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A brown envelope from HMRC | AccountingWEB | The UK needs a fair tax system fit for the 21st century

The UK needs a fair tax system fit for the 21st century


Dave Chaplin and Crawford Temple argue that the administration of the UK’s tax system needs a complete overhaul.

31st May 2024
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HMRC’s Tax Administration Framework Review: enquiry and assessment powers, penalties, safeguards consultation invited views on how aspects of tax administration could be reformed. The consultation forms part of the government's plans to establish a "trusted and modern tax administration system".

The consultation, which closed on the 9 May, explored three themes: enquiry and assessment powers, penalty regimes and safeguards. Stephen Pinhey, technical officer at the Association of Taxation Technicians, looked at some of the consultation's intentions for AccountingWEB earlier in the month.  

However, Dave Chaplin and Crawford don't think the plans go far enough. Both believe that the administration of the UK’s tax system is not fit for the 21st century and needs a complete overhaul.

Dave Chaplin, CEO of IR35 compliance firm IR35 Shield

'HMRC litigators act aggressively, simply because they can...'

Dave ChaplinThe glaring omission in the consultation on modernising the UK tax system is any acknowledgement of the lack of independent oversight and accountability across HMRC. While streamlining processes is welcomed, there is a fundamental problem with the power balance between taxpayers and HMRC. Holes within the current processes and a lack of independent oversight create opportunities for abuse of power.

High-profile cases like the decade-long harassment of Kaye Adams over an eventually dismissed IR35 dispute lay bare how the goliath of HMRC can unfairly pursue taxpayers by levering the imbalance of power. The Adams case is not an isolated incident when it comes to taxpayer bullying due to a lack of independent checks on their authority. Recently, a small business, RALC Consultancy, was pushed into insolvency after HMRC refused to accept a judge's decision, resulting in the Upper Tribunal remitting a case back to the First-tier Tribunal (FTT) for a fresh hearing concerning earnings from engagements fourteen years ago.

The HMRC litigators act aggressively, simply because they can. HMRC lacks any meaningful external oversight and continues to use taxpayers as guinea pigs as it pursues ‘clarity’ in the law. We need fairness to negate the David and Goliath battles and a system that protects small businesses from an overbearing unaccountable state body which has unlimited access to the public purse.

What the UK desperately needs is a legislated Taxpayer Bill of Rights that explicitly defines and protects fundamental rights as well as giving statutory force to binding Taxpayer Codes of Conduct that HMRC can be sanctioned for violating.

Without such sweeping reforms, any "modernisation" from within the system remains window dressing.

Crawford Temple, the CEO and founder of Professional Passport

'More enforcement manpower and funding would better equip HMRC...'

Crawford TempleHMRC's stated strategy of ‘preventing non-compliance through well-designed policies, promoting compliance through education and responding robustly to non-compliance when it happens’ are admirable goals. However, their approach will continue falling woefully short until they finally get serious about robust enforcement against tax avoidance schemes and the bad actors peddling them.

This long-overdue review into building a modern tax system is certainly welcome, but HMRC currently lacks the resources and resolve to properly wield the broad powers they already possess. More enforcement manpower and funding would better equip HMRC to fully understand the additional measures required to devise and implement a tax regime fit for the 21st century. It doesn’t matter how thick you make the rule book if there is no incentive to read it – enforcement creates that incentive.

As it stands, there is a thriving market for disguised remuneration schemes and other mass-marketed tax avoidance ploys that HMRC struggles to combat. Their current misguided tactic of pursuing individuals caught up in these orchestrated arrangements is appallingly misdirected - it is the scheme architects and promoters who are the real criminals in need of far more rigorous policing.

Until HMRC finally gets serious about rigorously enforcing the rules against the compliance criminals, all their consultations, strategies and good intentions about shaping an improved tax system will continue to ring hollow. You simply cannot develop effective policies when authorities lack the resources and vigour to ensure they're properly adhered to in the first place.

Dave Chaplin is CEO of IR35 Compliance firm IR35 Shield, which assists firms with IR35 status assessments and tax status enquiries. Crawford Temple is CEO of Professional Passport, which assesses payment intermediaries for compliance.


Replies (8)

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the sea otter
By memyself-eye
31st May 2024 18:09

HMRC - donkeys led by...err.. donkeys.
Why would we believe anything will change?

Thanks (2)
Rob Swan
By Rob Swan
01st Jun 2024 08:37

The first paragraph....

If HMRC don't already have more than enough information on what needs to improve - in all areas - then there is no hope. And I'm pretty sure the Government could do with saving a few bob on pointless surveys and consultations. (For younger readers a 'bob' is a shilling (5p) in old money and it was significant in those days.)

Thanks (0)
By Tornado
02nd Jun 2024 10:46

How about HMRC tuly working with us.

We both have the same aims to ensure that our clients pay the correct tax yet HMRC think they are the only people that can do this.

They should take a more commecial approach to their activities and give more responsibilty to people in the organisation and let them have the power to decide if a matter is really worth pursuing at the expense of more worthwhile cases.

We don't want to be be in constant conflict with HMRC so work with us,and we can both improve the tax administration system almost ovenight and make life better for everyone, except the tax evaders.

Thanks (3)
Replying to Tornado:
Rob Swan
By Rob Swan
02nd Jun 2024 12:18

Wouldn't that be nice?
Who knows what HMRC are thinkng?

Thay have a 'Marketing Dept.' !!!?? WHAT?!! What on earth do they need to 'market'? They produce an endless stream of 'explainer' videos and how-to webinars - like they're addressing themselves to individual taxpayers who don't have a clue how the ever-increasingly-complex tax rules work.....
Honestly don't think they will every say "Just go get an accountant." and/or have the capacity to appreciate thet FACT - as in 'factual' - there are highly trained/qualified/experienced professionals who actually know what they're doing - and a whole lot more than HMRC seem to know!

The less competent HMRC become the less (and less) competent they seem to think the rest of the worl is. Just symptoms of incompetence, ignorance and stupidity - IMHO ;)

Thanks (1)
paddle steamer
03rd Jun 2024 09:41

Before wondering about the fancy bits and processes they need to do two things:

1. Resource and staff HMRC so phones get answered and letters receive replies.
2. Train the staff they have correctly and for longer.

Everything else is frankly frippery

Thanks (6)
Replying to DJKL:
Rob Swan
By Rob Swan
03rd Jun 2024 11:56

That's boring.
HMRC perfers fancy bits and frippery; sooo.....

...that's what we get :(

Thanks (0)
By ArianAcademy
03rd Jun 2024 12:48

This is the core of the issue with substantive reform of HMRC, that "HMRC currently lacks the resources and --resolve-- to properly wield the broad powers they already possess" - that's why enforcement and legal action is taken mostly against individuals, using for example Disguised Remuneration Schemes, instead of the scheme creators and promoters. Additionally, they take no substantive action against major banking players and consultancies that have entire teams dreaming up the latest tax avoidance scheme. If they did these players wouldn't be happily dreaming up even more schemes, but as it's cost effective they do.

In terms of overall revenue recovered, chasing individuals into bankruptcy and criminal convictions to recover thousands is a waste of time and resources when there are corporate millions / billions outstanding - it achieves no groundswell of support that HMRC and politicians could leverage and emboldens the major culprits.

Incremental adjustments haven't worked and will not work in trying to address the systemic issues and failings of HMRC. There needs to be a fundamental shift in philosophy, not yet another attempt at simplification, patching and tinkering around the edges. An absolute resolve is lacking because HMRC know they haven't the tools to win that fights that really matter.

Thanks (1)
By AndyC555
12th Jun 2024 13:19

"The UK needs a fair tax system fit for the 21st century"

We had one of those in the 20th Century.

Thanks (0)