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Financial problems

Public Accounts Committee says HMRC is failing


The latest Public Accounts Committee report on HMRC performance suggests that ignoring your taxes has never been easier.

31st Mar 2022
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One of the fundamental tenets underpinning any tax system is the principle that “we are all in it together”. If that fails, then you risk anarchy or, at least, high levels of non-compliance.

The best way of understanding this is to think of a simple example. If you act for a self-employed tradesperson and explained that they are obliged to charge VAT on all transactions, even the backhanders in cash, the instant response is likely to be either that Jo round the corner isn’t charging VAT or no self-respecting plumber/builder would dream of it.

In our language, we might express it differently perhaps concluding that operating within the law makes their business uncompetitive when benchmarked against others in the industry.

Inevitably, the accountant’s response has to be that clients must comply with the law, regardless of the behaviour of others. However, this can be the quickest way to find an ex-client.

I fear that such arguments about abiding by the law are not going to be helped by the behaviour of the great and the good in recent months.

When government ministers not only proudly stand up in Parliament (when they are not proroguing it) and declare that they are happy to break laws, if those laws threaten to make Brexit even more of a disaster than would otherwise be the case, I despair.

If the Prime Minister himself regularly plays fast and loose with the law, that just makes things worse.

Anarchy in the UK

However, ethical standards are important to us and it is vital that they are upheld and protected otherwise we really will have the equivalent of anarchy.

The primary way in which our tax system is supposed to be protected is the work of HMRC officers to apply the law and recover taxes from those who have chosen not to pay them.

It therefore comes as depressing news to read the House of Commons Public Accounts Committee report on HMRC’s management of tax debt.

In this surprisingly snappy document, Dame Meg Hillier and her perennially frustrated colleagues lay into HMRC following its recent annual report in which the department showed a degree of honesty that I suspect may ultimately be to its detriment.

For the avoidance of doubt, this is not the Treasury Select Committee session at which Lord Agnew, having resigned from the Government in disgust, declared that the management of Covid loan schemes was a “Dad’s Army operation” one of the most significant consequences of which would be “happy days for crooks”.

The Covid loans disaster was a topic that led to anger on the part of the Public Accounts Committee.

Unfortunately, the problem spreads much more widely since, according to the committee, HMRC has not “articulated a clear plan or set out a detailed timescale to give us confidence it can manage the challenge it now faces”.

Substandard performance

I know that will come as no surprise to readers, who constantly and very justifiably moan and groan about substandard performance by every part of HMRC.

In this case, it is not so much substandard performance as complete lack of performance that is the issue. An astounding 6.2m taxpayers were in debt as of last September, which probably represents around 20% of the whole.

Even worse, the debt quadrupled to a figure of £67bn in the six months to August 2020, although it has now settled to a mere £39bn.

Given those chastening statistics, I doubt that anyone will be surprised to discover that HMRC’s debt management workforce has diminished from 4,857 in March 2014 to 3,975 six years later. Pandemic absences won’t have helped the few that are left to do their jobs either, nor boosted morale, which was already at what was imagined to be rock bottom a decade ago and has sunk considerably further since.

Just imagine what UK plc could do with that money. We could fund a war in Ukraine, feed the starving and probably even knock a couple of percentage points off income tax into the bargain.

Instead, as the committee identifies, HMRC is understaffed, under-resourced and underpowered to the point where literally millions of tax avoiders and evaders have been laughing all the way to the bank.

Having blotted his copy book so badly in last week’s mini-budget, Rishi Sunak needs a good news story in a hurry. Recovering tens of billions of tax debt could just be the answer, but I’ll bet he doesn’t even try to go there.

Replies (3)

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By Tornado
01st Apr 2022 13:40

The main problem with taxation is that it is too complex.

Debt would be easier to control if rules were simpler and easier to understand but projects like MTD just add to the complexity significantly and whilst my experience is that people want to pay the right taxes and do the right thing, there are inevitably limits where they give up trying to comply and just do their own thing.

Who can blame them.

Thanks (1)
By Hugo Fair
01st Apr 2022 18:34

I don't know who writes the Title of these articles, but would the author be happy to stand in front of Meg Hillier and repeat that the "Public Accounts Committee says HMRC is failing"?

That may well be her personal opinion (and it is one to which I, like many others, subscribe) ... but it diminishes these articles if words are made up and put into the mouths of public figures.

Thanks (2)
By Catherine Newman
02nd Apr 2022 18:55

A new client came yesterday and told me that all of his fellow Uber drivers have no accountants and are not registered with HMRC.

I explained that as he was previously employed, he had practically used up all of his allowances.

I also explained that all HMRC had to do was ask who Uber pay.

May be HMRC would like to contact Uber as to who the pay and have a field day.

Thanks (0)