The HMRC needs to do more to educate and regain the trust of tax advisers to clear the backlog of Tribunal hearings, according to a report from PKF Accountants & business advisers and Professional Fee Protection Ltd.
The survey was conducted among 200 UK tax professionals and it was found that advisers’ understanding, experience and perception of HMRC’s new disclosure facilities and procedures – such as alternative dispute resolution (ADR), internal reviews, the contractual disclosure facility and suspended penalties – were much lower than expected.
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The results reveal that 57% of advisers who had used HMRC’s new ‘review process’ to settle their clients’ tax disputes were either dissatisfied or very dissatisfied with the outcome.
Over half of these said that the reason for this was that the HMRC reviewer simply rubber stamped HMRC’s original position, and a further third saying that the review did not appear to be impartial.
The opportunity to offer to suspend tax penalties pending improvement of the taxpayer’s behaviour has been available to HMRC officers since the new penalty regime was introduced in 2008.
However, 77% of respondents said that they have never experienced an investigation or enquiry where suspension of a penalty was offered.
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By GlobalDataOnly 46% of the advisers surveyed said they were not aware of the legal responsibilities that the contract disclosure facility (CDF) places on their clients – despite the seriousness of a challenge under the CDF and the risk of a criminal prosecution if a taxpayer fails to make full disclosure.
The survey appears to vindicate HMRC’s focus on targeting undeclared offshore assets by the fact that 32% of respondents have experienced one or more clients admitting to having undisclosed foreign assets since 2007.
HMRC’s initial Offshore Disclosure Facility (ODF) was the most used way of helping clients to put right offshore tax irregularities. The Liechtenstein Disclosure Facility has many advantages for those taxpayers who need to put right offshore tax irregularities, but nearly a third of advisers have not told their clients about it.
