Trust in HMRC "Hammered"

 

The Chartered Institute of Taxation (CIOT) has warned that poor service levels at HM Revenue and Customs (HMRC) are "hammering away" at trust in the tax system.

In his inaugural speech, new CIOT president, Gary Ashford, said that HMRC has 6,000 fewer customer service staff than it did five years ago. He argued that this has led to "unacceptable" delays in processing tax returns and dealing with queries.

Ashford said that poor service levels are not just a "pain" for taxpayers and advisers, but they also "harm tax compliance, hinder business activity and hammer away at trust in the tax system".

He called on the government to provide HMRC with the resources it needs to improve its service levels.

The CIOT's warning comes as HMRC is facing increasing pressure to collect more tax revenue to fund the government's spending plans.

However, Ashford said that HMRC's focus on collecting more tax should not come at the expense of providing good service to taxpayers.

He said that "a strong economy needs an effective tax system" and that "trust is essential for an effective tax system".

What does this mean for taxpayers?

The CIOT's warning is a reminder that taxpayers have a right to expect a good level of service from HMRC.

If you are experiencing problems with HMRC, you should contact them directly to raise your concerns.

You can also contact the CIOT for advice.

What can be done to improve HMRC's service levels?

The CIOT has made a number of recommendations to improve HMRC's service levels. These include:

• Increasing the number of customer service staff
• Investing in new technology to improve efficiency
• Making it easier for taxpayers to contact HMRC
• Providing more information and guidance to taxpayers

The government has said that it is committed to improving HMRC's service levels. However, it remains to be seen whether these measures will be enough to address the concerns raised by the CIOT.

Tax does have to be taxing.

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Call To Delay MTD

Members of the CIOT and Association of Taxation Technicians have called for the £10,000 exemption from mandatory reporting responsibilities under MTD to rise to match the £83,000 VAT threshold.

Additionally, the two bodies also called for the delay of the implementation of digital record keeping.

Co-chair of ATT’s technical steering group Yvette Nunn said:

"All the evidence the ATT has got is that MTD will lead to significant costs and burdens for small businesses in additional accounting systems and support from their accountants. The survey shows that HMRC must help smaller businesses and those who are the most vulnerable in society to adapt to MTD."

Will the politicians and HMRC listen?

No! 

Tax does have to be taxing.

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Taxation vs Justice

My thanks to Anthony Thomas (Chairman of LITRG [Low Incomes Tax Reform Group], past president of CIOT and Master of the WcOTA) for providing me with the text of a speech about taxation that he made on the 1st of March at the Worshipful Company of Tax Advisers Budget Banquet where David Gauke was the main speaker.

Here is an extract of the speech:

I am sure you would be surprised if I did not make any comments about HMRC this evening, especially at a Budget Banquet and so very likely would our fellow diners.

Ever since HMRC was set targets for yield back in 2010, the “tax” world has been undergoing a significant transformation. There is an inevitable tension between maximising yield and maintaining fairness between taxpayer and state, and that tension is increasing. HMRC and the profession must work together to ensure a good outcome, which is bound to affect every person in this banqueting hall even if they do not practice tax or are guests of members. Of necessity, the transformative journey is a long one----perhaps infinitely long. It is crucial that both the objective of each step on that journey and the means are clear not only to those who are supposed to be leading it from the HMRC side, but also those impacted by the changes, taxpayers, tax agents and many more.

Chris Jones, the current president of CIOT has recently commented on the digital agenda. He quite rightly pointed out that the government’s digital strategy is most certainly not constrained by ambition. That must be the understatement of the year so far. In 2015 the Chancellor signalled the end of the tax return. That statement took the country by surprise. There was an emphasis on making tax easier, a slogan that promised to reduce the administrative burden.

Subsequently---one might say predictably---there appears to have been a change of emphasis---simplicity no longer features in the ambitions to make tax digital. Concerns have quite rightly been raised by many against the compulsory aspects. And not just by those in the tax profession. Even HMRC accepts that filing business records with HMRC on at least a quarterly basis cannot be made to work for everyone. HMRC’s own research published last August showed there are very significant numbers who for various reasons will be incapable of coping.

I can understand the government wish to drive into the digital world and I support that. But the response from government on digital was a little disappointing. Their response to mandation was interesting—I quote—“quarterly updates will largely be a matter of checking data generated from record-keeping software or app and clicking send”. This simplistic response, by way of a “sound bite”, is worrying. There could be no clearer indication of HMRC’s failure to understand how businesses operate, especially smaller ones. Nor does it give any appreciation or recognition to the huge burdens and costs that would be placed upon ordinary citizens and businesses in trying to comply while at the same time attempting to run their business and deal with the vast array of other state-imposed bureaucratic burdens, which add absolutely no value to their businesses or day-to-day lives.

Every pronouncement focuses on how quarterly reporting will help taxpayers, of course. But I suspect the truth is that record information will be subjected to computer analysis and used as a further tax compliance tool in HMRC’s relentless, misguided and wholly unachievable quest to eradicate incomplete records, with penalties for those who get things wrong and needless enquiries when HMRC fails, as it inevitably will, to understand the numerous innocent reasons why records, accounts and returns do not seem to match. If the information is to be used simply to highlight the few tax evaders that HMRC already know about, then this seems to place a disproportionate burden on the tax compliant. Of course we all expect HMRC to do what it can to ensure that the right, rather than the maximum, amount of tax is paid. I would be a lot more relaxed if I was confident that HMRC is being transparent about its intentions.

I am confident that most taxpayers and the tax profession are supportive of the government ambition to exploit digital technology to assist tax collection and compliance. However, little thought appears to have been given yet to the immense communication programme that will have to be rolled out, if the changes are not to prove a disaster and harm the already fragile relationship between taxpayers and the fisc. It is no exaggeration to say that digital will not work easily despite assurances by HMRC that in many cases this will be simply done by clicking the “send” button. It is naïve to think that it will be that easy.

On a concern for tax litigants that I raised in September, I cautioned against the Ministry of Justice’s proposals for tax appeal costs. Regretfully they have been imposed more or less unchanged in spite of robust challenge by the legal, accountancy and tax professions. Access to law has become the preserve of the rich---and of course HMRC, whose costs we pay for anyway. The new appeal costs have been implemented and consequently justice will not be available to the less well off or the poor. This is the very constituency which crucially ought to have access to justice, particularly against an increasingly aggressive tax authority. The concern for justice is also worrying the Lord Chief Justice.

 In his annual report Lord Thomas noted “Our system of justice has become unaffordable to most. In consequence there has been a considerable increase of litigants in person, for whom our current court system is not really designed”. How right and how concerning. Particularly in tax cases, the technical issues are routinely beyond the understanding of non-professionals. Now HMRC Officers, perhaps with inadequate training and with one eye on yield targets, may find it all too tempting to leave to a Tax Tribunal the exercise of sound judgement that they should have exercised personally.

That of course might be an easier way to get a quick win, simply because a taxpayer might not have the money to have his case heard. That would be a sad day for the relationship between HMRC and the taxpayers it should be serving and a sad day for democracy. Anyone with a legitimate case but limited means now faces a huge burden. There was a time when the rule of law ensured that justice, rights, lawful judgment, liberties and security was available to all but regretfully, this is no longer the case.

The Latin phrase “Quis Custodiet Ipos Custodes” can be translated as “who will supervise the supervisors?”

On tax matter, the tax profession increasingly has to do that---Parliament certainly does not do the job effectively. Sadly, it is becoming very difficult and time consuming. The many who ought to be listening seem not to hear.

“Justice between citizen and State”, is the translation of the motto that appears on the CIOT cost of arms. The owls on either side of the shield signify the wisdom of tax officials on the one hand and of tax advisors on the other. They are shown as balanced to indicate the aim of both sides to achieve justice and impartiality. However, I do question whether, today, there is in reality equality as between tax adviser and HMRC. It is hard to detect on occasions. Our valid and carefully thought out comments are sometimes dismissed as obstructive or self-serving. HMRC needs to recognise that the tax profession is honest and does a worthy job and that sunlight is the best disinfectant. Marking your own homework is totally counter-productive, as HMRC discovered when it attempted to refresh the Charter.

The public have increasingly exacting standards. They want justice to be done and to be seen to be done. It is not acceptable to be judge, jury and executioner. Some may feel that public shaming is a reasonable way to deal with tax dodgers. But we should be wary of government or departmental attempts to mobilise popular anger to extend state powers or toughen laws in ways that are questionable or Orwellian. History tells us that an ill-informed populist reaction
can be used all to easily as a stalking horse for oppressive or bad law.

The new strict criminal liability offence for failing to make offshore disclosures, and the new draconian GAAR penalties are clear and chilling examples----and it is a temptation that must be resisted until there has been a clear public debate into which all sides enter honestly and openly.
So where do we go from here? There needs to be a better way forward and I think there is one.
Our tax system could be much clearer. It could be much simpler. It should be easy to understand so that everyone knows how much tax they have to pay, why and when; and there should be proper, easily understood and realistic safeguards for taxpayers. Parliament needs to ensure that it does not over extend the might of the executive.

Taxpayers have a right to be able to understand how much they are paying and how it is calculated. The digital world will surely achieve that objective at least. There should also be greater certainty in tax so that businesses and individuals can plan ahead with reasonable confidence that the legislation will not be amended in the short and medium term. That is not an unreasonable goal, albeit that at the moment HMRC often seems to be driving tax policy in very much the opposite direction which is understandable if it is given a target to maximise revenue, which surely is the remit of Parliament, not the executive. In closing I readily confirm that the tax profession and tax professionals are willing to help achieve those laudable objectives of simplicity, certainty and fairness.

Comments and opinions are welcome.

Tax does have to be taxing.

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Offshore Tax Evasion - A Question of Proof!

The Chartered Institute of Taxation says that the proposed £5K statutory minimum threshold of tax evaded, wrt offshore evasion, is not high enough to protect people in the more complex cases.

The threshold, set by HMRC, is meant to ensure that people who make errors over relatively small sums of tax do not receive a prison sentence of up to six months.

However, CIOT want the threshold to be raised to £25,000.

John Cullinane of CIOT is quoted by Contractor UK:

“We are pleased to note that there will be a statutory defence of reasonable care.

This will be vital in limiting the scope of the offence.
But it would be a stronger safeguard for the taxpayer if the burden of proof was on HMRC to prove that reasonable care had not been taken, rather than being on the taxpayer to prove they took reasonable care.

We are also concerned that this proposal could be counterproductive for HMRC because the fear of prosecution, with no need to prove intention on HMRC’s part, could discourage taxpayers from coming forward voluntarily.”

As ever with HMRC, the concept of innocent until proven guilty doesn't apply!

Tax does have to be taxing.

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Don't Bypass The Courts

CIoT president Anne Fairpo has warned HMRC not to bypass the courts when enforcing tax debts.

She is quoted by AccountancyAge speaking at the CIoT's presidential reception:

"I am concerned about the increasing focus on HMRC enforcement without third party supervision. There is, and can be, no dispute that HMRC needs to enforce tax debts. There's no dispute that we have a societal infrastructure that needs to be paid for.

In a perfect world, perhaps HMRC wouldn't need the courts - but then again, in a perfect world, no-one would need the courts. This is not a perfect world. People make mistakes. HMRC makes mistakes."

Wise words indeed!

Tax does have to be taxing.

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Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

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Professional Conduct in Relation to Taxation

The UK's leading professional tax bodies have issued updated guidance (Professional Conduct in Relation to Taxation) on ethics and how tax advisers should act in difficult situations.

The five cornerstones of the guidance being:

- Integrity
- Objectivity
- Professional competence and due care
- Professional behaviour

"The leading UK professional bodies involved in taxation have issued updated guidance on how tax advisers should act in difficult situations.

The guidance appears in the publication 'Professional Conduct in Relation to Taxation' (PCRT): the latest edition has been issued by the bodies today. PCRT sets out the high ethical standards which should govern the tripartite relationship between tax adviser, client and HMRC. It supports the key role members play in helping clients comply with their tax obligations. This guidance is followed by members of the listed professional bodies, but many other bodies and professional firms also adopt it as best practice. 

It is based on five fundamental principles:

• Integrity
• Objectivity
• Professional competence and due care
• Confidentiality
• Professional behaviour

and provides guidance on applying these principles to practical situations, for example, if there is an irregularity in a client’s tax affairs and the client is reluctant to correct it.

The document makes clear the obligation of tax advisers to advise their clients accurately and thoroughly of the risks and implications of their actions including reputational and practical aspects.

Rosalind Upton, chair of the working party which produced the guidance, and Council member of the Chartered Institute of Taxation, said:
"The updated ‘Professional Conduct in Relation to Taxation’ gives clear, concise and practical guidance which will help tax advisers when dealing with difficult situations such as what to do when a client refuses to make a full disclosure to HMRC or receives an excessive repayment. It expands the existing guidance on areas including tax avoidance and the new General Anti-Abuse Rule." 

PCRT has been reviewed by Counsel, Ximena Montes Manzano of Atlas Chambers. 

HMRC has been consulted and ‘acknowledges that this guidance is an acceptable basis for dealings between members and HMRC’. ‘HMRC welcomes the publication of the new edition of this guidance for tax agents as a positive step. We recognise the role they play and the responsibilities they bear in ensuring taxpayers understand and comply with their tax obligations’.

Notes for editors
1. The key changes in this update include:

• An enhanced chapter on ‘Tax planning, tax avoidance and tax evasion’ which includes guidance on the new General Anti-Abuse Rule.
• Points to consider when HMRC wants to visit the member to discuss practice matters eg as part of Agent and Client Statistics
• Professional standards relating to participating in consultations or secondments with HMRC
• Advising clients who wish to rectify past irregularities
• A brief section on electronic filing

2. The guidance can be read at http://tinyurl.com/pcrt2014
 
3. The professional bodies who were members of the working party and who have endorsed the guidance are:

• The Chartered Institute of Taxation,
• The Association of Taxation Technicians,
• The Association of Chartered Certified Accountants,
• The Institute of Chartered Accountants in England and Wales,
• The Institute of Chartered Accountants of Scotland, and
• Society of Trust and Estate Practitioners

This guidance was last updated in 2011."

Tax does have to be taxing.

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Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

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CIOT RTI Survey

In August I noted that HMRC had launched an online survey to find out how difficult the ‘on or before’ rule for reporting PAYE in real time is proving for tax agents and employers. The ‘on or before’ rule requires employers to report PAYE on or before the date of payment to their employees.

The results of the survey will be used by HMRC to help them assess the impact of RTI reporting deadlines, and to determine what changes are needed.

The survey closed on Friday the 20 September, having originally planned to close on 13 September.

By happenstance the Chartered Institute of Taxation (CIOT) also set up their own survey:

"..to supplement the HMRC survey reviewing the use of the relaxation in 'On Or Before' (OOB) reporting by providing an additional comment section through which members can explain the reasons for OOB problems and any suggestions for how to resolve these. 

We want to identify what, if any, obstacles there are to reporting payments on or before they are made to employees and what, if any, permanent arrangement should be sought."

The survey contains five questions and, although there is no apparent deadline, appears to be still running but maybe for not much longer.

You can complete the survey via this link.


Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

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Standing Up To HMRC

Andrew Thomas, the outgoing President of the Chartered Institute of Taxation (CIOT), is going to make some choice comments about tax and HMRC today.

He will make the remarks in his valedictory speech at the CIOT’s annual general meeting in Westminster at 4pm today, before he steps down to be succeeded by Patrick Stevens.

"Outgoing President of the Chartered Institute of Taxation (CIOT), Anthony Thomas, will today say:

• Cost –shifting from tax authorities to taxpayers amounts to a ‘stealth tax’
• It is important for the tax profession to continue to challenge HMRC
• HMRC must be properly resourced to safeguard the UK ‘moneybox’

Anthony Thomas will say:
On Restoring Trust
“The theme for my year as President has been "Restoring Trust"; that is trust between HMRC, the professions, notably our Institute, and taxpayers... It is absolutely essential that HMRC be perceived as fair and even-handed.” 

Anthony Thomas will say that progress has been made and the need for trust now features regularly in conversations – but that there is still a long way to go. 

On Tax Avoidance
“Deliberate obfuscation of the important distinction between avoidance and evasion undermine[s] trust.”
Anthony Thomas will reiterate the CIOT stance that HMRC needs to get a better balance between tackling avoidance and tackling evasion – which again has seen progress during the year.

On Cost Shifting
“[T]here is little point in HMRC achieving cost savings if this involves greater costs, in aggregate, for taxpayers... cost shifting... is effectively another "stealth tax". There is a distinct possibility that this will be the result of the Real Time Information system currently being piloted, particularly for smaller businesses and tax practices around the country.”

On Standing Up To HMRC
“[I]t is important to continue to challenge HMRC... Doing the right thing will include continuing to be upfront about HMRC's failings and not gloss over them in the hope of an easier relationship...

“Continue to voice concern at the highest level that only a properly funded and resourced HMRC is capable of safeguarding the UK "moneybox" in a way which allows them time to treat citizens with respect. The Revenue department must never be put at risk and the current culture of fiscal compliance can only be retained by properly trained staff which includes being properly funded.

“We must continue to be outspoken and critical when attempts by the profession to impress upon HMRC the value of slowing down the implementation of their proposals in order to give proper consideration to their impact are simply ignored or result in HMRC speeding things up.”

Well said!

Tax does have to be taxing.

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Trust Dented - Rebuilding Trust

Anthony Thomas, President of the Chartered Institute of Taxation (CIOT), has laid out his vision of how HMRC can improve their "game" over the coming year and into the future, in an article in Tax Journal.

He notes, quite correctly, that a tax system depends on trust between the various parties involved; sadly that trust has been dented.

He notes:

"It is inevitable that the authority can be aggressive, and be endowed with overbearing powers – but these must be reserved for those who deliberately get things wrong."


Thomas calls for a fundamental review of governance arrangements wrt the whole of HMRC, not least HMRC needs to address the issue that NEDs on the HMRC have no operational tax experience. Thomas is also less than impressed with ExCom, again citing its lack of people with operational tax experience.

Consultation deadlines are also targeted as being too short.

Thomas is, quite rightly (as I have warned many times on this site), fearful of HMRC getting carried away by its powers:

"..we must ensure that HMRC does not evolve into a cross between an Orwellian ‘big brother’ and MI5."

He also, again quite rightly, expresses concern about the level of and quality of staff resources with HMRC.

As ever, views and comments are always welcome from everyone.

Here is the text in full:
 
"The UK tax system depends hugely on taxpayers complying with their obligations. For the tax system to operate effectively and efficiently there must be mutual trust between taxpayers, the tax profession and HMRC. It seems that trust has been severely dented. To improve things we need to make sure there is a proper balance between taxpayers, businesses and the tax profession on the one hand and the tax authority on the other. It is inevitable that the authority can be aggressive, and be endowed with overbearing powers – but these must be reserved for those who deliberately get things wrong. When these relationships which impact upon citizen, tax agents and HMRC go wrong the system is imperilled.

It is possible to restore that trust, but first there is a need to start a shift back to that ‘healthy tension’ between tax practitioners and HMRC.

Good governance is critical to restoring trust

HMRC must recognise that its governance is widely perceived as deficient. Hence there needs to be a fundamental review of the governance arrangements, not simply surrounding tax disputes but of the whole of HMRC. This is critical to start the process of regaining public trust; the most important element of trust being that taxpaying citizens having confidence in their tax authority.

A clear governance structure is the first step to a better public understanding. The main board of HMRC comprises nine members including a non- executive chairman and four non-executives. The non-executives are non-tax people. Operational tax experience for some of the non-executives of HMRC is essential. Having a number of non- executive tax experienced people on the main board would strengthen the governance.

There needs to be a balance on the board with business experience at chairman level but plenty of ‘deep’ tax knowledge elsewhere on the board. A non-tax CEO is likely to be a disappointment, but a COO non-tax ‘systems’ person would probably work well. The conflict of interest argument for appointing non-executive tax experienced people to the board is no justification nowadays not to appoint. If the will is there, a way can be found to address that issue.

Operational tax experience is equally essential on the HMRC Executive Committee (Ex-Com), being the decision-making body immediately below the main board and consisting of full-time HMRC executive directors. Insufficient ‘deep’ operational tax experience at this level has almost certainly resulted in poor decisions or communications leading to bad press comment. These difficulties may have been avoided by seeking external input. This could be supported by a couple of non-executive tax advisers to advise and strengthen the Ex-Com board. Some external appointment should provide balance and proper independent input to the decision-making process.

Genuine consultation really works

There is no doubt that consultation is vital to trust and efficiency in the tax system. The new Tax Policy Making document recognises this. While there has been significant improvement in some areas, it still sometimes appears that the decision has already been made by HMRC or HMT for example possibly on the 10% IHT rate leaving consultation merely on peripheral matters; that is not something which should be considered as proper consultation. If decisions have already been made, then please let us know so we do not waste time. The CIOT and other bodies put in a considerable amount of expertise and time into formulating a sensible and balanced response and it is exasperating when the combined efforts of experts are simply wasted.

Short response deadlines too are quite ridiculous on occasions, as is the sheer volume of change and hence consultations, which has grown enormously over the last few years. We do want to be consulted but is this really the best way to continue to seek the considerable input of expertise? For example, could HMRC/HM Treasury help by telling us where to focus our efforts? By following the Tax Policy Making procedures we are likely to avoid the problems.

One example of a consultation during 2011 that worked particularly well was the Alternative Dispute Resolution (ADR); all sides worked together and the pilot was extraordinarily well run. The HMRC personnel involved with this project are to be congratulated for their approach. The consultation comprised a considered piece of work and the ongoing pilot seems to be going well. This is the right approach to consultation and should be a model for future work on other consultations. Such an honest and fresh way of working is essential and could be very worthwhile.

HMRC and tax agents

I have major concerns about the HMRC tax agent strategy. The consultation worked well and we benefited from a huge involvement from CIOT and ATT members. We need to keep this involvement up: I cannot emphasise how important it will be for all tax agents to read, consider and comment on the next round of consultation in this critical area of future working. It is clear that there are major concerns around ‘self-serve’, IT security and the agent view. The ‘agent view’ could be a rather involved way to identify a few ‘bad apples’; we must ensure that HMRC does not evolve into a cross between an Orwellian ‘big brother’ and MI5.

The relationship between HMRC, tax agents and their clients is at serious risk of changing irrevocably. I know as an agent I have a responsibility towards the integrity of the tax system, but the main responsibility is to my client and not to HMRC and we must never lose sight of this important principle.

The tax agent strategy poses fundamental questions about the role of tax agents. The HMRC response to the consultation dodges a key issue of formal qualifications. It does not see a tax qualification as a necessary or single test of competence. This is something which needs proper debate.

I accept that there are many very able ‘qualified by experience’ agents. But the role of professional bodies in maintaining professional standards seems to have been sidestepped. Independent oversight is also something which cannot be ignored. It must be a line in the sand for all the professional bodies supporting HMRC in their future work in this area.

When reading the HMRC summary of responses it is hard not to think that it is all about regulation and that ‘self-serve’ is more of a sideshow. Ask yourself, regulation by whom? Would you rather be regulated by your peers or by HMRC? Do agents understand the implications of the proposals? You have been warned!

The impact of HMRC powers is worrying

The latest example of the ever-increasing powers being given to HMRC is the ‘dishonest conduct’ legislation. I totally support HMRC tackling dishonest tax agents. I remain unconvinced that this new legislation, apart perhaps from the information power, is needed, even though it is much improved. The rights of the taxpayer are important and new powers must only be introduced where the existing law is deficient or too complex. A lack of manpower or will to use the existing criminal powers of HMRC where criminal activity is an issue should not be used to justify new oppressive legislation.

The conflation by HMRC of evasion and avoidance must stop. 

A recent example was the HMRC statement on 22 November 2011 in connection with the launch of the new offshore unit. The comments in the public release were unhelpful and blurred the distinction between avoidance and evasion. This is wrong. Concern has been expressed in the past about such comments coming out of HMRC.

HMRC staff and training

Tax training is something which HMRC takes seriously. Getting its staff to better understand tax administration, processes and taxpayers and to apply the law correctly must be a priority. This requires commitment from the top and should not be ignored.

It is clear that HMRC is under-staffed and under-resourced, with further significant cuts on the horizon. Is cutting HMRC staff a sensible strategic move on the part of government? Staff morale and the tax collection engine are now under considerable strain. HMRC is the UK’s ‘moneybox’ and could end up being severely damaged. Any perceived or real weakening in the tax system could have a major impact for tax administration, collection and an adverse effect on taxpayer attitudes.

Business Record Checks (BRC) and Single Compliance Process (SCP)

I am hoping for a sensible resolution to the BRC project before any damage is done to professional and client relationships. This has been a difficult experience and it would have been much better if HMRC had been upfront and consulted over its strategic objectives from the outset. Expecting the smallest business to have perfect records is quite unrealistic so I welcome the recently announced review by HMRC.

The rush to go live with the SCP in 2012 is a concern. This is far too quick, needing further time to consider the impact and implications of the pilot. There is no point in upsetting the entire tax agent community with rushed and ill-considered processes.

HMRC service levels initiative

The current key areas under consideration are post, tax codes, repayments and bereavement. HMRC is totally engaged with this project and are ‘seized with the issues’ which is encouraging. There is support from the highest levels within HMRC, the professional bodies and tax charities. Any slowing down in 2012 would be a massive blow to the trust that is slowly being rebuilt; though there is so much more still to do.

There are certainly challenges ahead in 2012!"

Tax does have to be taxing.

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Scant Regard

The Chartered Institute of Taxation (CIOT) is less than impressed with HMRC's apparent "Digital by Default" strategy.

CIOT is of the view that HMRC are going beyond Cabinet Office guidelines, which specify that every single government service must be available to everyone (irrespective as to whether they are online or not).

CIOT state:

"HMRC do seem to be heading for 100% on line with scant regard for those unable to use online systems, or unable to use them practically because of poor broadband.

Whilst encouraging those that can to use digital channels, HMRC must not hide the existence of a continued paper option, nor force people to accept assistance or to use an intermediary service which is more onerous than the online service."

The scant regard HMRC has for the taxpayer is rather surprising, given that HMRC refer to the taxpayers as "customers" (implying that there is a degree of "choice" in the relationship, whereby the "customer" can specify how he/she wants to be "served2).

Give HMRC an inch, and it will take a mile.



Tax does have to be taxing.

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To find out more, please use this link Taxwise

Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

An Inspector Calls II - Clasper Speaks

On 10th October I wrote the following:

"The ICAEW reports that Mike Clasper (Charmian of HMRC) popped in to ICAEW Council last week for a wee chat.

Clasper told members that improving service standards and the "customer" experience were priorities for the department. He also stressed the importance of 2012 to HMRC as a number of changes are implemented.

This is his first visit to Council and he acknowledged the difficulties that have existed within HMRC since the merger between Customs and Excise and the Inland Revenue. He also stated that HMRC plans to become more efficient, increase tax revenue and improve the "customer" (ugh, the "C" word again!) experience ."

The wheels within the ICAEW sometimes grind rather slowly. However, after a wee bit of gentle pushing from me, the ICAEW has published a summary of what Clasper actually said at the meeting.

Here it is:

"hmrc service standards and tax agent strategy

  

HMRC’s Chairman, Mike Clasper, and Brian Redford, Deputy Director, Business Customer & Strategy, attended the October Council meeting to discuss service standards and the recently published consultation on Tax Agent Strategy.

The decline in service standards is one of the biggest concerns currently being mentioned by the ICAEW membership. Following a highly critical report by the Treasury Select Committee published in July 2011, a meeting was held in September 2011 between HMRC’s senior management and the professional bodies and various charities to discuss what should be done to help make improvements. 

 

It was chaired by Mike Clasper and following the meeting a joint statement was published, setting out plans for HMRC to work with the professions and charities to make improvements. Tax Agents have a critical role to play and need a strong relationship with HMRC. At the moment there is a lack of trust that needs to be addressed.

There is understandable concern that promises have been made in the past to improve service standards but they have not been realised. However, the joint statement marks a turning point and shows that HMRC has picked up the challenge issued by the Treasury Select Committee to work with the profession to make improvements.

The biggest problems highlighted are post and telephone handling. The challenge for HMRC and the profession is to jointly understand the nature of the problem, develop solutions to improve the service and find performance measures that accurately reflect the customer experience.

Background

In the past, there have been different views as to how HMRC should recognise agents, with some feeling that the focus of attention should be on the tax payer. HMRC are now clear that strategically the role of the agent should be recognised in addition to the role played by the customer and there is a genuine intention on the part of HMRC to improve relationships with agents.

With the launch of HMRC in 2005, there was a loss of confidence in the organisation from customers as it was felt that it did not have a clear customer centric focus. The foundations for the merger were solid enough. It offered one tax authority for business which is a huge enabler for a customer-centric organisation, a system of dealing with large businesses that is globally competitive and a vast amount of knowledge about tax payers. However, the merger did not fully resolve the cultural differences between the two organisations and needed to deliver efficiency savings at the same time as facilitating a smooth transition from a local to a national organisation.

Following the merger, HMRC’s strategic objectives included:

-       Closing the tax gap

-       Focusing on the customer experience

-       Providing value for money

-       Operating with professionalism

In the 2010 spending review, along with all government departments HMRC was charged with cutting costs by a further 25%, but reinvestment back into HMRC was agreed with a primary focus on closing the tax gap and improving compliance.

 

In order to achieve HMRC’s strategic goals, there has to be a balance between three key and often conflicting aims:

1.    The tax has to be collected

2.    The customer experience has to be good

3.    HMRC has to be efficient

2010 – A difficult year

Mike acknowledged that 2010 was a difficult year and had said so on the record, but that it had to be seen in context. For HMRC employees, existing systems and processes were becoming outmoded and as configured were not able to provide a single view of a PAYE customer on its systems and this required expensive manual intervention. The system designed to support PAYE was based on 13 regionally defined databases meaning that some people had several records, some of which had not been linked and led to bad data quality and inconsistency. Working with this dated system, people developed ways of getting the right result without inputting the right data which led to further problems. HMRC underestimated the problems that would arise in the move to the new national PAYE system (NPS) and the resources that were needed to tackle them. These problems were only made worse by the resulting high volume of telephone calls that taxpayers and agents made to HMRC.

A related problem was the growing backlog for reconciling PAYE exceptions, which by 2010 had reached 23 million open cases, a problem that dated back to 1983. It was proving impossible to tackle this backlog with the existing systems.

The current situation

Mike explained that over the last few months there had been a considerable turnaround in performance and customers were starting to see the benefits of the NPS investment and other operational changes. Customer contact has improved. This year 70% of calls, on average, are answered within 40 seconds which is a massive improvement on the previous year.

Postal response times are the best they have been since the merger. The average is less than 15 days – calculated from the day the post arrives at HMRC through to when it is posted on HMRC’s system and a response sent. However, Mike accepted that this is not translating to the customer experience and this needs to be addressed. HMRC is also working with its mail partners, Fujitsu and Royal Mail, to cut delays once correspondence leaves HRMC.  But Mike acknowledged that there is more to do in improving the customer experience.

Internally, work is being done to improve professionalism and quality. Training and development is an essential part of this. HMRC is supporting professionalism through the establishment of ‘The Tax Academy’, accredited by Manchester Metropolitan University. This year, some 200 members of staff will commence their training through the academy for full technical training, although it is acknowledged that a wider section of the workforce will undertake other training and continuing professional development.  HMRC recognise some 18,000 members of staff as tax professionals.

Teams have been empowered to improve their own processes through ‘Pacesetter’ methodology and already an improvement in productivity of up to 60% has been seen in some areas.

Work is also being done to cut down on the organisation’s hierarchy. There have been up to 14 approval levels, from frontline staff up to CEO. By March next year there will be no more than eight. The top four tiers of the organisation have also been reviewed. 45% of jobs have been competed with a number filled externally to revitalise the structure and overall numbers reduced.

Up to 8,000 members of staff are also moving from processing to compliance roles in the coming years, which will help to balance the three requirements to achieving strategic goals.

On the performance challenge, HMRC staff members have received the training needed to enable them to go out and observe Tax Agents in their own firms to get a first-hand view of the problems that they are experiencing. HMRC now needs the profession to volunteer to host their staff and help improve standards. At the moment, it was proving difficult to recruit volunteer firms and Mike requested that ICAEW did all they could to promote this initiative. Since the Council meeting a significant number of  ICAEW members and others have stepped forward and the visits are will commence as planned.

Tax Agent Strategy

Allowing agents to ‘self serve’ through an online system should improve the process. By enrolling and understanding the business profiles of tax agents, it will be possible to tailor communication and support.

Through this system, HMRC will now be able to look at all interactions with agents. If there are consistent problems, they can then work with the agents to make improvements, a mutually beneficial process.

 

Conclusion

HMRC has committed to a big challenge. However, improvements can only be made with the input of the profession and it is therefore important that firms come forward to volunteer to host HMRC staff. Council members are strongly encouraged to do so, and take their opportunity to share their experiences.

 

For further information, please contact Frank Haskew, Head of the Tax Faculty, frank.haskew@icaew.com "
Well then, Clasper sounds quite optimistic!

I have been publishing this site for several years now, and accept that I may at times be "jaundiced" in my views as to whether there is any genuine improvement or merely scratching around at the edges of the issues facing HMRC.

Therefore I would welcome opinions from my loyal readers (HMRC staff and non HMRC staff) on the above, and as to whether it is a fair reflection of reality.

I would note one thing, not everyone is of the view that there is such a cosy relationship between HMRC and the profession.

Anthony Thomas, President of the Chartered Institute of Taxation (CIOT), recently debunked the nonsense that there is a "special relationship" between HMRC and the professional bodies, calling it a "myth" (akin to that "relationship" between the UK and US governments).

 

This view may ruffle a few feathers over at the ICAEW, where Michael Izza (the CEO) claims that "we (the ICAEW) now have a partnership with HMRC".

 

Tax does have to be taxing.

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To find out more, please use this link Taxwise

Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Debunking The Myth

Anthony Thomas, President of the Chartered Institute of Taxation (CIOT), is none too impressed with the flood of consultation documents that spew forth from the HMRC bunker.

Speaking recently at the president's reception at the Tate Modern, he was quoted by Accountancy Age as saying that it was:

"enormously frustrating... spending hours poring over consultation documents on what seems to be thousands of documents flooding out of HM Revenue & Customs... especially when on occasions the consultation is a complete waste of time."

For why are these consultations a waste of time?

Because the decisions had already been made by HMRC.

 

Mr Thomas called for a sensible approach in the future whereby there would be a meeting in advance with policy advisers, to enable HMRC and professional bodies understand the issues.

 

He then went on to debunk the nonsense that there is a "special relationship" between HMRC and the professional bodies, calling it a "myth" (akin to that "relationship" between the UK and US governments).

 

This view may ruffle a few feathers over at the ICAEW, where Michael Izza (the CEO) claims that "we (the ICAEW) now have a partnership with HMRC".

 

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

Ground Hog Day

On 7th September HMRC's Chairman, Mike Clasper, hosted a meeting at 100 Parliament Street to discuss HMRC service delivery.

The meeting had been requested by a number of professional bodies/charities (one could, for want of a better word, call them "stakeholders") including:

- the Institute of Chartered Accountants in England and Wales,
- the Chartered Institute of Taxation,
- the Institute of Chartered Accountants of Scotland,
- the Association of Chartered Certified Accountants,
- the Association of Accounting Technicians,
- the Association of Taxation Technicians and the Low Incomes Tax Reform Group,
- Tax Aid
- TaxHelp for Older People.

Why was the meeting called?

The stakeholders wanted to follow through on the recommendation of the House of Commons Treasury Select Committee’s that HMRC should work closely with the professional bodies, tax charities and businesses to improve the end‐to‐end experience of dealing with HMRC.

In addition to Clasper, HMRC sent along some senior managers.

Despite the fact that HMRC are happy that statistics show that in recent months there has been a significant improvement in overall post handling times..really???..HMRC recognise that this improvement is not consistently reflected in the actual experience of taxpayers and agents.

In other words, from the perspective of the stakeholders the statistics are wrong or are (shall we say) measuring the wrong variables.

Anyhoo, on the 14th of September HMRC issued a joint statement which outlines the agreement made as a result of the meeting.

The whole area of post handling and processing will now be looked at in depth, to understand how far the recent improvements are reflected in the actual experience of taxpayers and agents. Additionally, the reasons for the experience and perception of HMRC’s customers being different from that of HMRC managers will also be examined. 

Quote:

"It was agreed that as a first stage, work should be taken forward quickly and on three fronts:

• Post processing and handling should be looked at in detail to establish where problems still exist and how they can be resolved (and HMRC’s performance measures reviewed where necessary to ensure that they are credible and effective). This work will be complemented by a review of the following processes where it is believed improvements can be made: non Self Assessment repayment claims, automated PAYE coding notices and practical issues relating to deceased estates.

• A number of agents and charity representatives will spend time with HMRC’s front line service delivery teams to look at processes in detail from a customer perspective and make recommendations as appropriate.

• HMRC will carry out structured visits to the offices of a number of practitioners and charities to gain an in depth understanding of service delivery as seen from a customer perspective.

The intention is to pursue this initiative within a very stringent timeframe to obtain tangible fast track results with a view to facilitating quick resolution in a number of areas. The joint initiative will commence on 3 October and progress on the initial three work streams will be reviewed by 30 November.

Mike Clasper said:

'Tax agents along with the charity and voluntary sector are vitally important customer and stakeholder groups for HMRC and I welcome their offer to work with us so we can better understand how to improve. We know that they and their clients are seriously impacted when we get things wrong and we are determined to deliver a better service.

We need to get a better understanding of the interaction of our customers and stakeholders with HMRC and of their experiences in resolving tax issues. Working with agent colleagues inside and outside HMRC will provide that knowledge and lead to better services for all of our customers.'
 
The professional bodies and tax charities said:

'We and HMRC are working very closely together to try to resolve a number of service delivery issues. This exercise is emphatically not a ‘talking shop’ and where appropriate we intend to make public the results and the action to be taken from the work streams we have embarked on.'"


The publication of the joint statement gave rise to an optimistic statement from Michael Izza (CEO of the ICAEW) on his blog:

"HMRC has made similar promises in the past to tackle service issues yet have failed to deliver. 

I believe this time will be different. 

Thanks in no small part to the role played by our Tax Faculty and in particular, Paul Aplin, chair of its technical committee, we now have a partnership with HMRC and a very public commitment from the very top to a way forward which will help turn things around."

I do not wish to discredit Michael's viewpoint and optimism.

However, having run this site for many years I have a feeling of deja vu wrt the promises being made and a feeling that we are now in the endgame wrt the current structure/leadership of HMRC.

Reading between the lines of the statement (re the comments about perceptions) I get the feeling that HMRC do not want to believe that there is a service issue, and that this will be used to try to discredit "stakeholder" perceptions of poor service.


Additionally, from my cynical ("tired old eyes") perspective, even if the promises are genuine given the state of HMRC I don't see that they will/can be fulfilled.

Given that I am so cynical, and therefore partisan in my viewpoint, I would really value hearing the viewpoints of my loyal readers (especially those who work within HMRC) as to the likelihood of this actually delivering what it promises to deliver.

BTW, whatever happened to the Charter?

Tax does have to be taxing.

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To find out more, please use this link Taxwise

Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"

CIOT Response To HMRC

The Chartered Institute of Taxation (CIOT) and the Association of Taxation Technicians (ATT) have published a response to HMRC's consultation document: 'Establishing the future relationship between the tax agent community and HM Revenue & Customs (Tax Agent Strategy)'.

Here are a few extracts:

"The overriding issue to manifest itself is that the condoc shows insufficient understanding of how agents work, of the various types of firms they may work for and of the problems they face in coping with a system which is creaking at the edges...

Successful delivery of the TAS depends on winning the hearts and minds of the tax community and HMRC should take deliberate steps to build trust....

There is a widespread cynicism about HMRC’s main drivers for change, which we have been informed are not about saving costs...HMRC need to work harder at explaining their strategy and resist the traditional approach of assertion..

It is disappointing that the consultation document omitted any analysis of the systems in place in other countries..."

Here is the "killer" quote:

"...some of our members voluntarily informed us that they are keen to be able to do HMRC’s work, especially as they say this would reduce the need to deal with inadequately trained HMRC staff and enable them to make adjustments once only."

It shall be interesting to see if HMRC takes these comments on board.

Tax does have to be taxing.

UK EXPATS: Reduce tax on UK Pensions
HMRC QROPS provider. Unlock your UK pension and access a 25% lump sum today.

Quote ID code "ABC" when contacting a QROPS specialist.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

What is TAXWISE?

TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Taxwise

Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.

Click the link to read about: Tax Investigation for Dummies

HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"