Finance Bill 2018-19: Consultation updates

08 November 2018

  • Government to change how taxpayers make amendments to tax returns
  • HMRC to adopt “joint and severally liable” measure for directors who take part in tax avoidance
  • Government battens down the hatches on phoenixism

Following the Finance Bill 2018-19 being published on Wednesday 7 November 2018, the Government publications page was heavily updated with consultation outcomes and publication of new consultations.

Amendments to tax returns – open consultation

The Government are set to explore how tax returns are amended and are keen to develop an amendments process that is simple and transparent.

The consultation outlines the current position on amendments to tax returns and asks a series of direct questions to gather evidence on the issues taxpayers face when making an amendment to a tax return. The consultation sets out 13 questions and will close on 6 February 2019. 

Currently, there are a number of different methods of making amendments to returns, which vary according to tax, value, accounting period and turnover. For example, the processes for amending an Income Tax Self-Assessment, Corporation Tax Self-Assessments  and VAT returns differ and are not consistent across the taxes or aligned with the digital future of tax administration.

The consultation focuses on income tax, corporation tax and VAT, although the Government is keen to gather feedback on other taxes where problems arise.

Tax Abuse and Insolvency – consultation outcome

The consultation received 28 responses and the Government has subsequently published its summary document. 

The response confirms that the Government will legislate in 2019 to 2020 to allow HMRC to make directors and other persons involved in company tax avoidance, evasion or phoenixism jointly and severally liable for tax liabilities that arise from those activities where the company becomes insolvent.

The original consultation was published in April 2018, following the announcement at Budget 2017 and Spring Statement 2018, setting out that the Government would explore ways to tackle those who deliberately abuse the insolvency regime in trying to avoid or evade their tax liabilities.

There was general agreement from respondents that HMRC should be trying to counteract those who run up tax debts through avoidance, evasion or repeated non-payment and side-step their payment requirements through insolvency.

One respondent of the consultation stated;

Where deliberate abuse of the insolvency regime can be identified, then we agree HMRC should tackle it. We would however urge HMRC to make full use of existing powers to collect unpaid tax liabilities and impose security deposits before introducing further legislation.

The consultation asked for views on two possible approaches to dealing with the issue: 1) transferring liabilities and 2) joint and several liability. HMRC currently have the power to transfer liability from the company to a director, or other officer, and to hold directors jointly and severally liable for the company’s debts to HMRC but only in limited circumstances and only in respect of certain taxes.

There was no clear preference over which approach would be most suitable but in general, most respondents felt that joint and several liability would offer both flexibility and clarity to the taxpayer.

It was announced that following Royal Assent of the Finance Bill 2019-20 and confirmed in the Government’s response, directors and other persons involved in tax avoidance, evasion or phoenixism will be jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency. The Government has said it believes that it will enable HMRC to take targeted and proportionate action prior to insolvency proceedings when it is clear that revenue is at risk.

Many respondents questioned what safeguards would be put in place to protect taxpayers’ rights with many suggesting a right of appeal to a Tribunal would be appropriate. The Government agreed that there should be a right of appeal to prevent disproportionate outcomes, together with clear definitions, to determine when and to whom the measure will apply, to ensure it is appropriately targeted.