Administration and effectiveness of HMRC – written evidence

Written evidence submitted by Keith Aiden

HMRC’s performance as an organisation and whether it is delivering its main aims;

1. I do not believe that HMRC has improved the extent to which individuals and businesses pay the right amount of tax.

2. This is delivered by highly qualified accountants, (Many not all I admit) have the necessary knowledge and experience to make sure that the right amount of income is declared and reliefs applied. Without which unrepresented taxpayers and taxpayers represented by lion tamers either pay to little tax or do not claim the reliefs they are entitled to. HMRC has repeatedly refused to recognise the important role professional accountants play in the smooth operating of the tax system and does not even have an idea of which accountants are good or bad.

3. HMRC needs to support good accountants by an increased awareness of when erroneous information is filed. Much of this is apparent from the accounts which HMRC seem determined to remove the requirement for. HMRC also needs to improve its enquiry success often pursuing cases where no extra tax is found and missing the blindingly obvious cases that would result in an easy recovery.

4. Communicating with HMRC is a tortuous affair, you cannot get through on the phones and when you do you cannot speak to anyone who knows about tax, instead many staff (not all) are deliberately awkward and the helpful ones can only give you another telephone number to ring. The post is not much better, as I write, HMRC have not opened Augusts post and very often they lose important correspondence or only manage to reply to one point in the letter ignoring the rest. Very often we find the only way to elicit a response is to submit several complaint letters. There are serious problems with HMRC’s post room!!

What the implications are of HMRC’s spending review

5. We welcome the additional funds available for combating tax evasion, although if these funds are directed towards paye earners paying 50% tax then it will be a wasted exercise as those on PAYE have little scope for altering their tax liability, and are more likely to submit false expense claims which is not HMRC’s issue. If spent wisely it would not be unreasonable to expect a tenfold increase in recovered lost revenue. Much would depend on HMRC’s ability to spot tax defaulters for which it appears to have no reliable mechanism. Better use needs to be made of money laundering reports and improved communication as by the time field officers get the information it is either to late or so filtered as to be of no real use.

6. HMRC cuts not a good idea – this is a bit akin to getting rid of your Sales and Production staff as a strategy for growth. There is plenty of unpaid tax out there so HMRC should be increasing its overall budget. Cutting back merely encourages more evasion as there is less chance of being caught.

Whether HMRC is able to deliver the Governments aim on tax compliance.

7. Much depends on its ability to clamp down on evasion which is currently rife. Compliance as already stated is delivered by good accountants, not HMRC. It would be cost effective for HMRC to support good accountants by chasing the bad if it knew which were which.

PAYE Reform

8. Why? This is the least of HMRCs concerns most PAYE is operated correctly when processed by competent agents the collection may be a concern, but HMRC already have effective ways of collecting that they do not use. The main weakness in the system would seem to be HMRC again, continually getting notices of coding incorrect and failing to enforce against defaulters.

9. OF large concern however are umbrella companies where large amounts of tax are missing through excessive expense claim allowances. The reason these are not clamped down on are that they are predominately used by the Banks and Government Departments.

What HMRC’s Priorities should be for the future?

10. The answer is:

11. Less rapid and poorly thought through change. – the system is not keeping up with the pace of change causing major non compliance from tax payers and the denial of problems from HMRC e.g. the construction industry scheme – which has been a complete failure, one could also quote IR35 as an example.

12. More enforcement of existing rules using existing enforcement powers.

13. Expecting compliance with large penalties but little enforcement clearly does not work, the emphasis should be on those that deliberately do not pay, not the cross selling of penalties to your existing good customers.

14. Return Tax compliance to local offices, Local people Local knowledge.

November 2010