Pre-Budget Report - Compliance and Enforcement

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07 January 2010

The headlines are: changes to the DOTAS regime, a further condoc on Working with Tax Agents, and legislating for Equitable Liability. HMRC have also published a number of consultation documents (or proposals to consult) in a number of areas including offshore evasion, Section 703 consultation, Excise modernisation and compliance checks, and the bulk and specialist information powers review.

Changes are also proposed to the SDLT and Petroleum Revenue Tax error or mistake legislation.

DOTAS

There are two proposals here. Firstly the application of a DOTAS regime to SDLT for residential properties is confirmed. It applies to residential properties worth more than £1million. The further significant change, is that all schemes, whether residential or commercial, will now be reportable by the user. HMRC want to find out who is using the schemes rather than what schemes are out there. Existing schemes will be grandfathered. These proposals will be effective from 1 April 2010.

More generally, HMRC have identified five changes they want to make to the current DOTAS regime including changes to the time when schemes are disclosed, powers to force intermediaries to disclose the identity of promoters, increased penalties for failing to disclose, an obligation to provide HMRC with information, and changes to the hallmarks (including three new hallmarks relating to employment schemes, income into capital schemes, and offshoring schemes).

Equitable Liability

HMRC has confirmed that they will legislate the current extra tax concession on equitable liability. A triumph for lobbying !

Working with Tax Agents

A further triumph for persistent lobbying. The original proposals have now been considerably watered down. There is a further condoc which takes things to the "next stage". It is clear that the target is now tax agents who deliberately submit incorrect returns, as well as those who make non-deliberate, but persistent mistakes. As regards the former, HMRC will throw the book and is proposing a new civil penalty for deliberate wrong doing by a tax agent, publishing the agent's name, and obtaining tax advice and auditors papers. There will be checks (either Circuit Judge or FTT) on their ability to obtain such information. The proposal for agents who make careless but persistent mistakes is to discuss, and then only report if those discussions prove fruitless. For high volume agents, HMRC wants to see checking of individual returns rather than just industrial scale submission. Where consultation with an agent is ineffective, they propose to withhold repayment in every single case dealt with by the agent unless it can show individual consideration.

However, these are again proposals on which HMRC are seeking further comments (by 3 March 2010) and the landscape may well change once again following such consultation.

For information on how these changes affect you please contact Nigel Popplewell by email (nigel.popplewell@burges-salmon.com) or by telephone +44(0) 117 902 2782.

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