This guidance is intended to help taxpayers to report and pay their taxes on time and thus avoid penalties. There is only one problem: timing.
The arrival of HMRC guidance does not always coincide with the point at which it is needed, particularly if you have a detailed question or complex problem.
While HMRC’s guidance is not tax law, it explains HMRC’s view of the law that underpins our tax system and it is used by HMRC staff, professional advisers and taxpayers. Accordingly, guidance is supplied at different levels of complexity.
The most basic guidance is that available on gov.uk. As the central source of online information about government services, gov.uk guidance is aimed at the general public, and focuses on what you need to do, when you need to do it and how to do it.
Guidance on many aspects of the new rules is still evolving and changing, leaving many advisers and trustees uncertain.Then there are HMRC’s manuals – these are more detailed, technical guidance that is written for HMRC staff, but also widely used by advisers to gain insight into how HMRC will interpret and apply new legislation in more complex cases.
When new tax rules take effect, basic guidance is usually available promptly on gov.uk, but this more detailed guidance available in the manuals can take months or even years to arrive.
During that time HMRC will receive multiple queries, often about similar scenarios, as professional bodies, advisers and even individual taxpayers all try to gain clarity on specific situations.
Trusts and CGT
The problems caused by late guidance is illustrated with two recent rule changes. Since April 6 2020, UK residents selling residential property who have capital gains tax to pay have been required to calculate, report and pay that tax within initially 30, and now 60, days of completion of the transaction.
These rules primarily affect landlords and second-home owners but can affect anyone who has not lived in a property throughout their ownership.
While the deadlines for taxpayers to report and pay are tight, in contrast, HMRC gave themselves 20 months before the first detailed guidance about the process was published in December 2021.
In the absence of effective guidance on how to use the system and deal with common issues for over a year, we found ourselves writing our own guide to assist our members.
This is not the first time that we have needed to write our own guidance to help advisers deal with new rules. A similar situation occurred with the Trust Registration Service.
First introduced in July 2017, the TRS is an EU anti-money laundering measure. Under the original rules, trustees of trusts that paid taxes including income tax or CGT were required to register the existence of their trusts with HMRC using the TRS. However, detailed HMRC guidance on the TRS did not appear until May 2021 – almost four years later.
In the meantime, further changes were made to the TRS rules in October 2020, which brought vastly more trusts in scope. Now, all trusts, whether they pay tax or not, must be registered with HMRC via the TRS by September 1 2022 unless they are eligible for one of a number of exclusions.
However, as it stands in midsummer, guidance on many aspects of the new rules is still evolving and changing, leaving many advisers and trustees uncertain which trusts HMRC is expecting to be on the register in less than four weeks’ time.
Detailed guidance regarding new tax rules must be available much earlier for taxpayers and their advisers.HMRC staff involved in the policies above have been willing to engage with us and others on the content of guidance – but only after the rules took effect.
While it is unreasonable to expect guidance that addresses every eventuality from the start, having nothing at all of substance for so long for both the CGT reporting and the TRS measures above has caused advisers and taxpayers a great deal of uncertainty and anxiety.
Detailed guidance regarding new tax rules must be available much earlier for taxpayers and their advisers to have the best opportunity to understand and comply with their obligations in a timely manner. It should be available by the date any new rules take effect – and ideally sooner so taxpayers can plan ahead.
Our concerns are shared with other professional bodies, as noted in the Charter Stakeholder Group’s comments in HMRC Charter Annual Report published this week.
We hope that HMRC takes these concerns on board for their next big project Making Tax Digital for Income Tax, which from April 2024 will affect how millions of self-assessment taxpayers keep their accounting records and file their tax return information.
It is vital that HMRC sees the benefits to taxpayers and their agents of timely guidance before those changes come into effect.
Helen Thornley is a technical officer at the Association of Taxation Technicians
