A potential “two-headed” leadership at HMRC could cause ructions at taxman, advisers fear.
Yesterday, the cabinet office announced that Jon Thompson is set to replace outgoing chief executive Lin Homer in April, with Edward Troup being promoted from tax assurance commissioner and second permanent secretary to executive chair at HMRC.
Chas Roy-Chowdhury, head of taxation at ACCA, expects Thompson to maintain a fruitful relationship between the taxman and accountancy institutes.
“It looks like HMRC has taken a two-headed approach to how it’s being run now, with Troup running the tax side of things and Thompson running the business side of things.
“I hope that there will be ongoing discussions between us and Thompson as to how HMRC will be run,” continued Chowdhury, who wasn’t surprised that someone from the public sector has been appointed to succeed Lin Homer, adding that he doesn’t know anyone from the private sector who would have taken the job.
Appointments could “create tensions” within HMRC
Jonathan Riley, head of tax at grant Thornton, told Accountancy Age that HMRC’s decision to split top-level duties between Thompson and Troup could produce conflicts between high executive staff further down the line.
John Thompson, new CEO of HMRC. pic.twitter.com/4xVXFp2pK7
— Andrew Brooks (@taxbod) February 24, 2016
“This split in role could create tensions – operations versus policy. Working together is going to be critical,” said Riley.
“The fact that the role is quite clearly split is interesting.Thompson’s brief seems to be operations, probably with a focus on the need to implement digital effectively and efficiently – this being the cornerstone of the government’s approach to tax and very dear to the financial secretary’s heart.
“If Troup is to focus on the technical aspects of that department it does give a degree of confidence, especially if he provides Jim Harra, someone who is widely respected, with a bigger brief. The risk is that Harra, not having got this positon may be moved to another department for his ‘first’ permanent secretary role to give him experience in that capacity.
Riley has also outlined two major tasks that Thompson should tackle immediately when he takes over from Lin Homer in April, starting with reinvigorating morale within the department.
“He should also focus on the morale of the department – although given headcount reductions in the armed forces his arrival may make some HMRC people nervous.
“Secondly, Grant Thornton has argued for greater tax simplification – if you reduce the forest of legislation it makes it harder for the aggressive avoiders to hide?
“Will these appointments hasten simplification? If I were Thompson I would look to the recently revitalised OTS to really come forward with some proactive thinking in this area – after all, a transparent and simplified tax regime is good for a vibrant economy,” continued Riley.
Stance on multinationals has to change
HMRC has taken heavy criticism in recent weeks over its handling of multinational corporations and their tax affairs, including the £130m settlement with Google over ten years’ worth of unpaid corporation tax.
The appointments were announced on the same day as the PAC published a report on HMRC’s deal with Google, demanding that the department should be leading the reform of international tax rules.
— Jake Wilde (@Jake_Wilde) February 24, 2016
Steve Lewis, leader of the Fair Tax Town campaign who pushed to become the next CEO of HMRC, has already written to Thompson following his promotion, pleading with him to reform the way the taxman taxes large international companies.
“You have a great window of opportunity to implement a more radical way of challenging this group of multinationals that as far as the public are concerned, are running rings around HMRC.
“I know the ‘tax man’ is not the guilty party but your predecessor, and I have to say, the current board have done little to change this perception or to win small business ‘hearts and minds’ with the settlements of late.
“As the board overseeing policy, direction and performance management, this is down to them, no one else. The change needs to start with them, it is a simple leadership issue.
“Thompson has to re-engage with SMEs”
Elaine Clarke, managing director of cheapaccounting.co.uk and a regular critic of HMRC under Lin Homer’s leadership, admits that she is not inspired by the CEO announcement, and believes that Thompson has three major challenges to deal with when he becomes chief executive.
“Firstly, Thompson has to re-engage with small businesses, as many of them are completely disillusioned with HMRC. Secondly he has to understand the gap in HMRC’s technical infrastructure – there are many things that need to be improved, including its Making Tax Digital initiative.
“He also has to gain a good understanding of the culture change within HMRC as they are closing down hundreds of tax offices and moving towards a more digital administration.”
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