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TW Ed thinks HMRC's Digital Strategy should be renamed "Digital To A Fault"

A Good Morning to you all. TW Towers has been a hive of activity for some months now, reaching near-fever-pitch in the last few weeks. Something is afoot – and not just my size-9s.

200,000 Will Miss Out on New Government Childcare?

There are a few stories that I should mention. There is a piece in the Independent of a “leaked” HMRC report which estimates that almost 10% of eligible families (around 200,000 out of 2 million) will be unable to enrol for the government’s flagship new childcare tax incentives, because they do not have access to the Internet. Of course, to cut administration costs, the only channel is online. Perhaps the government’s much-vaunted policy of “Digital by Default” should be renamed “Digital to a Fault”. I wonder how the public would react if a minister were to suggest that “those parents without Internet access at home could always use their local library”, à la Marie Antoinette.

I had rather hoped that the government – and particularly HMRC – had learned the error of its ways thanks to the proper drubbing meted out by the courts, and thanks in no small part to the Low Incomes Tax Reform Group, which helped to establish that HMRC’s insistence on the filing of VAT returns only online was unlawful, in breach of Human Rights. (LH Bishop Electrical Co Ltd & Others v HMRC Commissioners [2013] UKFTT 522 (TC)) LITRG has much to say on “Digital Exclusion” – see for instance its response to the Government’s Call for Evidence on digital reforms. I expect they will have more to say on this, in due course. I hope so.

I Thought Income Tax was Supposed to be Progressive..?

Last week, the Guardian (and other papers) reported that economists at the London School of Economics, and the Institute for Social and Economic Research at the University of Essex had found that “sweeping changes to benefits and income tax have had the effect of switching income from the poorer half of households to most of the richer half, with the poorest 5% in the country in terms of income losing nearly 3% of what they would have earned if Britain’s tax and welfare system of May 2010 had been retained”. The Personal Allowance has of course been significantly extended but I guess in order to benefit from that, you need to have sufficient taxable income in the first place.

Millions Missing Out on £Billions?

A few weeks ago, I asked whether or not HMRC should exercise its vast information powers to benefit taxpayers by pre-populating tax returns with all the details it already held. (Will HMRC be Preparing Your Next Tax Return..?) But I have recently been reminded of an old DWP report which said that roughly £10 Billion in benefits went unclaimed each year. (Update: Richard Murphy's Tax Research blog has timeously provided an up to date figure of £16 Billion for unclaimed benefits!) So, given the extent of powers both legislative and practical which HMRC and its sister departments have broadly granted themselves, is it now time to re-evaluate the basic tenet that all income must be declared but benefits and reliefs will be granted conditional on the making of a claim? Could HMRC et al not at least meet people halfway, and perhaps contact them to suggest that records indicated that they might be able to claim X, Y and Z?

Progress on HMRC’s Access to People’s Bank Accounts

Finally, some potentially good news: HMRC has published that it has introduced further safeguards to its much-criticised proposals to enable the Direct Recovery of Debts from taxpayers who “won’t pay”, rather than “cannot pay”. (See Government Promises to Strengthen Safeguards for Direct Debt Recovery)

I really do welcome the prospect of further safeguards, such as a promise to establish a specialist unit tasked primarily with identifying vulnerable taxpayers – although I note in page 18 of the main paper that it seems that this unit’s primary function may be limited to identifying vulnerable taxpayers only in the Direct Debt Recovery (DRD) population, and weren’t we previously assured that these 17,000 debtors were all hardened “won’t pay” villains, rather than those who just “can’t pay”? HMRC has also decided to shelve the idea of demanding banks provide 12 months’ bank statements for those subject to DRD proceedings, although I do wonder how much further they would have to stretch their powers under FA 2008 Sch 36 to check a person’s “tax position”, to the same end. And HMRC's "bulk" information powers can be applied to "a person".  (Thanks to Para 1 (4)(a) of the ridiculously wide-ranging FA 2011 Sch 23).

Perhaps most important is the promise that there will be a face-to-face meeting with each and every taxpayer considered for DRD proceedings. Surely this will help to eliminate anyone who cannot pay. Of course, this assumes that those meetings will actually take place, unlike those phantom telephone calls HMRC said it had made (on Christmas Day – really?) in the Kestrel Guards tax case. (Kestrel Guards Ltd v HMRC TC 3324). HMRC has committed to work closely with the voluntary sector over DRD. Something tells me LITRG is going to be kept busy.

Best regards,

TW Ed