Wendy Bradley has sifted through over 400 pages of HMRC’s reports and accounts to find out whether it is meeting its objectives and what it aims to do in the future.
To understand what HMRC has been up to in the year to 31 March 2017, a good place to start is the Single Departmental Plan for 2015 to 2020 as it provides the best short summary.
This states the HMRC objectives as:
- maximise revenues due and bear down on avoidance and evasion
- transform tax and payments for our customers
- design and deliver a professional, efficient and engaged organisation
This objective makes me feel my age: the organisation I used to work for once strove to collect the right amount of tax, not the maximum amount of tax and I, therefore, take much of the rest of their statements with a large pinch of salt.
HMRC claims £28.9bn of compliance yield in a year, and its calculations of this figure are supported by the NAO report on HMRC’s annual accounts for 2016/17. But there is a difference between actual money brought in by compliance action, and the calculation of the supposed "deterrent" and "revenue protection" effects of these actions.
I suggest HMRC should apply the same deterrent and revenue protection calculations to the figures of tax remitted because it wasn't considered "value for money" to collect it. For example, £28m was written off for small VAT and SA penalties more than two years old, and £58m of unpaid PAYE was written off.
Writing off penalties
The report says: "There was a bulk remission for Self Assessment (SA) penalties of £23m relating to 25,431 cases, where it had been identified that customers had not filed returns for at least three consecutive years. These customers were therefore removed from the SA regime and are no longer liable for SA."
Does this mean: If you don't fill in your tax return for three years and they won't bother you again?
There is both a compliance and a customer service point here. Instead of thinking of small scale liabilities as "not cost effective to pursue on a value for money basis", surely the penalties ought to be thought of as, first of all, an equity issue. No-one should get away with not paying their taxes because they only get away with a few quid.
Secondly the customer service issue – many small and low value cases may be due to departmental error or poor communication and understanding, not to delinquency on behalf of the taxpayer.
Transform tax and payments for our customers
I would feel a lot better about this objective if the words "for the better" were added at the end. The NAO picks up on this, commenting that it would like to see "better communication of what HMRC will look like after transformation for customers and staff" (see page R28). However, we can glean some clues from HMRC’s annual report.
HMRC will be largely digital: it will still receive funding for MTD even with the deferral and dilution of much of the project. The department's IT will be brought in-house (or at least into a wholly owned company) as current contracts end. HMRC now operates the government gateway and is migrating its tax credits work to DWP as tax credits are replaced by Universal Credit.
There is a plan to consolidate the HMRC estate into a small number of locations, closing down the local office network entirely. This does not seem to have been examined as an objective but simply accepted as a process.
There is a disconnect between the significant improvement in customer service according to HMRC's statistics, and the actual experience of customers. The NAO observes wryly that perhaps HMRC ought to strive to develop a set of performance measures which "better reflect customer experience".
An example is the large number of telephone calls which are disconnected before the caller speaks to a human. HMRC counts these calls as successful transactions because the caller has been helped/guided by the recorded messages they hear. Anyone who has ever called HMRC might have a different view.
An engaged organisation
The third objective to “design and deliver a professional, efficient and engaged organisation” worries me. The staff recruitment statistics are interesting: 192 graduates recruited onto the tax specialist programme but also "more than 1,200 apprentices" (see page 40). A clearer picture of who tax agents and taxpayers will be dealing with if they need to contact the HMRC in the future would be helpful.
HMRC includes responsibility for customs and excise charges: what will Brexit mean for the people who have financial oversight of our borders?
There is a new border planning group, with a new director general, Karen Wheeler. The report notes that HMRC will be working with HM Treasury to bring forward legislation "to establish a new framework for the UK customs service and other areas as required," but "our future projected budget does not reflect the additional costs that may be incurred as a consequence of Brexit" (see page 42).
Wendy Bradley is a retired tax inspector, a PhD student at Sheffield University (researching the relationship between tax simplification and better regulation) and a freelance journalist.