Introduction / About the Money Advice Trust Introductory Comment Responses to individual questions

Similar documents
Consultation response: DWP Deduction orders against joint accounts

Introduction / About the Money Advice Trust Introductory Comment Responses to individual questions

CMA Market investigation into payday lending notice of possible remedies

FCA Regulatory fees and levies: policy proposals for 2014/15

Consultation response: FCA Pension reforms

Consultation response: Civil Procedure. Rules Committee The Pre-action. Protocol for Debt Claims

HM Treasury Call for Evidence: VAT Registration Threshold Response from the Low Incomes Tax Reform Group (LITRG)

Making Tax Digital: interest harmonisation and sanctions for late payment Response from the Low Incomes Tax Reform Group (LITRG)

HMRC consultation: Alternative method of VAT collection split payment Response by the Chartered Institute of Taxation

Consultation response: Financial Capability Strategy for the UK

Money. Association of Accounting Technicians response to HMRC s consultation on Making Tax Digital sanctions for late submission and late payment

VAT registration threshold: call for evidence Response by the Chartered Institute of Taxation

Housing Rights Service and Law Centre (NI) Joint Response to a Consultation Paper on a Rate Rebate Replacement Scheme

HMRC Consultation: Large Business compliance enhancing our risk assessment approach Response by the Chartered Institute of Taxation

Alternative method of VAT collection Response by the Chartered Institute of Taxation

The Revenue Scotland and Tax Powers Bill Call for Evidence Response from the Low Incomes Tax Reform Group ( LITRG )

CREDIT CARD MARKET STUDY: CONSULTATION ON PERSISTENT DEBT AND EARLIER INTERVENTION REMEDIES

H M Treasury: Business Rates Review

Care Quality Commission consultation on regulatory fees from April 2018: NHS Providers response

StepChange Debt Charity response to the Banking Standards Board consultation: What do good banking outcomes look like to consumers?

HMRC Consultation Document Tackling Offshore Tax Evasion: A Requirement to Correct Response by the Chartered Institute of Taxation

VAT REGISTRATION THRESHOLD: CALL FOR EVIDENCE

MAKING TAX DIGITAL: INTEREST HARMONISATION AND SANCTIONS FOR LATE PAYMENT

Business Protection. Guide to business succession for companies

Consultation response

ICAEW TAX REPRESENTATION 68/17

The aim of all of these new developments is to try to bring more consistency and predictability to the way of working with the UK public sector.

Business Protection. Guide to Business Succession for Partnerships

MAKING TAX DIGITAL SANCTIONS FOR LATE SUBMISSION AND LATE PAYMENT

Association of Accounting Technicians response to HMRC consultation document Tackling the hidden economy: Sanctions

Response to HMRC Consultation document issued 18 May 2018

Credit card market study: Consultation on persistent debt and earlier intervention remedies

Strengthening the tax avoidance disclosure regimes for indirect taxes

Disclosure of costs, charges and investments in occupational pensions

StepChange Debt Charity response to Credit card market study: Consultation Paper CP17/43

Response to Ofcom s consultation on price rises in fixed term contracts

NORTHERN IRELAND COURT SERVICE COUNTY COURT RULES COMMITTEE REVIEW OF COUNTY COURT SCALE COSTS

Introduction. Executive summary

The content of this submission addresses only sections 1, 2, 3, 7, 9, and 11 of the FOS Proposed Terms of Reference Changes consultation paper.

Money Advice Trust response to the Financial Conduct Authority consultation on High-level proposals for an FCA regime for consumer credit

Financial Inclusion Commission: Call for Evidence

ENHANCING CONSUMER PROTECTION, REDUCING REGULATORY RESTRICTIONS: WILL-WRITING, PROBATE AND ESTATE ADMINISTRATION ACTIVITIES

Review of the Money Advice Service

TREASURY SELECT COMMITTEE VAT INQUIRY Issued 29 June 2018

CIH Response to: DWP Consultation on Discretionary Housing Payments guidance manual: August 31 st Shaping Housing and Community Agendas

res Regulatory fees from April 2018 under the Health and Social Care Act 2008 (as amended)

IMPROVING THE QUALITY OF PENSION TRANSFER ADVICE

Tackling offshore tax evasion: Strengthening civil deterrents for offshore evaders

FESE views on the Review of the Prudential Framework for Investment Firms

HMRC Penalties: A Discussion Document The Law Society's response May 2015

We have seen and generally support the comments made by Law Society of England and Wales in its response (the Law Society Response).

Aquila Heywood's response to DWP's Consultation Paper on Technical Changes to Automatic Enrolment

Transforming bailiff action, Ministry of Justice consultation paper CP5/2012

INCENTIVISING HOUSEHOLD ACTION ON FLOODING AND OPTIONS FOR USING INCENTIVES TO INCREASE THE TAKE UP OF FLOOD RESILIENCE AND RESISTANCE MEASURES

TAXING GAINS MADE BY NON-RESIDENTS ON UK IMMOVABLE PROPERTY

1 Payrolling of benefits

HMRC and HMT Consultation Document: Taxing Gains Made by Non-Residents on UK Immovable Properties

HM REVENUE & CUSTOMS SECURING COMPLIANCE WITH REAL TIME INFORMATION LATE FILING AND LATE PAYMENT PENALTIES. Response by

Market Oversight. Draft guidance for providers

ICAEW TAX REPRESENTATION 128/17

Long-term financing of the European Economy Submission from The Association of Investment Companies (AIC)

FSA Mortgage Market Review Distribution & Disclosure (CP10/28) Response by the Building Societies Association

Association of Accounting Technicians response to HM Treasury Call for Evidence on the Value Added Tax (VAT) Registration Threshold

TRANSFER OF FAMILY SUPPORT SERVICES TO DONCASTER CHILDREN S SERVICES TRUST

HM Treasury and DWP: Creating a Secondary Annuity Market Consultation Response. 17 June 2015

US Chapter 11 : Should it be adopted in the UK?

Welfare safety net inquiry

RE: Wholesale sector competition review call for inputs

REVIEW OF FIXED RECOVERABLE COSTS

British Bankers Association submission to the consultation on the legal framework for the fundamental right to protection of personal data

Response to the Consultation Paper on the Code of Conduct on Mortgage Arrears:

TACKLING OFFSHORE TAX EVASION: STRENGTHENING CIVIL DETERRENTS

Tax Enquiries: Closure Rules Response from the Low Incomes Tax Reform Group (LITRG)

A consultation on charging DWP consultation on Better workplace pensions

Capital Gains Tax: Payment window for residential property gains. Comments from Saffery Champness LLP

INSURANCE IN SUPERANNUATION VOLUNTARY CODE OF PRACTICE

National Hardship Policy

Department for Education Northern Ireland

Capital allowances for structures and buildings. Response by the Chartered Institute of Taxation

Consultation Response Office of Fair Trading: Proposals Payday Lending, Consultation on a Market Investigation Reference March 2013

By to:

The funding of supported accommodation

CP17/27: Assessing creditworthiness in consumer credit

Security and Sustainability in Defined Benefit Pension Schemes Green Paper Questions and NFOP Responses

Making tax digital: Tax administration

Strengthening Consumer Redress in the Housing Market. Executive Summary

1 Introduction. 2 Executive summary

June Background

Consultation response: HMT & DWP Public Financial Guidance Review

October The benefits of open reinsurance markets. 1. Introduction

Association of Accounting Technicians response to Law Commission Consultation on Anti-Money Laundering: the SARs regime

HM Treasury & Department for Business, Innovation and Skills

Response to the Joint Committee discussion paper on automation in financial advice. COB-DIS Date: 3 March 2016

Cabinet Committee on State Sector Reform and Expenditure Control STAGE 2 OF TRANSFORMING NEW ZEALAND S REVENUE SYSTEM

Freedom of Information Act 2000 (FOIA) Decision notice

NFA response to government consultation on social housing fraud

Stakeholder Pension. The simple way to start a pension plan. Retirement Investments Insurance Health

Investigatory Powers Bill ISPA response

Breathing Space: call for evidence

BBA RESPONSE TO JOINT COMMITTEE CONSULTATION PAPER ON GUIDELINES FOR CROSS-SELLING PRACTICES JC/CP/2014/05

Transcription:

Page 2 Page 3 Page 4 Page 5 Contents Introduction / About the Money Advice Trust Introductory Comment Responses to individual questions

The Money Advice Trust is a charity founded in 1991 to help people across the UK tackle their debts and manage their money with confidence. The Trust s main activities are giving advice, supporting advisers and improving the UK s money and debt environment. Over 1.35 million people were supported by the Trust in 2015, both directly through our advice services or indirectly through training advisers in charities across the UK. This includes almost 400,000 individuals assisted through National Debtline, over 50,000 small businesses through Business Debtline and over 900,000 through our adviser training. We support advisers by providing training through Wiseradviser, innovation and infrastructure grants. We use the intelligence and insight gained from these activities to improve the UK s money and debt environment by contributing to policy developments and public debate around these issues. Please note that we consent to public disclosure of this response.

We welcome the opportunity to respond to the Making tax digital consultation. Much of the consultation falls outside our remit. We have therefore concentrated our response to comments on the paper in relation to tax administration as it affects individuals and sole traders who are in financial difficulty or debt only. We are particularly concerned that any proposals in relation to enforcement of tax debt, penalties and interest for late payment are fair and proportionate. Safeguards and protections for people in debt and those in vulnerable circumstances should be at the forefront of the design. Vulnerable people who are digitally excluded are at particular risk of suffering detriment under the broader digital agenda. We are concerned about the points-based penalty proposals as they relate to non-deliberate failures to make a submission. It could be argued that the impact of factors outside of the business, such as illness or family bereavement, impact quicker and for longer on the smallest of businesses. In particular, the sole trader with no employees may be more vulnerable, having no-one else to deal with the business returns/submissions whilst dealing with family emergencies. Our key points are set out below. We believe that it should be possible to appeal points before the stage where they become a penalty. We are concerned that nano-businesses need to be appropriately recognised when any tiers are built into fixed penalties for late submission. We do not believe that 14 days grace before penalty interest is added is sufficient. This should be extended to 30 days. We believe that HMRC should increase capacity to answer queries and make time to pay arrangements as our Business Debtline clients experience severe problems getting through to HMRC. We would urge HMRC to ensure that the aspects of this consultation relating to penalties for people who are self-employed and vulnerable align with any principles developed by the Cabinet Office group addressing fairness in government debt collection in future.

This proposal would appear to be fair. We agree that at the very least, current safeguards should be maintained. It could also be argued that customer safeguards should include an additional element of flexibility, to take into account genuine mistakes or difficulties with the transition to a digital format. However, we would note that the consultation paper is a little vague on its definitions of safeguards. It is important that these are clear and transparent We have no comment to make in relation to this question. This would provide consistency, but again it would be useful to build in some extra flexibility for specific groups. Some people may find the move to keeping digital records more difficult than others which could lead to unintended mistakes or unusually delayed submissions. People in this situation who are particularly vulnerable may benefit, for example, from longer than 12 months to supersede a determination while they deal with the transition. We have no further comments to make in relation to compliance powers.

This proposal appears to be fair for most people, but there may be some people in more vulnerable situations, such as those who lack any digital skills, who need longer to become familiar with the new obligations. HMRC should build specific exceptions for people in vulnerable situations. The proposal of 24 months appears reasonable for customers with annual submission obligations (reference to comments made in section 3.21), but less so for those with more frequent submission obligations. The latter group are more at risk of accruing noncompliance penalties, and may find it more difficult to achieve a re-setting to zero. Would it not be fairer to have compliance timeframes that are linked directly to the customer s submission obligation frequency, perhaps ranging from 12 to 24 months? A tailored approach would add more complexity to the framework, but this could be to the benefit of many customers. The simplicity of the model has clear advantages for customers, but does not build in any flexibility for one-off or unforeseeable circumstances that may affect an otherwise excellent submission record. We would propose that there should be a limited element of breathing space that can be offered within a given period (for example a 30 days extension without penalty every 24 months). This could be granted only where there are no existing points, but would reward previous compliance. This would be a fairer model that would take into account individual circumstances. We are unable to respond to this question with suggestions, as it would also depend on the level of penalty generated on each occasion.

We have no comment to make in relation to this question. We would agree that this approach seems fair. However, we do not have enough experience of multi-business filing to comment in any detail. We have no comment to make in relation to this question. The escalator model may incentivise compliance, but is inflexible in the way it works. It could be argued to disadvantage the smallest of businesses for which penalties may have a greater financial impact. The effect of factors outside of a business, such as illness or family bereavement, can impact quicker and for longer on the smallest of businesses simply because the trader has no-one else to deal with submissions whilst they deal with family emergencies. The sole trader with no employees is arguably more vulnerable to penalties in this model. Point 3.2 (2) also states that: Penalties should be proportionate to the offence and may take into account past behaviour. However, the cumulative nature of this penalty model means that previous compliance offers little protection against future penalties.

We do not agree that a fixed penalty is always appropriate. From our experience of advising small businesses who contact Business Debtline, we would suggest that there is a possibility that a fixed penalty can financially disadvantage the smallest of traders. These nanobusinesses may have low profits which means that the amount charged can be financially quite severe. The fixed penalty charge may well represent a much larger percentage of profits than it would for larger businesses, and as such be more difficult to absorb. This is exacerbated by the fact that small businesses, without any third-party help, such as an accounts department or a bookkeeper, are arguably at more risk of late submission, and penalties.. It is difficult to offer alternative proposals as we do not know what the penalty amount will be, or how nano-businesses will be categorised within the proposals. A tiered approach to the amount of fixed penalty to reflect the size of a business is worth exploring. This would provide a fairer approach to the financial penalty, but will depend on how business size is categorised. For example, we wonder how will the smallest of businesses be distinguished from the more general micro-business definition? It would seem more appropriate for a customer to be able to appeal at the points stage, rather than the penalty stage. This would help to foster immediate engagement with the process and a swift conclusion to the matter. It must be a disincentive to be able to see points build up without the ability to challenge these until the cliff edge of a penalty being issued. This uncertainty would be detrimental for the customer. Also, there could be a considerable time gap between an appealable point being accrued and a penalty being charged. The delay could make it more difficult for some businesses to provide the necessary evidence to support their appeal if it was in relation to the first point that may have been incurred some time before. We are not convinced that 14 days is a sufficient length of time for people to either pay in full or make payment arrangements before penalty interest is charged. This length of time appears quite limited for a business genuinely experiencing cashflow difficulties. We would suggest 30 days is a more appropriate length of time before penalty interest begins to accrue. This would allow time for small businesses to consider financial adjustments and refinancing where necessary.

Suitability also depends on what process is used for customers to apply for a time to pay arrangement, and how easy it is to access a time to pay arrangement. Is it envisaged that a customer be able to use online services to request time to pay in this model? There have been issues with Business Debtline clients being unable to contact HMRC by phone to discuss payment arrangements. This can cause particular difficulties for the one man band who struggles to find time to stay on hold and carry out his or her trade. The very act of trying to negotiate time to pay can further contribute to financial difficulty by the resulting loss of trading time that is involved. We would hope that HMRC is taking action to address these capacity issues to make it easier for people to make suitable payment arrangements easily. Whilst we can see the case for charging penalty interest for non-compliance, we are concerned that the rate should be reviewed regularly, so that it is not disproportionate. A regular review mechanism should be built into the system. There also needs to be genuine consideration of time to pay arrangements for those unable to pay. Adding penalties alone can make a situation appear unrecoverable and may conversely hinder collection for people who become trapped in a spiral of ever-increasing debt. We have no comment to make in relation to this question. Our primary concern with these models is that penalty interest is charged fairly and with due regard to people in vulnerable circumstances. It is vital that the chosen model has clear protections and safeguards built in to ensure that HMRC will freeze penalty interest where people are vulnerable or who are in debt and contact HMRC to make a payment arrangement. It is vital that HMRC allocates sufficient resources and capacity to making it simple for people to contact them for this purpose. We have difficulty choosing either model. We would reiterate the point about building in safeguards to ensure vulnerable people are not unfairly penalised by whichever system is chosen.

This approach sounds reasonable on the face of it but we have not seen a plain outline of the changes that demonstrate the winners and losers under the proposals. The landscape is so confusing as to be impossible for us to easily work this out. There may, therefore, be groups that are particularly affected by these proposals that are not easy to identify from the information provided in the paper. As we have said, there should be safeguards and protections built into the system to protect those in vulnerable circumstances and people in debt. We are unable to answer this question as we do not feel that we have sufficient information to make a judgment. We do not have an alternative model to the current interest rules to suggest at present. We would welcome the added simplicity and transparency of aligning interest rules across taxes. However, it is vital that the most progressive rules are adopted so that customers have the best chance of being treated fairly. The proposed changes will affect advice, training and amendments to information for advisers and clients, both online via our websites and via paper fact sheets.

We would argue that people in debt should be considered particularly vulnerable. People in debt can be considered particularly vulnerable to additional stress and anxiety in coping with their finances and a growing tax debt with penalty interest and charges will cause particular distress. When considering indirect discrimination we would suggest that people in vulnerable circumstances and with mental health issues in particular might be less likely to engage and therefore contact HMRC to make payment arrangements either online or by phone.

The Money Advice Trust 21 Garlick Hill London EC4V 2AU Tel: 020 7489 7796 Fax: 020 7489 7704 Email: info@moneyadvicetrust.org www.moneyadvicetrust.org