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U.K. Financial Secretary Sets Out ‘New Normal’ for HMRC

Posted on Aug. 24, 2020

HM Revenue & Customs has done much to respond to the COVID-19 pandemic and will refocus its principles as a result as it resumes its regular activities, Financial Secretary to the Treasury Jesse Norman said.

In an August 20 speech during the Institute of Chartered Accountants for England and Wales’s annual conference, Norman said he was proud of the work HMRC has done so far to try to mitigate the economic effects of the coronavirus crisis. He noted the speedy introduction of the furlough scheme, which helped 1.2 million employers claim nearly £36 billion in assistance, and HMRC’s assistance to about 27 million self-employed people as they claimed nearly £8 billion in grants.

In addition to quickly introducing new assistance programs, HMRC implemented more than 60 policy measures to assist taxpayers, including deferral of income tax self-assessment payments and temporary customs duty and import VAT relief on medical supplies, Norman said .

All of these changes, however, mean new questions about the direction in which HMRC will go, according to Norman. “Is there going to be a ‘new normal’ for HMRC, and what does that new normal look like?” he asked. “For HMRC that does mean a refocusing and a reconsideration of the key principles by which they operate, again focusing wherever possible on supporting individuals, supporting businesses, protecting the taxpayer, and ensuring the money comes in to fund public services.”

To that end, Norman said HMRC will continue operating on five principles: collecting tax that is due in a taxpayer-friendly way, communicating in a transparent and open manner, continuing to be professional and fair when interacting with taxpayers, building on temporary arrangements that have improved the taxpayer experience, and cracking down on tax fraud as part of its tax collection activities.

HMRC has already resumed debt collection activities and will still issue penalty notices, but “should take a sympathetic approach” to individuals and businesses that are still struggling financially during the pandemic, according to Norman.

“So HMRC will initially focus on collecting debts from taxpayers who are least affected by COVID-19 and most able pay their tax debts,” Norman said, adding that those taxpayers might still be eligible for support if they are uncertain about whether they can pay.

Norman also highlighted HMRC’s publication of its 10-year tax administration strategy, published on July 21 along with several calls for evidence and other documents. “It means improvements to businesses’ digital skills, and it means a series of measures focused on reforming the tax administration in a way that reflects the modern economy, so that it is working in real time, it is allowing people and businesses to pay the right tax, without tax becoming a burden or too intrusive or difficult,” Norman added.

The plan also means extending the Making Tax Digital program for VAT to businesses with turnover under the £85,000 VAT threshold starting from April 2022, and starting consultations on a Making Tax Digital program for corporation tax in the fall of 2020, Norman said.

“We think this is the start of a really interesting process as we continue to embrace technology,” Norman said, adding that HMRC intends to move toward increased use of real-time data to give taxpayers an immediate idea of their tax obligations.

The tax authority would also like to consider ways to ensure more timely tax payments and start a debate on aligning tax payment with real-time tax reporting and other kinds of services, according to Norman. Modernizing the tax administration framework will be crucial in the future, he added.

“This, taken together, is I think quite a significant and important moment,” Norman said. “I think it forms a coherent package of change, and a long-term package of change. Therefore, I am very excited about it.”

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