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John Andrews of the Low Incomes Tax Reform Group (LITRG) reports that recent discussions with HMRC have been useful and productive.   

Introduction

LITRG is often critical of HMRC for not taking on board our suggestions.

But sometimes we can report successes. Here we outline where we have helped influence changes to HMRC’s proposals on modernising and aligning the powers of the former Inland Revenue, and Customs and Excise.

LITRG has been an active participant in the many consultations on this topic. Our last article focused on the proposals to introduce the same record-keeping requirements for Inheritance Tax as for other taxes. One welcome piece of news in this year’s Budget is that HMRC have bowed to the wishes of LITRG and other representative bodies, and decided not to carry out that measure. 

Of course it is impossible to please everyone all of the time; particularly as HMRC are faced with the difficult task of reviewing, simplifying and aligning the myriad powers inherited on merger. But we are pleased to note that in their response to the latest consultations, HMRC have taken on board many of our representations:

Penalties for late filing of returns and late payment of tax

• Originally HMRC proposed that there should be a minimum late payment penalty. We felt this could be disproportionate where people owed only small amounts of tax which they paid late. HMRC have now withdrawn their proposal.
• HMRC have acknowledged our plea that not everyone has ready access to the Internet, and have agreed to look at producing a simple hard copy leaflet explaining the ‘reasonable excuse’ provisions if a taxpayer has filed a return or paid late.
• HMRC agree that legislation should include clear provisions as to how penalties interact, the absence of which could mean that taxpayers are disproportionately penalised for a single error. 
• In the consultation we spoke up for older or disabled people who employ carers with money provided by their local authority (‘direct payments’). By doing so they acquire some of the responsibilities of employers, such as payroll obligations, and become subject to HMRC’s new compliance regime. As we requested, HMRC have now promised to consult on what this means for such 'accidental' employers.

Debt management

• HMRC is introducing a power to obtain information about tax debtors from third parties. We and TaxAid argued that the original draft clause was too widely-drawn. HMRC have therefore agreed to narrow its scope and specifically exclude most voluntary sector advisers from the definition of ‘third party’. 

Tax repayments

• We criticised recent consultation for failing to focus on repayment of tax.  HMRC say that action now has been taken to speed up repayments.
• Also welcome is an agreement to defer introduction of the new four-year time limit on claiming a repayment until at least 1.4.2012 for non-Self Assessment taxpayers.  Coupled with the new 'taxback' initiative for those in receipt of Pension Credit ( reported in our Budget article entitled Budget: Not Much to Smile About ), we hope this will allow many more people to make claims where they have paid too much tax in the past. 

Tax payments

• HMRC have agreed to explore alternative payment arrangements suggested in our last consultation response, including modernising Certificates of Tax Deposit and considering some form of tax savings account.
• HMRC now accept that plans to pay tax bills by instalments (‘payment plans’) should not be based only on direct debit and are exploring alternatives; in particular we are pleased to note they have agreed to accept standing orders.
• For payment plans, HMRC acknowledge that they need to communicate clearly with taxpayers. Their ongoing work will include looking at an online calculator to forecast liabilities - we hope that similar help will be available for those without Internet access. 
• In a world where 17 million people in the UK remain potentially 'digitally excluded', we strongly objected to the fact that HMRC’s proposals seemed to limit the option of new payment plans to those who file tax returns online; so we are glad to note that they are now considering how paper filers can be included.
• HMRC have agreed that their original proposal to cancel payment plans on a first default was too harsh and they will look at how to build in some flexibility.

Conclusion

With such extensive changes in HMRC’s powers, it is pleasing that some of our representations have been listened to.  But this is not a one-off process.  As the new powers are gradually implemented, we will continue to put the case for the unrepresented taxpayer (and benefit/credit claimant) to ensure that they are operated fairly.