In a recently released policy paper, the HMRC has set out how it intends to support taxpayers over the coming period and its longer-term plans for tax administration reform.
The policy paper includes commitment from HM Revenue and Customs (HMRC) that it will enhance its online tax services, and in particular its webchat offering, and will deliver on the Government's newly announced '10-year vision to establish a modern tax administration system'.
For instance, the UK Government has announced that VAT-registered businesses with a taxable turnover below £85,000 (those who have voluntarily registered for VAT) will be required to follow Making Tax Digital (MTD) rules for their first return starting on or after April 2022. Further, MTD for income tax will be introduced for the first time, for accounting periods starting on or after 6 April 2023. This will require more businesses, the self-employed, and landlords to report to the tax authority quarterly, using MTD-compliant software.
In its reform plans, the Government has also indicated that as well as bringing in more frequent reporting obligations, the Government is also considering the case for increasing the frequency of tax payment obligations.
The Government said:
"Real-time information can be introduced without the automatic need to change the frequency of tax payments, but the government wishes to explore whether, over the longer term, tax payment should be brought more into line with the increasingly real-time nature of tax reporting and other customer services."
Specifically, it is looking at whether taxes paid under the self-assessment income tax system could be required more regularly. This would impact the self-employed in particular.
Further, it is also looking at whether VAT could be paid immediately to the tax agency where a sale is facilitated by an intermediary. This would likely be through a split-payment mechanism, an anti-tax evasion measure that requires the intermediary to pay the VAT payable under a sale directly to the state, rather than to the supplier.
On taxpayer's ongoing obligations, the paper indicates a change in stance from HMRC, compared with earlier this year. While considerable support was provided in the early months of this year, HMRC has said that taxpayers must continue to file their tax returns and claim forms or renewals on time.
HMRC said taxpayers should contact the agency if they can't meet their deadlines, as penalties are sometimes automated.
On enforcement, notable announcements include that HMRC will use new investigatory powers included in the latest Finance Bill to investigate fraudulent claims for COVID-19 supports. However, those claimants who have made honest mistakes with their claims may notify the agency by 20 October 2020, or within 90 days of receiving a grant, whichever is the latest, to rectify the situation.
On compliance checks, HMRC said it will continue existing ongoing compliance checks but may pause cases as circumstances dictate.
It said it will usually only open a new inquiry into those badly affected by COVID-19 or those 'leading the fight against the virus' if the agency thinks it can engage and resolve the inquiry.
However, HMRC intends to launch compliance checks in a number of circumstances into companies regardless of whether they are struggling with COVID-19 impacts, namely:
- where HMRC suspects criminal activity, fraud or significant deliberate non-compliance, including avoidance;
- where not doing so would mean missing a deadline that would prevent HMRC from ever collecting the unpaid tax; and
- where HMRC is seeking to protect employees, such as in relation to the National Minimum Wage.
HMRC said, to help control the spread of the virus, the agency will first conduct a risk assessment regarding on-site visits and visit customers in person only where it's absolutely necessary.
"As lockdown measures have been relaxed, we have restarted debt collection activities with customers. We are taking a compassionate and common-sense approach to dealing with people with debts or who are concerned about their ability to meet tax obligations."
"We will initially focus on collecting debts from customers who are least affected by COVID-19 and most able to pay their tax debts. We will do this gradually to make sure we have enough experienced advisers available to take calls and give them the attention they need."