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Persons Known to HMRC

HM Revenue & Customs (HMRC) has commenced yet another campaign, this time called The Tax Return Initiative. (See Tax Return Initiative Offers Chance to Settle Tax Bills). The campaign is disappointingly narrow in scope, since it focuses only on those people who have already been asked by HMRC to submit a tax return in earlier years, but have failed to do so. In other words, these are people about whom HMRC is (in theory at least) already well aware.

It is rather disquieting that HMRC has sought to address these apparent failures by way of a campaign, rather than by tracking down specific individuals and demanding that they bring their respective tax affairs up to date. Previous campaigns have focused on areas of uncertainty, where HMRC had reason to believe that there might be non-compliance in certain sectors and wanted to encourage a fresh start. 

Here, however, HMRC already knows exactly who is being non-compliant, since a failure to provide a tax return when one has been requested is in breach of the legislation (Taxes Management Act 1970 s 8). So it would be easy to infer either that HMRC is running very low on resources, or has become a little ...lazy? In truth, a substantial proportion of those who have not made returns will have done so for good reason: they may have ceased receiving the income that required them to fill in a return, or they may have paid the full amount of tax - or more - than they actually owe. So there will be many cases where HMRC is going to get little money (or may have to refund tax) as a result of this campaign. But strictly, a return is required to be made if it has been correctly issued.

Get in Line!

On the one hand TaxationWeb is more than happy to promote any efforts made by HMRC to help and encourage people to get their affairs in order. But on the other hand, it is getting hard to keep track of all of the various narrowly targeted campaigns which HMRC has favoured over the last couple of years - and there are even more on the way, according to HMRC's Campaign News and Updates page, this time for "Direct Selling" and yet another bite at the Home Improvement sector. Given the broadly constant background noise about tax campaigns, taxpayers might be forgiven for missing their slot.

Whilst HMRC's own press release Tax Return Initiative Offers Chance to Settle Tax Bills states that "...the campaign is... ...available to any individual who has tax returns to submit to HMRC for these years [up to 5 April 2010 and no later]...", the new Tax Return Initiative Guide itself quite clearly states that you cannot enlist in the campaign proper "...if you are not currently registered for Self Assessment but need to file a tax return." So we now have a campaign with favourable terms exclusively for individuals whom HMRC knows to have been non-compliant, which are not guaranteed for people who are perhaps thinking of "doing the decent thing" and coming forwards unprompted!

To be fair, the Guide does goes on to encourage anyone who has outstanding tax liabilities to contact HMRC. It could be argued that to take these lines out of context is misleading but one has only to consider the preceding section at TMA 1970 s 7 to appreciate that it is not only those who have already been issued a notice to file under TMA 1970 s 8 who can have outstanding returns to file.

Time for a Real Amnesty?

The problem with the continual "background noise" of narrowly targeted campaigns is that people will start to ignore them, (or simply fail to notice when a new one starts), and it may be years before the 'right' campaign comes along for them. The obvious solution is to draw up a universal amnesty, of sufficient duration and with enough publicity to ensure that its target audience notices and has time to take action. There are of course risks that some might perceive a general amnesty to be unfair to those who have already settled on less favourable terms, and that might be a difficult issue to address. Also, how to deal with those who still don't come forwards, even after a general amnesty - full investigations and even prosecutions are expensive. But it may well be that the overall benefit for both sides far outweighs the potential problems.