Clause 23
Finance (No. 2) Bill
10:30 am
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
The hon. Lady makes an interesting comment and I shall return later to the report of the Public Accounts Committee. However, shortening deadlines could also lead to more mistakes and problems with tax return submission.
Tax advisers have good reason to be concerned about the lack of public consultation. It is certainly not in line with the HMRC’s guidelines on consultation, and the lack of consultation has been remedied not by publishing and circulating a consultation document but by asking professional advisers to comment on the partial regulatory impact assessment. That is not a very satisfactory way to gain tax advisers’ and their clients’ consent and agreement to the change.
The other aspect that concerns me is the impact that the proposals will have on three key groups: taxpayers, their agents and the HMRC itself. Taxpayers must produce information to enable them to complete their returns on time. Hon. Members will know from completing their own tax returns that, depending on how simple or complex they are, a great deal of information can be needed. Some of that information is supplied in line with statutory deadlines. For example, Members should receive a P60 by 31 May and, where applicable, a P11D by July of each year.
For other providers, however, no such statutory requirements exist. Often, information is provided only on an annual basis—for instance, on the anniversary of a particular policy or investment—and there is no consensus on when that information should be received. Taxpayers will have to wait for information before they complete their tax returns, and will have a shorter period in which to complete them.
Taxpayers in seasonal occupations are also an issue. We mentioned that topic in debate last week. Many people who complete self-assessment forms are self-employed in small owner-managed businesses. They will face challenges when trying to achieve those deadlines. Businesses will have to use the time between the end of March and September to finalise their returns. By bringing forward the filing dates for assessment, the Government will compress the time that small businesses have to complete their returns for tax and other purposes, placing an additional burden on them.
We know that certain sectors have seasonal peaks in their work load. A large amount of the tourism and hospitality sector’s business is done during the time when the new filing deadlines will require businesses to complete and finalise their returns. The farming sector spends the time between July and September bringing in the harvest. Farmers will want to use those hours to harvest their crops, not to complete income tax self-assessment forms.
As we heard on Thursday, auctioneers and people who work in the art market find their own seasonal peak in the summer. They too will find it difficult to produce their returns. According to research undertaken by the Association of Chartered Certified Accountants, 54 per cent. of its members feel that the revised dates will have a negative impact on businesses engaged in seasonal trade. The pressure of assembling the information required for self-assessment during that period and completing the form will place additional burdens on individuals at their busiest time of the year.
A number of people will employ agents to complete their tax returns. Such agents will have issues managing their work load. In April, they will need to complete year-end returns for the HMRC; in May, they will deal with P60s on their clients’ behalf; in June, they will deal with P11Ds; and they then normally experience a lull in their work load until September when some paper returns are finalised and again in January when returns are finalised.
That is not to say that outside those peaks, agents are twiddling their thumbs. Often, they do audit and accountancy work on their clients’ behalf and offer high-quality business advice. Such agents will find their work load and their ability to manage it challenged. Some 91 per cent. of respondents to research on the impact believe that the Carter review will have a significant impact on tax agents’ working practices.
Agents want to ensure an even flow of work throughout the year. They have an interest, as does the HMRC, in doing so. It is easy to forget the scale of operations undertaken by some tax agents. A medium-sized practice with 13 individuals in its tax department might process as many as 3,500 returns. It normally starts to receive information from the majority of its clients in early August. By the end of November, a practice of that size has received back the information required for about 80 per cent. of its clients, submitted draft returns for approval to about 65 per cent. and filed about half of those returns with the HMRC already. That is by November, the latest date under these recommendations for filing online returns. If the deadlines were brought forward, that would bring forward the timetable for clients and their agents.
It is not just advisers and their clients who will have a problem; the HMRC needs to deal with the issue as well. It has two work load peaks, one near the self-assessment filing date in January and the other at the annual return deadline in May. The concern is that the arrangements will not smooth that workload but will bring forward the peaks. The industry would hope to see taxpayers and agents receiving greater encouragement to file their returns earlier, so as to spread the work load. Tax advisers welcome a great deal of Lord Carter’s report, and they support his proposal to align the inquiry window with the actual, rather than the statutory, filing date, as they believe that that would encourage the smoothing of the work load.
The hon. Member for Bishop Auckland (Helen Goodman) referred to mistakes and errors in relation to the later filing deadlines. If the deadline were earlier, advisers, agents and businesses might submit provisional or estimated figures in order to meet the September deadline for paper returns or the November one for online returns.