean should be
24 months? If not, what other period would be appropriate?

Question 3.3: We invite views on the design principles outlined for the pointsbased penalty. For example, do you consider there are any further elements
to build in to this basic model?

Question 3.4: At what stage for each of these different submission frequencies
should points generate a penalty?

Question 3.5: We would welcome comments on whether existing penalties are
sufficient to support compliance with occasional filing obligations. If not, what
more is needed?

Question 3.6: Do you agree that, in principle, a single points total that covers
all of the customer’s submission obligations is the right approach?
Question 3.7: Do you agree that the proposal outlined in paragraphs 3.25 to
3.28 is the right way to operate a single points total? If not, what alternative
would you suggest that ensures the design of the penalty is kept simple?

Question 3.8: We welcome views on whether the escalator model would be a
more effective way of aligning with the five principles described in paragraph
3.2?

Question 3.9: Do you agree that a fixed amount penalty is appropriate?
Question 3.10: Should the amount of fixed penalty reflect the size of a
business?

Question 3.11: Do you agree that points should only become appealable when
they have caused a penalty to be charged?

Question 4.1: Do you agree that 14 days is an appropriate length of time to
allow customers to either pay in full, or make arrangements to do so before
penalty interest is charged?

Question 4.2: Do you think that charging penalty interest is the right sanction
for non-compliance with payment obligations?
Question 4.3: Are there other commercial models that might be appropriate for
us to consider?

Question 4.4: We invite views on the design principles outlined for penalty
interest. For example, do you consider there are any further elements to build
into this proposal?

Question 4.5: Does model 1 or model 2 best meet the government’s objective
of providing a fair and proportionate response to late payment of tax?

Question 4.6: Do you agree that the timing of late payment penalties should
change to reflect the frequency of payment due dates?
Question 4.7: We invite views on the design principles outlined for late
payment sanctions. For example, do you consider there are any further
elements to build into these proposals?
Question: 4.8: Which proposal best meets the design principles?

Question 5.1: Should the current interest rules for Income Tax and Class 4
National Insurance contributions continue to apply in MTD?

Question 5.2: Do you have any initial comments about aligning interest rules
across taxes?

Question 6.1: Please provide details of how the proposed administrative
changes will affect you, including details of any one-off and ongoing costs or
savings.
Questions 6.2: Do these administration proposals have a significant or
disproportionate impact on groups with legally protected characteristics, as
recognised in the Equalities Act 2010?

One comment

  1. You’re not the only one still trying to work out what they’re after. In fact, I’m not entirely convinced that the person who wrote the condocs has anything but the most general impression of what TMA1970 actually says; ss8,9,12 etc will all need to be totally rewritten to accommodate this. But the condocs don’t even mention the fact. They’ve shown us a lovely picture of what technology could do, and forgotten about what the law needs to do. I just keep thinking Underpants Gnomes.



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