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A journey into the mystical heart of HMRC
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HMRC and the chamber of secrets

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John Stokdyk embarks on an epic journey into the organisational twilight of the UK’s beleaguered tax department.

18th Aug 2022
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This week I took a look at HMRC’s latest performance statistics. They don’t make for cosy reading. After tracking the ups and downs of recent measures – mainly downs – the authors acknowledged: “We expect to see continuing pressure on our services for some time, but we’re maintaining service levels across most areas of our business and we’re focused on continuing to deliver improvements for our customers in the remaining quarters of the year.”

The smoothly reassuring, but apologetic tone doesn’t quite get across the depths of frustration taxpayers and agents have faced as average call waiting times rose to nearly 19 minutes during April before recovering to 13.10 minutes in June.

Like so many private-sector organisations, HMRC had a tough time switching to remote working during the pandemic while handling a raft of new support initiatives. And it has been just as stretched by staff shortages since. But just on the call waiting time average alone, HMRC’s performance is more than three times worse than the under five minute times it was achieving in 2017–18.

Clues to inner workings

The bland, quarterly statistical summary is one of those occasional documents the tax system ejects that gives us clues about its internal workings. Reams and reams of companion documentation are also available, such as annual accounts, strategy papers and consultation documents. All of this is guided by a hotch-potch of visions and strategy emerging from a central entity known as “ExCom” (OK, it stands for executive committee, but sounds more epic-friendly in the abbreviation). 

As a random example of the output, how about the Evaluation vision from chief finance officer and tax assurance commissioner Justin Holliday? In this paper, he explained: “HMRC’s vision is for good-quality monitoring and evaluation delivered proportionately and systematically. This will support transparency in our evaluation decision-making and help us to build on our evidence base.”

Reading such self-referential phrases and the accompanying opaque internal measurements can be like trying to decipher archaeological scrolls from another era or dimension.

“Welcome to the land of tax administration, muggle,” they seem to be saying. “Close your eyes and allow us to weave a veil around the untold tales taking shape within our departmental citadel on Parliament Street and in outlying fortresses around the provinces.”

Ultimate fantasy organisation

HMRC is like an organisational hydra spinning out its own fantasy franchise. The creature lurking at the heart of our adventure has so many arms and tentacles it’s hard to keep track: a customs wing here; revenue and tax credits there; the national minimum wage hiding in the corner; AML regulation, valuations and trusts lining up in the hallway. These offshoots frequently reconstitute themselves, changing their shapes and names, disappearing and reappearing according to unwritten timetables.

To get glimpses into HMRC’s inner workings, outsiders like us have to rely mainly on secondhand reports from a collection of insiders and gatekeepers including professional body representatives, software company liaison people and consultative committees. Or institutional overseers with arcane names like the comptroller and auditor general (National Audit Office), The Adjudicator’s Office and the Infrastructure and Major Projects Authority.

Fleeting appearances

Depending on the crisis alert level within the department, parliamentary select committees occasionally devote resources and airtime to exploring the organisation. These occasions are tightly controlled and HMRC executives are carefully briefed, but like the National Audit Office’s annual audit reports, they are valuable for presenting a first-hand view from within the belly of the beast.

On rare occasions, first permanent secretary and HMRC chief executive Jim Harra will put in a fleeting appearance. As a long-time taxman, he brings an aura of authority to the role, like a wise old teacher of the taxation arts. If Parliament TV had those quirky background effects you get with Zoom, you could almost imagine him in a wizard hat, with swirling stars and twinkly magic dust appearing over his head as he bats away ill-thought-out questions from MPs.

As we have seen from the performance figures and heard from countless AccountingWEB members, all the communication portals, contact centres and helplines attached to the HMRC organisational matrix are struggling to keep up with the demands being imposed on them. No one can be sure how this saga is going to turn out, but you can bet many more volumes will be published before it reaches its climax. Or it will become one of those big-budget epics that never actually reaches a conclusion.

The problem is that this governmental basilisk has become so complex and reclusive that few of us can ever get a comprehensive view of the beast. Perhaps my biggest concern is that the same can be said for those running the organisation, and the political masters who make their lives and ours so difficult.

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By Hugo Fair
18th Aug 2022 23:46

"All of this is guided by a hotch-potch of visions and strategy" ... is being generous to lovers of Mazes.

There are few (any?) people within HMRC who claim to understand even what component parts exist, let alone how they are meant to inter-act. A bit like the rabbit warrens they infest, which can lead to 'interesting' scenes.

One of my favourites a decade or so ago was prefaced by a senior HMRC manager losing his temper at Euston Towers (because I'd publicly challenged a guest Director to 'tell the truth for a change') - and telling me I was barred, not just from Euston Tower, but from 100 Parliament Street.

The denouement, the very next week, was seeing his face when I walked into one of his meetings (in the bowels of no. 100) ... because I'd entered the complex via the Horseguards Road entrance (as a guest of the Treasury who happened to be 'sponsoring' his pet project)!

It was the first time in my life I enjoyed remaining silent ... as he squirmed every time I looked like I might say something.

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By Justin Bryant
19th Aug 2022 09:43

I don't think anything needs deciphering here. It's self-evident* that the whole of HMRC is a shambles and not fit for purpose. Just look at the Loan Charge debacle (JH's words, not mine) as a recent example.

*we are all only too painfully aware of this on a pretty much daily basis.

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Replying to Justin Bryant:
Morph
By kevinringer
19th Aug 2022 10:24

For more recent examples, look at 30-day CGT which was launched with inadequate piloting just days into first national lockdown the UK had experienced. It was such a mess that HMRC had to change it to 60-day CGT and still have numerous problems and delays. And for a very recent example look at the new VAT Registration Service that was launched last week. I've been using the old one for 20+ years. It worked straight out of the box. But the new one does not. The PBs have put together guides on how to workaround some of HMRC's blunders with the new service, but there's only so much workaround we can do. Within the last week HMRC has made the following statements on the Agent Forum:

VAT-17269 "Since the launch of MTD in 2019 the COLE team have to manually key all changes to the system – these used to happen automatically once the VAT 1 was accepted. As a result of this the process has been hugely elongated – with a corresponding increase in waiting times. An application which used to take a few minutes to process now takes several days."

The above statement gives a sense of frustration within HMRC itself.

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ghm
By TaxTeddy
19th Aug 2022 10:15

Good work John.

You might wonder why there are so many useless committees, policy wonks and the like. This is a good example of an organisation which has lots of money and has no external commercial (or political) pressures.

Set free from any real constraints and with lots of money to spend, non-jobs will proliferate. Local councils are not quite as bad but only because they don't have a big enough budget.

As my great aunt might have said, "This is why we can't have nice things - you idiots are spoiling it for everyone else. See - we has self assessment and everyone was happy and you had to ruin it by introducing MTDIT."

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By ireallyshouldknowthisbut
19th Aug 2022 10:27

The main issue we have on a practical level is the number of contact points to get anything done.

So instead of one call or letter, it often takes 5 or 6 to achieve the simplest of tasks and often passed through several hands, and nothing is ever referred back as a "this didn't work because", something is not actioned and then just binned HMRC's end without ever coming back to the agent or tax payer.

The number of wasted calls and letters must be phenomenal.

There is a lack of any sort of accountability or checking that things get done. The majority of the staff you speak to simply don't have the power to do anything to get things fixed and are constantly referring matters to other 3rd parties rather than being able to just say "right done that for you". The wasted time around all of this is ridiculous.

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Replying to ireallyshouldknowthisbut:
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By BrianL
19th Aug 2022 14:04

I would love to see a study of the Failure Demand on their services. Capacity is consumed by the sum of Value Demand (What the organisation exists to do for those that HMRC dishonestly calls 'customers'.) and Failure Demand. (All the other stuff, like the multiple phone calls to clarify letters from HMRC that aren't understandable in the first place.) No organisation will have zero Failure Demand but driving it down, by properly studying demand and designing the processes to match the demand, will free up capacity to deal with taxpayers' & agents' real needs at no extra cost. HMRC clearly doesn't understand this. Even worse, it seems to go out of its way to increase Failure Demand by foisting on the public new systems & processes that don't work from Day One.

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Replying to BrianL:
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
19th Aug 2022 17:36

Just to be clear, I tried to acknowledge some sympathy within the article for the people caught in the beast's clutches (HMRC staff). Often the sources of failure demand (a very useful concept - many thanks!) come from new and changed requirements placed on the department, like the Big MTD - though previous regimes had a hand in that by using it as a pretext for their own £1.8bn+ digital transformation budget pitch. In recent years, the politicians have dumped Brexit/VAT transition responsibilities, CJRS and SEISS, AML regulation and numerous other unnecessary tweaks and accompanying anti-avoidance controls & complications.

This complexity goes back to the ludicrous, Heath Robinson-like way that UK tax law has been patched and extended for more than 200 years. Why the masterminds behind MTD never sat down (for example with a couple of tax practitioners) and worked out how they could simplify the system first before automating it remains the most mystifying thing of all for me.

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Replying to John Stokdyk:
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By Hugo Fair
19th Aug 2022 21:31

"Why the masterminds behind MTD never sat down (for example with a couple of tax practitioners) and worked out how they could simplify the system first before automating it remains the most mystifying thing of all for me."

Well it'd be a major task - but the sad fact is that the short-termism of politicians and (increasingly) of civil servants (at least at junior mandarin level and up) stymies any proper planning.

In my days as a systems designer (for large bespoke systems), one would never start with 'what have you got?' - which is the short-term imperative imposed at HMRC.
You start with 'what do you want to end up with (just imagine you're starting with a blank sheet of paper)?'
Then you tease out this virginal objective to ascertain (a) immutable deadlines, (b) priorities and (c) external connections (aka feed receipts & submissions).
You've now got the beginnings of a (possibly unrealistic) target 'model'.

Next (or in parallel if you have a large enough team) you do the opposite ... investigate & document all the existing systems that overlap your area of interest - which includes any that merely interface with your focus, not just those that may need to be replaced.
This team then moves on to research (via interviewing and quantitative analysis) of the performance/adequacy of the existing component parts ... not just to help identify issues to avoid/improve, but the equally important discovery of aspects that need to be retained (even if rebuilt from scratch).
You've now also got the beginnings of what HMRC is sorely missing ... a complete picture of which systems are part of the mix you intend to address, along with their individual strengths & weaknesses as they currently exist.

Only now are you ready for the 'fun part' (the point where HMRC tend to jump in without doing any of the previous work I've outlined) ... specifying your brand new system.
It is also at this point, and ONLY at this point, that it is safe/sensible to consider 'agile' development - by which I mean that the benefits of 'agile' are not just speed but disposability (in other words for prototyping concepts nor for real development).
What you are doing, at its simplest, is building a spec that is planned to deliver the optimal (long-term) solution whilst building on (sometimes literally) appropriate bits of existing systems - and where necessary re-building them.

Documenting (as you go) the evolution of the prototype components enables you to do four key things - which HMRC does badly if at all:
* produce/manage/maintain a written specification (this is the 'bible');
* build chunks of code/APIs or whatever and test-frameworks (in parallel);
* start producing user documentation ('how it works') for staff & taxpayers;
* set-up two levels of feedback groups (technical & user) for regular reviews.

This diatribe is already too long for this platform (and yet far too simplistic), but there are pointers both as to why HMRC don't do what you (rightly) suggest - and will *never* be effective in terms of IT development (unless there is a seismic change in culture and timescales)!

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Replying to Hugo Fair:
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By Anthony G Thorne
20th Aug 2022 07:43

This clearly explains why HMRC is not fit for purpose and that the whole system needs to be rewritten from scratch plus in language that can be understood by all.

A great article.

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Replying to Hugo Fair:
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By Catherine Newman
22nd Aug 2022 10:31

You are spot on Hugo. When I was at Eagle Star I had to draft responses to Consultation Documents. They start with "This is how it is" rather than we are seeking suggestions.

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Replying to John Stokdyk:
Morph
By kevinringer
20th Aug 2022 11:48

I know from countless discussions with HMRC staff, they're as fed up with HMRC as we are. Long serving HMRC staff know how poor the performance of HMRC is compared to 20 years ago. They also complain about the lack of channels to escalate issues within HMRC. It is as if the HMRC mandarins sit in a glass tower deliberately avoiding contact with either their own staff or their "customers" and those mandarins have been out of contact with these key parties for so long, the mandarins now live in a parallel universe where ideas like MTD seem achievable whereas to those of us in the real world know they are not. Trouble is, the HMRC mandarins are convinced their idea of reality is real and ours is not and no matter how out of touch with reality the HMRC mandarins are, they call the shots and we have to comply.

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LL
By RickyRoark
19th Aug 2022 11:18

HMRC is a strange place. One day you're answering the phone, the next you're solving a Rubik's cube while sitting in a pentagram. Rumour has it that high ranking officials are actually lizards that can take human form.

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By djtax
19th Aug 2022 11:34

Once upon a time HMRC (or IR as was) had departments called things like 'Corporation Tax' or 'Income Tax' etc. Nowadays there are depts for 'Customer Engagement' and 'Operational Excellence'.

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Replying to djtax:
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By BrianL
19th Aug 2022 14:05

See mine of 14:04 today.

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By ianthetaxman
19th Aug 2022 12:06

Imagine the scene - HMRC employee having a review with a line manager.....

Manager - 'I've listened to a recording of one of your calls and I'm not happy.'
Employee - 'Oh, why is that?'
Manager - 'Well, you see, you asked the tax payer (my wording - they are not customers!) for their NINO.'
Employee - 'Yes'
Manager - 'And they gave it to you.'
Employee - 'Er, yes.'
Manager - 'Ah but, your reply was completely incorrect in every way.'
Employee - 'Oh, really?'
Manager - 'Absolutely - totally incorrect.'
Employee - 'Er, ok then, if you say so, but why?'
Manager - 'Well, I mean, you replied with the word 'perfect' instead of 'thankyou; how could you!'.
Employee - 'So, what was wrong? I thought that would be ok, you said for basic things we could have some leeway and use words that were not in the 'script' we work from'.
Manager - 'Oh, if only it was that simple! The word 'perfect' can be interpreted as conveying some form of agreement that the NINO was in fact correct, rather than being a passive acknowledgement of the information given, which could be seen as you providing confirmation of private data to a third party that we are not at liberty to disclose under current legisaltion and could pose a security breach, whereas 'thankyou' simply acknowledges what the taxpayer has said, and clearly doesn't convey agreement or denial of the accuracy of the NINO given, despite you then successfully accessing their records with it, and so your response was not in line with the detailed training notes that were updated yesterday afternoon, for the 28th time this year.'.
Employee -'Well, when you put it like that, I can see the travesty that has occurred....'.

This happened to an HMRC worker this week, and if this is the sort of nit-picking, jobs worth approach that HMRC departments are forced to take due to unworkable systems that bend so far to accomodate all possible eventualities they lose sight of themselves let alone their purpose, thereby wasting time and money, it should come as no surprise that the system is broken!

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Replying to ianthetaxman:
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By Catherine Newman
22nd Aug 2022 10:37

Several years ago I had it confirmed to me that they have to stick to a script otherwise the conversation did happen. I even had call handlers say "Let me look at my script". I refused to ring HMRC for at least a couple of months unless it was absolutely necessary.

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Tornado
By Tornado
19th Aug 2022 12:35

This Chamber of Secrets is indeed a despicable place, particularly for the lies that emanate from it such as the assurance that quarterly Returns will provide taxpayers with running tax liability calculations, when we all know that you can only calculate the true liability after the tax year end when all income, allowances, reliefs and the wide options range of options for Capital Allowances have been taken into account.

There is also that other blatant MTD lie that it will only cost businesses £330 in a one off transitional cost and then £35 per annum extra after that.

The daft thing is that they think we can't see through this, but the bottom line is that their magic is such poor quality that we can see through every lie they tell us.

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Replying to Tornado:
Morph
By kevinringer
19th Aug 2022 12:23

The problem with the MTD lies is that HMRC genuinely believe the costs are true and that we are wrong. They know that we don't agree with HMRC but they're as adamant that they are right as we are that we are right.

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Replying to Tornado:
By Nebs
19th Aug 2022 16:36

Tornado wrote:

There is also that other blatant MTD lie that it will only cost businesses £330 in a one off transitional cost and then £35 per annum extra after that.

Perhaps we could just send a box of receipts and invoices and bank statements to HMRC each quarter, with a cheque for £8.75, and let them get on with it themselves.

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Replying to Nebs:
Morph
By kevinringer
19th Aug 2022 16:49

Nebs, what an excellent idea.

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By indomitable
19th Aug 2022 12:32

Absolutely John, no-one in government appears willing or able to tackle these issues head on.

Government - and I mean successive governments here - have become a navel gazing talking shop appearing totally incapable of delivery in most if not all public services.

I don't think I am being too harsh and I don't think it's a matter of money either, when you read statistic that still over 50% of civil servants don't want to go back to the office, the civil service is more worried about recruiting diversity directors than actually delivering anything - where will it all end?

I hate to think where we are headed

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Replying to indomitable:
LL
By RickyRoark
19th Aug 2022 14:41

Tbh, I'd be in favour of 100% of Civil Servants not wanting to go back to work.

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By Catherine Newman
22nd Aug 2022 10:17

I have just done a return for a client who has been chasing NEST and she said she feels sorry for the poor staff who have to read from a script that the information should be out by 31 August. I decided to do the return anyway and if necessary would have used last year's figures. I discovered the client was no longer a higher rate taxpayer and there was an in-year adjustment assuming she was. I don't think I need to go further but I am seeing more in-year adjustments. A client emailed saying the assessment was nothing like I had said so I had to explain it to me and screen shot the 2021/22 liability and I invited him ( a retired doctor) to choose his own version of "it is utter rubbish". If NEST can't get the information out by end May, what hope is there for MTD?

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By flightdeck
23rd Aug 2022 12:35

That's rather funny and now I see it, the perfect meme!

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