Extra statutory concessions
At present, HMRC are able to make concessions outside of the strict interpretation of statute that affect the amount or payment of tax. Following a landmark case (‘Wilkinson’), HMRC have been reviewing whether such concessions can continue. It is quite likely that many of the current statutory concessions will be legislated for in the Autumn, following the proposed completion of their reviews. Mazars believes this is long overdue and looks forward to the result of HMRC’s internal review with interest.
Single penalty regime – further clarity
Building on legislation introduced by FA2007, penalties for a failure to notify HMRC of a new taxable activity will now be subject to the same proposed 30%, 70% and 100% penalty regime. All current penalty provisions are to be repealed and replaced by just two regimes which will bring together the current various regimes relating to taxes, levies or duties with effect from 1 April 2009. The penalties levied will relate to filing an incorrect return and the failure to notify a taxable activity. The amount of the penalty will depend on the behaviour which led to the failure and whether it was the failure to take reasonable care, deliberate understatement, or deliberate understatement with concealment. A further new penalty will be introduced and levied on a third party whereby that third party has been responsible for causing an understatement of tax. No penalties will apply where there is no loss of tax or NIC.
New HMRC powers proposed
New legislation will be introduced in the Finance Bill that will give HMRC new powers relating to:
1. record keeping requirements;
2. inspection and information powers; and
3. the ability to make tax assessments out of time relating to fraud or discovery.
There will be a transitional period whilst these new powers are brought in that will run from 1 April 2009 to 31 March 2010. The new powers will see a raft of legislation eventually become obsolete in connection with record keeping, inspection and information powers. This is in keeping with the alignment of the various powers available to HMRC following the merger of the Inland Revenue and HM Customs and Excise.
Of interest, though, will be the changes to time limits that allow HMRC to raise assessments out of time. In future, assessments made outside of the ‘enquiry window’ will need to be raised in the following periods:
| Mistake | Discovery | Failure to take reasonable care | Deliberate understated or failure to notify chargeability | |
|---|---|---|---|---|
VAT |
4 years | N/A | 4 years | 20 years |
Income tax & capital gains tax |
N/A | 4 years | 6 years | 20 years |
Corporation tax |
N/A | 4 years | 6 years | 20 years |
PAYE |
4 years | N/A | 6 years | 20 years |
On the back of the raft of ‘discovery’ assessments raised following Dextra, this is indeed good news.
