Lords Economic Affairs Committee challenges the Chancellor on changes to offshore tax time limits
Clauses 79 and 80 in the new Finance Bill (No. 3) 2017-19, which extend the time limits for assessing offshore tax matters to 12 years, are unnecessary and should be removed from the Bill.
This is one of the interim recommendations made by the House of Lords Economic Affairs Finance Bill Sub-Committee in a letter to the Chancellor of the Exchequer.
In this letter, the Sub-Committee presents evidence that the Government's justification for increasing the time limit is inadequate. Witnesses told the Sub-Committee that the measure would be burdensome for elderly and low-income taxpayers, and suggested it may be motivated by resource pressures at HMRC.
The time limit is currently four years unless a taxpayer has failed to take reasonable care or has been deliberately non-compliant.
The Sub-Committee also commends HMRC's effective consultation process on Making Tax Digital penalty and interest provisions.
The Committee will publish two reports before the end of 2018. A report on Making Tax Digital for VAT will be published later in November, and a report on the powers of HMRC will be published in December.
Lord Forsyth of Drumlean, Chairman of the House of Lords Economic Affairs Finance Bill Sub-Committee, said:
“Witness after witness giving evidence to our inquiry opposed the extension of offshore tax time limits to 12 years. This would place disproportionate burdens on well-behaved taxpayers, many of whom are not high net worth individuals. For example, anyone with shares in an overseas company would be affected. Taxpayers who have shown reasonable care with their tax returns would have to hold onto records for three times as long as the current 4-year limit to defend themselves against potential HMRC inquiries.
“The Government should withdraw this measure from the Finance Bill and start a fresh dialogue with tax specialists on managing offshore tax matters more effectively.”
The House of Lords Economic Affairs Committee appoints a Finance Bill Sub-Committee each year to inquire into the draft Finance Bill. The Sub-Committee's inquiries focus on technical issues of tax administration, clarification and simplification rather than on rates or incidence of tax.
This year the Sub-Committee is investigating whether HMRC is using its powers disproportionately in its dealings with taxpayers, and preparations for the rollout of Making Tax Digital for VAT in April 2019.