HMRC: Extra-statutory concession A19 review

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


ACCA is pleased to have the opportunity to respond to HMRC’s consultation on the future of ESC A19. We take some comfort from the acknowledgement in the introduction, at ‘Scope of this consultation’, that the concession is an important part of the safeguards in the UK tax system. However, much of this comfort is stripped away by the detailed content of the document itself, and still more by recent reports in the specialist press which seem to indicate that HMRC have already moved to operating a system more in line with their proposals than the current concession.

Much has been made in some quarters of HMRC of the benefits to taxpayers of the introduction of a five-fold categorisation of behaviour by HMRC. By adjusting their response in accordance with the taxpayer’s motivation, HMRC aim to improve engagement with those who are, or wish to be, compliant while targeting penalties and enforcement activity on those who wilfully neglect or evade their responsibilities.

The current proposals run counter to the spirit of the new model, which specifically identifies a group of taxpayers to whom the concession would almost exclusively apply, the ‘willing but unable’. By seeking to impose an objective ‘letter of the law’ test to their compliance efforts, HMRC will penalise those who are least likely to have been able to appreciate the details of the law which HMRC have failed to operate.

It must be remembered that ESC A19 is a concession – it is by definition a discretionary mechanism, introduced to deal with cases which the statute cannot be framed to cover, or where strict adherence to the letter of the law would result in a manifest injustice. It is in many ways the polar opposite to the anti avoidance strategies pursued by HMRC, operating as it does to prevent a result which Parliament could never have intended. In the case of the concession, that unintended result is of course the hardship inflicted upon a blameless taxpayer as a result of HMRC’s failure to act in the first instance in accordance with its own duties under the Taxes Acts.

Specific comments

Taxpayer responsibilities

5.1: Do you agree with the removal of 'reasonable belief' to be replaced with an objective test based around 'taxpayer responsibilities'?

In theory this should offer more certainty for advisers and others familiar with the system. In practice however this will defeat the very object of the statutory concession, which is to deal with the problems faced by those who are not familiar with the system and have been let down by HMRC’s failure to operate it correctly. 

Although predating the 5 layered segmentation model that HMRC now operates, it is inherent in any equitable concession that it will be available only to those taxpayers who are, or have attempted to be, compliant with the spirit of tax legislation. It seems implicit in the nature of this concession that it would be directed at those who would wish to be compliant, but lack the skills or means to be so. It is one of the greatest challenges facing HMRC that it is charged with handling the tax affairs of every sector of society, from the most able and well advised to those whose capacity to interact successfully with the system is most limited. The current proposals to restrict the application of the concession suggest that in some areas HMRC’s response to the challenge is to reduce its applicability to them, which is regrettable.

HMRC Responsibilities

5.2: Do you think that the introduction of HMRC responsibilities makes it clearer in regard to what information HMRC must act on?  Has HMRC identified the correct responsibilities and/or are there others that should be included?

While clarity in this area is welcome, the precise scope of HMRC’s responsibility to act is circumscribed by the information on which it is prepared to act, and the timing of communication of any taxpayer concerns. In particular, the restriction of ‘information received’ to information relating to changes in employment or year end benefits statements would appear to impose upon the taxpayer a requirement to inform HMRC themselves every time they receive a pay rise or other change in circumstances.

The suggestion that HMRC be absolved form responsibility in any case where an ‘objective test’ indicates that the individual should or might have suspected an impact on their tax liability but failed to make a contemporaneously minuted telephone call to HMRC to discuss their concerns is unwelcome and in practice unworkable. The current culture of taxpayer responsibility is perceived to be one where HMRC’s mighty computers calculate the correct tax based on the information provided by your employers’ computers. Although the high profile failures around the introduction of NPS have significantly dented taxpayer confidence in HMRC’s competence to manage their tax affairs, we are still a long way from a common expectation that taxpayers should be in regular communication with HMRC to query information which employers should already have provided, or HMRC should already have acted on. Add to this the difficulties faced by those taxpayers who do attempt to contact HMRC by phone, and the proposed new definitions and processes look less like an exercise in promoting clarity and more like an exercise in restricting HMRC’s scope to even consider the application of the Concession.

'Exceptional circumstances' test

5.3: Do you agree that the 'Exceptional Circumstances' section is now redundant and can be removed from ESC A19?  If not, for what circumstances do you think it should be retained?


It is in the nature of an exceptional circumstances test that the precise scope of its application cannot be predicted. It is equally in the nature of a discretionary extra-statutory concession that it should be as broad as possible and given every opportunity to restore equity. The exceptional circumstances section should be retained.

Capital gains tax

5.4: Can you identify any issues with the removal of CGT from ESC A19?  HMRC would be particularly interested to hear examples of where a recent request has been made in relation to CGT and ESC A19.

The same issues arise as with the exceptional circumstances test. The scope of the concession’s potential application should not be limited.

Time limit for requesting HMRC looks at ESC A19

5.5: Do you agree with introducing a time limit for individuals to contact HMRC? Can you identify any issues with HMRC adopting this approach?

While there is some logic to limiting the time frame for requesting the application of the Concession, particularly given the underlying equitable nature of the process, the proposals put forward in this consultation are far too restrictive. It is in the nature of the concession that it will most fairly be applied in those cases where individuals have through no culpable fault of their own failed to engage fully with the tax system over a considerable period of time.

Other considerations

5.6: HMRC plans to issue supporting guidance alongside the revised wording. What format would be most appropriate for this?  For example, online guidance, a Question and Answer document or updates in the PAYE Online Manual.

While online guidance for taxpayers and updates to HMRC manuals for advisers to rely upon are essential, it is in the nature of this Concession that guidance and explanatory materials must be available in clearly written and clearly printed hard copy, in as many formats and languages as can be supported by HMRC’s technology. If HMRC wish to impose upon those taxpayers who are able the burden of second-guessing Parliamentary intention in keeping with the ‘spirit of the law’, it is only just that HMRC assume the same burden in respect of their own duties to the most vulnerable and disadvantaged within the tax system.

Last updated: 29 Oct 2012