MPs voice doubts on HMRC compliance plans

MPs on the Commons Public Accounts Committee last week warned that HMRC risked falling short of its ambitious targets for raising extra revenue due to staff cuts and inefficient technology project management.

The committee’s latest report on HMRC’s compliance and enforcement programme also criticised the department for appearing to advise senior public sector staff that it was appropriate for them to avoid tax by using a managed service company.

In many other aspects, the PAC report covered similar ground gave to a National Audit Office study on the same subject published in March, but was backed by additional evidences presented at committee hearings in the intervening months.

Although the HMRC made “substantial progress” in increasing tax yield, £1.1bn more could have been collected had HMRC not cut more than 3,000 jobs over the five-year period, the committee said.

In evidence to the committee, Mike Eland, HMRC’s director general enforcement and compliance, defended the tens of thousands of job cuts at HMRC over the past five years.

Eland told the MPs ministers wanted to create a new revenue department that was “much smaller and more efficient” than its two predecessors. But critics including tax campaigner Richard Muprhy have argued that jobs losses have hampered HMRC’s ability to counter tax evasion.

In her evidence to the committee, HMRC’s new chief executive Liz Homer, hailed the £4.32bn of additional revenue generated between 2006 and 2011 from £387m invested as a success, representing an 11.1 times return on the investment.

The big surge in enquiries yielded more than £500m over the past five years, and HMRC has set out ambitious expectations for the taskforces that are now underway. To monitor how these campaigns are proceeding, and the impact they are having on UK businesses and advisers, AccountingWEB has opened a new tax investigations discussion group to collect evidence from community members.

Continued...

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Comments
frustratedwithhmrc's picture

Why do you insist on printing the biased views of Richard Murphy    4 thanks

frustratedwithhmrc | | Permalink

It is well known that a significant proportion of Mr. Richard Murphy's funding comes from the PCS union.

Therefore, publishing his views on the staffing levels of HMRC without a disclaimer saying that he is not providing a neutral viewpoint is (in my opinion) wrong.

.    2 thanks

ireallyshouldkn... | | Permalink

I am not surprised by the  National Audit office concluding that HMRC have lost £1.1bn by firing 3,000 staff.  The level of tax investigations is so low now as to be negligible and the competence of the staff left seems to be poor. Its been at least 3 years since I have spoken to a competent officer which means we either run rings around them, or spend hours battling over basic points of law (and get compensation afterwards too!) 

If you want to raise tax you must make tax payers feel "at risk" of an investigation or it becomes largely a voluntary exercise.

johnjenkins's picture

I like the expression    2 thanks

johnjenkins | | Permalink

pipeline or a "one off". I'm of the opinion that the big money is a one off and the smaller stuff is on-going. I really don't think there is too much more to be had unless you're going to spend millions on going for the really big boys.

One thing that hasn't been mentioned even by Mr Murphy is that if, the border staff got together with HMRC and got rid of all the illegals working for peanuts so that our youngsters might have employment, not only would we see a decrease in benefits, we would see taxes going through the pipeline as they should be. Yes, there are that many illegals to make a difference. 

Yes

The Black Knight | | Permalink

ireallyshouldknowthisbut wrote:

If you want to raise tax you must make tax payers feel "at risk" of an investigation or it becomes largely a voluntary exercise.

We have had the same experience, see tax evasion on a daily basis and no enforcement.

Of course no one will take any notice because we have a vested interest.

More tax enquiries = more work for accountants

More clients wanting to get things right and pay the right amount of tax = more work for accountants.

More tax = more work for accountants.

You just can't get away from it!

We have seen investigations where the tax evader still paid less tax and penalties than he would have done had he kept proper books. Talk about an incentive.

e.g. spotted unlawful dividends and collected s.419 , then missed half the missing takings for corporation tax, missed the Vat entirely and the cash in hand employees.

Every time this happens an honest taxpayer turns to the dark side.

So far we have new IT projects and more under way, that have identified risk areas (that was obvious to us anyway) produced a list then HMRC have randomly sampled that group and caught a few fish. Sorry but tax evasion is so rife that all HMRC have to do is randomly cast a rod and they will catch a fishy.

Tax investigations and prosecutions (which there should be more of) have a real deterrent effect.....But have we even seen a list of deliberate defaulters yet?...another bright idea that exists on paper but not in reality.

 

Margeret Hodge MP is a total antithesis to Austin Mitchell MP

david5541 | | Permalink

Thank you again Margeret Hodge for chairing this comittee,

Its about time george osborne and his "savvy" spin doctors/special advisers and the chairman of board of HMRC started listening to her.

ineffective and aggressive tax investigations

david5541 | | Permalink

The Black Knight wrote:

ireallyshouldknowthisbut wrote:

If you want to raise tax you must make tax payers feel "at risk" of an investigation or it becomes largely a voluntary exercise.

We have had the same experience, see tax evasion on a daily basis and no enforcement.

Of course no one will take any notice because we have a vested interest.

More tax enquiries = more work for accountants

More clients wanting to get things right and pay the right amount of tax = more work for accountants.

More tax = more work for accountants.

You just can't get away from it!

We have seen investigations where the tax evader still paid less tax and penalties than he would have done had he kept proper books. Talk about an incentive.

e.g. spotted unlawful dividends and collected s.419 , then missed half the missing takings for corporation tax, missed the Vat entirely and the cash in hand employees.

Every time this happens an honest taxpayer turns to the dark side.

So far we have new IT projects and more under way, that have identified risk areas (that was obvious to us anyway) produced a list then HMRC have randomly sampled that group and caught a few fish. Sorry but tax evasion is so rife that all HMRC have to do is randomly cast a rod and they will catch a fishy.

Tax investigations and prosecutions (which there should be more of) have a real deterrent effect.....But have we even seen a list of deliberate defaulters yet?...another bright idea that exists on paper but not in reality.

yes and HMRC always go for easy pickings; electricians, the medical profession whilst turning a blind eye to the big tax dodgers who live on overseas "capital" distributions.

Evasion and avoidance    3 thanks

The Black Knight | | Permalink

I did not say the last paragraph I have been quoted on.

And I think we are smudging avoidance with the issue of evasion again.

I do not think that it is right that a plumber should evade paying a couple of hundred thousand pounds of tax just because he is small.

And neither should you!

johnjenkins's picture

I don't think

johnjenkins | | Permalink

that there are many plumbers that earn a couple of hundred thousand pounds let alone evade that amount of tax.

20 Years

The Black Knight | | Permalink

johnjenkins wrote:

that there are many plumbers that earn a couple of hundred thousand pounds let alone evade that amount of tax.

Over 20 years this is easily achievable!

In any case Tax evasion should not be available to some and not others! Whether it be a few grand or a hundred grand.

We have allowances and reliefs to help the poor (not that plumbers are poor)

Why should I pay for his share (twice these days with tax credits)

Or are we saying that we should all be able to pinch a certain amount? Perhaps work out what your tax should be then knock off a couple of grand or always put £10K a year in your pocket and don't declare that.

 

johnjenkins's picture

Isn't that what the

johnjenkins | | Permalink

big boys do, then moan about it when the littluns have a go. MP's expenses might ring a few bells. At least the plumber has contributed for the last 20 years. How many illegals are there who haven't?

all equally guilty to me

The Black Knight | | Permalink

It's the sentence (or penalty) that should reflect the gravity of the crime.

I am not defending MP's or white collar fraud all theft needs to be dealt with.

Although the first two plumbers stole much more and received lighter sentences! So the working class heroes are treated more favourably.

The illegals are often paid cash from undeclared cash takings (missing tax and Vat) even when caught do HMRC raise an assessment? No!

Even your local drug dealer would not be able to afford his new Audi if HMRC slapped him with an assessment.

Self assessment can only work if there is increased enforcement It is no good ramping up the penalties if you have virtually no chance of being caught.

There will always be the residual 25% that will nick it even if you are looking but its the 50% that will nick it if they think they can get away with it that you need to send a deterrent message too.

 

johnjenkins's picture

Therein lies

johnjenkins | | Permalink

a major problem. GB thought most business were on the fiddle so he hit the working class heroes heavily. HMRC are continuing that mode. That's all OK if everything else is perfect but it's not. Yes I agree all are equally guilty but when you set systems up to catch loads of crooks when there aren't loads, just a few, then we are getting what we've got now, total mayhem. At least my pasties won't be going up.

Pasties tax    1 thanks

The Black Knight | | Permalink

What a smoke screen that was? Has to have been deliberate? I bet there's a competition who can come up with the ideas that cause the irriots to riot. We can now all witness that we have a listening caring government. Justice has been done. A victory for pasty eating workers united. Perhaps more pasties will be eaten now?

johnjenkins's picture

Can we not

johnjenkins | | Permalink

then turn IR35 into some sort of pie? We have heinz57 so IR35 could be Indecisive Roll 35, where you could make it anything you want by playing around with the ingredients.

richard.murphy's picture

Well known - but completely wrong

richard.murphy | | Permalink

The information noted is wrong

Yes I am paid by PCS - but the sum involved in less than 10% of my total income

And the fact I am paid by PCS is disclosed on my web site - as are all my major sources of income

Therefore on every point the suggestion made is wrong, as is normal for those who oppose tax justice

 

 

15%

The Black Knight | | Permalink

Is the figure where our independence as auditors would be brought into question?

So to be fair 10% ought not to be an issue?

johnjenkins's picture

It really is    1 thanks

johnjenkins | | Permalink

irrelevant because when it comes down to it the arguement is, and always has been about Tax Justice. In my view artificial tax systems set up purely to raise money (IR35) are just as bad as some tax avoidance schemes. Employment status has to be decided by those engaging and not HMRC "guidelines" (which they make up as they go along).

frustratedwithhmrc's picture

Fair point, but directed at AccountingWeb editors not yourself

frustratedwithhmrc | | Permalink

richard.murphy wrote:

The information noted is wrong

Yes I am paid by PCS - but the sum involved in less than 10% of my total income

And the fact I am paid by PCS is disclosed on my web site - as are all my major sources of income

Therefore on every point the suggestion made is wrong, as is normal for those who oppose tax justice

For myself Mr. Murphy, I have no problem with your campaigning for Tax Justice or the source of your funds.

What I do object to is your viewpoint being put forward as a neutral opinion when it is clearly not.

johnjenkins's picture

As we work

johnjenkins | | Permalink

for our clients and not HMRC, is it not possible for our viewpoints to be biased. To me the concept of compliance takes away any flexibility that could solve problems. Similar to a banks computer deciding on loans. Once the computer "says no" that's it.