Budget Analysis 2011 – Tax Administration

9. Tax Administration

a.    Reciprocal arrangement to recover tax and exchange information

Legislation is to be introduced in Finance Bill 2011 to upgrade the legal gateway for the UK to assist and utilise EU member states in the recovery of taxes and the exchange of information. This follows the consolidation of the Mutual Assistance Recovery Directive (MARD) agreed by the EU in 2010.

The new directive is expected to be operational from 1 January 2012 and will:

  • cover all national taxes and duties, local taxes and motor taxes;
  • permits member states to exchange information automatically on refunds (except VAT);
  • allows tax officials from one member state to attend or participate in enquiries in other states;
  • permits information to be used more widely than previously allowed; and
  • permits a range of national bodies to utilise MARD.

HMRC will have greater scope for utilising other member states to gather information and collect taxes relating to UK residents. This also means that other member states can utilise HMRC to gather information or collect taxes for people now residing in the UK.

b.    Dishonest Tax Agents

HMRC continues to push for the power to formally request working papers from agents it believes are dishonest, penalise them and publish their details on its website. HMRC undertakes to continue to consult with professional bodies and will publish a consultation document and draft legislation in July 2011.

c.    Information Powers

HMRC is introducing legislation to penalise persons who deliberately provide inaccurate information or documents under Schedule 36 FA 2008.  There will also be a safeguard to clarify that only documents in the power or possession of the recipient of the notice can be requested.

People who receive formal information notices under Schedule 36 need to check that the information provided is accurate and complete. It is essential that you or your client seek specialist advice when you are unsure.

d. Employers required to provide security

HMRC will introduce legislation in Finance Bill 2011 to seek security from employers it perceives as high risk.  Failure to provide the security may result in a criminal offence.

New employers or people starting new businesses need to ensure that they communicate effectively with HMRC to prevent HMRC seeking to enforce the payment or seeking to prosecute them for the criminal offence.  A further consultation document will be issued on 31 March 2011.