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HMRC would like to reduce the time spent on enquiries and included some ideas in annex B of the March 2006 consultation document 'Modernising Powers, Deterrents and Safeguards'. HMRC intend to trial these ideas from July 2006.
Both the ICAEW's Tax Faculty and The Chartered Institute of Taxation point out that this does not give HMRC time to consider responses to the consultation, but HMRC say that the consultation document made clear that they are proposing to trial them, although it was not stated in the document when originally issued, the current version on HMRC's website includes this intention. The ideas are:
- Current business record-keeping review: checking current records to make sure they meet HMRC standards.
- A short risk review: HMRC will issue a questionnaire to a business based on a risk profile developed for the particular trade, industry or behaviour grouping to which the business belongs.
- Self audit: this will be based on letters or telephone calls requiring the taxpayer to consider potential risks around specific entries on their return, making any necessary adjustment and notifying HMRC of the adjustment made.
- Telephone contacts: dedicated HMRC teams will telephone taxpayers and explain why HMRC consider that an error has been made on the return.
The intention is to see if there are quicker, less costly and more effective ways of working that can benefit both taxpayers and HMRC.
Taxpayers would not have to agree to a current business record-keeping review under existing legislation and it is questionable, according to the Tax Faculty, whether HMRC have power to insist on using any of the other interventions either. Both the Faculty and the CIOT are concerned that the trials are going ahead before HMRC will have had time to evaluate the responses to the doucment. The Faculty says that if a taxpayer is included in an HMRC trial it, it is up to him to decide whether or not to co-operate. Some of the proposals seem helpful but at the same time incorporate potential dangers, as some of them seem to risk by-passing agents. The CIOT states in its response to the powers document that it too has some concerns about the role of agent, and is concerned at how important the role of the agent will be.
The Faculty understands that agents should be sent copies of any letters sent to their clients, including letters giving advance notice of telephone contact. Overall, the Faculty hopes that people do take part because some of the proposals seem to provide a basis for reducing work for everyone.
A precise start date for the pilots has not yet been set. An HMRC spokesman says that the 'trials wil be considered alongside responses to the consultation document'. He added that 'taxpayers' reactions and the impact of costs will be included in the evaluation criteria'.
