The document explores 22 potential opportunities for reform over three areas: HMRC’s enquiry and assessment powers; penalties; and safeguards. On safeguards, the consultation focuses solely on the processes in place for taxpayers to make use of alternative dispute resolution (ADR), statutory review and appeal to the First Tier Tax Tribunal.  

The opportunities for reform include the following: 

HMRC’s enquiry and assessment powers    

• Aligning enquiry and assessment powers across the various taxes HMRC administers;
• enabling the tax consequences resulting from non-compliance in relation to one tax to be corrected across all affected periods and tax regimes; and
• modernising how HMRC sends statutory notices to taxpayers and agents (including the use of digital and self-serve options) while providing alternative provision for those who are digitally excluded. 

Penalties 

• Increased alignment across different tax regimes, especially in relation to penalties for late filing, late payment, failure to notify and inaccuracies; 
• simplification of the calculation of penalties, which includes removing the impact of the behaviour of the taxpayer in determining the size of penalty;
• use of penalty suspension for the first non-deliberate or careless failure by a taxpayer;
• regular uprating of fixed penalties (eg  every five years);
• setting fixed penalties with reference to the taxpayer’s income; and
• the role of penalty escalation for continued and repeated non-compliance.  

Safeguards

• Aligning the processes for direct and indirect tax appeals to ADR; 
• expanding access to statutory reviews and ADR; 
• mandating use of statutory reviews in certain circumstances (eg in cases relating to late filing penalties);
• withdrawing the availability of statutory reviews where, for example, there is no reasonable grounds for appeal or where the dispute involves an avoidance arrangement; and
• making greater use of digital appeal routes.

The call for evidence has been made as part of the government’s tax administration framework review. 

Responses are required by 9 May 2024. If you have comments on the proposals that could contribute to a response from ICAEW, please contact Richard Jones.