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HMRC needs to show more empathy

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4th Sep 2015
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HMRC officers (and some tax advisers) struggle to appreciate just how difficult it is for taxpayers to deal with the tax system, says Ray McCann, partner of New Quadrant Partners.

Parliament makes the tax law, but HMRC design the tax compliance system including the tax forms and procedures for penalties and appeals. Recently HMRC have been inserting too many traps in the tax compliance system which they say are there to prevent unintended tax breaks, but which catch out unwary taxpayers. 

The £100 automatic penalty for late submission of a tax return is a good example. Appeals against these penalties create a huge workload for HMRC, and the costs of dealing with those appeals must surely outweigh the penalties charged. There are no available statistics on how many of those automatic penalties are actually collected, or how much of that revenue is reinvested to reduce the number of taxpayers who struggle to comply.      

McCann feels that the current batch of HMRC inspectors treat every taxpayer mistake with suspicion. He has some tough advice for his previous employer, “HMRC must look seriously at how it can restore sufficient discretion to inspectors, so that tax risks can be dealt with more effectively and less important issues are disposed of quickly.”

McCann argues that this is not about going soft on tax cheats, but simply ensuring the issues HMRC inspectors pursue are worth the effort. As Winston Churchill said: “you will never reach your destination if you stop and throw stones at every dog that barks!”

The problem with the current structure of HMRC is that power is too centralised and the individual inspectors are not permitted to make decisions locally. Every tax decision of any size has to be signed-off within HMRC by multiple layers of management, which creates an atmosphere of inertia. The old procedures set out the Taxes Management Act 1970 are no longer fit to cope with the fight against tax avoidance. 

McCann speaks from forty years of experience of dealing with UK and international tax disputes gained from both sides of the tax divide as a senior HMRC inspector and as a tax consultant. He says what is needed now is a new Taxes Management Act rewritten for the modern age. HMRC and the UK tax system need to connect with the real world. A good start would be to communicate with tax agents by email, so that routine matters can be dealt with quickly.

These points were original made by Ray McCann in his article “Love it or Hate it” published in the August edition of Tax Adviser.

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By billgilcom
07th Sep 2015 12:05

Email
Agree totally with author and another good reason for communicating by email is that it cuts out the up to 10 days postal delays caused by HMRC sending letters usually by 2nd class post and via central post rooms. It's either that or the TMA (new McCann version ) should include a lengthier period for responding to HMRC letters.

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By The Black Knight
07th Sep 2015 12:16

only the compliant

Only the compliant are punished usually for being late. Those that ignore the system or play it are seen to get away with quite large amounts.

Hmrc just don't have the staff ability. They seem to have a poor knowledge of the rules and a lack of experience in what they are looking for.

The hardest part of any engagement is to get through several layers of obstinance and incompetence and the only way to get anything right is to keep complaining but even then you have to give up. Most notibly when then they have made a mistake in the clients favour and cannot back down when they are told.

Empathy? You have to be joking that would be a massive culture shock.

It is hard to see what was complicated about the avoidance schemes, most didn't work.

Evasion is a real problem, much bigger. Basically you can fill in whatever you like on a tax return and it will be accepted (through ignorance or deliberately). HMRC will deny there is a problem so you are home and dry.

There are billions to collect but HMRC are just not bothered.

 

 

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