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HMRC Powers

Power to give statutory effect to existing concessions

Legislation will be introduced to provide for existing HMRC concessions to be made statutory by Treasury order.

This power will be operative on or after the date that the Finance Bill 2008 receives Royal Assent, but no orders under this power are expected to be made until after HMRC’s review of its concessions has been completed.

HMRC review of powers, deterrents and safeguards: Penalties for incorrect returns and failure to notify a taxable activity

A single penalty regime for incorrect returns is to be introduced, to cover all the taxes, levies and duties administered by HMRC.

The penalty will be determined by the amount of tax understated, the nature of the behaviour giving rise to the understatement and the extent of the disclosure by the taxpayer.

There will be no penalty where a taxpayer makes a mistake, but there will be a penalty of up to 30% for failure to take reasonable care, 70% for deliberate understatement and 100% for deliberate understatement with concealment. Each penalty will however be substantially reduced for disclosure, more so if it is unprompted.

This is expected to apply for return periods commencing on or after 1 April 2009 where the return is due to be filed on or after 1 April 2010.

Provision will also be made for penalties for failure to register or notify HMRC of a new taxable activity, expected to have effect from 1 April 2009. There will be no penalty unless there is tax and/or NICs due but unpaid as a result. The penalties are similar to those to be introduced for incorrect returns, as mentioned above.

HMRC review of powers, deterrents and safeguards: Compliance checks

Legislation will be introduced to reform the rules for checking that businesses and individuals have paid the correct amount of income tax, capital gains tax, corporation tax, VAT and PAYE or claimed the correct reliefs and allowances.

The date of introduction will be 1 April 2009, although time limits for making assessment and claims will become fully operative on and after 1 April 2010.

There will be:

- aligned and modernised record keeping requirements;

- new inspection and information powers

- aligned and modernised time limits for making tax assessments and claims.

HMRC review of powers, deterrents and safeguards: Payments, repayments and debt

Measures are to be introduced to make it easier for taxpayers to pay what they owe on time, and for HMRC to tackle those who seek to avoid their obligations, by paying late or not at all. The changes will be as follows:

- Credit card payments will be accepted by HMRC from Autumn 2008

- HMRC will be able to set repayments due to individuals and businesses against debt

- HMRC’s debt enforcement powers will be modernised and aligned with regards to collecting unpaid sums by taking control of goods in England and Wales or by taking action through the civil courts.