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Tax Administration

Detailed Budget Measures

Coding out

The Government will consult on improving its collection of tax debts through the PAYE system (known as coding out), to make the process fairer and more equitable. This will include increasing the size of debts that can be recovered through coding out from those with higher incomes. Changes will be made through secondary legislation in due course.

CCH Comment:

The proposed change to coding out is an understandable attempt by HMRC to collect as many tax debts through PAYE as is possible. There must be a temptation to make it as easy as possible to use the PAYE system to collect debts due to the government of whatever type and size.

Stanley Dencher, Tax Writer.

Industry Comment:

These enhancements will go a long way to reducing the admin HMRC will incur chasing debts. The current limit of £3,000 per year for all tax debtors, will be replaced with a graduated scale, introducing higher limits for those with higher earnings – or up to £17,000 limit for those earning £90,000 or more. HMRC’s information technology (IT) system will also be upgraded to allow splitting of debts across years for ‘Coding Out’.

Alistair Kendrick, Tax Director, MHA MacIntyre Hudson.

PAYE late payment and filing penalties

As announced in Budget 2012, and following consultation, legislation will be introduced in Finance Bill 2013 to encourage compliance with the real time information payment and information obligations, whilst ensuring those who do not comply do not gain an advantage. The legislation includes new late filing penalties and changes to the current late payment penalties to ensure they can be charged in-year, with effect from 6 April 2014. It will also include minor changes to the existing inaccuracy penalties so they can be charged in a way that minimises the burden on employers and HMRC, with effect from the date of Royal Assent to Finance Bill 2013.

For more details see the Tax Information and Impact Note.

Information powers

Following consultation, legislation will be introduced to bring into effect international agreements to improve tax compliance. Primary legislation will be introduced in Finance Bill 2013. Regulations will also be issued shortly to implement the UK-US agreement to Improve International Tax Compliance and to Implement FATCA (FATCA refers to the US provisions commonly known as the Foreign Account Tax Compliance Act). An updated Tax Information and Impact Note for this measure will be published alongside the regulations. Further regulations will be introduced to implement subsequent similar automatic exchange agreements entered into.

Data-gathering from merchant acquirers

As announced in Autumn Statement 2012, legislation will be introduced in Finance Bill 2013 to amend the current data-gathering powers to allow HMRC to issue notices to card payment processors. The notices will require them to provide bulk data about businesses accepting credit and debit cards. This data will help HMRC identify businesses that are not declaring their full tax liability. Following consultation, the legislation has been revised to ensure that all institutions that settle card payments to businesses are covered. This measure will have effect from the date of Royal Assent to Finance Bill 2013.

For more details see the Tax Information and Impact Note.

Notification requirement for avoidance scheme users

The Government will consult on a proposal to follow up court decisions in HMRC’s favour in avoidance cases. This will require taxpayers who have used avoidance schemes which are defeated in another party’s litigation to acknowledge to HMRC that the judgment applies to them and amend their returns accordingly, or confirm that they stand by their original return. A tax-geared penalty would be charged subject to safeguards, if they failed to take reasonable care. Legislation will be in Finance Bill 2014.

Administration of the Scottish rate of income tax

Legislation will be introduced in Finance Bill 2014 to require the National Audit Office to report direct to the Scottish Parliament annually on HMRC’s administration of the Scottish rate of income tax. The Scottish rate was legislated for in the Scotland Act 2012 and will be introduced in April 2016. The legislation will ensure that the auditing and reporting arrangements envisaged during the passage of the Scotland Act 2012 can be fully implemented.

Customs and excise modernisation

The Government will consult on modernising customs civil penalties to create a fairer, consistent, more transparent and effective system, while securing our borders and protecting revenue. The changes will bring the customs civil penalty regime in line with other HMRC penalties. Legislation will be in Finance Bill 2014.