MPs attack Big Four over HMRC relationship

The relationship between the Big Four accounting firms and HMRC is far too close and is a threat to the objectivity of UK tax policy, according to the Public Accounts Committee.

The PAC's latest tax avoidance report turns its attention to the role of large accountancy firms and calls for a ban on the revolving door of external accountants working inside government.

MPs said accountants were...

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Comments

"...threat to the objectivity of UK tax policy..."

Trevor Scott | | Permalink

What policy? I thought the government were practising .... expediency....which is why the "system" isn't closed to schemes.

The PAC is increasingly becoming a loose cannon. Explosions, lots of noise, never hits its target or achieves anything.

Red Leader's picture

Politicians!    1 thanks

Red Leader | | Permalink

Just grandstanding. Never telling it straight but always looking for a line to spin that will get easy votes.

Time for change's picture

Quite a few on this committee

Time for change | | Permalink

have past "track records" which they might choose to forget?

I am completely bemused the

ireallyshouldkn... | | Permalink

I am completely bemused the thought of these secondees finding out how to evade tax at HMRC!  

I had assumed the transfer of knowledge would be very much in the other direction, people out in practice explaining very slowly to HMRC how the law works. Bit like when you get a tax investigation and the staff don't have a clue and you have to train them into the law into which they are looking. 

Of course do MP's dont make the tax law in the first place

Nor of course do they have any control over HMRC and er, staff it properly if they are not doing enough decent tax investigations and there is money being lost. Probably take 3-5 years to train the staff up, but it could be done, albeit they might have to bribe all those ex-tax inspectors that got sacked [you know the good ones that you couldn't run rings round] back into the fold to train them up. 

 

Blurred distinctions    6 thanks

Stratfan | | Permalink

Listening to the interview with Margaret Hodge and Bill Dodwell on Radio 4 this morning, it is clear that there is a risk that public anger towards tax avoidance is transferred across to perfectly legitimate ways of lowering tax liabilities through reliefs and incentives. Mrs Hodge gave an example of a KPMG intern who had worked with HMRC on the design of the Patent Box scheme, on returning to his firm, starting to promote it  to clients including producing a brochure entitled "What's in it for you?". For some reason she found this unacceptable.

My experience with HMRC inspectors dealing with incentives such as Patent Box and R&D tax relief is that they are actually keen for companies to take advantage of them. Indeed, promoting these schemes is part of the remit of the units they work for. What is the point of introducing such incentives if taxpayers cannot be encouraged to use them?

Mrs Hodge is a formidable woman and I hope that her attitude deters companies from taking part in aggressive and artificial tax avoidance. At the same time though, she needs to distinguish between that and the legitimate use of instruments of fiscal and social policy in exactly the way Parliament intended. Would she find it unpalatable for a bank to produce a leaflet on ISAs entitled "What's in it for you?".

Locutus's picture

I rolled my eyes when I heard Hodge's sanctimonious outburst    4 thanks

Locutus | | Permalink

Politicians make the law and [shock, horror] the tax specialists within the Big 4 know that law (often better than HMRC!) and use it to their clients' advantage, who incidentally pay them for giving this advice.

... And this outburst comes from someone who is apparently number 15 on the Times Politicians Rich List.

http://www.thetimes.co.uk/tto/life/article3749110.ece

I wonder whether any tax minimisation advice was sought or given in course of amassing this fortune?  I hope not, otherwise to some it might smack of hypocrisy.

Showboating    1 thanks

Ian Bee | | Permalink

The parts of the report I read were much better written and thought out than the headlines and press reports would suggest. And certainly more so than Margaret Hodge's showboating appearances on the radio this morning.

It would be more helpful though if the PAC were to produce a report showing what is involved and what specialist expertise is needed in order to get these areas right at all, before you even consider any tax planning.

What might be useful is that the names of the advisers in any case taken to the FTT and above should be made public. It's sometimes clear but why not every time. For the large firms this might not be such an imposition if they no longer advise on aggressive avoidance schemes.

robertlovell's picture

ICAEW response to the report

robertlovell | | Permalink

ICAEW chief executive Michael Izza commented: “Chartered Accountants are essential to helping make the tax system work and ensuring that the right amount of tax is collected. How they do this is underpinned by guidance that sets out clearly their ethical and professional obligations.

“As the Public Accounts Committee has recognised, the UK tax system is incredibly complex and has struggled to keep up with the increasingly global nature of commerce. Simplifying and updating it will require international leadership, co-operation and agreement through organisations such as the OECD and G8. The accountancy profession also has a critical contribution to make in helping improve and strengthen the tax systems and is just as vital as a well written tax code and HMRC.

“We will continue to ensure ICAEW Chartered Accountants are aware of their obligations when it comes to the provision of tax advice. This includes updating our guidance for members to reflect the latest measures designed to reduce aggressive tax avoidance including the introduction of the GAAR later this year.”

Roger.Thornton's picture

Why use the big 4?    1 thanks

Roger.Thornton | | Permalink

Quite simply there is an unacceptable conflict of interests when members of the big 4 are seconded to government departments before returning to private practice. We have seen time and again that the big 4 look after .........the big 4 and their clients. Today we were treated to the unedifying spectacle on radio of the head of tax policy at Deloitte actually defending the antics of Starbucks and others in avoiding UK taxes.

Perhaps if HMRC want to consult accountants they should speak to “real” accountants, those who deal with ordinary businesses and understand what really drives the economy. Real wealth creators, not fat-cat parasites like Starbucks, and the like.

frustratedwithhmrc's picture

Rank hypocrisy!    1 thanks

frustratedwithhmrc | | Permalink

However coming from the Right Honourable member for Stemcor this is hardly surprising.

"And why beholdest thou the mote that is in thy brother's eye, but considerest not the beam that is in thine own eye?" Matthew 7:3

 

Locutus's picture

With politicians like ...    1 thanks

Locutus | | Permalink

frustratedwithhmrc wrote:

However coming from the Right Honourable member for Stemcor this is hardly surprising.

"And why beholdest thou the mote that is in thy brother's eye, but considerest not the beam that is in thine own eye?" Matthew 7:3

 

With politicians like Hodge and their family it is a matter of trust (ahem).

Is Labour's IR35 Hodge increasingly like Hodges of Dad's Army?

dstickl | | Permalink

AWEB readers - here's the link -

http://www.accountingweb.co.uk/article/mps-slam-public-sector-tax-arrang...

will recall Labour Hodge's alleged IR35 tax view 'that IR35 was (A) "not that easy to apply" and it was (B) not being applied in as many situations as it could be', and may just chuckle at PAC's hilarity against co-al Government encouraging increasing realism and competence in tax application that the "Big Four accountants were advising the government on changes to tax law, but were exploiting these positions to pick up inside knowledge they could pass on to clients about tax loopholes they found", when some small outfits - including mine as was - were apparently in the front line of IR35 attacks, whilst it was my personal opinion that similar consultants from the "Big Four" were apparently not so exposed.

As IR35 was introduced by Labour in 2000 - when she was an MP [see for example http://en.wikipedia.org/wiki/Margaret_Hodge ] - I have to ask if a logical conclusion is that both she and Labour are "capabilty challenged", especially in the implementation of taxation? 

SUM UP Q: Having just viewed another TV-rerun of John Le Mesurier etc tonight:  Is Labour's IR35 Hodge increasingly like Hodges of Dad's Army? 

Time for change's picture

I find    1 thanks

Time for change | | Permalink

Wikepedia a great source of entertainment in these situations.

Talk about "the pot, calling the kettle black".

And, they all do it with a straight face!

 

To be fair

The Black Knight | | Permalink

To be fair the british public get what they deserve when they vote in retards.

The failure is with MP's. They write the laws, they pass the laws, they set the budgets to enforce the laws.

It really is a bit lame to claim "they made me do it!" ..IF you are not in charge then what are we paying you for?

it really is a catch 22 situation though?

yes the big four and others run off seeing every change in the law as an opportunity to sell more schemes, and redo the ones that now don't work and as an offshoot there is a huge market in CPD courses.

But HMRC do not have any of their own brains (just highly paid monkeys as they thought a pay rise would make them brighter? doh)

HMRC are clearly failing and its not difficult to see millions in missing tax that has just been overlooked.....So one would draw the conclusion that they do need some help.

johnjenkins's picture

Perhaps putting

johnjenkins | | Permalink

Rupert Murdoch (sorry Richard Murphy) in charge of HMRC might work.

Murphy

The Black Knight | | Permalink

johnjenkins wrote:

Rupert Murdoch (sorry Richard Murphy) in charge of HMRC might work.

Thought he had some points...but his appearance on panorama proved he didn't know the first thing about tax either.

Murphy says to Paddy

"I see your glass is empty will ya be havin another one"

Paddy relies

"what the f&%c would I want with two empty glasses"

itp3asso's picture

big four and hmrcand putstively cosy relatiobship

itp3asso | | Permalink

oh... and. let s speak. plainly here... you mean among other things the vaious.allegations which have been made on sundry political websites about. the chair of the committe and her family company s. " traditional expertise. ". in finessing the tax avoidance dynamic. such that it pays inconsequential amounts of tax on a fully legal basis as do most of its major shsreholders of which she is one ...

frustratedwithhmrc's picture

Richard Murphy    2 thanks

frustratedwithhmrc | | Permalink

johnjenkins wrote:
Rupert Murdoch (sorry Richard Murphy) in charge of HMRC might work.

Since Richard Murphy's "research" is partially funded by the PCS, who are the main staff union at HMRC he is a bit biased.

Also his "research" on the UK Tax gap shows such a poor understanding of capital allowances, liquidation or the fundamentals of modern economics that it is an embarrassment. My 11-year old could do better.

IMHO: Hodges' alleged "cowardly streak" is asserted by Wikipedia

dstickl | | Permalink

I also find that ...  

Time for change wrote:

Wikipedia a great source of entertainment in these situations.  ...  

and I draw your attention to this link https://en.wikipedia.org/wiki/List_of_Dad's_Army_characters that IMHO (In My Humble Opinion) alleges Hodges' alleged "cowardly streak".  [Incidentally, the only material shortcoming I can find in this Wiki-link is a failure to note that Private Joe Walker routinely addressed Private James Frazer as "Taffy".]  

Would you perhaps agree with me that the "Dad's Army" sitcom is almost an allegory for the long outstanding "IR35 fiasco" - Hodges seems to me to routinely refer to the men (who seem to me to be similar to the undeserving targets of IR35) as those  " 'orrible 'ooligans" - a description that IMHO might perhaps be hinted by action/s etc by some bigger consultancies, etc, who, like Labour IMHO, seem to me to be frightened of downward cost pressures of competition from some independent self-employed worker [professional] consultants (who have incorporated as one man "bands")?