HMRC: Withdrawing a notice to file a self assessment return

Comments from ACCA to HM Revenue and Customs (HMRC), July 2012.


ACCA is pleased to respond to the above consultation of 24 May 2012. ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management. We support our 154,000 members and 434,000 students in 170 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of over 80 offices and centres and more than 8,000 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence.

ACCA fully supports efforts to make the tax system simpler and easier for taxpayers and their agents to use and understand, and implementing a clear, consistent process with an appropriate legislative basis will assist all those involved in resolving the situation where a potentially unneeded return has been issued. Please find below our response to the individual questions within the consultation.

Q1: HMRC welcomes general views on whether a power to remove a notice to file a SA return would be beneficial and how the proposed power should work in practice

ACCA agrees that a codified power to withdraw a notice to file would be a welcome development. The existence of a formal mechanism with defined process and conditions would promote certainty for both HMRC and taxpayers. Where the power is relevant and used it would aid efficiency, as the administration would have a defined process to follow.

As suggested, the power should operate with a relatively wide discretion. We agree that HMRC should have the option to require a return if the initial response did not make it clear why none was required, but would encourage HMRC to operate guidance and procedures which would keep such returns to a minimum. While processing an accurate and complete tax return may incur a lower marginal cost than corresponding directly with an individual to establish the facts and circumstances, it seems likely that in cases where an individual has not properly understood the initial notice and the process for withdrawing from it that they may also struggle with the form itself, and further manual intervention would in any event be required after receipt of the return. Dealing properly with the case before the first return ever comes due would cost HMRC no more than the alternative, and would reduce costs and inconvenience for the taxpayer, helping to ‘improve the individual’s experience’.

Q2: HMRC welcomes views on whether there should be a deadline by which people who think they should not be in SA must contact HMRC and what that deadline should be

A period of thirty days from receipt of the Notice to File seems reasonable for the initial approach to HMRC. This would of course need to be stated clearly in the notice and accompanying documentation, and should be clearly worded in a positive fashion.

Individuals who receive a notice should be in no doubt that if they have any concerns they should write to HMRC who will consider their personal circumstances in an objective and constructive fashion and explain why a return is, or may not be, required. It should be clear that a simple enquiry as to the validity of a notice would not be considered a ‘challenge’, nor (in and of itself) expose the individual to any penalties or negative impacts.

There may of course be genuine reasons why an individual might miss that 30 day deadline – eg an individual who is working overseas for a significant part of the year and hence has no UK income. While HMRC would always have its existing discretion under general care and management powers to withdraw a notice where the failure to respond within the time limit was not the fault of the individual, it seems sensible to build a discretion to follow the normal statutory process even where the time limit is breached, and for this discretion to also be acknowledged within the publicity material in the notice. It should of course be clear that the discretion is there only for genuine cases, and that simple failure to respond may leave an individual liable to complete a tax return, and leave HMRC’s systems to remove them from SA following an analysis of that return anyway.

Q3: HMRC welcomes views on applying failure to notify penalties under Schedule 41 Finance Act 2008 where a notice to file has been withdrawn on the basis of incorrect, misleading or partial information.

It is appropriate that penalties should be available to discourage those who might seek to abuse the new facility. Using the existing ‘failure to notify’ penalties seems logical. The guidance around the process should mention the existence of penalties for deliberate misuse of the facility, but detail should be reserved for the response letter to a request to withdraw the notice.

The notification at this point should emphasise that the individual may be subject to penalties if they abuse the system, and then clearly set out the grounds on which HMRC believes the application to have been made, and their analysis of whether the application is successful. The applicant should at this stage be given the opportunity to amend or withdraw their notification to HMRC if there has been any misunderstanding or mistake without penalties being due. Attention should be drawn to the importance of seeking advice from a qualified professional or CAB if the individual is in any doubt as to their position.

Once the taxpayer has been given this notification, if it subsequently becomes apparent that they have misrepresented the facts and should be within self-assessment then penalties should be levied.

The process should also include sufficient information for an individual to be aware of the sort of change of circumstances which might subsequently bring them back within the self-assessment tax net, and of their obligation to notify HMRC if this happens.