HM Revenue & Customs 2010-11 Accounts: tax disputes - Public Accounts Committee Contents

4  Overall leadership of the Department

24. There is little evidence within the Department of personal responsibility being taken for serious errors. The Permanent Secretary for Tax initially told us that no disciplinary action had been taken against anybody for the mistake in the settlement that led to a loss in interest due to the Department.[66] In a later hearing, he eventually disclosed that a review had been undertaken by the head of the Department's Large Business Service. This resulted in the error being taken into account in the relevant officer's annual appraisal, and no bonus was paid to that individual that year.[67] However, it was not clear that the senior staff who designed, operated and oversaw the system in which the mistake was made were held accountable in the same way.[68] When asked if he had considered his own position, the Permanent Secretary for Tax said he had no plans to resign.[69]

25. The Permanent Secretary for Tax did assure us that the Department had learned from its mistakes and, in relation to the case where the error involving interest was made, he claimed: "we have made sure that a mistake like that cannot be made again".[70] Nevertheless, he was unable to give us an exact answer on the scale of mistakes made by the Department each year and did not explain how he expected managers to ensure their staff learn from mistakes when they are made.[71]

26. We are concerned about the perception that the Department has an unduly cosy relationship with large companies it is trying to settle tax disputes with. The Permanent Secretary for Tax has had a significant number of lunches and dinners with companies, tax lawyers and tax advisers - as many as 107 such engagements in two years.[72] The publication of details of hospitality received from companies is a welcome transparency measure, but would only be meaningful if supported by information about the extent to which the Permanent Secretary for Tax is also involved in negotiations with, or decisions affecting, those companies.[73]

27. The Permanent Secretary for Tax assured us that he does not have lunch or dinner with companies that he is negotiating with, but conceded that: "I find other ways of doing things…maybe a cup of coffee in my office".[74] The absence of full transparency about his relations with companies risks the perception that he has acted improperly or exercised poor judgement.[75]

28. The Department appears to be showing large companies greater leniency in the time it is allowing them to pay their tax liabilities. We heard that large companies have been given up to 10 years to pay their liabilities.[76] In contrast, other taxpayers such as small businesses and individuals on tax credits are not permitted a similar amount of time to pay what they owe.[77] This sort of inconsistency raises significant misgivings about whether the Department is treating different groups of taxpayers fairly and reasonably.[78]

66   Q 113 Back

67   Qq 701-705 Back

68   Qq 154-156 Back

69   Q 751 Back

70   Qq 111-112 Back

71   Qq 117-118 Back

72   Q 192 Back

73   Q 713 Back

74   Qq 190, 194-195 Back

75   Qq 71-72, 190, 193-194, 717 Back

76   Q 214 Back

77   Qq 723-725 Back

78   Qq 220, 223-226, 723-727 Back

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Prepared 20 December 2011