An HMRC press release dated 27 February announced more detail on the proposed governance for settlement of major tax disputes. Changes have been made to the processes suggested by the Public Accounts Committee in December 2011 in their 61st Report. Key points are as follows:
- Appointment of new HMRC Commissioners - the assurance Commissioner - responsible for overseeing all large settlements but no indication of his/her identity
- The assurance Commissioner and two other Commissioners to review all settlements over £100m, with recommendations from a panel of senior tax professionals
- Publication of a new code of governance for all tax disputes
- Settlements of £100m or less will be subject to systematic review instead of the random sample recommended to the Public Accounts Committee
Timing has not been announced. The assurance Commissioner will be a tax expert but have no day-to-day responsibilities in relation to any individual taxpayer. The Public Accounts Committee had suggested an Independent Assessor be appointed who was external to HMRC with powers enshrined in statute. The office holder will not be as independent of HMRC as the Public Accounts Committee had intended.
All cases involving tax in excess of £100 million will be referred to three HMRC Commissioners: the Assurance Commissioner, the Director General Business Tax (or the relevant Director General for other taxes), and a Commissioner with unrelated responsibilities. All three Commissioners will be "tax experts".
- The Assurance Commissioner will be the second permanent secretary to HMRC and will be required to "make sure" that governance procedures have been followed, and challenge whether any settlement (i) would efficiently secure the correct amount of tax, and (ii) would involve taxpayers being treated even-handedly.
- There is no clear indication of how disagreements between the three Commissioners would be resolved. However as the Assurance Commissioner has responsibility we would expect that if he is not content with a proposed settlement, further work would be needed. It is hoped that this will be clarified in the new code of governance when published.
- When a case is referred, the three Commissioners will receive recommendations from a panel of senior tax professionals. We would expect the recommendations to include a steer on the specific tax issues and the specific settlement terms. Influencing these recommendations is likely to be of key importance to taxpayers. There is no indication of how the panel will be appointed, or its terms of reference.
- There is a reference to "an enhanced role for … the Audit and Risk Committee" on which the National Audit Office - which is supervised by the Public Accounts Committee - has a representative, but no other details of its involvement are disclosed.
HMRC will publish a new code of governance for all tax disputes. This will need to dovetail with guidance on HMRC governance in the Litigation and Settlement Strategy published in June 2011
An annual report on HMRC tax settlement work will .be published to provide greater transparency which the Public Accounts Committee saw as vital.