1. 1 HMRC Review of Powers, Deterrents and Safeguards The compliance checking framework Finance Act 2008

2. 2 Today’s purpose To outline Context and background The new framework and what it changes Making it happen

3. 3 Context Objectives: Modernisation Alignment A new department that feels different from its predecessors Behavioural change “HMRC should support those who seek to comply, but come down hard on those who seek an unfair advantage through non-compliance”

4. 4 Why are we changing the framework? For those who try to get it right Improve the experience – more working together Faster checks Approaches tailored to risks and circumstances Cross tax checks – look at records across taxes, and resolve issues in one visit One set of rules – easier to understand Reduced costs More safeguards

5. 5 Why are we changing the compliance checking framework? For those who deliberately underpay tax Behavioural change Effective deterrents Faster reaction to risk Deal with all the risks Tackling the shadow economy Reduce the tax gap

6. 6 What is the new framework? Aligned across CT,CGT, IT, PAYE, VAT : Record keeping requirements: Schedule 37 Inspection powers for business: Schedule 36 Taxpayer information notices: Schedule 36 Third party information notices: Schedule 36 Time limits: Schedule 39 Access to computer records: section 114 And Changes to SA enquiry framework: section 119

7. 7 When can powers be used? When it is reasonable and required to check a tax position Linked to risk not a return Restrictions on powers once SA/CTSA return made “Evidence of facts” time limits for VAT More intrusive powers need pre-authorisation

8. 8 Records: Schedule 37 Same basic requirements as now Taxpayer decides format HMRC can specify records to be kept HMRC can allow early disposal on case by case basis

9. 9 Inspection powers: Schedule 36 Part 2 HMRC can visit business premises – not homes HMRC can inspect statutory business records and assets on those premises Must be reasonably required to establish the tax position

10. 10 Inspection powers: making the visit Visit normally arranged in advance. If officer wants to visit without warning needs special approval from senior officer or a Tribunal. HMRC cannot force entry or search. HMRC must explain taxpayer rights and obligations at start

11. 11 Taxpayer information notices: Schedule 36 Part 1 HMRC can ask for extra information and documents by a written notice Must be reasonably required to establish tax position Right of appeal (except for statutory records) or Tribunal authorisation

12. 12 Third party information notices: Schedule 36 Part 1 HMRC can ask for extra information and documents by a written notice Must be reasonably required to establish tax position of another person Third parties have a right of appeal unless Tribunal authorises. Exceptions for statutory records along a supply chain

13. 13 Restrictions on inspection and information powers Only apply if in taxpayer’s power or possession HMRC cannot see personal information Old information – only reasonable if in position to assess Legal professional privilege Tax advisors and auditors

14. 14 Time limits Basic assessing time limit for assessments, determinations, claims: 4 years Time limit for IT, CGT & CT failure to take reasonable care: 6 years Deliberate understatement : 20 years Failure to notify or failure to notify and avoidance scheme: 20 years

15. 15 How does it all fit together? Records are kept Statutory Records Information Inspection Powers Information Powers Is there a risk? Visit? Is it necessary? Is it reasonable? Is there an error? Is there a tax position? Can any error be corrected/time limits? Quantify and Assess Conclude

16. 16 Safeguards Taxpayers have extra appeal rights HMRC face more authorisation requirements Retention of “enquiry” and “evidence of facts” Earlier certainty – shorter assessing time limits Codes of Practice Deterrents Penalties for failing to comply with information notice or inspection authorised by a tribunal Offence of destroying or concealing records requested by pre-authorised notice

17. 17 Making it happen Legal framework is only the start Ensure powers are introduced and used as intended and used reasonably Guidance Transitional arrangements Training Publicity Evaluation

18. 18 Questions?