1.1 NAO report on HMRC annual report and accounts
The National Audit Office (NAO) has issued its annual report on HMRC. The report considers parts of HMRC's business including the objective of maximising revenues, progress in transforming the way it administer taxation and how well tax reliefs are managed.
The NAO considered HMRC's objective of 'maximising revenues' (as opposed to its previous objective of 'maximising revenues due') and whether the extra costs of compliance justified the revenue brought in.
Two key areas of risk were highlighted by the NAO in relation to HMRC's progress in transforming the way it administers tax ie Making Tax Digital.
- The first was optimism bias in its main assumptions. For instance, HMRC has assumed that taxpayers will move away from telephone and postal services and towards online services.
- The second area of risk is understanding the costs and benefits to taxpayers as HMRC are yet to estimate the costs of the transition to online services for individual taxpayers or businesses.
The NAO made some recommendations in relation to how HMRC manage tax reliefs. These include publishing all of its information on the cost and impact of tax reliefs to enable parliament to understand whether they are working as intended. The report focuses on private residence relief, entrepreneurs' relief, patent box, venture capital trusts and interest paid on qualifying loans.
www.gov.uk/government/publications/hmrc-annual-report-and-accounts-2015-to-2016/hmrc-annual-report-and-accounts-2015-16-executive-summary (then click '3. Performance - how we did and our plans')
1.2 Tax avoidance schemes: accelerated payments
On 29 July 2016 HMRC updated its list of those avoidance scheme reference numbers (SRNs) whose users may be issued with an accelerated payment notice (APN).
HMRC confirms that this list is under continual review to ensure that only current and newly disclosed schemes whose users may receive an APN are included. The next update of the list is due to be published in October 2016.
- New scheme reference numbers added are: 09985774, 39648582, 52889153.
- No scheme reference numbers have been removed.
1.3 Labour leadership candidates tax plans
With the intention of informing our readership, we set out below key statements relating to tax of the Labour Party leadership candidates.
Both candidates say they would reintroduce a 50p income tax rate for earnings over £150,000.
Jeremy Corbyn was reported in the Guardian on 22 July as saying at a closed seminar that rather than cut the deficit he would 'raise taxes on the rich, clamp down on corporate tax avoidance and use up to £93bn of corporate tax reliefs'. While avoiding any mention of specific personal tax changes, he is reported to have said that the wealthy would pay a little more, not just in absolute terms but proportionately, while the bulk of extra Treasury receipts would come from higher corporate tax revenues.
Owen Smith has called for a more 'progressive' system, including effectively an investment income surcharge of 15% for additional tax rate taxpayers, although this has been described as a 'wealth tax'. In his speech on 27 July 2016, at the Knowledge Transfer Centre Advanced Manufacturing Park, he said:
'My plans will ensure the wealthiest in society and big businesses pay a much fairer share...we'll ask the wealthiest in society to pay a fair share.
'We'll re-instate the 50p top rate of income tax – the Tories' tax cut for millionaires – and put a stop to further reductions to Corporation Tax. We'll reverse Tory cuts to Inheritance Tax and Capital Gains Tax. And to tackle the historic inequality that is holding Britain back, Labour on my watch will take the historic and necessary step of levying a Wealth Tax. A surcharge on investment earnings by the wealthiest 1% in our country, raising £3Billion a year. ... That's the kind of revolution I'll deliver.'
1.4 PAC: Waiting on the telephone
The Public Accounts Committee (PAC) has published its latest report into HMRC's 'Quality of service to personal taxpayers and replacing the Aspire contract'. It warns that further cuts to Government spending on personal tax services could trigger another collapse in customer service, which led to taxpayers spending some four million hours waiting for HMRC to answer the telephone in 2015/16. On digital services, the PAC commented:
'HMRC plans to further digitise its services and reduce the number of staff in personal tax by a further 34% by 2020–21. It acknowledges that the challenge of getting customers to use online methods of contact (for example, a digital tax account) is the key risk it faces in personal tax services.
'Recommendation: HMRC must test whether its forecasts of demand are realistic and be prepared to flex its resources as necessary to ensure service demand is met. HMRC should pilot how taxpayers will respond to new digital services before they are widely implemented.'
The full report, which includes other key recommendations such as: 'It should ... ensure the optimal balance is struck between its own costs and those borne by customers' is available at:
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