Bill Outlining Devolved Tax Arrangements Introduced

The Welsh Revenue Authority will manage devolved taxes
from April 2018 - including landfill tax and stamp duty.

Last week,  Finance Minister Jane Hutt (Lab, Vale of Glamorgan) introduced the Tax Collection & Management Bill to the National Assembly. It establishes the mechanisms required to ensure that when certain taxes are devolved to Wales in April 2018 they're collected and managed robustly - the clue's in the name (see also : Assembly Calls for Tax Power Accountability)

This is one of those rare occasions where the explanatory memorandum (pdf) is shorter than the Bill itself (pdf).

What does the Tax Collection & Management Bill propose?

The Welsh Revenue Authority

The Bill :

• Establishes the Welsh Revenue Authority (WRA) as a body corporate, made up of a board appointed mainly by the Welsh Government. The usual restrictions on membership (i.e. AMs, Lords ,officers of the crown etc.) apply.
• Sets out WRA's main functions with regard devolved taxes as :
• collection and management
• advising and assisting Welsh Ministers
• advising taxpayers on devolved taxes
• resolving complaints and disputes
• promoting compliance with the law and preventing tax evasion
• Prohibits anyone associated with WRA from disclosing confidential taxpayer information unless it has the taxpayer's consent, is to be used in a criminal or civil investigation or is used internally within WRA. Breaching confidentiality could lead to a prison sentence of up to 2 years and/or a fine.
• Gives WRA the power to instigate criminal or civil proceedings in EnglandandWales.
• Places a duty on Welsh Ministers to provide any funding necessary for WRA to carry out its functions.
• Places a duty on WRA to pay any money it collects into the Welsh Consolidated Fund (minus disbursements or credits) and publish an annual tax statement of the money it collects.
• Means WRA must publish a Charter setting out standards of behaviour and values of WRA staff when dealing with taxpayers and agents.

Tax Returns & Assessments

The Bill :

• Places a duty on taxpayers liable to pay devolved taxes to keep appropriate records needed to make a complete tax return. They also need to keep these records for six years.
• Gives permission to WRA to amend any tax return where obvious mistakes have been made within 9 months of the return being submitted.
• Means any enquiries into tax returns may be referred to a tribunal (where applicable), and that any taxes chargeable following an enquiry need to be paid within 30 days.
• Gives WRA the power to set a determination for a devolved tax in cases where a person liable for a devolved tax hasn't submitted a tax return. If the taxpayer submits a valid return after a WRA determination, that return supersedes it.
• Gives taxpayers a right to claim tax relief if they believe they've overpaid a devolved tax or were not eligible to pay.

Investigatory Powers

The Bill :

• Gives WRA the ability to apply to a tribunal to get permission to issue notices requesting information ("information notices") or a document to check if an individual, or a company (or its subsidiaries) are liable to pay a devolved tax and details relating to any penalty notices or payments relating to devolved taxes.
• Also gives WRA the power to ask for information to enable a person's identity to be ascertained and contact details of debtors.
• Requires that information notices be set out within 3 months of being approved by a tribunal.
• Restricts the above powers, by creating exemptions for journalistic investigations, personal records (i.e. health records), privileged communications (i.e. between lawyers and clients) and tax advisors.
• Gives WRA a power of entry to any business in order to check that business' tax position – subject to tribunal approval. They will also have the power to use any equipment or material needed to carry out an inspection.
• Creates an offence of concealing information following the issue of an information notice, with the punishment being a fine or prison sentence of up to 2 years.

Penalties & Interest

The Bill creates several penalties relating to devolved taxes:

• Failure to make a tax return :
• Failure to make a tax return on or before the required date - £100 fine.
• Failure to make a tax return within 6 months of the required date - £300 fine, or the equivalent of 5% of the amount of devolved tax due (whichever is larger).
• These fines can be reduced if information if disclosed which was withheld.
• Failure to pay tax :
• Failure to pay an amount of devolved tax by a specified date – the penalties will be outlined in tax-specific legislation which will be introduced in the Fifth Assembly, though the Bill outlines the mechanism for deferred payment.
• Inaccuracies in a document which lead to understatement of tax liability, a false statement of loss or a false claim of repayment :
• Deliberate inaccuracy : Fine to the equivalent of 100% of potential lost revenue.
• Careless inaccuracy : Fine to the equivalent of 30% of potential lost revenue (though fines for careless inaccuracy can be suspended).
• Failure to notify WRA of an under-assessment for tax : Fine to the equivalent of 30% of potential lost revenue.
• Failure to keep and preserve records : Fine of up to £3,000.
• Failure to comply with an information notice or obstructing an inspection : Fine of £300 and an extra £60 for every day an inspection is obstructed.
• Providing inaccurate information : Fine of up to £3,000.
• All fines must be paid within 30 days of issue.
• The WRA may also apply interest to late payments at a rate decided by Welsh Government regulations.
• The police will be given the power to investigate criminal offences committed in relation to provisions within the Act, and devolved taxes will also be subject to proceeds of crime legislation.

Reviews & Appeals

The Bill :

• Gives taxpayers the right to appeal decisions, or request a review, relating to liability for devolved taxes, penalties, the amount of tax due and issues relating to information notices (unless said notices are approved by tribunal).
• Sets a time limit of 30 days to request a review of certain decisions.
• Places a duty on WRA to make a decision within 45 days of receiving a notice of appeal.
• Means that if the appeal is unsuccessful in relation to a fine, that fine is payable within 30 days of the decision being made.

Another historic step forward?

If you're still awake, it's fairly obvious this is some seedy hardcore top-shelf political anorak stuff. The kind of thing you get from dodgy-looking blokes hanging around in trench coats. Or me.

This is historic in its own way as it sets the groundwork for the first Welsh taxes in 800 years or so, albeit relating to a rather piddling amount of ~£195million from two taxes. It's a start I suppose.

It looks as though WRA is going to delegate the task of actually collecting taxes (presumably to HMRC), which was suggested by the Assembly's Finance Committee in their report a few weeks ago (linked earlier). There's still some time left to make a final decision (just under three years).

In terms of costings, the Welsh Government have based the figures on the start-up costs of Scotland's equivalent of WRA, Revenue Scotland. They anticipate WRA will have costs of £800,000 in 2016/17, up to £4.4million a year in 2017-18 and 2018-19 (when taxes are devolved) then £2.9million a year from 2019-20 onwards. So in the first five years you're looking at around £15.4million.