HMRC needs top-to-bottom improvement

HMRC HAS MADE HEADLINES for the wrong reasons this week, with a double dose of negative publicity. It was revealed that 12,000 people not had been taken off the register for self assessment tax returns – despite contacting the tax office to arrange for their affairs to be dealt with through PAYE – and sent incorrect penalty warning letters. Adding to the Revenue’s catalogue of high profile blunders in recent years, this will not have done a lot to bolster public confidence.

In addition to this, figures released by shadow Treasury minister Owen Smith on 1 May reflect the systemic demise of the service taxpayers can expect from HMRC, with one in four people who call the ‘helpline’ hanging up in frustration. The decline in the quality of HMRC’s interaction with the taxpayer is clearly shown by the near-trebling of average waiting times for taxpayers waiting to speak to a Revenue adviser in the last two years. In 2010 it took an average of 1 minute 31 seconds for someone to get through to an HMRC representative, whereas the latest figures for 2012 reveal that most people wait a mind-numbing 4 minutes to speak to the Revenue today.

This is not the only indication that HMRC is in trouble and there will be toil ahead to address its deep-seated problems. If evidence were needed that fair is often indeed foul, the last six months have seen the department’s attempts to present a positive face to the public undercut by the fact that those at the top are leaping overboard like rats from a sinking ship.

In the aftermath of the sad news of the death of former HMRC CEO Dame Lesley Strathie, one would have hoped that the appointment of her successor Lin Homer in January would have signalled a positive move forwards. However, the confirmation of tax secretary Dave Harnett’s imminent retirement followed by this week’s news of chief executive Mike Clasper’s resignation reveals that to the contrary, a foul wind continues to prevail at the Revenue.

Perhaps Clasper has realised the truth that ‘vaulting ambition’ often does ‘o’erleap itself’ and that his previous experience as chief executive of BAA was no preparation for the complexity of the task of chairing HMRC.

In my opinion the widespread problems which currently plague HMRC are the result of a combination of weak leadership – from an executive committee without adequate expertise – and political interference from a Government which not only continually shifts the goalposts but also makes unreasonable demands, expecting performance to improve while costs are cut.

The catalyst for Mike Clasper standing down from HMRC may well have been the ‘poisoned chalice’ of the 2012-13 remit letter, in which George Osborne outlines the government’s expectations for the Revenue in the year ahead. While reports suggest that Clasper is leaving over the Revenue’s controversial relationship with big business – and this may be partly true – anyone who has seen the contents of the remit letter will understand Clasper’s desire to abdicate as quickly as possible.

Not only does the remit outline a series of expectations which would be ambitious in strong economic times with HMRC functioning at maximum efficiency, it is also littered with inherent contradictions. Topline targets include increasing compliance revenue by £7bn, closing the tax gap by a staggering £17bn and creating ‘efficiency savings’ – cutting costs – by 25%. The letter demands that HMRC increase efficiency while asking it to haemorrhage frontline staff at an alarming rate to meet ‘headcount reduction targets in customer contact’.

This will clearly not help the Revenue resolve the current issues with its helpline service and meet its objective of handling 90% of ‘call attempts’. If the contradiction in that brief were not obvious enough, there are further flaws in the instruction that the Revenue ‘invest in the skills and expertise to tackle complex tax affairs’ while introducing ‘local, market-facing pay’. Does the Chancellor truly believe the way to invest in talented people is to announce that vast swathes of its most skilled employees will be paid less money?

HMRC may not have the most impressive track record, but positive change moving forward will only come about when the executive committee are given a brief that is not only realistic but achievable. I also cannot be alone in seeing the irony in the Chancellor’s instruction to HMRC to invest in ‘skills and expertise’ lower down the ladder when the government continues to install executives at the top who have little or no relevant experience.

To return to Macbeth, ‘what’s done is done’ as far as the Revenue’s past is concerned, but to lead strongly into the future a replacement for Clasper needs to be found who has both the deep knowledge of tax and the clarity of vision to ‘screw their courage to the sticking-place’ and rise to the complex challenge of steering HMRC through these challenging times.

Mike Fleming, CTA, TEP, is a partner at Straughans Chartered Accountants and a former Inland Revenue tax inspector

Image credit: Shutterstock

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