CIOT: Tax defaulters – HMRC must have resources to process extra information
The Chartered Institute of Taxation (CIOT) has responded to the launch of the ‘Managing Deliberate Defaulters’ programme by HM Revenue and Customs (HMRC) today.
The Managing Deliberate Defaulters (MDD) programme will apply to businesses and individual taxpayers who have been found to have made deliberate errors resulting in a tax loss of over £5,000, unless the penalties charged have been reduced to the minimum allowed through co-operation with HMRC.
(This is in addition to the potential publishing of names of those with errors resulting in a tax loss in excess of £25,000). In addition to the penalty for the original offence, for the five years afterwards, the taxpayer will be subject to additional checks on their returns and visits from the taxman to check on their compliance.
HMRC will send a letter to businesses in the MDD programme requiring additional information to be submitted along with their tax returns for the following five years.
Gary Ashford, Chairman of the CIOT’s Management of Taxes Sub-Committee, commented:
“It is right that HMRC come down hard on those who deliberately under-declare tax. Tax evasion is a serious crime. Cheating the Revenue robs the Exchequer of the money the Government need to fund public services.
“However, it is crucial that HMRC get decisions right on whether errors are deliberate or simply the result of carelessness and that penalties and other sanctions are proportionate. A £5,000 error for a large corporation is quite small – and could result in a huge amount of additional reporting to HMRC.
“It is important that HMRC are clear about what additional information needs to be reported by businesses in the programme and the format in which it is required.
“We also have concerns about the extent to which HMRC are trying to automate this process. It is questionable whether the additional information requested will help to assess whether returns are accurate and, for the programme to work, HMRC will need adequate human resource to analyse and make effective use of the information when they receive it.”
Heather Brehcist, the CIOT’s Professional Standards Officer, added:
“A further issue for tax advisers will be identifying those in the MDD programme – especially if it is a new client. The CIOT will be producing guidance on this. In the meantime advisers will need to ask potential clients and their previous advisers whether an individual is in the programme to ensure they know what work they are quoting for.”
Notes for editors
1. Details of the Government’s announcement can be found at: www.hmrc.gov.uk
2. The Chartered Institute of Taxation (CIOT) is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities.
The CIOT’s comments and recommendations on tax issues are made solely in order to achieve its primary purpose: it is politically neutral in its work. The CIOT will seek to draw on its members’ experience in private practice, government, commerce and industry and academia to argue and explain how public policy objectives (to the extent that these are clearly stated or can be discerned) can most effectively be achieved.
The CIOT’s more than 15,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’.
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George Crozier
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The Chartered Institute of Taxation
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