Pre-Budget Report 2009 commentaries - Miscellaneous
"The commentaries below are written in general terms. Details can also be found in our downloadable Pre-Budget Report brochure. You are strongly recommended to seek specific advice before taking any action based on the information given, both in the commentaries and in the publication."
Equitable liability
An individual in the Self Assessment system is required to file an annual return. If they fail to do so HMRC is able to issue a determination (effectively an estimated assessment) and the tax shown on the determination is due for payment unless the taxpayer files a return within a set period of time. However, in some cases, if this deadline is missed, HMRC may still allow a late return to be made by concession. Legislation will be introduced to permit HMRC to continue to apply this treatment provided the taxpayer can show the figure of tax due is excessive compared to the correct amount payable and they bring their tax affairs completely up to date.
Comment:
HMRC have been reviewing all Extra Statutory Concessions following a case which cast doubt on their legality. Some concessions have been enshrined in legislation and others have been scrapped on the basis they have become obsolete.
HMRC originally planned to scrap this particular concession, but this caused a backlash from the professional bodies. This was because the concession had proved of fundamental value in cases where an individual’s tax affairs had got into a muddle perhaps because of illness or just an inability to cope with paperwork. In such cases HMRC may have been contemplating bankruptcy proceedings and the concession gave the opportunity for a last minute reprieve to be sorted out.
DISCLOSURE OF TAX AVOIDANCE SCHEMES (DOTAS)
DOTAS was introduced in 2004 and required promoters of tax avoidance schemes to notify HMRC of new schemes within strict deadlines. DOTAS now applies to income tax, corporation tax, CGT, SDLT, VAT and NIC. The Government has used information from DOTAS to introduce a range of anti-avoidance measures every year since 2004 - a total of 49 measures, closing off over £12 billion in avoidance opportunities.
A consultation document has been issued setting out the following five proposals to improve the disclosure regime:
- a change to the time when a promoter must disclose a marketed scheme to HMRC;
- a power to require persons who introduce potential clients to a promoter to provide information about the promoter;
- increased penalties for failure to disclose a scheme;
- promoters to provide HMRC with periodic information about clients to whom they have issued a scheme reference number; and
- revisions and extensions to the extensions to the Hallmarks.
Comment
DOTAS has become an important weapon in HMRC’s armoury and therefore we can expect the rules to be kept under constant review so that it is responsive to changes in market trends.
Tax administration and debt management: enforcement of judgements and litigation
HMRC has announced that for decisions from courts and tribunals after 1 April 2010 they will take a tougher stance on the collection of debts in litigation.
Hitherto, HMRC has been prepared to forgo collection of tax where there is a further continuing appeal, notwithstanding that they have the power to proceed with collection.
They intend now to take a consistently tough approach and will normally require payment of the tax due in all cases where they win whether or not there is a pending appeal.
Comment
As a result of this change, because interest in these circumstances will be on a simple basis, it may well be that the taxpayer will not be put back in the overall position that he should have been in if HMRC had not erroneously claimed the tax.