Hartnet remains defiant

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HMRC permanent secretary for tax Dave Hartnett has rejected claims that HMRC is too cosy with big business and has said that people who pay cash in hand to tradesmen are “diddling” the economy.

Hartnett, who is to retire in June, had a bruising 2011. He had to explain the PAYE coding fiasco, which had MPs and newspapers frothing at the mouth about the number of taxpayers who were facing repayments after a two-year backlog built up, and faced growing criticism of HMRC’s controversial tax settlements with Vodafone and Goldman Sachs.

Writing in the Tax Journal in response to criticism by CIOT president Anthony Thomas that HMRC is “too collaborative” when collecting taxes from larger businesses and unsympathetic to smaller businesses and individual taxpayers, Hartnett said HMRC is careful to treat its customers even-handedly.

“At the heart of HMRC’s compliance work lines the goal of voluntary compliance – where taxpayers freely meet their obligations, cheaply and easily, and without the need for intervention from us,” Hartnett wrote in January. “In strategic terms, this means that we will support those who are honest and open with us as well as those who need help, while relentlessly pursuing the cheats – irrespective of their size.”

Settling tax disputes outside court is a pragmatic use of resources, based on clear principles, Hartnett added.

In January, Hartnett warned that people who pay cash in hand to tradesmen are “diddling” the economy and diverting money from hospitals and schools.

“Tax provides the funding to run the country: hospitals, schools and everything else,” Hartnett told the Telegraph. “Every time someone pays cash in order not to pay VAT, the nation gets diddled.” 

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About Nick Huber

Nick Huber profile image

I’m a specialist business journalist and have a particular interest in tax and technology. 


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13th Feb 2012 11:49

Bit of info for you Mr Hartnett.

The person who pays cash is NOT diddling anyone. To start with the tradesman might insist on cash for a number of reasons. Let me make things even clearer Mr Hartnett. If a tradesman does not declare a proportion of their income, for whatever reason, that is not "joe publics" fault. So stop trying to divert your incompetance on to someone else.

There is enough tax taken in this country to run everything. It's what it's spent on is the problem.

The EU costs a fortune to run. Get rid of HMRC and let Accountants do the job.

I like the idea of getting HMRC's relationship right with Accountants. Have you not read what Mr. Redford has said?

Ther's an old saying. Take the plank out of your own eye before trying to take splinters out of others eyes.

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13th Feb 2012 11:59

Diddling the economy

One could argue that senior civil servants submitting excessive expense claims are "diddling the economy".  Are they not diverting taxes contributed by hard working tradesmen (and women) that would otherwise have been used to fund hospitals, schools etc?

Another old saying "people in glass houses should not throw stones"


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13th Feb 2012 12:02

In support of Dave

Dave Hartnett may not have had a good press last year and may have brought some of that on himself. BUT the reported comments above are correct and I for one support them.

And I include in that the implication that paying cash with the known and delibrate intention to avoid VAT contributes to tax evasion.  I agree with @johnjenkins that we cannot assume that everyone who asks to be paid in cash is on the fiddle. But where a tradesman quotes you one price including VAT and a lower figure for cash, the implication is quite clear.



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13th Feb 2012 12:26

Come on Mark

Conservatory £24K or £20K . How many people would go for £20k. How many builders would bump the price up, then take the VAT off to get the job ( bit of Psyco) but still declare the "right" amount. (yes I know some builders might charge vat, take cash and not declare anything).

It still comes down to the tradesman and not "joe public". The public will always try and get a good deal for them so you cannot put the responsibility of the tradesman onto the public which Mr Hartnett has tried to do. Unforunately this is all part of HMRC's strategy.

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13th Feb 2012 14:31

He is a disgrace

Did anyone see his performance before the PAC before Christmas?

He was arrogant and showed nothing but disdain for the elected representatives of the people.It was shemeful.

Hartnett and his kind are the ones diddling our economy.

No doubt his mates at Vodafone and Goldman Sachs will see him alright.




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13th Feb 2012 18:06

Hartnett at Home

I hope that he and his wife do all their own gardening and cleaning, or operate a PAYE scheme for any paid help that they have.

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14th Feb 2012 10:22

be fair

the man makes a valid point !

Yes there is waste and probably fraudulent expense claims and the vastly overpaid useless are having a ball in their government jobs. (NHS frontline workers excepted)


It is our honest clients that pay the price in lost business to the "cash in hand merchants" as they cannot hope to compete.....and lets face it there is a rising tide !

I suspect Dave has used the term as an expression (as we would)...understanding that receiving cash is not wrong ..only the not declaring it.

I don't like their message that we could waste more money on schools and hospitals and speed cameras if everyone paid more tax......if we want better everything we all have to work for it and that means lower taxes = a growing economy = more income = more tax take.

But we also need more tax enforcement ! Virtually none at the moment...apart from a few unused words.

Unfortunately the poor old work horse (small business) is on its knees having been flogged to death by the controllers and the professional layabouts.


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14th Feb 2012 11:28


Black Knight has hit the nail on the head, more tax enforcement will yield more tax collected.HMRC tend to investigate small businesses that comply and complete tax returns trying to force them to pay more,rather than going for those who live entirely in the black economy and dont comply with anything at all. We all know people who do this and appear to get away with it for years and years. Apart from not paying tax NI etc, many claim benefits as well, they destroy local compliant businesses by undercutting them on price, yet consistently stay under the radar. Government should put more rescources into smashing the black economy by creating more HMRC investigators who, if properly motivated would pay for themselves and get the signal out that these criminals wont get away with it, Courts should also give the maximum sentences under money laundering and asset recovery legislation.

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14th Feb 2012 15:03

You don't need MORE

tax enforcement just levelled in a different direction. The problem with those living outside the real economy is you can't smash them. Those that are in big business and pay peanuts in tax are also out of bounds to those other than DH. So you're left with easy targets for a few bob here and there. HMRC get enough tax to run this country efficiently. It's just spent on the wrong things. You don't need management in the NHS just highly trained doctors and nurses. You don't actually need HMRC, we do all the work anyway.You don't need a Eurpean government or European court.etc.etc.

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14th Feb 2012 16:43


"People who pay cash in hand to tradesmen are "diddling" the economy".

"Every time someone pays cash in order not to pay VAT , the nation gets diddled.

If this is an accurate transcript, the man is a disgrace and the sooner we're rid of him the better. This is the man that conveniently hides behind the Data Protection Act when it suits him. This Act should be repealed to exclude certain Government functions such as the various committees and he should be called back to tell us how much we actually lost in the Vodaphone case.

If I use a tradesman who finishes a job late on Friday afternoon, I always offer cash because I know that a cheque won't be banked until Monday at the earliest and not available for drawing down until the following Friday. His need is invariably greater than mine and hence the offer.

This is not something DH would understand, "working" in his ivory tower and awaiting his gold-plated, inflation-proofed pension.




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14th Feb 2012 17:00


he understands it alright he just chooses to ignore it as the whole of HMRC do if it's not in their indoctrination.

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15th Feb 2012 10:10

Try and convice Mr Rednapp of this .....

Hartnett wrote in January. “In strategic terms, this means that we will support those who are honest and open with us as well as those who need help, while relentlessly pursuing the cheats – irrespective of their size.”

Settling tax disputes outside court is a pragmatic use of resources, based on clear principles, Hartnett added.

“If we reached a place where every case went to court to settle, tax administration would be severely hampered. This would result in the flow of corporate tax revenues slowing to a trickle, and customers undoubtedly seeing long delays before they had certainty. Reaching appropriate settlements makes sense for us all.” 

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15th Feb 2012 10:44

Poor old Harry my heart bleeds

Some criminal prosecutions are necessary (and you can't win them all)

Perhaps the guys at Vantis should have been found innocent as well ??

I think we need to drop the anything they say is wrong mentality !

I can see nothing wrong in the statement made or the approach.

Much gets lost in the merging of two completely different issues. That of avoidance and evasion.

Avoidance certainly needs tackling at large corporate level, including managed service company use (what was that all about lots of words but no action as usual). Quite a lot of these would be dealt with by applying substance over form. A few sackings at HMRC for under performance might assist that. They do have the tools, just don't have a will.

Evasion also needs tackling at the SME level and it would be good to see some tax evaders £75k ish level in court. That really would send a message !

Rather than picking on poor old Harry who looks so sweet and came from a poor family and had a bad education.

One or two easy prosecutions and POC confiscations reported in the local papers would in my opinion raise so much tax revenue from subsequent voluntary disclosures that even the government could not waste it fast enough.

You might even find we took our foot of the drowning legitimate small businesses and got our economy moving in the right direction.

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15th Feb 2012 11:41


"Every time someone pays cash in order not to pay VAT the nation gets diddled"

Please explain what is wrong with this statement, those who think "the man is a disgrace".

Dave Hartnett is an extremely talented and knowledgeable person who believes very strongly in what he does on behalf of the country. He defends his staff to the hilt, having come right up through the ranks of the Inland Revenue over his entire career. He has worked in local districts and he understands how tax works at all levels. He does cross swords with the accountancy / tax profession sometimes, and sometimes says things that gets peoples' backs up big time. We can all second guess decisions made, particularly when we only get part of the story (and that from the Daily Mail) and I am not saying he is right all of the time, but villification of a public servant like this is wrong. I have enormous respect for him - a dying breed - a senior person at HMRC who really knows the tax system and understands tax law.

Yes, the implication that everyone who pays in cash is fiddling (or faciltiating it) overstates the case, and is quite a different matter to the statement I quoted above. Dave often does over egg this, and has similarly wound up professionals in other ways by overstating a case compared to how we see it. But I guess we all speak as we find. A friend told me that police officers often have a very jaded view of humanity.  However, I tried a little experiment once. A trader asked me for payment in cash. We were chatting and he asked me what I did for a living. I actually said "tax lecturer" but he heard "tax inspector", and I didn't correct him. He went as white as a sheet and almost staggered backwards. He shot off like he had the hounds of hell at his back. Try it sometime and see what response you get!

Until people realise and accept that it is schools, hospitals and pensioners they are robbing with their "bit on the sly", and until tax evasion becomes as socially unacceptable as drink driving the honest people will continue to pay more than their share. In what way is it appropriate to use the services of a civilised society and gain the benefits without paying your share? Never mind that you disagree with Government policy - use your vote, don't fiddle your tax.

Sorry, Rant over! Was teaching in a school where we got into this and the attitudes were very interesting (and a bit shocking).

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to Retiring Accountant
16th Feb 2012 08:51

You don't get it Rebecca-

Its his cosying up to big business and allowing the likes of Vodafone and Goldman Sachs to get away with paying much less

than their fair share of tax that sticks in my craw. He is like the Police in that HMR & C are bullies who pick on easy targets who they scare and frighten

with their aggressive approach and tactics. These easy targets can't fight back At the same time he allows Vodafone, who can fight back and can afford to hire

clever accountants, to pay much less than their fair share.

I agree that everyone should pay their fair share but that includes Vodafone and Goldman Sachs. As someone once said "... from each according to their means"

You should be teaching that to your school children.

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15th Feb 2012 12:24

@ Rebecca

I will have a shot at an explanation.

Nobody pays cash in order to fiddle the vat they pay cash to get a cheaper deal and there is nothing wrong with that. It is not the responsibility of Joe public to decide what or not the trader declares, that is solely the traders responsibility.

It is disgusting that a man in his position tries to con the public into believing that they are not allowed to get a cheap deal by using hospitals - notice he didn't say support the Greeks or EU expenses.

Gordon Brown is an extremely talented man who believed very strongly in what he did on behalf of his country and look where he left us. There are many others I could name.

Unfortunately HMRC policies are now being formulated on the basis that everybody is on the fiddle. I suppose the best form of defence is attack.

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to free-rider
15th Feb 2012 13:04


johnjenkins wrote:


Nobody pays cash in order to fiddle the vat they pay cash to get a cheaper deal and there is nothing wrong with that. It is not the responsibility of Joe public to decide what or not the trader declares, that is solely the traders responsibility.

I respect your view John but disagree.

People do pay cash to avoid the Vat. A recent example of £56k in cash for an extension to avoid the vat has been repeated to me, the tax also has to be missing therefore.

A client remarked, while I was having our extension done, that "I bet you pay cash to avoid the VAT" I replied "not on your Nelly as they would hang me from the nearest lamppost for that one". The Client thought as a tax adviser I should know this method of not paying tax, I tried to explain but I suspect the point was too complicated.

My building clients often loose work to cash no vat work and are always moaning to me about it.

Would you say the same if you brought a hooky motor that you suspected might be stolen ?

In my opinion both parties to the crime are guilty, or at least the home owner has incited tax evasion, and is in receipt of the benefit of that crime and perhaps confiscation proceedings (POCA) could follow (would only take a couple of cases and the practice would stop). Probably sell a few copies of the daily mail as well.

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15th Feb 2012 12:30

My mates

Take great glee in introducing me in the pub as a taxman (rude term of endearment omitted)s

Kills the conversation quicker than "I'm an Accountant"

Don't you have to be careful unless you are seen to be impersonating an officer of HMRC ?

Well said Rebecca

Have the next generation of tax evaders been trained then or is this now inappropriate behaviour

? (as my daughter keeps repeating to me on other issues than tax). I must try a tax ethics question.

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15th Feb 2012 12:37

Well said Rebecca
I agree

Too many people believe every word reported in the press and treat quotes as verbatim when the truth is often very different. Much easier to judge a man when you've seen the whites of his eyes - as you and I have done with Dave on many occasions over the years.

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15th Feb 2012 14:32

@The Black Knight

Whilst I fully understand where you're coming from. You are wrong, because ultimately it doesn't matter what price someone pays for an extension if the trader doesn't declare the income that is his sole responsibility and if it's not declared it is called tax evasion, which is a criminal offence. Do you suspect a motor is hookey just because it's cheap? I'm sure there are many people that have unknowingly bought stolen property. 

@Mark. Are you saying that DH didn't say that paying cash to traders was fiddling the economy?

HMRC are the new trainers of tax evaders. The more they push the more evaders there are and they're getting smarter. It is my view that if HMRC stopped all this compliant crap and chilled a bit we would see the black economy shrink.

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15th Feb 2012 15:47

But it does matter

The honest trader is under massive amounts of pressure to meet that price which can't be met.

If the demand was removed then perhaps the supply would not be needed.

I think everyone knows what is meant by a cash deal. (In lay mans terms)

and the poor trader still has to put food on the table for his family regardless of the rules.

I do tell my clients to pretend its a "cash Job" but still record it.

Even national sales campaigns have been run on No vat to pay (which was misleading) but I guess that helps your argument as much as it does mine.

In building terms this is an excellent way of laundering drugs money through a PPR Value increase, the builders are supposed to be high value cash dealer registered (but I bet few are).

The question of where all that cash came from is another matter, found it in ones trouser turn ups no doubt.

Builders really need a confidential hotline with a community action cash reward for use when they have come under pressure to break the law. The customer will find the supplier that gives the right answer much in the same way as tax advice.

Law enforcement makes massive tax free payments to criminal informants. Why not Tax evasion as well?

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15th Feb 2012 16:03

How can any trader

come under pressure to break the law? Sorry don't buy it. Doddy didn't do too bad with the "don't trust banks" routine. Mind you he wasn't far wrong was he?

It is the financial institutions (how can you value a property at £200k the 3 months later £175K for mortgage purposes - ludicrous) and HMRC that are putting all the pressure on with no safety valve. Watch out when the events of Greece move further north.

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16th Feb 2012 10:06

Oi Mr Harnett

Why have one of my clients got a partnership and personal £100penalty for not filing 2011 tax returns on time. Oh wait a minute the HMRC receipt states process date 16.09 on 31/01/12. Let me think is that within the deadline.

Anybody else getting them or is it just me they don't like?

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16th Feb 2012 10:19

Happens !

Every year and always to the client that is going to shout at you.

Stick in an appeal, hopefully you can have a day out a tribunal.

That seems to be what tribunals are for ! LOL

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16th Feb 2012 10:23

In fact

Try and bill them for the hour and distress you suffer caused by their error.

You need to bill the client first and when they can show they paid you HMRC will refund the fee to the client.

You will need to make a formal complaint.

I don't see why it should not cut both ways !

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16th Feb 2012 11:19


It amazes me that anyone would want to defend someone who thinks that simply paying by cash is aiding and abetting tax evasion. Such a prejudice indicates an unreasonable mind, if not irrational. I cannot see how a government can employ a person with such ideas to perform important leadership functions while at the same time issuing cash to the populace. Such an inconsistency lacks credibility.  

There never was an argument that it is wrong to enter into a contact in which one of the terms, irrespective of payment type, consists of defrauding the public purse.


Mr Hartnett has operated during a time when the tax collecting department of this country has been run into the ground, to the extent that many of its own staff simply abandoned ship, and those staff remaining caused it to be listed as the worst performing department of the civil service. The “113th brigade”.


I don’t think the government care what is happening.


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16th Feb 2012 13:05

It amazes me that

People cannot understand what he meant.

I guess that some of the comments have more to do with the politics of envy, and trying to make a point when there wasn't one. (it's an accountant thing)

You could say he has had to deal with massive amounts of change brought on by people who thrive on change.

Is it any wonder we are not listened to, when all we can do is hurl personal insults and fail to come up with any reasoned arguement.  RIP the accountancy profession.

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16th Feb 2012 14:29

Sorry, The Black Knight,

I and many others have watched over the years as HMRC have dug themselves into the biggest hole imaginable. They came up with "working together" but only within the existing framework. When the existing framework is rotten, eventually it has to be replaced. We have offered solutions in varying degrees only to be saddled with the same old tripe.

We all know what he meant. Let's see what job he takes when he leaves.

DC wants to shakeup the NHS, about time he looked at HMRC, but then he might agree with their thinking that most people are on the fiddle.

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16th Feb 2012 15:07

They have indeed

And I too have witnessed 25+ years on the front line.

Does that make me a classic a vintage or a veteran ? I wonder.

HMRC keep getting it wrong because they will not listen, I know, but is not difficult to see where their managing agents attitude comes from. We need to show them the way, difficult I know with their mindset.

I would start with.

1. Less rapid poorly thought through change. We have chopped and changed our minds at a whim not giving any chance for anything to work or be properly implemented and have lost track of what worked in a fair way (e.g. indexation)

2. Stop trying to do agents jobs, we are the best at it and the best at delivering compliance.

3. Support agents by using the sword of Damocles rather than just waving it.

4. Large corporate abuse does need to be dealt with, as do Government departments that stimulate managed service companies etc The latest tax case may lead the way on that.

5. Do something about SME No income tax no vat merchants before it is too late, Enforce using existing rules. I recon I could spot at least £10K every hour if I had their tools and cannot see why this would not be cost effective.

I am sick to death of giving the correct advice when nothing is done to those that do not comply with the law or give more than dubious advice.

We could all pay a little less tax then and perhaps (dreamland) reduce waste and inefficiency in public services so that we actually got value for money. I mean how difficult can it be !!

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16th Feb 2012 15:20

Excuse time is finished

It is now time for action. I am really hoping that the agent strategy will change things. It's the nearest we are going to get to get it right first time. This is our and HMRC's only chance to really sort problems out. I'm so enthused I might apply for DH's old job.

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16th Feb 2012 16:01

We're ok

Just tried ethical question on daughter.

Cash no vat and no tax, is definitely dodgy.

Wait a minute

Should they get away with it ? It depends !

Does want to be a barrister though.

Is now back tracking ! LOL

yes or No ?

No !


CPS for you then girl !

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