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Confront the Revenue over its failings

19th Jan 2015
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ICPA is a professional organisation for accountants in practice.

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HMRC, tax agent relationships and future working’ was the title of Anthony Thomas’ session at the ICPA’s recent Annual Conference – and he certainly didn’t pull any punches.

For the UK tax system to operate effectively and efficiently it must be founded on “trust, co-operation and mutual respect”, keynote speaker Anthony Thomas told delegates to the ICPA’s Annual Conference. Thomas’ half-hour presentation focused on what he identified as the flaws in the current system, outlining HMRC’s failings and pointing to recent developments that should be a cause for concern.

“Without these fundamental principles the system will simply fail,” said Thomas, who is Chairman of the Low Income Tax Reform Group. He said it was vital that HMRC “retained the respect of all taxpayers, and is seen as trusted, even-handed and transparent”.

However, Thomas believes the Revenue is failing in this respect, saying: “HMRC seems to have forgotten the principles of the rule of law, notably with DRD (the Direct Recovery of Debt proposal).” Under the DRD initiative HMRC would be able to take money directly from a taxpayer’s bank account if they owe tax, so long as the account retains a minimum of £5,000 and the taxpayer owes more that £1,000. Thomas said: “DRD shows contempt for the taxpayer and shows HMRC can’t be trusted.” How long will it be before the £5,000 limit is abolished, he speculated.

Thomas added that it was also vital the public had the confidence that all taxpayers are treated equally by HMRC. He quoted Lord Bingham’s three principles: that the law of the land has to apply equally and there cannot be one rule for the rich and powerful and another for the poor; that ministers and public officials exercise their powers in good faith, fairly, and in doing so do not exceed their powers; and that legal rights and liabilities are resolved by an application of the law, and not by the discretion of a government official.

“The focus of criticism is that HMRC has a too cosy relationship with Big Business,” said Thomas. “The unthinkable has happened – tax tops the news agenda.” Of this ‘cosy relationship’, Thomas said: “The letter of the law has been replaced by the spirit of the law, and big companies – as well as small ones – don’t know what to do about it.” He said the example of Starbucks had shown how far the system had gone wrong. In 2012, the coffee chained ‘volunteered’ to pay £20m to the Revenue in lieu of corporation tax it had ‘avoided’; the resultant bad publicity had led to a consumer boycott of its cafes. Thomas said: “The Starbucks example shows that the tail is wagging the dog. What happened was exactly the wrong way round. If we have a system that’s not fit for purpose, it’s up to the government to change it, not for foreign companies to offer a donation!”

Thomas also blames the government for the current state of play – politicians do not allow time for adequate scrutiny of tax legislation, he said. And the case of Goldman Sachs, which struck a secret deal with HMRC chiefs over unpaid corporation tax, showed the Revenue was happy to lend itself to “political face-saving”.

Thomas pointed to an unholy trinity of problems associated with HMRC’s dealings with Big Business: and over-complex tax code, a desire to negotiate over tax owed; and confidentiality that prevents public scrutiny. The politicians were also to blame for not properly resourcing HMRC, he added.

As well as multinational companies, tax professionals, too, believe they have a “special relationship” with HMRC, said Thomas. “While this is more perceived that real, there shouldn’t be any,” said Thomas. “There should be no conversation behind closed doors; instead, there should be openness and straightforward dealings.” But in reality, HMRC has become a power-seeking authority that tramples over civil liberties, all done on the back of the tax avoidance debate.

So what can tax professionals do to improve the situation? Thomas has some advice, which he outlined to delegates. “You must continue to confront the Revenue over its failings,” he said. “Voice concern that only a properly funded HMRC can protect the UK’s money box. It is also important to recognise that tax professionals and the Revenue are not always going to agree, but don’t be confrontational – just open and up front. We must all stand up and say no.”

• The ICPA Seminar 2015 is set to take place in the Midlands next September. Keep an eye on the ICPA website for details.

This article is taken from “Accounting Practice” the ICPA quarterly magazine. Dedicated to supporting and promoting the needs of the general practitioner. You can find us at www.icpa.org.uk  or email [email protected]  or by phone on 0800-074-2896

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