Last updated: 10 Jun 2024 05:00 Posted in:
A single set of rules governing all taxes could help make the UK’s tax administration system easier to navigate and less costly for taxpayers and advisers, legal experts have said.
In a response to the UK government’s recent consultation on how certain aspects of tax administration could be reformed, tax experts at law firm Pinsent Masons suggested that setting out the powers across all taxes in a single piece of legislation, with appropriate cross-references from the specific tax regimes, could ensure consistency is maintained.
“The need for concurrent but different methods of assessment and appeal is unnecessarily complex,” said Ian Robotham of Pinsent Masons. “It also results in discrepancy between the periods for which income tax and NICs can be recovered, because one is based on a tax year basis and the other on a strict time limit prescribed in the Limitation Act 1980, which is linked to monthly rather than annual accrual of NICs.”
He added that deadlines are less likely to be missed where there is a more uniform system. “This would benefit HMRC for raising assessments, but also taxpayers, for example in ensuring that opportunities to make claims or amendments are not missed,” he said.
One area of variation suggested is HMRC’s powers for value added tax (VAT) and other indirect taxes.
“The powers for VAT are well established and well understood and changing them would require significant consideration of the relative merits of any proposed new system against the disruption costs,” said Bryn Reynolds, also a tax expert at Pinsent Masons.
Issues for VAT generally cover multiple periods, according to Reynolds, so it would be important not to introduce four times the amount of administration due to the quarterly nature of most VAT returns.
There may be some elements of the direct tax system which could be introduced into the indirect tax regime, he said, for example, the option for a taxpayer to apply for a closure notice in order to bring an enquiry to an end and move on to the next stage of a dispute.
The consultation, which closed in May, focuses on HMRC’s enquiry and assessment powers, penalties and safeguards. It is part of the government’s plan to simplify and modernise these aspects of the tax administration framework, in a bid to provide greater certainty and consistency, drive compliance and ensure taxpayer rights are protected.
“The powers for VAT are well established and well understood and changing them would require significant consideration of the relative merits of any proposed new system against the disruption costs.”
Ian Robotham, Bryn Reynolds, Pinsent Masons