CIOT urges simplification of HMRC’s tax rules and processes

In a response to HMRC's call for evidence on its Tax Administration Framework Review¹, CIOT argues that the current misalignment of powers, penalties and processes across different tax regimes creates confusion and makes it harder for taxpayers to comply with their tax obligations and for HMRC to administer the system.

Margaret Curran, CIOT Technical Officer, explained:

“Tax rules are complicated, and compliance requirements are often onerous. But they are more complex and more onerous than they need to be because of the huge inconsistency between the rules for different parts of the tax system.

“Greater alignment of HMRC’s powers and of requirements on taxpayers across the tax system could make a major contribution to tax simplification.

“Alignment of the rules would be of particular benefit in multi-tax disputes where disparate rules, processes and time limits create unnecessary complexity. A particular example of this is found in employer compliance processes, where the HMRC team must follow two different processes – one for income tax and the other for national insurance. This is inefficient.”

In its response² the Institute recommends re-evaluating HMRC’s enquiry powers for Income Tax Self-Assessment (ITSA) and Corporation Tax Self-Assessment (CTSA) to align them with powers that have a statutory time limit, similar to those in VAT and PAYE systems. This change could bring quicker clarity and certainty to taxpayers' positions.

Further recommendations by the CIOT include:

• Preserving shorter assessment time limits for non-deliberate behaviour and ensuring consistent application across all taxes and National Insurance Contributions.
• Aligning penalties across all tax regimes including those for late filing, late payment and errors, with a view to making the penalties regime simpler with fewer different types of penalties.
• Aligning appeals processes to help mitigate the confusion and misunderstandings that different rules, terminology and procedures currently create.
• Creating a new Taxes Management Act so that all tax administration legislation is kept together and is easy to find and follow.

 Margaret Curran added:

“It is crucial that taxpayers and the public have trust in the tax system when it comes to how HMRC exercise their powers and impose sanctions, and how taxpayer protections and safeguards operate. The way HMRC use their powers and operate safeguards under a reformed tax administration framework must be effectively monitored and subjected to appropriate oversight.

“We encourage HMRC to be bold enough to implement real simplification and change in these areas and we look forward to being involved in further consultation as their review progresses.”

Notes for editors

1. Call for evidence: The Tax Administration Framework Review: enquiry and assessment powers, penalties, safeguards

2. The CIOT respond to the HMRC call for evidence on the Tax Administration Framework Review