Call for evidence outcome

The Tax Administration Framework Review: enquiry and assessment powers, penalties, safeguards - summary of responses

Updated 30 October 2024

1. Introduction

The call for evidence The Tax Administration Framework Review: enquiries and assessment powers, penalties, safeguards was published on 15 February 2024. This document provides a summary of the responses and the government’s next steps.

The call for evidence was open until 9 May 2024 and covered opportunities to reform:

• HMRC’s powers that enable it to check the accuracy of information submitted to it and to address non-compliance by taxpayers in terms of meeting their tax obligations
• the financial penalties that can apply when taxpayers fail to meet their tax obligations
• the safeguards that ensure taxpayers and intermediaries are treated fairly and in accordance with the law

Reform in these areas has the potential to simplify and modernise the tax administration framework, provide greater certainty and consistency, strengthen drivers to comply and, ultimately, help to support and increase trust in the tax system.

The government is grateful to those who contributed their views, evidence, and time to respond to this call for evidence. In total, 42 written responses were received, primarily from professional and representative bodies, tax agents, charities, businesses, and legal firms. HMRC also held a series of roundtable engagement events between February and May 2024 to discuss the content of the call for evidence with interested stakeholders.

In addition to the specific reform opportunities, respondents also provided comments on how the government should approach any future reform. Some felt that consolidation of existing tax management and administration provisions into one place, perhaps through a new Taxes Management Act, could help taxpayers and agents to navigate legislation. Others felt that legislative simplification, while an important secondary goal, was not the priority. Many supported the principle that any reforms would need to be carefully scoped and the technical detail subject to further consultation.

The following chapters provide a summary of the responses to the call for evidence and next steps.

2. Responses

Enquiry and assessment powers

Reform opportunity A: consistent powers across tax regimes

Question 1: What are the potential opportunities, benefits, and risks of moving to a single set of powers across all taxes?

There were 27 responses to this question. Around half of respondents supported the idea, in principle, of a single set of enquiry and assessment powers. Many cited potential benefits of reduced complexity for taxpayers and agents (who currently need to deal with different processes and requirements across different taxes) and a reduced need to contact HMRC to clarify obligations.

Several respondents noted that there would likely be short-term, transitional costs for HMRC, agents, and businesses when adapting to any new rules. However, it was recognised that these should be balanced by longer-term benefits, as both tax professionals and HMRC staff would be able to work more easily across different tax regimes. Greater consistency could potentially lead to quicker resolution of enquiries and assessments, enhance trust in HMRC, and strengthen perceptions of fairness.

Many of the respondents to this question, including some of those who were undecided on the merit of introducing a single set of powers, noted that it would be a significant task and carried the risk of unintended consequences. Several respondents noted the importance of not putting people in a worse position than the current system by enhancing HMRC powers at the expense of taxpayer safeguards.

One common theme across all responses was that simplification and harmonisation were desirable goals, but a ‘one size fits all’ approach would not be appropriate in all cases as some tax regimes had different features for good reasons. For instance, one stakeholder highlighted that information to identify the tax treatment of expenses in profit-based regimes may not exist until after the tax year has ended. Any single set of powers would need to be tailored to account for features of specific regimes.

There were 5 respondents who opposed introducing a single set of powers, mostly on the basis that the risks would outweigh the benefits. There was concern that standardisation could create confusion in the short-term, remove the nuances of different tax regimes, and lead to substantial transitional costs.

Question 2: What are the potential opportunities, benefits, and risks of moving to a model that gives greater consistency and alignment to the key assessment and enquiry provisions?

Around half of the 25 respondents to this question supported the principle of moving to an enquiry and assessment powers model that aligned taxes of a similar nature. Three respondents did not support any changes to the current enquiry and assessment powers.

National Insurance Contributions (NICs) were cited by some respondents as an area of the tax system which could benefit from greater alignment with other areas of the tax system. While the specific nature of different tax regimes was cited as a barrier to a simpler, harmonised model, some felt that non-harmonisation should be the exception rather than the rule.

There were mixed views on retaining the current enquiry model, and none supported extending it to cover indirect taxes. Some respondents thought there was scope to provide more certainty regarding the enquiry process and to clarify the more subjective elements of HMRC’s assessment powers. Respondents emphasised though that any changes should not extend HMRC’s powers.

Some respondents said they would welcome a review of the current time limits for assessments, which they saw as overly complex, did not encourage timely action by HMRC and, in some cases, were felt to be disproportionate. Several respondents suggested that assessment time limits could be simplified to 2 categories, reflecting deliberate and non-deliberate behaviour.

Where contract settlement was mentioned, most respondents were supportive of keeping this approach to settling an enquiry, as part of any reforms. Some also suggested it might be beneficial to extend this approach to Value Added Tax (VAT).

Question 3: What are your views on any potential costs of changes to assessment and enquiry powers?

Most of the 24 respondents to this question believed that any changes would result in short term costs for taxpayers, agents, and HMRC. Likely costs included training of staff and agents, updates to guidance and computer systems, and potential disruption during any transitional period. To ensure transitional costs can be minimised, any changes should be implemented with sufficient engagement with agents and taxpayers, with good-quality guidance material and investment in new HMRC systems.

Several respondents noted that potential longer-term benefits included simpler powers that would be easier to understand, leading to more efficient compliance checks and fewer procedural disputes (such as whether an enquiry had been opened within the statutory time limit for doing so).

Question 4: Are there any circumstances or taxes where specific enquiry and assessment powers may be necessary?

There were 22 responses to this question. Several respondents cited areas of the tax system they felt would continue to need specific powers, such as transfer pricing, research and development reliefs, claims outside of returns, and partnerships.

Some felt the issues lay more with HMRC’s resources and staff training, than with its powers, and that more effective information-gathering and reporting requirements could achieve the same goals. Some respondents emphasised that taxpayer safeguards provided certainty and finality to taxpayers, even if in some situations they added to complexity and could lead to some tax being uncollectable due to errors of process.

Some respondents referred to HMRC’s informal approaches to compliance (such as nudges and prompts) as a useful function of tax administration that could be retained. However, others noted a lack of formality could itself create issues, including the inability for taxpayers to obtain tax enquiry insurance.

Reform opportunity B: consistent powers across tax regimes

Question 5: What would be the impact of greater alignment in the examples mentioned?

There were 17 responses to this question. Some respondents believed that greater alignment could simplify processes, improve HMRC’s services, make it easier for taxpayers to understand the tax system and help to build trust between taxpayers and HMRC. Several repeated their caution that a ‘one size fits all’ approach could be challenging to design and implement, and careful consideration would need to be given to the differences between annual and transactional taxes.

There was some support for harmonisation between Income Tax Self Assessment (ITSA) and Corporation Tax Self Assessment (CTSA), particularly around the area of partnerships. Some respondents supported extending discovery determination provisions to ITSA, though noted this could be complex to achieve.

On the proposal of possible consequential amendment provisions for ITSA, some respondents suggested that HMRC would need to consider the trade-offs (particularly the impact on taxpayer certainty, if amendments could be made outside the normal time limits).

Respondents had mixed views on aligning NICs with Pay As You Earn income tax (PAYE) to make directors personally responsible for liabilities. Some favoured this, while others stated that NICs is significantly different from income tax, including in its underlying legislation, which could make changes difficult to implement.

Question 6: Are there other potential gaps or mismatches that you think it would be beneficial to address?

A range of themes and specific reform opportunities were included within the 17 responses to this question.

Several respondents believed consequential claim provisions should be broadened, and that taxpayers should be able to make claims, elections, and amendments in their favour. Referring to mismatches, some noted that the extent of permissible consequential claims and loss notifications could vary, depending on whether additional tax arose due to culpability. Others commented that, for income tax returns, consequential claims were available on closure of the enquiry whereas consequential claims on closure of an enquiry into a company tax return were limited to situations where a consequential amendment was made to another return.

One respondent noted that consequential claims to carried-forward losses were available following the issuance of an assessment, but there was no ability to submit a valid Group Allocation Allowance Statement (for groups of companies). Another believed that when a taxpayer brought their tax affairs up to date, the tax liability should be equivalent to what would have been charged, if a timely correct return had originally been submitted. In such circumstances the respondent believed time limits for claiming reliefs and allowances should not be restricted.

Several respondents thought there was scope, across tax regimes, for greater alignment of correspondence time limits, information and record-keeping requirements, enquiry and assessment time limits, the ability of taxpayers to make claims or amendments, the extended time limits relating to overseas tax issues, and error correction periods.

Other inconsistences and uncertainties were cited, including CTSA allowing HMRC to remove overstated losses but not allowing the taxpayer to correct understated losses. It was also noted by some that ITSA did not contain a general right for the taxpayer to establish a loss, or an increased loss, within 4 years.

One respondent believed that, with respect to partnership enquiries, there was a lack of clarity around the scope of a deemed enquiry into a partner’s return and the link with notification of the consequences of closure of the partnership return enquiry. Another respondent commented that the narrowly defined ‘information made available’ rules (for discovery assessments) should be updated to reflect the increasing breadth of circumstances taxpayers are required to provide information about.

Reform opportunity C: consequential amendments and assessments across periods and across taxes

Question 7: What are the merits and risks of HMRC introducing a consequential amendment power across periods and tax regimes?

There were 29 responses to this question. The majority of respondents did not support HMRC introducing a consequential amendment power across periods and tax regimes. A particular concern was the perception HMRC would be effectively given a time-unlimited amendment power.

Other significant risks cited by respondents included potential overreach by HMRC, unintended consequences from any reform, and creating a lack of transparency, certainty, and finality for taxpayers.

Five respondents were supportive, seeing the potential benefits to both HMRC and taxpayers. Some suggested it might promote a more joined-up approach across HMRC.

Most respondents, whether supportive or not, suggested that any reform in this area should consider an equivalent power for taxpayers to make amendments in their favour, in the interest of fairness.

Reform opportunity D: conditions for assessment

Question 8: What are your views on the opportunities and merits of reform in this area?

There were 24 responses to this question regarding knowledge of facts conditions for assessments, with many respondents suggesting there was an opportunity to strengthen certainty.

Several respondents believed there was significant subjectivity in relation to the disclosures required to the hypothetical ‘officer’, which could be addressed. Some commented on the ‘any other information’ box of a tax return (the ‘white space’), where taxpayers can write additional notes and explain transactions. Respondents suggested that removing this box could lead to a decrease in transparency and could discourage taxpayers from providing additional information. Respondents noted that the ability to provide a full and open disclosure in the ‘white space’ helps taxpayers to achieve certainty in a reasonable timeframe.

Some respondents supported a common assessment time limit to bring greater consistency, with taxpayers receiving the same amount of time to self-amend returns, make elections, and claim reliefs and allowances.

Though some respondents welcomed the idea of a strict time limit approach, most emphasised the need for safeguards to ensure HMRC acted in a timely manner and gave certainty to taxpayers. Many respondents cautioned against removing ‘knowledge of facts’ provisions.

Several respondents highlighted the importance of clarity and capability, the need for adequate training and support for HMRC staff, with appropriate processes, systems, and guidance.

Reform opportunity E: tailoring HMRC’s powers

Question 9: What are the challenges relating to claims for relief and credits? How should reform to enquiry and assessment powers for reliefs and credits be approached?

Many of the 21 responses to this question acknowledged the need for HMRC to be able to effectively identify and tackle those who sought to bend or break the rules. Nearly half of respondents expressed concerns that additional checks or requirements could increase delays in payments and repayments being made to taxpayers.

Many believed that delays could be addressed with more or better-trained HMRC staff to handle any additional checks. Some suggested additional repayment supplement or interest should be paid by HMRC to taxpayers to compensate for any additional delay. Better identification of risks and targeting of HMRC’s resources was broadly felt to be preferable to any legislative changes or new powers. Several respondents felt a ‘trusted agent’ system, where HMRC could recognise that claims submitted by particular agents posed a lower risk than others, could help in this respect.

Several respondents believed HMRC’s current approach of ‘process now, check later’ risked giving the impression a repayment was ‘approved’, and this could create hardship if a later enquiry required the return of a repayment that had already been spent by the recipient.

There was some support for the idea taxpayers should provide a reason when rejecting a revenue correction notice, though some believed that HMRC should also be obliged to explain why a notice had been given, helping assist the taxpayer and potentially reducing the number of rejections.

Reform opportunity F: modernising administration and communications

Question 10: Are there specific issues relating to compliance activity that need to be considered as HMRC moves to greater use of digital communications?

There were 28 responses to this question. The majority of respondents supported greater use of digital communications to improve the speed of communication between HMRC, taxpayers, and agents.

Several respondents emphasised the importance of accessibility, particularly the need for HMRC to ensure digitally-excluded taxpayers had appropriate options to enable them to comply. Some respondents cautioned against an approach that would legislate to force taxpayers into digital channels unless they chose to opt out.

Some expressed concerns digital communications could potentially be overlooked by a taxpayer: for example, with email notifications missed or automatically diverted into the taxpayer’s spam folder, which could then lead to penalties for non-compliance. HMRC should explore whether it could track if communications had been opened, send reminders to taxpayers, and allow sufficient time for taxpayers to act. This could mean a multi-channel approach, with different follow-up communication channels used as appropriate. Some respondents suggested that HMRC should routinely send automated responses confirming receipt of emails, including information around how to seek further help and when to follow up on an application or query.

Some respondents supported a more streamlined process to allow emails to be used as a normal method of business communication, for HMRC to provide support for alternative file sharing platforms and to log ‘temporary agent authority’ centrally within the department.

Others highlighted the importance of data security, and the need for appropriate safeguards to protect digital records and enable recipients to easily identify genuine HMRC correspondence.

Government response to questions relating to enquiry and assessment powers

The government welcomes respondents’ views on the challenges HMRC faces relating to increasing numbers of claims for tax reliefs and credits, including the risks and opportunities different approaches could present. More broadly, respondent feedback emphasised that reforms in this area could support a clearer and simpler approach to tax administration.

The government will consult on new approaches to tackle high volumes of lower value non-compliance and address these challenges. Options include a model that would offer taxpayers an opportunity to quickly resolve potential errors identified by HMRC and self-correct their returns.

Wider reform to HMRC’s enquiry and assessment powers, to either create a single set of powers across tax regimes or more closely align the key provisions of these powers, has the potential to deliver benefits to taxpayers, agents, and HMRC through greater simplicity and clarity. While there was broad support, in principle, for a system that reduces complexity through harmonisation of powers, there were also concerns that such reform could be complex, impose transitional costs, and carry the risk of unintended consequences.

On balance, the government considers there would be benefits to reform in this area, recognising the challenges and opportunities cited by respondents. The government does not plan to make any specific reform proposals at this stage, but HMRC will continue to engage with stakeholders and analyse options to make it easier and quicker for taxpayers to get things right, welcoming further input on how simplification and harmonisation of existing powers could be approached.

Penalties

Reform opportunity G: aligning penalties across tax regimes

Question 11: Which types of non-compliance do you think should have common penalties applied consistently across HMRC’s tax regimes?

There were 24 responses to this question, with the majority supportive of applying common penalties across tax regimes. Many respondents saw greater alignment as promoting simplicity and fairness. Some also suggested that there could be reduced costs, arising from fewer mistakes, fewer systems, and less legislation. Other potential benefits included making it easier for HMRC to train staff and administer taxes more efficiently, and the penalties having a greater deterrent effect as they would be easier for many taxpayers to understand.

Respondents gave most support to alignment of penalties for late filing and late payment, while the alignment of penalties for failure to notify and inaccuracies were also popular suggestions.

Some respondents did not want to see the application of common penalties across all types of non-compliance or all taxpayer groups. There was a concern that this would not take due regard of the nature, severity, and impact of the offence or the behaviour and circumstances of the taxpayer. Several respondents encouraged HMRC to continue with a nuanced and flexible approach, which allowed for differentiation and discretion, where appropriate. Such an approach could take account of the different impacts of a £100 penalty on, for example, an individual and a large, multinational business.

Some taxes were also seen as requiring a different approach. For example, penalties arising from not meeting regular reporting requirements (such as quarterly returns under VAT) should be different from penalties arising from non-compliance concerning taxes on one-off transactions (such as Stamp Duty Land Tax), given some taxpayers’ lack of familiarity with certain transaction or event-based taxes.

A small group of respondents encouraged HMRC to refund penalties for late filing where no (or minimal) tax was due, without the need for an appeal.

Question 12: Are there tax regimes where a differentiated approach to certain penalties may be needed?

There were 20 responses to this question. Several respondents highlighted that the different characteristics and compliance challenges of specific taxes supported a differentiated approach. One respondent cited Inheritance Tax as an example, believing that penalties should be more lenient due to the sensitive circumstances of the tax and the limited knowledge of friends and family where they are acting as executors, particularly when those penalties arose due to misunderstandings or the complexities of estate evaluation. A further example was Insurance Premium Tax, where it was felt that specific knowledge of the intricacies of the regime was required. More broadly, some respondents felt that international tax issues, such as transfer pricing, might require a different approach to reflect the complexity and multinational nature of business operations.

Some respondents suggested reviewing penalties where they applied to third party reporting to HMRC. Penalties can arise for third parties, such as banks, insurers, and investment managers, for a number of reasons, including failure to report chargeable events or having errors in chargeable event certificates. Such reporting usually applies to large numbers of customers and is automated. In these situations, an underlying IT issue can result in the third party receiving a lot of penalties, including where there is no tax at risk.

Two respondents encouraged HMRC to recognise that the greater the complexity of the tax, the more the penalty regime should take into account the efforts made by taxpayers and the particular circumstances relevant to any failures.

Reform opportunity H: simplifying individual and related penalties

Question 13: Are there particular penalty regimes you think should be simplified? We would welcome views on why and how such penalty regimes might be reformed.

There were 24 responses to this question. The majority of respondents supported simplification in different forms.

Some respondents believed that simplifying offshore penalties should be a priority, due to their perceived complexity, for which several detailed examples were provided. Stakeholders believed most taxpayers were unaware of offshore penalties until they sought advice on correcting a mistake, suggesting the penalties have little deterrence effect. Some suggested the quantity of information HMRC obtained from overseas jurisdictions under Exchange of Information Agreements and similar initiatives undermined the case for having different penalty levels for offshore matters.

Several respondents encouraged HMRC to strengthen incentives to cooperate, through the simplification of penalty rate reductions where the taxpayer discloses their inaccuracy. One suggested removing the 10-percentage point cap on a reduction where it has taken the taxpayer 3 or more years to disclose an inaccuracy. This cap was perceived to be unfair as it applied regardless of how quickly the taxpayer acted after becoming aware of the mistake.

Some respondents called for this aspect of the mitigation process to be either withdrawn or given a statutory footing rather than be implemented in guidance only. It was felt that, at present, it added an extra layer of complexity and did little to encourage good behaviour amongst taxpayers due to it not being widely known or publicised.

Another similar suggestion was made to remove the distinction between whether a non-deliberate failure to notify was disclosed within or after 12 months. This would reflect that most taxpayers disclose as soon as they become aware of the need to do so which may be some time after the fact. Others suggested changing the wording of tax-geared penalties so penalties would be imposed only where HMRC can assess the tax liability, citing several tribunal cases where penalties applied despite no tax being assessable.

Some respondents suggested simplifying the different categories of behaviour, with several suggestions for how this could be achieved. For example, some favoured removing the category of ‘deliberate and concealed’ behaviour, as the categories of ‘deliberate’ or ‘non-deliberate’ were believed to be sufficient. Another suggestion was to treat all non-deliberate behaviour equally and simply not charge a penalty in these cases, although it was recognised that this would lessen the incentive for taxpayers to take care when meeting their obligations. The subjective nature of the penalty regime and perceived inconsistencies in the way HMRC applied penalties were also raised as concerns.

Other respondents supported the use of behavioural penalties and highlighted the important protections they provide to taxpayers who make mistakes in their tax affairs while taking reasonable care. Removing behavioural penalties could mean those making genuine mistakes are treated the same as those going out of their way to evade tax.

Two respondents suggested that the process for reporting errors in pension compliance was opaque, due to the lack of a clearly defined process, and that there was little clarity over how penalty mitigation was applied or accessed.

One respondent told us that HMRC often sends out penalty partnership notices without naming the partnership concerned. This caused problems for any business which invested in multiple partnerships. There could also be a problem with penalties sent to limited partners of private capital funds where the partner had no day-to-day control over running the business. In this scenario, the partner receiving the penalty might have no means of resolving the issue which led to the penalty.

Question 14: What are the potential benefits and challenges of moving away from the current set of behavioural penalties? What alternative models should be explored?

There were 26 responses to this question, with many in favour of retaining behavioural penalties and providing suggestions to improve the current model.

Several respondents believed that the current system effectively addressed various degrees of culpability and had been proven to work well in many circumstances. The system ensured that penalties were proportional to the nature of the non-compliance and upheld fairness by treating taxpayers who made honest mistakes more leniently than deliberate evaders. This approach also encouraged voluntary compliance as it incentivised taxpayers to correct non-compliance themselves.

Some respondents supported moving away from behavioural penalties, noting challenges such as the need and subjective nature of determining the behaviour and assessing reasonable care in each case. This was seen to create uncertainty and delay for both HMRC and taxpayers, as well as being a cause of inconsistency and unfairness, increased disputes, and litigation concerning penalty assessments.

Respondents expressed concerns about the practicality and fairness of alternative models, which could introduce more ambiguity and complexity. A points-based system was suggested by some as an alternative, with penalties applied after the taxpayer had accumulated a certain number of points for minor instances of non-compliance. The points-based model for late submission penalties for VAT was given as an example. Respondents felt a similar approach to other penalties could promote consistent compliance without immediate, harsh penalties.

Several respondents noted the drawbacks of basing penalties for inaccuracies on the taxpayer’s level of cooperation and their history of inaccuracies. In certain circumstances, it was felt this could lead to a taxpayer making careless errors receiving a higher penalty than a taxpayer making deliberate and concealed errors. Others suggested the number of inaccuracies was not an accurate indicator of the gravity of the error or its tax impact, and were concerned this approach could discourage a taxpayer from disclosing an error in case it took them over the threshold for receiving a penalty.

Reform opportunity I: reforming the use of penalty suspension

Question 15: What alternatives to the current model of penalty suspension do you think should be explored?

There were 21 responses to this question, with respondents noting the benefits of penalty suspension but also raising concerns and offering suggestions for improvement.

Several respondents held the view that, under the current system, the application of suspension could be inconsistent, suspension conditions took time to agree, and taxpayers were often unclear on what the suspension was trying to achieve and how to meet the conditions. Others added there was often little or no follow-up from HMRC to see whether the taxpayer was complying with the conditions for suspension. These factors were seen to undermine the effectiveness of suspension as a learning opportunity and a deterrent. There were also concerns that the taxpayer could not appeal the HMRC decision on whether conditions had been met at the end of the suspension period.

One suggestion was that suspension should be discussed at the outset for all careless penalties as part of a compliance check. This was seen as a way of ensuring that all taxpayers were aware of the possibility of suspension and the benefits of complying with the conditions. It was also suggested that there could be merit in encouraging businesses to suggest reasonable and effective suspension conditions for HMRC’s consideration, rather than the conditions being imposed unilaterally by HMRC.

Some respondents encouraged HMRC to monitor compliance with suspension conditions more closely and consistently and provide feedback to the taxpayer on their progress and performance. This would enhance the credibility and transparency of the suspension process and encourage taxpayers to improve their behaviour.

Others encouraged HMRC to consider extending the use of suspension to a wider range of penalties, including penalties for failure to notify, late payment, late submission, and failure to keep records. One suggestion was to extend suspension to late VAT registration penalties, where it was believed there was scope for the taxpayer to rectify their error and demonstrate improved compliance. This was seen as aligning the suspension regime more closely with the principle of encouraging compliance rather than raising revenue. Some respondents suggested extending suspension to deliberate penalties, perhaps by implementing a longer suspension period and suspending only a percentage of the total penalty.

Several respondents supported the idea of applying penalty suspension for careless errors automatically, while others made the case for issuing a warning for a first offence instead of a penalty. One suggestion was that this could be combined with putting a taxpayer on notice that any future errors would incur a penalty, with the outcome being that the penalty suspension regime could be removed entirely. Another respondent suggested that HMRC should send a ‘must improve’ letter to a taxpayer instead of imposing a suspended penalty for careless behaviour. Any future careless behaviour would then lead to a high penalty for deliberate behaviour.

Reform opportunity J: proportional fixed penalties

Question 16: What merits and challenges would making fixed penalties more proportional to a taxpayers’ income, resources, or tax liability present? Are there other models that should be considered?

There were 24 responses to this question. Several respondents endorsed the principle of proportionality and believed it would encourage tax compliance and improve fairness. Some noted the different impact a £100 penalty had on, for example, a sole trader in comparison with a large company. A sole trader might view a £100 penalty as a significant amount while, for a large company, it could be viewed as just another cost of doing business. HMRC was encouraged to take a more tailored approach to certain situations, such as towards insurers and pension funds (which can accumulate substantial fixed penalties when they are penalised per taxpayer) and late filing penalties for partnerships (where penalties are imposed per partner).

Other respondents suggested that the size of the penalty was less of a deterrent than the threat of the penalty itself. This applied particularly to businesses which had a legal duty to report a penalty to their regulator and suffered a reputational impact from having to do so.

The call for evidence suggested 3 measures on which the penalty calculation could be based: the taxpayer’s income, resources, or tax liability. Many respondents thought that using any of these measures would lead to greater complexity. A common plea was that any calculation should be based on information already held by HMRC, as requesting new information could lead to delays and disputes about the figures to be used. There were also concerns about how to quantify incomes and resources, given that the values could fluctuate over time. Furthermore, some respondents commented that income and resources were not necessarily indicative of a taxpayer’s ability to pay or the harm caused by their non-compliance.

Overall, tax liability was seen by the most respondents as the fairest measure, as it was perceived to be more closely connected to what HMRC were seeking to collect and could reflect the relative seriousness of the non-compliance.

Reform opportunity K and L: penalty escalation for continued and/or repeated non-compliance

Question 17: Do you agree that penalty escalation could help to address instances of continued and repeated non-compliance? What challenges could this present?

There were 22 responses to this question. On balance, respondents offered general support for penalty escalation but emphasised the importance of having adequate taxpayer safeguards in place.

Several respondents believed that HMRC should not be allowed to escalate a penalty if the taxpayer was unaware they were making a mistake. Some suggested that one of the key flaws of escalated penalties, at present, was the charging of multiple escalated penalties for historic non-compliance at the same time. In these circumstances, the taxpayer was considered to be denied the opportunity to respond to one level of penalty and correct the non-compliance before the next was charged.

A few respondents felt that no additional escalation measures were necessary, as penalty escalation already existed in the system (such as the higher penalty rates for deliberate behaviour, the suspension conditions for careless behaviour, and as a result of the penalty rate reductions for ‘telling, helping and giving access’).

Some respondents believed that the current penalty regime provided sufficient incentives and deterrents for taxpayers to comply with their tax obligations and that further escalation could create unfair and disproportionate outcomes. There was concern that penalty escalation could unfairly penalise taxpayers who were trying to cooperate and put things right, without accounting for the underlying facts and circumstances.

Question 18: Are there particular models of penalty escalation you think should be considered, and why?

There were 8 responses to this question. Respondents offered suggestions, along with general principles, as to how different models of penalty escalation could work.

Respondents commented that taking a more lenient approach to first time or occasional offenders should be part of any penalty escalation model. One respondent suggested a graduated penalty system, similar to the model used for breaking the speed limit when driving, where points accumulate and result in stronger sanctions. This model would allow HMRC to differentiate between one-time offenders and those who persistently flouted the rules.

Another respondent suggested that the penalty regime should be simplified, rather than adding new conditions to what they felt was an already over-complex series of rules. They felt that there was already an escalation principle within the existing model, for example, through the reductions for ‘telling, helping and giving access’.

Several respondents recommended focusing any penalty escalation on those who engaged in deliberate or fraudulent behaviours. This would ensure the system remained fair by not unduly penalising those who made honest mistakes or who encountered complex issues that might lead to unintentional non-compliance.

Another respondent felt that any model of penalty escalation would be effective only if the penalties were issued in a timely manner, so that the taxpayer had the opportunity to avoid the next step of penalty escalation.

Reform opportunity M: designing new penalties to discourage undesirable behaviour

Question 19: Are there specific behaviours and situations that you think new penalties could help to address, and why?

There were 21 responses to this question. The majority of respondents expressed concerns about the scope for reform in this area. In particular, there was concern that the definition of ‘unreasonable behaviour’ could be highly subjective and there was a question about how this interacts with the ‘Notification of Uncertain Tax Treatment (UTT)’ legislation. It should be noted that UTT does not consider behaviour, but simply requires notification of uncertainties that satisfy 2 objective criteria. A small number of respondents believed that there was adequate existing legislation for HMRC to address where taxpayers adopt unreasonable tax positions.

One respondent felt that penalties for a taxpayer taking what HMRC consider to be an unreasonable tax position could restrict access to justice. This view was based on the premise that a taxpayer could be discouraged from taking forward an appeal for fear that the courts and tribunals could judge their arguments to be unreasonable and worthy of a penalty.

Over half of respondents commented specifically on the suggestion that penalties could apply for carelessness by agents. Several respondents were supportive of imposing penalties on agents who repeatedly provided incorrect advice to taxpayers or were careless when acting on behalf a client. However, many expressed the view that HMRC’s existing oversight and powers with regard to agents were sufficient, and any changes to strengthen the regulatory framework for the tax advice market should be allowed to ‘bed in’ before the government considered further changes.

Some respondents were concerned that it would be difficult for HMRC to impose penalties on agents as this would require HMRC to determine the role of the agent in the non-compliance. It could also lead to conflicts of interest between agents and advisors, resulting in taxpayers being unrepresented at the settlement stage of a long-running enquiry with HMRC. Other risks raised included agents being unwilling to represent clients due to the potential liability of tax-geared penalties exceeding fees; taxpayers taking less care if they could ultimately shift the blame onto their advisors; and higher costs of agent insurance, which could be passed on to clients. One respondent commented that agents often assume responsibility for miscommunications between themselves, taxpayers, HMRC, and other third parties to maintain good relations with their clients.

Reform opportunity N: modernising administration and communications

Question 20: Where could HMRC communicate in a more timely or effective manner with taxpayers about penalties?

There were 22 responses to this question, all of which encouraged HMRC to improve the way it communicates with taxpayers.

Many respondents wanted HMRC to improve the tone and clarity of its written communications and to have more sympathy with those individuals who found it difficult to process information from HMRC.

Several respondents wanted HMRC to do more to let taxpayers know the amount of a proposed penalty at the time the underlying assessment was issued or, at least, give advance notice of the possibility of a penalty.

There was widespread support for greater use of digital methods of communications. Several respondents suggested that HMRC should integrate all correspondence directly into a taxpayer’s digital account, similar to the model used by banks. This suggestion was seen as a way of tackling the problems of using the traditional postal system, where post sometimes went missing or taxpayers failed to let HMRC know of a change of address. The government’s ‘Tell Us Once’ service was suggested as a model to ensure addresses were kept updated. There were also suggestions that taxpayers should be legally required to tell HMRC of a change of address, in a similar manner to the requirement for car owners to update the Driver and Vehicle Licensing Agency.

Some respondents, however, highlighted the drawbacks of digital communications. For example, it was noted that taxpayers can lose access to digital accounts or not receive email alerts.

A few respondents encouraged HMRC to be alert to cases where a penalty notification did not prompt the taxpayer into action, as this could mean the notification had not been received.

Reform opportunity O: regular uprating of fixed penalties

Question 21: Would you support the regular updating of fixed penalties for inflation? What challenges would this present for you?

There were 24 responses to the question, with mixed views on the merit of regular uprating of fixed penalties.

Many respondents highlighted the drawbacks of automatic uprating and encouraged HMRC to consider the broader context. Personal allowances, tax reliefs, and thresholds have not been routinely uprated for inflation. Uprating penalties alone could be seen as unfair and undermine trust.

Several respondents agreed with the principle of automatically uprating penalties in order to maintain their deterrent effect. Some respondents thought that periodic uprating, perhaps every 5 to 10 years, would be preferable to annual uprating, in order to keep the process simple for taxpayers to understand. Some respondents cautioned that annual uprating would mean that published information on penalty levels could quickly become outdated, leading to complexity. Others encouraged HMRC to take into account factors such as the economic environment and the effectiveness of the specific penalty being considered.

Several respondents suggested penalty figures should be kept as round numbers following any uprating. Penalty figures expressed in pounds and pence, even when that was the precise figure resulting from the uprating, would add complexity.

Reform opportunity P: transparency

Several respondents commented on the suggestion of HMRC publishing regular statistics on penalties, with the general view being positive.

Most respondents felt that publishing data would support compliance and inform the public debate on tax compliance. One respondent thought it would be useful to agents in helping clients understand the importance of taking reasonable care with returns and making voluntary disclosures. Another said that publishing information would help identify whether there were any penalties that were rarely or ever used. Consideration could then be given as to the reason for this and whether they were still needed.

Some respondents suggested that, to be effective, any publication should be advertised across multiple news and social media channels, as well as GOV.UK. A few respondents suggested HMRC should review whether current publication schemes, such as the list of deliberate tax defaulters, were effective.

One respondent noted that the length of time for which HMRC can publish the details of offending parties is inconsistent. In some circumstances, there is a time limit of 12 months whilst in other circumstances, there is no time limit. The respondent thought the names of offending parties should be removed only when the information is no longer helpful to taxpayers in identifying risks.

Government response to questions relating to penalties

Penalties play an important role in HMRC’s compliance approach, by encouraging taxpayers to comply with their tax obligations, acting as a sanction for those who do not, and reassuring the compliant majority that those who break the rules run the risk of being worse off. The government welcomes the broad support for simplifying penalties and the suggestions made for how individual penalty regimes could be reformed.

Building on the responses to the call for evidence, the government will consult further on options to improve the existing behavioural penalties for inaccuracies and failures to notify. This will include exploring the scope for how simplification, alignment, and escalation can be applied to these penalties to provide benefits for taxpayers, agents, and HMRC.

Reforming how penalty escalation is used could strengthen compliance and build trust, provided such escalation is relatively simple and supported by appropriate safeguards to ensure fair treatment. Options will be considered at both ends of the spectrum: where there is occasional non-compliance caused by non-deliberate behaviour and where there is repeated deliberate non-compliance. The future use of penalty suspension will be looked at as part of this.

Respondents were clear that they saw scope for further improvement of HMRC’s penalty communications with taxpayers and agents. HMRC will continue to explore greater use of digital methods of communications as part of existing initiatives such as the Single Customer Account. Alongside this, HMRC will continue to invest in compliance caseworker learning and capability to ensure processes, guidance, and controls are applied effectively and consistently.

The government is keen to increase transparency. The publication of regular data on penalties will be kept under review and considered on a penalty-by-penalty basis as the review progresses.

A small number of respondents raised the issue of late filing penalties where there is no tax due. Late filing penalties are being modernised as part of ‘Penalty Reform’ under the Making Tax Digital initiative. New penalties have been introduced for VAT, and new penalties for ITSA will come next. The government intends to continue modernising late filing penalties via this ongoing programme of work.

Safeguards

Reform opportunity Q: aligning how appeals are made

Question 22: What are the merits and challenges of aligning the appeals process with either the direct or indirect taxes approach?

There were 24 responses to this question. Many respondents wanted HMRC to improve the time it takes to deal with cases and ensure that the communications issued as part of the appeals process explain HMRC’s decisions or views clearly.

The majority of respondents supported aligning appeals processes, specifically favouring the current approach used in direct taxes. It was noted this would allow for a more streamlined process which would be simpler and easier for taxpayers to understand and make it easier for HMRC to train staff. Others suggested this approach would also promote fairness, transparency, consistency, and efficiency, and would improve opportunities for alternative dispute resolution (ADR).

Several respondents noted the indirect appeals process had challenges, mainly from the requirement to pay upfront unless hardship was proven. Some were concerned this may limit access to justice based on a taxpayer’s means or ability to afford legal representation or other forms of representation.

Some respondents favoured a hybrid approach, feeling that this would better serve the existing differences between the direct and indirect taxes process and could encompass aspects of both approaches.

One respondent recommended alignment towards the indirect appeals approach, believing that the appeals process should be a ‘last resort’ safeguard.

Question 23: Are there other examples of appeals processes for direct and indirect taxes that could be considered as an alternative approach and why?

There were 13 responses to this question, with several respondents providing examples of alternative appeals processes.

Some respondents highlighted approaches used by tax authorities in other countries. One cited France’s third-party body which examines and agrees the facts of a case, but not matters of law, and believed a similar approach could help improve impressions of impartiality for the statutory review process. Another noted the Australian Taxation Office’s early assessment and resolution process, with its emphasis on achieving resolution during the enquiry and assessment process.

Some respondents believed a statutory review offer should be made compulsory, after a ‘view of the matter’ was given by HMRC and taxpayers given 30 days to accept the offer. Other suggestions included extending the 30-day time limit to apply for a statutory review to 90 days and enacting new legislation to make ADR more accessible in the first instance (currently, statutory time limits require taxpayers to apply to the tribunal to access ADR during or after the statutory review stage).

A few respondents suggested HMRC consider a hybrid approach, where aspects of direct and indirect taxes appeals processes could be combined into a unified approach. Some suggested HMRC should review current data and compare the effectiveness of the direct and indirect taxes appeals process, using this to inform a hybrid approach.

A few respondents commented that pursuing a judicial review of an HMRC decision could be expensive and time consuming and, as a general principle, any HMRC decision should instead be capable of being disputed through the tribunal. Current legislation means that some decisions may have to be disputed via judicial review, for example, taxpayers cannot appeal HMRC’s rejection of an overpayment claim unless HMRC had previously enquired into the claim.

Reform opportunity R: aligning payment requirements

Question 24: What are the merits of aligning payment requirements across regimes where a liability is disputed, and a tribunal appeal is made?

There were 20 responses to this question, with the majority of respondents in favour of aligning payment requirements. Many noted that there were merits to alignment such as adding clarity, improving efficiency, and reducing confusion and uncertainty.

Many respondents favoured alignment with the direct taxes approach, where no payment would be required prior to the conclusion of the appeal. Some of these respondents believed that, should the taxpayer be unsuccessful with their appeal, the Exchequer would be compensated via additional interest that would be accrued. Three respondents commented that payment upfront might reduce cashflow for a business. Others noted tax could end up deferred for several years due to litigation under the direct approach, but HMRC could make use of Accelerated Payment Notices (APNs) where this was abused.

Around half of respondents expressed concerns about hardship applications and how these could impose an added cost, which might cause an additional burden to taxpayers. Three respondents recommended the reintroduction of Certificates of Tax Deposits (CTD), believing this could be a way for the taxpayer to make a payment on account without giving up on their appeal.

Question 25: Are there specific circumstances where you think the existing differences across regimes are important or desirable to maintain?

There were 8 responses to this question. Several respondents cited inheritance tax as a specific circumstance where it was desirable to maintain a different approach, due to the time taken for the granting of probate and to complete the sale of any property. It was seen as valuable to maintain these differences to preserve certainty for taxpayers. Others cited VAT, believing its focus on the supply chain meant it would continue to necessitate a different approach.

Reform opportunity S: improving access to ADR and statutory review

Question 26: How can HMRC improve access to statutory reviews and ADR? Are there ways to encourage voluntary take-up of these you think we should explore and why?

Almost all of the 25 responses to this question supported the goal of improving access to statutory reviews and ADR.

Many respondents thought HMRC could provide better communications to taxpayers, including advertising targeted at specific audiences, clearer guidance on the aims of statutory reviews and ADR as dispute resolution options, as well as clearer factsheets on what the process involved and criteria for rejection. Some respondents, in reference to HMRC’s ADR manual, wanted to see a clearer explanation of what ‘tax facts’ disclosed during mediation were, and how these could have legal and technical implications for a taxpayer’s liability.

Many respondents emphasised that any increase in take-up of statutory review or ADR by taxpayers would demand a corresponding increase in HMRC staff and training. Some suggested HMRC required more trained specialist officers, particularly for cases where technical knowledge was needed.

Several respondents thought take-up of statutory review and ADR could be improved if HMRC could strengthen perceptions of independence. Some believed it was unhelpful that HMRC review officers might contact HMRC caseworkers to discuss or clarify details in review cases. This could give the impression of a lack of impartiality. One option might be to prohibit all contact between review officers and caseworkers and their teams, to ensure the review provided a genuine ‘fresh pair of eyes’. The involvement of an external mediator was cited as another potential solution.

Some respondents noted extensions for statutory reviews were often requested by HMRC, and this could add delays to the process. Some suggested that this indicated a need either for more specialist HMRC staff or better training, or an extension to the 45-day time limit to ensure it was an effective alternative to tribunal.

HMRC’s Litigation and Settlement Strategy was commented on by several respondents, who suggested it could be reframed to allow negotiation for amounts of tax due and provide a better entrance into ADR.

Some suggested specific areas of the tax system undermined trust that reviews would be completed in a timely manner, as HMRC’s original decision is upheld if a statutory review fails to conclude within 45 days or such longer time is agreed prior to the expiry of the deadline. Examples included the Taxes Management Act 1970 section 49E(8), Inheritance Tax Act 1984 section 223E(8), Finance Act 2003 Schedule 10 paragraph 36E(8), and Value Added Tax Act 1994 section 83F(8).

A few respondents suggested HMRC could provide better publicity for the statistics on the outcomes of reviews (such as automated penalty cases, where the ‘success’ rate is quite high) to help raise awareness.

A couple of respondents suggested HMRC could explore reduced penalties as an incentive for engaging with statutory review or ADR.

Question 27: What are the merits and challenges of increasing take-up of statutory reviews and ADR with a ‘recommendation and opt out’ approach?

There were 28 responses to this question, with the majority of respondents supporting this potential approach. Many viewed it as a way to encourage take-up of statutory reviews and ADR without removing any safeguards. It could help to normalise the concept that statutory review and ADR processes are non-adversarial, effective dispute resolution options that are commonly used. A few respondents noted the legislative option for taxpayers to request a review, such as Taxes Management Act 1970 sections 49A(2)(a) and 49B, should be retained if such an approach were adopted.

Some respondents cautioned taxpayers might feel coerced into participation or may not fully understand their rights without proper communications. Taxpayers may still wish to directly approach the tribunal, and this should be recognised. Others believed ADR should not be recommended in cases where guidelines say ADR is not appropriate. Some suggested that if opting out required the taxpayer to give a reason, these may need to be limited to ensure mediation was not avoided.

Existing models and approaches used elsewhere were cited by some respondents, suggesting HMRC might learn from these. The Small Claims Mediation Service, provided by HM Courts and Tribunal Service, was suggested as a precedent for a ‘recommendation and opt out’ mediation scheme, though it was noted that even with this approach the overall level of mediation referrals was only 21%. Other examples included the Court of Appeal ‘Automatic Referral Scheme’, under which certain types of appeals have been automatically referred for mediation since 2012, and automatic referral schemes operated within County Courts.

Some respondents suggested alternative approaches or ways in which a ‘recommendation and opt out’ approach could be supported by other initiatives. One suggestion was a ‘safeguards helpline’ operated by HMRC so taxpayers could ask about their current position and options available to them. Another was that HMRC could consider expanding Rule 3(1) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 to encourage parties to consider the use of ADR and report back to the judge on their considerations. Alternatively, HMRC could consider consulting members of professional bodies with appropriate specialisms to opine on positions where taxpayers and HMRC disagreed.

Reform opportunity T: mandating statutory reviews in certain circumstances

Question 28: What are your views on the possibility of mandating statutory reviews in certain circumstances?

There were 22 responses to this question. Many respondents supported the idea of mandating statutory reviews on the basis that it could increase take-up and help to support a more consistent and fairer approach to disputes. Some of these respondents cautioned it would not be appropriate in all cases, that taxpayers should maintain the ability to opt-out and appeal at tribunal, and that it should not become an additional financial burden to the taxpayer. It was also suggested conversations prior to closure of an enquiry with HMRC might already achieve the aims of a statutory review.

Around half of respondents highlighted HMRC would need to have appropriately trained staff in place to deal with any additional statutory review cases.

Some respondents emphasised that there needed to be clear support and guidance for taxpayers who might be unrepresented through the appeals process.

Question 29: Are there specific circumstances where you think it would be appropriate or inappropriate to mandate statutory reviews?

There were 16 responses to this question, with around half of respondents supportive of mandating statutory reviews in simple cases, such as late payment surcharges, penalties or as part of resolving minor disputes. Some were concerned there was a risk of creating a two-tier system if mandating statutory reviews were to be administered with a financial limit, which could disproportionately affect small and micro businesses.

One respondent suggested this approach could limit flexibility in the appeals process. Another believed that where the law is ‘unambiguous’ or is very unlikely to lead to a difference in interpretation between the taxpayer and HMRC, it would be inappropriate to mandate statutory reviews.

Reform opportunity U: withdrawing the option of statutory reviews in certain cases

Question 30: Would you have any concerns if HMRC were to withdraw the option of statutory review in some cases?

There were 26 responses to this question and almost all respondents opposed withdrawing the option of statutory reviews in certain cases.

Many respondents emphasised statutory reviews served as a fundamental taxpayer safeguard to ensure HMRC decisions were robust and grounded in fact before escalation to more formal and potentially contentious appeal processes. Withdrawing statutory reviews in certain cases could deprive taxpayers of a valuable alternative to tribunal appeal and be counter-productive to increasing its use. Others commented that it would remove the ability for taxpayers to deal with a different HMRC officer and seek an alternative viewpoint.

Some respondents noted that statutory reviews were an essential method of obtaining an explanation of HMRC’s decisions and could help taxpayers understand HMRC’s case, obtain advice, consider their chances of success and whether they wanted to spend time and money on an appeal. On its part, HMRC could lose the opportunity to identify and resolve mistakes if it did not undertake reviews, thus entrenching those mistakes and delaying resolution. This could also negatively impact trust and fairness.

Several respondents commented on the underlying objective of addressing the minority of taxpayers who seek to exploit safeguards such as this, in order to delay resolution. Some noted that taxpayers might ‘game’ the system to prolong or defer payment by making spurious review requests, though this was likely to be a very small number of taxpayers. Addressing this challenge should not impose disproportionate costs on the compliant majority of taxpayers. Instead, HMRC could try to avoid granting extensions to taxpayers who had little or no intention of providing additional information or submissions. There was a suggestion that it might be appropriate for HMRC to withdraw the option of a statutory review in very limited cases, such as those concerning mass-marketed avoidance arrangements, though others noted that it would be unfair if HMRC were to decide who was defined as an ‘avoider’ in such cases.

Reform opportunity V: Digital administration

Question 31: Are there other areas you think would benefit from alternative appeals channels (for example, digital)?

There were 19 responses to this question. Most respondents were positive about the potential benefits of digital appeal services, on the basis that they could reduce costs for HMRC and taxpayers. Around half of respondents cautioned that a digital channel alone would not be sufficient to serve the digitally excluded or those with unique circumstances.

Some respondents noted that a digital route would require some way to inform taxpayers and their agents that correspondence had been sent, as this could be easily overlooked, and time limits might be missed. Others mentioned that if digital services did not include the ability for taxpayers to upload additional information or attach documents, this could lead to an ongoing reliance on manual or paper-based methods.

It was also noted that a taxpayer might have multiple agents that deal with different aspects of their taxes: for example, one agent dealing with corporation tax while another dealing with PAYE. Any system should therefore allow for the appropriate agent to interact with HMRC.

Government response to questions relating to safeguards

The right for taxpayers to request a review and appeal HMRC’s decisions are fundamental safeguards and are recognised as strengths of the UK’s tax administration framework. The call for evidence sought views on how to improve these safeguards and ensure disputes are dealt with fairly, consistently, and swiftly.

The government agrees there is scope to improve awareness of taxpayer safeguards and to simplify the processes and procedures that accompany them. There is potential to increase taxpayer awareness and understanding of dispute resolution options and ensure taxpayers are guided to the appropriate dispute resolution method suitable to their circumstances, including whilst an enquiry is ongoing. This may also save time and costs for taxpayers and HMRC by seeking to resolve disputes at the earliest opportunity. Given their importance in ensuring fair outcomes for taxpayers, the government intends to consult on ways to improve access to dispute resolution and statutory review outside of tribunal to explore how these benefits can be realised.

Alignment of the appeals processes under a specific model (direct or indirect tax) has the potential to bring significant benefits but carries considerable challenges, as highlighted by respondents. HMRC will continue to explore options for reform, considering alternative approaches used elsewhere to better understand best practice and where improvements could be made.

The government acknowledges respondents’ positive comments about increased alternative appeals channels and taxpayer awareness by using digital communications. HMRC will continue to explore greater use of digital services and communications while being aware of the digitally excluded.

The government acknowledges respondents’ strong concerns about the risk of withdrawing statutory reviews in certain circumstances and has no current plans to explore this proposal further.

3. Next steps

Many respondents provided detailed and considered feedback to all 22 reform opportunities posed in the call for evidence. The government is grateful to all those who contributed their time and expertise. HMRC will continue to draw on these responses to inform any future reforms across these policy areas.

As set out in the chapters above, the government has identified a broad range of reforms that could deliver benefits to taxpayers, agents, and HMRC, supporting a simpler and more efficient tax administration framework. The government will build on the feedback to the call for evidence and consult on:

• options for new approaches to tackle high volumes of low value non-compliance, including a model to offer taxpayers an opportunity to quickly resolve potential errors identified by HMRC and self-correct their returns
• behavioural penalties, including how the concepts of penalty alignment, simplification and escalation can be applied to existing ‘inaccuracy’ and ‘failure to notify’ penalties
• ways to improve access to alternative dispute resolution and statutory review to help resolve disputes before they reach tribunal

Reforms in these areas could strengthen trust in the tax system, promote fairness, improve compliance and bring benefits to taxpayers, agents and HMRC. They also have the potential to improve the taxpayer’s experience of dealing with HMRC, by introducing greater clarity, supporting taxpayer understanding, and ultimately reducing costs.

The government is committed to continuing to review those aspects of the tax administration framework which relate to compliance, as part of delivering a modern and reformed tax administration system. The perspective provided by respondents is vital to informing robust policy development and the government is committed to working closely with taxpayers and agents to ensure they are consulted as policy reforms are designed and delivered.

Annex: List of stakeholders consulted

• Advice NI
• Amstone Management Ltd
• Association of British Insurers
• Association of Certified Chartered Accountants
• Association of Taxation Technicians
• Avalon Tax
• AW Tax Service Ltd
• Azets
• BDO LLP
• British Private Equity and Venture Capital Association
• British Universities Finance Directors Group
• Centre for Effective Dispute Resolution
• Chartered Accountants Ireland
• Chartered Institute of Taxation
• Contentious Tax Group
• Country Land and Business Association
• Deloitte LLP
• DWF Law LLP
• Ernst & Young LLP
• Futurelink Group Ltd
• Grant Thornton LLP
• Institute of Chartered Accountants in England & Wales
• Institute of Chartered Accountants in Scotland
• Institute of Financial Accountants
• KPMG LLP
• Lloyd’s of London
• Low Income Tax Reform Group
• Mazars LLP
• Moore Kingston Smith LLP
• Nomad Accountancy Ltd
• Pinsent Masons LLP
• Professional Passport Ltd
• Pump Court Tax Chambers
• PwC LLP
• RSM UK Tax Ltd
• Shoosmiths LLP
• Slaughter and May
• The Association of Independent Professionals and the Self-Employed
• UK Finance Ltd

• Vialto Partners

• Two individuals