It’s time for HMRC to behave like grown-ups
Instead of pursuing pointless penalties, HMRC should do the mature thing and use its resources to educate and help taxpayers.
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Ray McCann is a consultant to Joseph Hage Aaronson LLP and Charter Tax Consulting Ltd. He is a fellow of the CIOT and a member of the ATT and was CIOT president between 2018 and 2019 and a member of the CIOT Council until this year. He is a former HMRC inspector.
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'Depressingly, in recent years, it is not a new question. We have seen far too many Quayviews, where scathing criticism of HMRC has come from tribunal judges'
I think the answer to this is that HMRC have grown increasingly arrogant in the last few years and have become more incompetent at the same time, the arrogance making it impossible for them to even consider that they are incompetent.
The arrogance also makes it impossible for them to respect the law, after all, they know best don't they?
It's no wonder that HMRC believe every taxpayer starts from the premise of 'what can I get away with this time' ... since that's the very attitude that they bring to the table in all these cases.
Maybe they should take a look in the mirror and observe what arrogance really looks like in a dept that appears to believe that they are not subject to the law.
And yet they continue (quite deliberately) to use the descriptor 'evasion' when pronouncing on any 'avoidance' activity ... and seem confounded when taxpayers reflect HMRC's own behaviour.
HMRC have become their own worst enemy - which is saying something given the competition for that accolade!
The difference between HMRC and the Taxpayer is usually that HMRC are a faceless organisation where no individual is required to accept responsibility for anything whereas the Taxpayer is often an individual who has no facade to hide behind and has to take whatever is thrown at them.
Thank goodness for the Courts.
'It’s time for HMRC to behave like grown-ups'
Hush now
Otherwise HMRC will run to the corner, stamp their feet, and shout 'it's just not fair'
I'm not sure how they can educate and help when they simply don't have enough staff, enough trained staff, the systems are completely inefficient and not fit for purpose.
It needs an MP to be responsible for it, them to be answerable and for it to be run by Accountants not some offshoot of the political machine.
HMRC is needlessly difficult to deal with and to try and understand.
How it is acceptable to say "there is a 12 month estimated response date" to an issue then hammer people for responses within short time frames is mind boggling.
They have absolutely no direction, no leadership and have become a drain on the publics time (as well as agents), HMRC needs a complete overhaul from top to bottom.
The "Office of Tax Simplification" needs shutting down as they are another useless Quango with absolutely no useful input / prevention of these crazy political ideas to get people using software that have no need for it.
HMRC is a mess and people are just fed up having to deal with them.
Crikey you will be expecting politicians to be competent next and on this planet. Rishi and Liz ably demonstrating neither of these traits.
HMRC have (incorrectly) issued an assessment for wrongly claimed SEISS. I rang the number on the letter on behalf of the client who is incapacitated and the officer refused point blank to speak to me despite having a 64-8 in place and despite the issue being about the completion of the self-employment section of the tax return. His argument was that 'SEISS could only be claimed by the taxpayer'. He was WFH so couldn't put me through to a manager and was immovable that only the taxpayer could ring up to discuss the assessment. I could hear the smirk down the phone and that he was enjoying 'computer says no' attitude. I've written to them and are scheduled to receive a reply in 3 months time. Now the client is incorrectly getting penalties, which we have to appeal as well. Common sense and HMRC should never appear in the same sentence!
I have had exactly the same issue. The agent helpline put me through to SEISS who refused to speak to me, back to the agent helpline who have put a note on the system for SEISS that there is no claim error. Now anticipating that there will be further letters and penalties that we will need to appeal!
HMRC does not recognise the 64-8 as agent authority for questions about SEISS grant applications, see: https://www.accountingweb.co.uk/tax/business-tax/why-wont-hmrc-talk-to-you
But HMRC offices should talk to agents about SEISS figures on tax returns, where authority to deal with income tax is in place. If HMRC has altered a figure on a tax return to include /amend a SEISS figure they should talk to the agent.
I've had a few thoughts (dangerous concept) after reading your post.
I suppose that the grants are not actually tax, just taxable. So the application and payment of the grant would not be covered by tax agent authority. But the taxation of them is.
If some other department (such as dwp or the treasury) had been responsible for the grant applications, it would have made it clearer I think. The fact it was hmrc and the grants were taxable income based on previous tax returns seems to have muddied waters over why they wouldn't involve agents in the application. At least for me. Until reading your post that is.
The former HMRC Permanent Secretary for Tax Dave Hartnett stated that is impossible for any one person to understand the whole of the UK tax system therefore if correct then it is immoral to impose a penalty if you get it wrong.
What is required is root and branch reform of the tax system to make it understandable by all and remember the KISS principal "Keep it simple stupid".
If they wish MTD to work then they need to do this first.
Stop blaming a government entity with 66,000 employees. Start naming names, these people love to hide the dirt and screw ups under the HMRC name and avoid accountability. For politicians and senior government officials, their name is their brand and reputation, you wont see any change until the pain tax payers have to go through starts being linked to them directly and impacting their own brands and reputation.
HMRC pursued the wrong taxpayer… no, someone within the HMRC did this, they made a choice, and it was the wrong one, who was it? Who is the department head?
He added that HMRC’s behaviour was “unreasonable and the case should never have come before the tribunal” .. who’s behaviour was it?
As former HMRC Permanent Secretary for Tax Dave Hartnett used to say… ok, a name, but former.
If every article on MTD was titled ‘Jim Harras’ MTD or ‘Giles McCallum’s MTD, I guarantee any response will be much better than just blaming HMRC.
We blame Mike Ashley for Sports Direct screw ups, Elon for Tesla, Boris for the Tories…why should HMRC get away with it?
https://www.gov.uk/government/people/alan-evans
Alan Evans was appointed General Counsel and Solicitor for HM Revenue
-Responsible for carrying out the department’s civil litigation
For this case it was Mrs E Edley, litigator of HM revenue and customers solicitors office
Hereinafter referred to as Jim Harassment and Giles McCulprit.
I never realised The Brittas Empire was a documentary.
And while they are growing up, they need to start replying to queries / post within acceptable time limits, answer phones within reasonable time limits, repay tax refunds within promised time frames and the list goes on....
If tax payers are their customers they have a duty of care towards them and expecting everyone to submit things "real time" is unfair given their own sense of time is so skewed.
The problem is clearly one of staffing levels and more particularly skills, within HMRC.
I am retired now but recall my early days as an accountant in the late 1970s (when Inland Revenue and HM Customs & Excise were separate), when there were local tax offices with experienced staff who knew and understood the tax legislation. Now, it seems that there are just a few national offices of the combined tax authority, staffed by people who largely follow guidance provided digitally by their computer systems without any proper understanding of the legal principles or common sense.
Rather than spending over the past 20-odd years (HMRC refers to it as 'investing') shed-loads of money in IT systems that don't properly work, they should have spent on recruiting and training staff to better understand what they are doing (and why). Technology can have great benefits, but it's only a tool to be used by people who understand what it's for and have the training and experience to use it effectively.
Giving a spanner to an idiot will not by itself enable him/her/it to fix a mechanical problem!!
Ah the days of being able to speak to an inspector in the local tax office - it was useful and also an opportunity for an 'off-the-record' conversation which could sometimes help things along.
On one occasion the inspector gave his name (Mr. Pepper as I recall) and after a pause I said "oh D J Pepper, you're the DISTRICT Inspector ?" and he said yes, it was part of his job to take some calls as it helped him keep in touch with the real world as it were.
Arguably MTD is an example of lack of human engagement with the taxpayer being pushed to an extreme.
As in Pepper v Hart (Classics Master at Malvern College and Mastermind winner)
He was the DI at Worcester and, I think, at Evesham. I spoke to him several times. he was courteous, knowledgable and pragmatic. How I long for the days when you could call the local district, speak to an inspector and get a sensible and correct answer.
But HMRC can't be totally to blame here, as they know most judges are biased in HMRC's favour which encourages HMRC to take these crazy cases in the 1st place. If we had more fair & sensible judges like RT HMRC would be discouraged from taking such cases to tribunal.
I would be far more accepting of penalties for taxpayers if there were also penalties for HMRC - the other side of the coin.
But they want to penalise us while accepting NO responsibility for their behaviour and performance.
But the penalties would have to be levied on the HMRC individual not the ephemeral body which passes the cost back to us (the body of all taxpayers).
The solution is in HMRC's hands (which is why it won't happen) ... introduce penalties on HMRC, but issued as points not pounds.
And change Jim Boy's contract, such that for every X points he loses another day of paid holiday that year + for every Y points he loses another 10% of his pension contributions for the year + for every Z points his post-employment honorific decreases another level!
What irritates me more than anything is when HMRC issue penalties on deceased cases despite being aware of the death. These include late payment penalties where most HMRC staff are unaware that tax does not become due until 30 days after Probate is granted and do not understand that a tax return issued to the deceased after he has died is invalid until it is reissued to the executor. In so many cases that I deal with the executor is therefore unaware that a return had been unlawfully issued until the unlawful penalty notice arrives to the distress of the bereaved family. HMRC insist we prepare and lodge formal appeals and will not even consider them until the final tax return is lodged and all taxes paid. On countless occasions I remind HMRC that we should not need to make a formal appeal where HMRC have acted unlawfully, but they stick to their non-legislated rules and cost the estate unnecessary costs and delays. Why cannot HMRC put the brakes on everything on their computer when they are notified of the death. This is surely just a matter of common sense and respect and to save them work in dealing with all my complaints.
I fully agree they should drastically change their attitude. Just had a case myself - after telling my client two years ago that no further tax returns would be due, they started issuing penalties for failing to submit last year's return. Finally got it cancelled this morning, so my client pays them nothing, but then there's my fee. He's still out of pocket for THEIR [***]-up.
I DETEST their referring to us all as "customers". That term implies choice - whether or not to buy, and if so, from which supplier. If you get bad service at Tescos, there's always ASDA.
Is the alternative to "shopping" at HMRC, not shopping at all?
Yes, I agree. There is a century old saying that "The customer is always right" so if we are customers then they (HMRC) by inference are always wrong. I have not witnessed HMRC having done anything right in the last 20 years.
Good article and I think we all agree HMRC are simply not good enough - like most of the civil service now - nothing works.
And who's to blame - government of course - seem incapable of reforming any department of state.
My view is our politicians are just not up to the job. I don't think it is about money or staff shortages
Personally I would like it to be made compulsory for all letters from HMRC to be signed by an individual who takes responsibility for its contents
The closing of local tax offices has not worked. I may not have always agreed with a decision from a local inspector but I respected their opinion and they were prepared to discuss a point as professionals and as equals
The computer says no approach is not an improvement
this Government are investing in HMRC so that it will collect £9 billion a year more from its compliance activities by 2014-15.
That's when it started and what better way than to increase penalties. I remember being told by our district inspector that I could not charge a 20% penalty for a deliberate omissions by an accountant on his own return and that 10% was sufficient.
Here, here!! Several years ago I applied for AML registration (thinking that it was the responsible thing to do), but HMRC destroyed my cheque, saying it was not necessary. Unfortunately, I took them, at their word, but, despite submitting VAT Returns and Tax Returns for 6 clients, it took them 4 years to decide I should be registered. Apparently I should have been checking their website to see if the rules had changed (as if I had nothing else to do!) I received a penalty of £500 plus the missed years. I took this to tribunal but still had to pay, although the penalty was reduced to £100. It would not have been cost-effective to appeal, but I still think the fault was theirs.
Obvious answer sack Jim Harra and replace him with Ray McCann.
At least it sounds as if he has that rarest of rare commodities these days - common sense.
HMRC have given up on getting tax right judging by the rubbish we receive from them so they think they can shrink the tax gap with penalties. Sometimes they can but if you fight hard enough they will give in.
MTD is purely an exercise to levy more and more penalties and we know whom it will hit hardest - the little people who struggle anyway and the elderly living off the rents from their strived for property portolio - usually a couple of terraced houses - which HMG are making more and more difficult to deal with and now HMRC are putting the boot in as well.
Easy to see why - hit the people who don't have the capacity to complain - it's easier than dealing with accountants who often understand it better than HMRC.
Send all your complaints to the Chancellor of the Exchequer then he will be swamped and might place a boot in Jim's backside to get things sorted. We need a bit of pressure from where it counts. No use thinking the professional bodies will do much as they are too interested in sounding important to get their hands dirty.
I'm curious as to the aim of this article, and many like it. Is it just reinforcing the echo-chamber of a supportive audience, or is there an expectation that it will result in some change in behaviour at HMRC? If the latter, what is the process by which HMRC's behaviour is changed by the industry?
I ask because even with all the kickings they've had in the last decade from FTT, the industry, LITRG, Parliament, others, they seem to be getting much worse, and the process of becoming worse seems to be accelerating.
Does a mechanism for change even exist?
Only if you can get a national daily (preferably a tabloid) to pick up the cudgels on our behalf and splash the injustice of penalising the taxpayer for EVERY breach of the deadlines, but escaping ANY sanctions on HMRC.
Only when HMRC has to start paying up for penalties (yes, I know the money will just go around in a circle) will they change their behaviour. Any penalties levied ON HMRC during a given period could be ascertained via a FOI request.
Apply for compensation and perhaps there should be a scale fee structure such as
£40.00 for letter/e-mail received
£60.00 for letter/e/mail out
£25.00 per telephone call for first 5 minutes and £5 per minute thereafter including being on hold etc.
Since I wrote this article we have had this decision, which is further evidence of the points I made, HMRC needs better systems that identify bad cases. https://www.bailii.org/uk/cases/UKFTT/TC/2022/TC08459.pdf