A new online tax forum and dedicated webchat service was launched by HMRC on 1 August. The intention is to give small businesses and the self-employed a quick and easy one-stop-shop for getting answers to questions on tax.
Unfortunately, as all professional tax advisers learn throughout their careers, simply answering a layman’s question rarely presents the right answer. Why? Because it’s rarely the right question.
You first need to understand the taxpayer’s circumstances and the basis upon which the query has been sought. Only once you’ve put the matter into context can you point the enquirer in the right direction or even suggest another approach to get the same result.
If asked whether a certain type of income is subject to VAT, or whether a specific payment made to a company’s shareholder is taxable, the correct yet somewhat infuriating answer is often ‘it depends’.
The tax rules in this country aren’t simple, which is why responding to a simple question with a simple answer (or merely directing someone to a page on the GOV.UK website) could just end in tears.
The idea behind the forum is sound and HMRC should be congratulated on the launch of this new service, but they should be wary perhaps of unrepresented taxpayers acting on responses received or misinterpreting information taken from the HMRC website. What if for instance, they act on the right answer to the wrong question?
When it comes to penalties, making an entry on your tax return that understates the tax or misrepresents the facts is not a reasonable excuse. Every taxpayer has a responsibility to take reasonable care, but will HMRC take a sympathetic view of small businesses taking answers from the new forum as given?
For more information please comment below or get in touch with Stuart Robb.