HMRC chief executive says ‘no penalties for innocent errors’ in people’s tax affairs
Jim Harra, the chief executive of HM Revenue and Customs, has said there are “no penalties for innocent errors” in an individual’s tax affairs.
Appearing before the Public Accounts Committee, Harra was careful to point out that he was not discussing any particular individual. He said:
Carelessness is a concept in tax law. It can be relevant to how many back years that we can assess, can be relevant to whether someone is liable to a penalty and if so, what penalty they will be liable to for an error in their tax affairs. There are no penalties for innocent errors in your tax affairs. So if you take reasonable care, but nevertheless make a mistake, whilst you will be liable for the tax and for interest if it’s paid late, you would not be liable for a penalty. But if your error was as a result of carelessness, then legislation says that a penalty could apply in those circumstances.
It’s worth pointing out that Nadhim Zahawi did pay a penalty imposed by HMRC as part of an estimated £5m tax bill.
Harra told MPs that officials would help “in any way we possibly can” with the ethics inquiry into Zahawi’s tax affairs.
Key events
Filters BETA
Robert Booth
Lord Pickles, co-chair of the body overseeing a new £100m UK Holocaust memorial, said he is “desperate” to finally start building, given the dwindling number of survivors.
On Wednesday, the prime minister said he would legislate to work around a court ruling preventing the memorial and learning centre being erected on the Grade II listed Victoria Tower Gardens beside the Houses of Parliament. The scheme has been in development since 2014 but has been mired in controversy.
Pickles, who co-chairs the UK Holocaust Memorial Foundation with former Labour education secretary Ed Balls, said the death of the Auschwitz survivor Zigi Shipper last week on his 93rd birthday, only increased the urgency to start work, nine years after the plan was first proposed by David Cameron.
“Given the numbers now dying I really am desperate to begin construction,” he said. More than 100 survivors have died in the past two years, according to the Holocaust Memorial Day Trust.
Rishi Sunak’s move should clear the way for planning consent to be granted by the planning minister, Lucy Frazer, but opponents of the location, including Westminster city council, appear ready to renew objections.
Read the full story here:
HMRC data shows the value of unpaid taxes rose by almost £5bn during Nadhim Zahawi’s brief stint as the chancellor.
In the three months between July and September 2022, the value of unpaid taxes owed grew to a whopping £47bn, an increase of £4.9bn on the previous quarter, according to the figures that were uncovered by the Liberal Democrats and published in the Mirror.
The Lib Dems accused the Conservatives of “allowing eye-watering amounts of taxes to go unpaid” whilst the “underfunded” NHS struggles to cope.
Lib Dem Treasury spokesperson Sarah Olney said:
Families around the country who work hard and play by the rules will be rightly furious to see billions of pounds in taxes being poured down the drain. It’s little wonder the Conservatives are failing to crack down on those failing to pay their fair share, when Nadhim Zahawi spent his time as chancellor negotiating his own settlement with HMRC.
Diane Taylor
Deputy prime minister and justice minister Dominic Raab’s plans to replace the Human Rights Act with a homegrown bill of rights have been dealt another blow with the publication of the European court of human rights annual report today.
Raab has expressed concern about the undue influence wielded by the court on UK domestic matters. However, today’s report shows that per capita, the ECHR dealt with fewer applications from the UK than anywhere else in Europe in 2022.
The court delivered 1,163 judgments in 2022, of which just four concerned the UK. Of the four, only two judgments found at least one violation of the human rights convention.
At the end of 2022, there were 74,647 applications pending before the ECHR; 99 of those – 0.12% – concerned the UK.
On Wednesday parliament’s joint committee on human rights urged the government to drop the bill of rights plans, warning that the introduction of this legislation could lead to more rather than fewer cases ending up in ECHR.
The Lib Dems have responded to the statement to MPs by the Cabinet Office’s permanent secretary Alex Chisholm that the government expects to pay up to £222,000 in legal fees to help Boris Johnson defend himself against claims he misled parliament over Partygate.
The Lib Dem chief whip, Wendy Chamberlain, described the news as a “sleazy new low” for the government and called for taxpayer support for Johnson’s legal fees to end.
She said:
While the British people battle with a cost-of-living crisis, this Conservative Government seems more interested in helping Boris Johnson with his cost-of-lying crisis. This is a sleazy new low for this government, dragging politics into the gutter.
People will be outraged that hundreds of thousands of pounds of their money will be used to defend a lying lawbreaker who disgraced the office of prime minister.
The organiser of the 75th anniversary celebrations of the Windrush generation’s arrival in Britain has also condemned Braverman’s announcement.
Patrick Vernon, convenor of the Windrush 75 network, told PA Media it was a “slap in the face”. He added: “This June marks 75 years of the contribution made to Britain by the Windrush generation and their descendants.
“For the home secretary to be backsliding on government commitments to set right the injustices of the Windrush scandal – particularly in this anniversary year – is a slap in the face for those communities.
“Suella Braverman should make a clear commitment to right the wrongs of the Windrush scandal.”
Suella Braverman’s decision to row back on key commitments made in the wake of the Windrush scandal has triggered more criticism.
PA have a statement from the independent chief inspector of borders and immigration (ICIBI), who said it was a “missed opportunity” not to increase the powers of the post.
Braverman announced on Thursday that a recommendation, made following an inquiry into the Windrush scandal, that the ICIBI should have their powers bolstered would not be acted on by the Home Office.
David Neal, the current chief inspector, said in a statement: “I am disappointed the home secretary has decided not to progress recommendation 10, since this presented an ideal opportunity to take stock and examine a number of issues relating to the independence and effectiveness of the ICIBI.”
He added: “This is a missed opportunity to look at increasing powers regarding the publishing of reports as explicitly recommended by Wendy Williams.
“It is disappointing as well that no role and remit review will examine Wendy Williams’ recommendation that a duty be placed on ministers to justify the non-acceptance of ICIBI recommendations and that the chief inspector will not be able to work closely with a migrants’ commissioner when formulating his inspection programme, as the home secretary has also decided not to proceed with recommendation 9.”
Robert Palmer, executive director of Tax Justice UK, has written an opinion piece for the Guardian arguing the British tax system is stacked in favour of the wealthy.
Here’s a taste of the piece:
Last week the Guardian reported that a senior minister, Nadhim Zahawi, has paid a penalty of around £1m to HMRC for being “careless” with his taxes. This might seem galling to those who are spending this month carefully filling out their tax returns, or those who automatically pay their taxes through PAYE.
According to HMRC figures, £6.1bn a year is lost to people “failing to take reasonable care” with their tax returns. Some of this will be caught by the tax authorities, but much of it will go unnoticed.
Then there is a range of ways in which individuals and companies purposefully slash their tax bills. Some of these methods are illegal – deemed to be tax evasion – and can result in criminal prosecution and even jail. Somewhere in the middle there are ways in which people can use laws in unintended ways to pay less tax – known as tax avoidance. At the other end of the spectrum are deliberate gaps in tax rules that allow some people to pay much lower rates of tax than others.
Tax evasion might mean taking cash in hand for work, not reporting business income or hiding the proceeds of crime. HMRC estimates that the government loses £8bn a year from tax evasion and the hidden economy.
Another way of earning money from work without paying tax on it is to receive a loan instead of a salary, with the understanding that the loan is never repaid. These “disguised remuneration” schemes are usually pushed by unscrupulous professionals who are often based offshore. They rarely work and it’s usually the worker, not the professional, who is punished.
Peter Walker
Asked about Harra’s comment on “innocent errors”, Rishi Sunak’s deputy spokesperson said: “I’ll point you to the words of Jim Harra himself. I think he was speaking more generally about tax policy. But it’s now a matter for the independent adviser.”
Questioned about whether Zahawi would be expected to hand over details of his tax affairs, the spokesperson added: “Again, it’s an independent investigation, so I can’t comment on the process. More broadly, the prime minister expects participation with it.”
He declined to comment on reports that Sunak’s ethics adviser, Laurie Magnus, could complete the report within 10 days, saying only that No 10 had asked for the process to be completed “as quickly as possible”.
Cabinet heads to Chequers to plot Sunak survival course
Jessica Elgot
When politicians last gathered en masse at the grace-and-favour retreat Chequers, they were farewell parties for prime ministers whose time in office was cut shorter than they expected.
On Thursday, Rishi Sunak will gather his cabinet there for an all-day summit to plot the strategy to ensure his time is not similarly curtailed – by his own MPs or, more likely, by the electorate.
The cabinet will meet at the Buckinghamshire country house, where Sunak has been spending most of his weekends as prime minister, to begin thrashing through the strategy for the general election most now expect to be held in autumn 2024.
The prime minister fired the starting gun in early January, with a speech setting out his five key tests for the next two years – three on the economy, the others on NHS backlogs and small boat crossings in the Channel.
Ministers will be joined by senior staff from No 10, including the new director of communications, Amber de Botton, and her deputy, Nerissa Chesterfield, as well as the Tory elections strategist Isaac Levido, newly back to the fold after having been ousted by Liz Truss during her short premiership.
At the summit, ministers will look in detail at a presentation of battleground seats and voters’ priorities – a grim electoral picture. Labour have a 22-point lead in the most recent polling, suggesting the majority of the electorate now believe Keir Starmer will be the next prime minister – and even most 2019 Tory voters say they are relaxed about that happening.
Read the full story here:
The former Cabinet minister, Jacob Rees-Mogg, is joining GB News to host his own show.
The Tory MP for North East Somerset will “debate the hot topics of the day” and interview guests from “across the political spectrum”, according to the broadcaster.
He will also take his show on tour, broadcasting in front of live audiences in towns and cities across the country.
Rees-Mogg described the network as “a bastion of free speech” and said he had been “impressed” by its “independent-mindedness”.
He said:
GB News is a bastion of free speech which clearly has its finger uniquely on the pulse of public opinion and does not talk down to its viewers and listeners.
The former Brexit opportunities minister and business secretary resigned from the Cabinet in October when Rishi Sunak entered Downing Street.
Editorial director of GB News, Mick Booker, described Rees-Mogg as an “authentic and authoritative voice of the Tory backbenches” with “an impish sense of fun”, and said he was a “terrific addition” to the network.
MPs have been told that the government expects to pay up to £222,000 in legal fees to help Boris Johnson defend himself against claims he misled parliament over Partygate.
The law firm Peters and Peters was awarded a four-month contract worth £129,700 in August 2021 to provide Johnson with advice during the investigation into his conduct by the House of Commons Privileges Committee.
That amount has since been increased to £222,000, the Cabinet Office’s permanent secretary Alex Chisholm said at a meeting of the Commons Public Administration and Constitutional Affairs Committee.
He said the increase was due to the length of the Privileges Committee inquiry, and could rise again depending on how long the inquiry takes. He said:
At the moment we have estimated that it would be up to a figure of £200,000, which has been published, £222,000 to be precise. We hope and expect that will be a maximum figure but obviously we don’t want to anticipate and certainly could not regulate the conduct of the committee, which is entirely up to them.
The head of the inquiry into the Windrush debacle has issued a rare statement expressing disappointment after Suella Braverman confirmed she has dropped three key reform commitments made in the wake of the Home Office scandal.
Wendy Williams said she was concerned that the government had dropped the pledge to create the post of a migrants’ commissioner, who would have been responsible for speaking up for migrants and identifying systemic problems within the UK immigration system.
Another promise, to increase the powers of the ICIBI so that they would be able to launch and release their own inquiries has also been abandoned, as work on the post-Windrush reform programme is downgraded.
Williams said:
I am disappointed that the department has decided not to implement what I see as the crucial external scrutiny measures, namely my recommendations related to the migrants’ commissioner (rec 9) and the ICIBI (rec 10), as I believe they will raise the confidence of the Windrush community, but also help the department succeed as it works to protect the wider public, of whom the Windrush generation is such an important part.
Downing Street has declined to comment on HMRC chief executive Jim Harra’s remarks that there are “no penalties for innocent errors” in an individual’s tax affairs.
A No 10 spokesperson instead referred reporters to Rishi Sunak’s remarks in the Commons yesterday. They said:
The independent adviser will establish the facts and provide advice to the PM and then he will obviously consider next steps. I obviously can’t pre-empt that. It is right that the independent adviser is allowed to continue with that work.
Asked if the ethics probe into Nadhim Zahawi could be completed in as little as 10 days, they said:
We have said that we would like to see the work completed as quickly as possible. That remains the case but ultimately the timeline is a matter for the independent adviser. We wouldn’t put a time constraint on him.
Braverman confirms government ditching key Windrush pledges
The home secretary, Suella Braverman, has confirmed the government is dropping several of the key commitments made in the wake of the Windrush scandal.
In a written statement in the House of Commons, Braverman said she would not be creating the post of migrants’ commissioner, who was due to be responsible for speaking up for migrants and for identifying systemic problems within the UK immigration system.
Other promises, including increasing the powers of the independent chief inspector of borders and immigration (ICIBI) and holding reconciliation events with the Windrush community, have also been abandoned.
Braverman said in her statement:
The Home Office regularly reviews the best way to deliver against the intent of Wendy Williams’ Windrush Lessons Learned review. As such, after considering officials’ advice, I have decided not to proceed with recommendations 3 (run reconciliation events), 9 (introduce migrants’ commissioner) and 10 (review the remit and role of the Independent Chief Inspector of Borders and Immigration) in their original format.
The recommendations were accepted three years ago by the government after a formal inquiry by Wendy Williams examined the scandal under which the Home Office erroneously classified legal residents, many of whom arrived from Caribbean countries as children in the 1950s and 60s, as immigrants living in the UK illegally.
The former chief economist of the Bank of England has warned there is “more pain to come” for households and the wider economy as mortgage rate increases hit people’s bank accounts and weigh on spending.
Andy Haldane, who is now chief executive of the Royal Society of Arts, said it was painful to see the effects of rising interest rates since he left the Bank of England and its rate-setting monetary policy committee in June 2021.
The Bank of England has raised its key interest rate sharply since late 2021, from a historic low of 0.1% in November 2021 to 3.5% in December 2022. British households have been hit at the same time by big energy price increases and inflation in a broader collection of goods and services.
Haldane told BBC Radio 4’s Today programme:
It is painful and I fear there is more pain to come as those mortgage rate rises from last year begin to hit people’s bank accounts over the course of this year.
I would have preferred the Bank and other central banks to have started their rate rises a bit sooner. That would have helped a bit in nipping inflation in the bud and would have meant that we wouldn’t have had those rapid rate rises at the same time as the economy was hitting the buffers. But overall this global shock was always going to bring a significant degree of pain, including through higher rates.
Read the full story here:
Here’s more from Jim Harra, the chief executive of HM Revenue and Customs, who suggested he could offer a more public comment on a minister’s tax affairs if he was given permission.
Appearing before the Public Accounts Committee, he said:
Taxpayers can consent for HMRC to share details of their tax affairs with other people and that’s normal, for example, when they have an agent. However, it would still not be normal for HMRC to publicly comment on someone’s tax affairs even if they had said that it was OK for us to do so. Our requirement not to disclose information publicly sits whether a taxpayer is relaxed about it or not relaxed about it.
Asked if a minister, or Nadhim Zahawi, granted permission to HMRC to discuss their tax affairs with the committee, Harra said:
It would not be normal for me to account to this committee for a person’s tax affairs, but if there are general issues about how we manage tax and I’ve got the ability to be disclosive that’s obviously something I would take advantage of.