Response The consultation generated a lot of interest and respondents were supportive of the early engagement on this potentially difficult subject, and all were in broad agreement with the five principles. Many pointed out the potential tensions that exist between having a proportionate and fair system for individual taxpayers, whilst ensuring a consistent and standardised approach. There were differing views about the best overall penalty model with some favouring a greater use of interest in place of penalties, or suggesting adjustments to the current regime. Many were interested in exploring what the penalty model might look like.
Chapter 2 of the response document sets out the questions posed in the discussion document and summarises the responses given, which included:
views expressed by almost all respondents that an ideal penalty system is one that is simple, flexible, proportionate, appropriate and tailored; a system in which penalties are only issued where they are deserved; encouragement from over a third of respondents that HMRC should review its current approach to reasonable excuse and special reduction as hurdles to qualify are often too high to get over; views received from more than a quarter of respondents that decisions about behaviour and reductions for disclosure (both of which have a bearing on the amount of penalty charged) can be subjective, causing inconsistency in the application of penalties; concern expressed by a quarter of respondents that the VAT default surcharge produces very substantial penalties for comparatively trivial transgressions and does not differentiate between payments that are one day or several months late; general support for tailoring the penalty to take account of the customer’s overall compliance position and to reflect the nature or seriousness of the non-compliance rather than applying penalties on a tax- by-tax basis; and general agreement that penalties for first-time offences should ordinarily be suspended, subject to conditions and supported by HMRC-provided education, to encourage future compliance.
Respondents also suggested changes which they considered could improve compliance including:
issuing a warning letter (rather than a penalty) to first-time offenders; setting earlier deadlines for non-compliant individuals; staggering the due dates for returns and payments so that the return always falls due before the payment; and refunding penalties if compliance improves within a specified timeframe.
Next steps Chapter 3 of the response document sets out the conclusions HMRC have come to after analysing the responses.
HMRC will develop a series of options in respect of the review of penalties over the next few months, after which further consultation will take place. Subject to Ministers’ agreement, HMRC would propose to issue firstly a further consultation document on proposals for a new penalty scheme for late filing and late payment and then a document on inaccuracy penalties. If Ministers ultimately decide to proceed to legislation the draft legislation would be consulted on; the earliest possible date for legislation would be Finance Bill 2017. HMRC will also publish the roadmap for “ Making tax easier: The end of the tax return ” later this year. HMRC published this document in March 2015 which explained how customers will be able to view and manage their tax information in an online digital account. It outlines how HMRC will use the information it already holds to populate the digital accounts so that customers can deal with their tax affairs quickly and easily.
CIPP comment The CIPP Policy Team will continue to be involved in all consultation and will keep members and the profession updated accordingly.
CIPP response to HMRC Penalties discussion document – May 2015
Real time information on or before reporting for micro employers 23 September 2015
HMRC has published the findings of research conducted to help establish readiness among the existing micro employer population to move to full on or before reporting in April 2016.
CIPP Policy News Journal
25/04/2016, Page 285 of 453
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