CIPP response to HMRC Discussion Document on Penalties
11 May 2015
In February 2015 HMRC published a discussion document to consider how they can change how penalties are applied as they transform their services to deliver more through Digital technology.
The publication HMRC Penalties: a Discussion Document is the first stage of consultation which asked for comments on how the application of penalties may be changed to better differentiate between deliberate and persistent non-compliers and those who might make an occasional error for whom alternative interventions are more appropriate.
The purpose of the discussion is to seek views on the policy design and any suitable possible alternatives, before consulting later on a specific proposal for reform.
The CIPP Policy Team ran a survey to collate your views and experiences and we received a total of 45 responses, 6 from non-CIPP members.
The CIPP response largely focuses on experience and opinions relating to PAYE automatic late filing and risk assessed late payment penalties. Respondents believe that a fair penalty regime is a critical element to a successful tax administration. The concerns relate less to the look and feel of a penalty regime and more with the accuracy of the underlying systems that generate a reason for the issue of a penalty.
In section 5.10 of the discussion document it states, "...any changes would need to take account of, and be dependent on, HMRC's developing IT capability…"
It is precisely HMRC's developing IT capability or capability to develop IT that has seen the most comment in relation to the adaptation of any new policy with regard to the penalty regime.
1) We welcome the three day delay initiative that was announced shortly after late filing penalties were introduced however and unsurprisingly concerns were expressed about how, for some, deadlines are key and therefore some form of limitation to this three day relief, for example, to two or three occurrences in any one tax year would act as an incentive not to abuse this extension and to prevent it becoming simply an ‘alternative deadline’ for some employers to work to.
2) Taxpayers are not customers - would a business have the legislative powers to be able to penalise their customers for choosing not to do business with them? We, like many others, believe that by simply using the term customer doesn’t make a taxpayer a customer and nor does it affect the service that they receive from HMRC staff.
3) We recognise that moving to increased use of digital technology and automation will reduce costs for HMRC however the feedback we have received in increasing amounts suggests that reduction of staff numbers has removed a vital human element that provides a common sense ability to resolve an issue where the error appears to have been caused by HMRC processes.
4) Agent involvement between the customer and HMRC appears to have suffered as a result of increased use of automation which appears also to have seen an increase in blame culture by remaining HMRC contact centre staff who are not in a position to establish where the error has occurred - "it is the agents fault" or “the client has done something wrong” are commonly reported comments.
5) Layers within a penalty regime currently exist based on numbers but should consideration be given to the type of employer? Certain domestic employers benefit from a number of ‘relaxations’ in legislation, it would be encouraging to see consideration being given to all domestic employers particularly on the subject of penalties. We would ask therefore should a domestic employer be judged on a par with a business employer?
Whilst late payment penalties continue to be assessed on a risk assessment basis, our members responses to these and other surveys suggest that there has been a level of deterioration with payment compliance due to reallocation and reconciliation which we believe is due, in part, to increased use of automation by HMRC and we would ask that consideration be given as part of this consultation to the part in which HMRC staff and systems play in achieving tax payer compliance.
If the taxpayer is truly to be considered a customer then HMRC systems and customer service must improve.
We have formally responded to HMRC and you can download our full response through the link below.
We would as ever like to thank those who took the time to feed in their comments to this discussion document survey. We would also like to thank those who responded to the Re-allocation of PAYE remittances survey which we ran through February and March; the responses were also used to feed in to this response.