A Westminster committee has accused the government of failing to make an adequate case for its proposed reforms to the tax system.
The House of Lords Economic Affairs Finance Bill Sub-Committee, a collection of peers who are scrutinising the government’s proposed changes to the tax system, said it was concerned the Treasury did not give sufficient cause for changing the dates of the tax year and reporting requirements for business.
HMRC are bringing forwards commitments made in the 2020 Spring budget which will standardise the time period over which self-employed individuals are taxed and require businesses to alert the authority about uncertain tax treatment.
Lord Bridges of Headley, Chair of the Economic Affairs Finance Bill Sub-Committee, said: “once again, HMRC’s approach to changes to the tax system has been found wanting. It needs to do more to clarify the rationale for change, and to consult properly on changes. Once it has done that it must help businesses prepare for change by providing them with a clear roadmap of what has to be done, by when.
“Failure to do this risks undermining people’s trust in HMRC,” Lord Headley added.
The report claimed the consultation process for basis period reform was flawed and the proposals published in haste. It also noted that at recent evidence sessions witnesses had repeated criticisms made when an initial draft of the bill was published underscoring the need for further evaluation of the measures.
The Institute of Chartered Accountants in England and Wales commented on upcoming changes. A spokesperson said: “If the uncertain tax treatments regime encourages businesses to discuss matters of uncertainty with HMRC in advance of filing a return so that a notification is not required, then this can only be a good thing.
“However, in order for such discussions to be effective, HMRC needs to provide more resources to its customer compliance managers and make them more accessible. HMRC also need to provide a facility so large businesses without a customer compliance manager can easily discuss tax matters with an expert,” the spokesperson added.
ICAEW has previously called for proposed basis period reforms to be scrapped until after changes have been made to the way self-employed individuals report tax under the government’s Making Tax Digital scheme.