Other matters

Online filing

Lord Carter’s review of HMRC online filing services was published in 2006. Legislation will be brought forward during 2007 to implement the changes which will start in 2008.

The key proposals are to:

• require businesses to file their PAYE in-year forms, VAT returns and company tax returns online in phases from April 2009
• introduce new filing deadlines for income tax self assessment returns of 31 October for paper forms from 2008 but retain 31 January for online returns
• relate the time limit for HMRC to commence enquiries into an income tax self assessment return to the actual filing date of the return and not the statutory filing date.

Company filing dates

Following Lord Carter’s recommendations and consultation by HMRC and Companies House, the government will work to provide a single online filing facility by 2010. From 2008 the period during which an enquiry can be opened into a corporation tax return will, for most companies, be tied to the actual date HMRC receives the return rather than a fixed filing date. The aim of this is to encourage earlier filing and give businesses certainty sooner.

Review of HMRC powers, deterrents and safeguards

The government launched a review of HMRC powers and taxpayer safeguards in March 2005 as a result of the creation of the newly formed HMRC. The general consultation on the approach to investigation work is continuing and will focus on areas such as safeguards for taxpayers, making it easier to pay, tackling late payment and compliance assurance checks.

Criminal investigation powers

Currently the powers in the Police and Criminal Evidence Act 1984 (PACE) apply only to the former Customs & Excise part of HMRC. These powers are to be extended right across HMRC and will apply to criminal investigations into direct as well as indirect taxes. Specifically Revenue officers will be able to:

• apply to magistrates and judges for search warrants
• apply to judges for a court order to obtain evidence from a third party
• arrest suspects, search upon arrest and question.

Penalties for incorrect returns

There are currently a wide range of penalty powers within the different tax regimes administered by HMRC. These will be removed and replaced by a single regime that will apply for income tax, corporation tax, PAYE, NIC and VAT where taxpayers understate their liability to tax.

The new penalty regime will be largely determined by the behaviour of the taxpayer leading up to the understatement. The extent of any disclosure made will be taken into account, but it is anticipated that there will be much less scope for negotiation on the level of penalties than under the current regime.

The new rules will also provide for penalties to be suspended to allow taxpayers to demonstrate that they have mended their ways.

The provisions are likely to apply to returns for periods commencing after 31 March 2008 where the return is filed after 31 March 2009.