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MPs condemn HMRC performance

4th Nov 2015
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The Public Accounts Committee (PAC) has published a scathing report on HMRC’s performance, accusing the tax authority of being unfit for purpose and “failing UK taxpayers”.

“The Committee of Public Accounts today highlights serious and ongoing concerns about evasion, avoidance and collection in the tax system,” reads the document’s introduction.

Meg Hillier MP, Chair of the PAC, said in a statement: “HMRC must do more to ensure all due tax is paid. The public purse is missing out and taxpayers expect and deserve better.

“We are deeply disappointed at the low number of prosecutions by HMRC for tax evasion. We believe it is important for HMRC to send a clear message to those who seek to evade tax that the penalties will be severe and public.”

Reacting to the PAC’s report, a HMRC spokesperson told AccountingWEB: “We are disappointed that the Public Accounts Committee has overlooked HMRC’s record results, which include collecting a record £517bn in tax revenues and further reducing the UK's ‘tax gap’ - the difference between what is due and what is collected - to ensure it remains one of the lowest in the world.”

John Christensen, executive director of the Tax Justice Network (TJN), was unsurprised by the PAC’s criticism. “HMRC’s resources have been severely depleted, not just by this government but by previous governments as well,” said Christensen. “Adding to this, there is a culture of kowtowing to corporations and financiers at the revenue. There’ve been a number of appointments from the private sector to HMRC that come saddled with numerous conflicts of interest.”

The PAC did, however, commend HMRC in increasing the amount of tax collected while also reducing its running costs over the last 5 years. But this compliment was only a brief detour from the report’s whirlwind of criticism.

“Too many avoidance schemes run rings around the taxman, operating legally but gaining advantages never intended by Parliament,” said Hillier. In its report the PAC said HMRC was stifling effective tax policy-making through a lack of transparency. “HMRC does not report on the scale of aggressive tax avoidance, which means Parliament cannot assess whether tax law is working as intended,” reads the report.

“HMRC should identify and report the value of all tax avoidance schemes. It should include an estimate of the value of those schemes it has challenged but which have been judged to be legal by the courts, both so that Parliament can see the scale of avoidance and ensure improvements are made to tax law.”

HMRC responded, “We routinely publish the number of tax avoidance schemes, which show a steady decline as a result of tough government action. We brought in more than £1bn from the first year of applying accelerated payments to avoidance cases and have closed many loopholes and secured tough new enforcement powers.”

The PAC, however, is clearly unconvinced by HMRC’s reporting standards. “HMRC still does not report on how much cash was received as a result of its compliance work or on the scale of aggressive tax avoidance which exploits loopholes in the law,” said the report’s summary. “HMRC also continues to avoid publishing information on the scale and nature of tax reliefs that would assist Parliamentary oversight of this area of the tax system.

“We see no case, other than to avoid accountability, for HM Treasury and HMRC to reject the previous Committee’s recommendations to improve [transparency]…”

The PAC is not alone in being frustrated by HMRC’s institutional opacity. Responding to HMRC’s contention that it is unable to offer those figures Jolyon Maugham QC, a barrister specialising in tax called the assertion “absolute twaddle”.

“I have absolutely no doubt that they could take a decent stab at it”, Maugham continued, “and I think it’s thoroughly disingenuous for HMRC to pretend that they can’t.”

Robert Maas, a tax consultant at CBW accountants, disagrees with the PAC and Maugham, however. “The PAC wants HMRC to work out what the tax paid would’ve been if we hadn’t granted individual reliefs, that’s an enormous job. They don’t have the figures; our tax system isn’t geared towards that”.

The report’s other big criticism will be familiar to AccountingWEB’s members: HMRC’s customer service. “It beggars belief that, having made disappointing progress on tax evasion and avoidance, the taxman also seems incapable of running a satisfactory service for people trying to pay their fair share,” said the report in one of its most scathing passages.

HMRC’s response to the PAC’s concerns was that its main focus was on “providing a consistent level of customer service throughout the year, rather than meeting annual targets”.

“We explained to the committee that we hadn’t provided a consistent level of customer service in the first half of the year, and we had recruited around 3,000 new staff to improve service levels. But these customer service issues did not affect our ability to collect tax,” said a HMRC spokesperson.

The PAC noted, however, the consistency of the service is not measured by HMRC’s current performance indicators. “HMRC should report its performance against measures which reflect all its aims, including providing a consistent level of service and ensuring that accurate and complete advice is provided first time.”

For Maugham, the issues raised by the PAC can be split in two. “The abysmal customer service is down to operating in a resource-constrained environment; HMRC has experienced very deep cuts in funding,” said Maugham. “But others – the lack of transparency, this attitude that reliefs don’t need to be properly scrutinised – are cultural and political.”

Maas, however, was underwhelmed by the report: “It could’ve been written by The Daily Mail,” he told AccountingWEB. “The PAC is right in that customer service is a huge worry, but the rest of the report is the PAC telling HMRC to reassign its critically stretched resources from providing customer service to produce statistics instead.”

“What’s needed now is a comprehensive review,” said the TJN’s Christensen. “HMRC needs to strengthen its capacity to tackle big companies and Britain’s elites. It needs to be made fit for purpose in the 21st century.”

Replies (13)

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By ireallyshouldknowthisbut
04th Nov 2015 11:12

.

Hmm, MP's make tax rules increasingly complex to administer.

Then they cut the funding to HMRC to run their services.

And wonder why HMRC are struggling.

Yes HMRC do a lot of stupid things, but the underlying reasons are complexity of legislation which they are not in control of, and lack of funds, which they are not in control of. 

MP's however are in control of both.

 

 

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By AndyC555
04th Nov 2015 11:28

HMRC prosecutions......

MPs are clearly outraged that there are not enough prosecutions!

#Sigh#

Anyone would think that successive statements by MPs in parliament going back as far as 1923 and as recently as 2002 had made clear that  "The Board [of HMRC] will accept a monetary settlement and will not pursue a criminal prosecution if the taxpayer...makes a full and complete confession of tax irregularities." and had implemented what is generally known as the 'Hansard procedure" and had then in 2005 replaced this with the Civil Investigation of Fraud code procedures which essentially said the same thing.

Oh, wait, that's the actual position.

HMRC's policy - put in place and supported by successive governments - is that full co-operation, tax and a civil penalty is better for the exchequer than a costly adversarial prosecution that may not be successful (Harry Rednapp?) and won't bring in any more tax and may not result in higher penalties than a civil settlement.

In other words, MPs are having a paddy about a system which they themselves put in place and have been endorsing for well over 90 years.

 

 

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By Oppco
04th Nov 2015 11:52

Avoidance

''Too many avoidance schemes run rings around the taxman, operating legally but gaining advantages never intended by Parliament,” said Hillier

 

Whose fault is that, then?

 

Does he expect HMRC to pursue taxpayers operating legally?

 

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By redboam
04th Nov 2015 11:54

Make it Simple.

Perhaps a flat tax with no exceptions one way or the other would enable more effective tax collection with a corresponding reduction in the cost to the public purse?

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By NYB
04th Nov 2015 12:21

PAC
The PAC make scathing reports about HMRC year on year yet nothing ever changes. Can't see the point of 'em. Except the amusement of seeing HMRC struggle and wriggle with their responses & the ensuing " spin".

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By The Black Knight
04th Nov 2015 13:43

PA

C

You have to watch it to believe how incredibly stupid these MP's are.

One claimed to be an accountant then had to have "how vat works" explained to him in simple terms by a partner of Ernst and Young and he still disagreed.

These results are forseable and caused by MP's meddling with something most of them do not have the capacity to ever understand.

Yes Evasion is out of control

Yes we probably are doing better than Greece on this.

Yes Punitive Penalties punish the compliant largely when they are dealing with the effects of a mis-managed economy

Yes HMRC is underfunded, christ i'd be making a massive profit.

Yes the PAC is scathing it's a culture thing they learned from Anne Robinson. Shame they are not objective and fit for purpose.

Yes avoidance has been an issue but they never got to grips with what avoidance was? Take them to the tribunal and then you have found out that many were very micky mouse and were really just fraudulent trading anyway.

Justice must be seen to be done and without sanctions law cannot exist.

 

deliberate defaulters and 100% penalties seem to have replaced criminal sanctions even if they don't collect the tax or penalties after they have been assessed. Theres a £4M one on there? How much do you have to steal before it's theft. I think we should all be made aware of the limits.  I'd like a new car, a new mistress, and cash to splash too. It's really not fair.

 

Wasting breath really but this is just "Bread and circuses" when morons are paraded for public amusement

 

 

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By vinylnobbynobbs
04th Nov 2015 14:36

Are we supposed to be suprised by this?

I think the PAC is the Daily Mail of politics.  Get a sound bite and it will get you in the news. Previous reports have highlighted HMRC's inadequacies.  Is this new to them?  Don't M.P.s read? 

We know HMRC is "woe-fully inadequate" and please don't refer to taxpayers as customer!

 

 

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By JimFerd
04th Nov 2015 14:16

I guess the PAC wouldn't be doing a very good job if their stock response was to say "Yep - HMRC are doing just fine - no need for improvement!"

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Time for change
By Time for change
04th Nov 2015 14:35

What really annoys me is

if HMRC were a school, care home, or hospital, it would be put in special measures.

My only surprise is that George Osborne hasn't asked the Chinese to take a look at it. They seem to be involved in everything else, where we run out of cash.

Put together; the hierarchy of HMRC and the House of Commons and, it's pure theatre.

 

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By johnjenkins
04th Nov 2015 15:00

The

blind leading the blind.

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By clive
04th Nov 2015 18:31

HMRC report

HMRC,by saying it s system cannot help in determining the quantum of aggressive tax avoidance,are just shrugging their shoulders and saying what can we do about it,even what do you expect us to do about it? Like most policing authorities in the UK,it's a matter of setting up some stumbling block or obstruction that then supposedly prevents or severely limits any action that they can take.HMRC should get back out into the field again and stop sitting behind computer screens waiting for information to fall into their lap.

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By AndyC555
05th Nov 2015 13:25

Easy to say, hard to do

clive wrote:

HMRC,by saying it s system cannot help in determining the quantum of aggressive tax avoidance,are just shrugging their shoulders and saying what can we do about it,even what do you expect us to do about it? Like most policing authorities in the UK,it's a matter of setting up some stumbling block or obstruction that then supposedly prevents or severely limits any action that they can take.HMRC should get back out into the field again and stop sitting behind computer screens waiting for information to fall into their lap.

 

Well, first define 'aggressive tax avoidance'.  And since tax avoidance is generally accepted as acting within the law, can you suggest a way HMRC could spot taxpayers acting within the law but in a way some people don't like?

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By AndrewV12
06th Nov 2015 11:41

Tax evasion

Extract above

 

“We are deeply disappointed at the low number of prosecutions by HMRC for tax evasion. We believe it is important for HMRC to send a clear message to those who seek to evade tax that the penalties will be severe and public.”

Typical Politicians on one hand,

yes the Uk is open for business,

Low touch regulation,

terrified of adverse publicity from big business

Terrified big business will cut their funding

 

On the other hand 

Read the article above

HMRc all a bit in the middle

 

 

 

 

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