Administration and effectiveness of HMRC – written evidence

Written evidence submitted by Andy Wells

I am a partner in AVN Venus Tax LLP specialising in tax dispute resolution. I was formerly a partner in the accounting firm BDO Stoy Hayward. I am a member of the Chartered Institute of Taxation (I sit on the Management of Taxes committee) I was formerly a member of one of the CBI's tax committees and I am a volunteer with the charity Tax Help for Older People (TOP). I deal with HMRC and small to medium sized accountanting firms who have to deal with HMRC on behalf of (generally) individuals and small to medium sized businesses on a daily basis. I have been engaged in tax work for well over 30 years, so I consider that I am probably one of the most qualified people there could be to express a view on the subject of this enquiry.

I have previously made public criticisms of the way that HMRC has changed under its present and previous management. I will not repeat what has been said here. A selection of published articles may be found following these links. The subject matter is all very relevant to this enquiry:

http://www.taxation.co.uk/taxation/articles/2007/09/06/5324/no-end-sight

http://www.taxation.co.uk/taxation/articles/2010/05/19/20427/difference-opinion (this one relates to how HMRC inappropriately and inaccurately estimate the "Tax Gap" that politicians may well be relying on. It's not as big as you think!)

http://www.taxation.co.uk/taxation/articles/2010/09/15/20981/no-no-no

http://www.taxation.co.uk/taxation/articles/2009/06/03/18893/vision-thing

I want to make it clear that whilst I am prepared to speak my mind when I perceive that something is wrong, I am in no way opposed to HMRC, or its front line officers who have a job to do in difficult circumstances. Nor do I personally support or indulge in tax avoidance or condone tax evasion.

In my opinion, HMRC's Management has lost sight of its true purpose (see the comments of the respected Low Income Tax Reform Group quoted in the fourth of the above articles) and taken unto itself a political role. I am afraid that successive Governments have allowed it to do this. In a democracy it is not appropriate for unelected officials (Civil Servants) to be dictating tax policy. Moreover, the current Permanent Under-Secretary for Tax is on the record for saying that it is HMRC's role to collect the maximum amount possible from taxpayers (see the article "The Dave Channel" written by the editor of Taxation magazine on 2nd April 2008 - see comments by Mr. Hartnett under "Strategy".

I am afraid to say that relations between HMRC and the tax professionals who try and assist people to understand the complicated and demanding system that HMRC presides over, are almost certainly at an all-time low. At a recent event I attended in Leeds, a room full of over 40 tax accountants was asked "who would trust HMRC to behave with integrity" in a certain situation and not a single hand went up. I found that very sad but I accept it reflects the reality of 2010.

There are certain basic things that HMRC does not do well. A prime example can be found whenever an alleged tax debt is passed to a Debt Management Unit for collection. There is apparently no communication between the collection and assessing arms of HMRC and supposedly no means to communicate. Well there should be! A taxpayer faced with  demand for disputed tax is offered no explanation by the collection machinery that is unwilling even to put the matter on hold in order to fire off an email to the appropriate department so that the taxpayer might have some sort of explanation. There was a time when the Collector would have telephoned the Inspector and this could easily have been sorted out. Not these days. Try it and see if you don't believe me. This is the complete opposite of taxpayer service and is something that, with the will, should be relatively easy to fix, but the modern HMRC says many fine things about "customer service yet allows such basic faults in its system to occur.

There is much much more I could add, relating horror stories about some of the cases that I see and deal with. However it seems to me that the key point is that things are likely to get worse as HMRC are required to shed further jobs. I see at first hand how officers currently struggle with large backlogs of work. Only recently I was advised by an officer (who was trying to be helpful) that my urgent correspondence could not be expected to be dealt with within two months and that if I wanted it seen sooner I should write in to complain to "bypass" the backlog. I don't perceive that this was an untypical situation and I am sure the IRSF will have plenty to say about resources (or lack of them) within the department. It manifests itself by making life difficult for the poor and vulnerable in society who cannot afford accountancy advice. Tax can be especially complicated for low-income pensioners which is where TOP comes in.

Enquiry centres were never any substitute for local tax offices as far as the poor and vulnerable in society are concerned. Unless you happen to live in a City, close to one they are remote and imposing and telephoning with anything but the simplest question has become a soul-destroying business. Try ringing HMRC with a query if you don't believe that.

The main suggestion I have for this committee is that the Board of HMRC does not tend to be populated by people with a genuine understanding of what goes on at the coal face. The present Chairperson was parachuted in from another Whitehall Department and had little or no previous experience of the UK's very complicated tax system (according to her c.v.). So, I'd like to suggest that the Board of HMRC should always contain one or more people from outside the Civil Service on the appointment of the responsible Minister on one-year rolling secondment, in order to address some of the evident problems over delivery of service. I am, of course, not referring to captains of industry or the great and the good who don't have to deal with HMRC themselves and would have no real idea of what goes on.

That person could have the brief to listen to practical suggestions for improvements and to see that reasonable ones are implemented. It would not be hard to set up a website where practical problems could be highlighted together with proposed solutions. Clearly fixing things is not a board-level task but ensuring there are appropriate chains of command to get things fixed can be. I feel the current Board may not have much focus on such matters and may be slightly carried away with its war on tax avoidance and trying to calculate the "tax gap" which in my submission is a largely pointless occupation.

This idea would not work unless the person or people seconded are from outside the department and are very familiar with what actually goes on at the service level. I think it could do a lot to repair relations between HMRC and the taxpaying citizens of this country. If you want volunteers then you have my details.

On one other note, HMRC has been waging a war on tax avoidance for some time. Mr. Hartnett said he would make it "not worthwhile" by 2009. He has made a decent job of achieving that, to be fair, but it still goes on and probably always will, as tax avoidance is driven by demand from people who resent the amounts of tax they have to pay. The surest way of defeating the tax avoidance industry is to reduce taxes and simplify the system but that is something that has eluded even Governments that had the will to do it (if there have been any). Anyway, If HMRC's estimates of the tax gap are any use at all they must demonstrate that the "gap" continues to widen depite HMRC's efforts. So my point here is why not seek the advice of people outside the Department who may have some different ideas that might work? Why should Civil Servants be the best people to understand what drives the tax avoidance industry? Investing relatively small sums in outside specialists might well prove fruitful for the Exchequer. I've even got some ideas myself that aren't necessarily controversial or radical but nobody would think of asking me.

November 2010