The government have published their response to the Treasury Sub-Committee's report 'Disputing Tax' which covers how HMRC deals with tax avoidance and evasion and their approach to conducting tax enquiries and resolving tax disputes.

The report made thirteen recommendations, also reminding HMRC that it must be fair and consistent in its application of tax measures. In their response the government have accepted or partially accepted all of the recommendations:

Tax Avoidance

Recommendation: HMRC should write to the Treasury Committee on an annual basis with a summary of the number and characteristics of people it knows to be involved in tax avoidance schemes.

Response: Partially accepted. HMRC will publish further information about those involved in tax avoidance and will explore options to publish additional information about the number and characteristics of those involved in tax avoidance on an annual basis.

Recommendation: Provide an update on the number of cases that have been concluded under the Contractor Loan Settlement Opportunity and how many chose not to take it up.

Response: Accepted. The government estimate that:

  • around 50,000 taxpayers involved in disguised remuneration schemes are affected by the loan charge.
  • More than 28,000 scheme users expressed an interest in settling their tax affairs.
  • Between Budget 2016 and 30 June 2019, HMRC has agreed about 8,000 settlements bringing into charge around £2 billion.
  • It is too early to give a final figure for how many users of disguised remuneration schemes did not settle and how many of those subject to the loan charge have complied with their filing obligations.

Recommendation: There have been delays in providing settlement terms to those wishing to settle their affairs under the Contractor Loan Settlement Opportunity. HMRC recommended that it closely monitor its response times and report back on progress in providing settlement calculations.

Response: Partially accepted. HMRC acknowledges there have been delays. HMRC deployed additional resources to support the settlement process; by 31 August 2019 over 99% of users had received settlement calculations.

HMRC will allow enough time for those taxpayers who provided information by 5 April 2019 to settle their schemes and has confirmed no one who provided the necessary information by 5 April 2019 will be disadvantaged if settlement of their case takes longer due to HMRC delay.

Recommendation: HMRC to work with the professional bodies (and report back by June 2020) to consider whether their standards are sufficiently clear about conduct when members are advising on tax avoidance.

Response: Accepted. HMRC is exploring ways to raise standards in the paid tax agent market, including agents who do not belong to any of the professional bodies and are not bound by the Professional Conduct in Relation to Taxation (PCRT). The 7 PCRT-owning professional bodies have said they intend to review the PCRT in autumn 2019. HMRC will engage with them to seek co-ordinated action alongside that review.

Recommendation: HMRC should vigorously pursue the promoters and enablers of avoidance schemes to the full extent of their powers and produce a clear strategy for dealing with tax advisers that continue to promote or enable tax avoidance.

Response: Accepted. Following commitments to double resources to tackle promoters of such schemes, HMRC is updating and strengthening its strategy, expecting to finalise it by 31 March 2020.

Recommendation: HMRC to ensure it leaves good time to ensure enquiries are opened and, where necessary, assessments made or amended, to give proper regard to the potential impact of the use of extended time limits.

Response: Accepted and agreed. During enquiries, HMRC will seek to maintain appropriate communications with taxpayers.

Recommendation: HMRC to set out which, if any, powers and measures need tightening or enhancing through legislation, or resources need strengthening, when it comes to dealing with offshore promoters, taxpayers or jurisdictions concerning tax avoidance and evasion.

Response: Accepted. HMRC continues to keep legislation and resource needs under review. Changes to tax policy, including to HMRC’s powers, are announced at the budget.

Dispute resolution

Recommendation: HMRC to provide a clearer explanation of its definition of ‘vulnerable’ when it comes to identifying this sub-set of customers.

Response: Accepted. HMRC’s advisers are trained to look out for characteristics of vulnerability including: confidence, mental or emotional state, capability, complexity and disability. Staff are expected to transfer vulnerable customers to Extra Support advisers with the skills, knowledge, empathy and equipment required and be a consistent point of contact. HMRC is working with customers who have used their Extra Support Services (ESS) to see if there are other characteristics indicating vulnerability of which they are not aware.

Recommendation: HMRC reports on how it has used the insights of groups such as the Low Incomes Tax Reform Group, the tax charities and other bodies to gain insight into the difficulties faced by taxpayers who cannot afford to pay for advice.

Response: Accepted. HMRC is working with the Voluntary and Community Sector (VCS) through a range of forums and building on the experience of the ESS to see how best to support customers undergoing compliance checks. HMRC has taken action to improve the information provided to customers at the start of a compliance check so they are clearer on what they can expect and what their legal rights and protections are. HMRC acknowledges some of the people the VCS support may lack trust or confidence in dealing with HMRC direct, and some may be in dispute with HMRC, so the VCS is an integral part of HMRC’s strategy to support customers.

Recommendation: HMRC urgently reviews and improves the accessibility, quality and level of detail of guidance it makes available to vulnerable taxpayers.

Response: Accepted. HMRC recognises the importance of clear, concise and understandable guidance but more improvements can be made to GOV.UK, an extensive programme of which is underway. HMRC will work with the Government Digital Service to see what more can be done to improve guidance aimed at unrepresented customers, using customer research and involving bodies such as the Chartered Institute of Taxation and Low Incomes Tax Reform Group (LITRG), to deliver improvements by March 2020.

External link:

Government response to the conclusions and recommendations of the Treasury Sub-Committee report on ‘Disputing Tax’