Hartnett interview: Morale is low at HMRC

It is a gloriously sunny day and Dave Hartnett appears relaxed and slightly
demob happy as he walks into a meeting room at the cavernous HM Revenue &
Customs headquarters in Westminster, London.

Hartnett, acting chairman of HMRC, only has a couple of days left in his
current role before handing over to
, former executive at private equity firm Terra Firma.

The shaggy haired Hartnett – who will become acting chief executive of HMRC
until a permanent candidate is found – is in an upbeat mood and is keen to talk
about the department’s ongoing offshore tax investigation.

The investigation is targeting British citizens who are hiding money in
offshore centres such as Lichtenstein to avoid paying taxes in the UK.

Last year HMRC raised £400m after British taxpayers with money in offshore
accounts run by high street banks were granted leniency in return for voluntary

HMRC is now poised to turn up the heat on wealthy tax dodgers and their
accountants who have refused to co-operate.

Hartnett said it is determined to crack down on a small minority of repeat
offenders in the accountancy profession who advice clients on stashing money
offshore without declaring it to the tax authorities.

‘I think the overwhelming majority of accountants, public tax advisers and
lawyers are powerful advocates of people making their peace with the tax
administration and coming forward [with information about their tax affairs],’
says Hartnett. ‘Sadly there are a very small proportion who have helped their
clients hide money offshore.’

Tracking down advisers involved in dodgy offshore tax services is no easy
matter, of course. ‘Unfortunately accountants generally don’t put signs up
outside their offices saying come here for your Lichtenstein accounts,’ says
Hartnett dryly.

But HMRC does have a new weapon in its fight against offshore tax dodgers –
technology. It is using powerful software to search financial records and trawl
the web to build evidence against accountants and establish a pattern of

This – along with closer co-operation between governments and tax agencies –
could pave the way for prosecutions of accountants if they are shown to be
complicit in a client’s illegal offshore affairs, which is classed as fraud.

‘We have got more successful at rooting out tax advisers who are maybe not as
honest as they should be,’ Hartnett says. ‘Because we are identifying more
people with offshore accounts we are better informed today than we have ever
been before about how they have found their way into the offshore environment.’

He says HMRC hopes to start its first offshore prosecution of an investor
within months. He adds that the 300 British investors with Lichtenstein-based
bank accounts range from professional investors and writers and feature some
‘household names’.

A couple of high-profile prosecutions will bring some welcome headlines for
HMRC. It was left red faced after last year’s fiasco of the lost computer discs
holding the personal details of 25 million people. Meanwhile, thousands of jobs
are being cut as part of a restructuring to improve efficiency.

‘Morale here is not high and that’s because we are in the middle of a huge
change programme,’ admits Hartnett. ‘Our customers don’t really write to us
anymore or come into our offices and we are changing.’

‘It’s a difficult world for 83,000 full-time staff to be thrilled with life.
But then it you look at our investigators doing offshore work they find it
exciting and interesting and they love the thrill of the chase.’

But what about the next career challenge for Dave Hartnett? There has been
speculation that Hartnett, a former policy chief of HM Revenue & Customs,
might apply for HMRC chief executive.

Hartnett, who is well respected in the tax profession for his mastery of
detail, sidesteps the question. ‘I don’t think about these things. I don’t rule
myself in or out of anything,’ he says. I’ve got an old fashioned view that as a
civil servant I’m here to serve.’

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