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Nicola Tratalos, Partner at Deloitte said
“Rather refreshingly, this Budget did not include a significant
number of consultative documents in relation to compliance. However,
there are a number of things tucked away in the “Supplementary
Documents” as well as some relevant changes in the heart of the
Budget releases.
“As we expected, the penalty regime which was introduced in FA 2007
(generally effective from 1 April 2008) has been extended to all
other taxes, levies and duties administered by HMRC. Previously only
corporate tax, income tax, VAT, PAYE & NI were covered. The extended
regime will therefore include areas such as Environmental Taxes,
Excise Duties, Stamp Duties and IHT. We will shortly be releasing a
bulletin that gives further insight into the detail, and how the
behavioural rules that are introduced are expected to impact
businesses.
“FA 2008 will, as expected, introduce new legislation to deal with
compliance checks. The key changes here of interest to business will
be the new inspection and information powers which were proposed to
be considerably extended. We will be reviewing and digesting the
proposals, and in particular will be looking to see what aspects of
the concerns raised in consultation have been reflected, to give
business the protection that we consider to be very important.
“Among the supplementary documents is a progress report on the
simplification of anti-avoidance legislation. There is to be a
review, likely to be welcomed by many, of some of the more complex
and tortuous anti-avoidance legislation, including Section 703
(transactions and securities), value shifting/depreciatory
transactions and property lease premia. Informal dialogue is
expected over the Summer, with a view to possible formal
consultation in the Autumn - the exception to this is the lease
premia rules, where the review will take place on a longer
timescale. There are some other interesting aspects of this
document. One is that a stated strategic aim for countering
avoidance is to change the economics of avoidance to make it less
attractive, so that “the expected costs of avoidance exceed the
perceived benefits”. There is no explicit explanation in this
document as to how this is to be achieved. Another interesting
aspect is how the simplification is to be achieved - it is
recognised that anti-avoidance needs to be clearly targeted, and the
document suggests that a range of approaches will need to be
retained, including principles based approaches and TAAR’s.
“A progress document (Tax Appeals against Decisions made by HMRC)
gives the anticipated way forward, against the background of the
reform of the tribunal system. It is expected that tax appeals will
be transferred to the Tax Chamber of the new Tribunal from April
2009. There are clear proposals to introduce an internal review of
cases, as an option prior to a hearing before the Tribunal. This is
expected to be a statutory right, but not mandatory. It is hoped
that this will offer a way to reduce costs and streamline the
resolution of disputes. HMRC still needs to consider in detail how
the reviews should be conducted and taxpayers will be particularly
interested in what measured independence they can expect from the
process.
“Finally, there is a progress report on the review of links with
large business, initially published in November 2006. Although the
review was initially focused on the LBS, the extension to local
compliance has meant that around 14,000 businesses have been
impacted. Taken together, the changes as effected and proposed
constitute an enormous transformation for HMRC, and one where
taxpayers will continue to see changes as behaviours become embedded
in HMRC. From our experience, it is clear that there is still
considerable progress to be made to achieve the benefits that HMRC
anticipate, and to achieve consistency. This appears to be
recognised by the Chairman of HMRC, in his foreword to this
document.”
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