UK and International Tax news

HMRC Issues Technical Note On Automated Decisions

Wednesday 6th November 2019

HMRC is proposing changes to current law in relation to the issue of tax notices automatically by computer without the intervention of an HMRC officer.

For nearly 50 years, the issuing of a notice to file a tax return or a tax penalty has been governed by TMA 1970 which requires action by ‘an officer of the Board’, i.e. HMRC, for such action to be valid.

There are recent cases where taxpayers have challenged the issue of such notices, and some tribunal judges have looked carefully at the evidence provided by HMRC. In particular, they have asked which HMRC officer made the decision to issue the notice.  Where there have been deficiencies in the notice issued, the disputed penalties have been cancelled.

HMRC’s technical note states that their policy intention is to make clear that HMRC’s use of large-scale automated processes to serve certain statutory notices and to carry out certain functions is and always has been fully supported by legislation.

The proposed legislation will provide that for certain functions anything capable of being done by an officer may be done instead by HMRC through the use of a computer or other electronic means, whether automatically or not. These will include notices to file a return in relation to individuals, trustees, partnerships and companies, corrections of a personal or trustee’s return by HMRC, the making of a determination imposing a penalty under any provisions of the Taxes Acts, and the determination of penalties in respect of SDLT.

The legislation, to be included in the next Finance Bill, will apply both retrospectively and prospectively in order to safeguard revenue charged since automated processes were introduced by HMRC. This means that both the automated processes themselves and anything done subsequent or pursuant to the automated process will be covered by the legislation prospectively and retrospectively. For example, where a notice to file a SA return was issued under s.8 TMA70 by HMRC using an automated process, anything done by HMRC related or pursuant to the issuance of that notice, such as charging a late filing penalty, or enquiring into any return received pursuant to the notice, will be covered by this legislation.

It is intended that any taxpayers who have received a settled judgement from a court or tribunal regarding the use of automation by HMRC before the date of this announcement, being 31 October 2019, will not be subject to the retrospective application of the legislation in respect of the issues covered by that judgment.

It is noted that there has been no prior consultation on the proposed changes despite professional bodies calling for a review of the powers contained in TMA70 and the principles governing HMRC’s powers in a digital age.

If you would like more information on the above, please contact Keith Rushen on 0207 486 2378.

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