HMRC: The Good, The Bad, and The Future

I READ with great interest the speech given by Anthony Thomas, the incoming President of CIOT, on the 17 May. My response here is as president of ARC – the Association of Revenue and Customs, which is the union that represents senior officials in HMRC – so do not take it as the HMRC line!

There were many aspects of Anthony’s speech where I found myself in agreement with his views, but on others I could not quite recognise the tax world he sees. But I do absolutely agree with him that trust between HMRC and the professions is of huge importance, and has come under severe strain in recent years. However it does not help to present a picture of unalloyed gloom, which fails to recognise the very real improvements HMRC, and ARC members, have made in the face of immense pressure. So let me start with some of the good features.

The Good.

By the end of the Spending Review period HMRC will have suffered ten years of incessant and deep cuts. Despite that, performance in a number of key areas has improved enormously. Just look at the number of serious criminal gangs that have been brought to justice over recent years. Look at the fact that despite cuts, the yield from HMRC interventions has improved year on year – and not just marginally, but by large amounts. Look at the way the customer relationship model has improved the way HMRC deals with the large business community. And while Anthony sees the changes in powers as a fundamentally bad thing, I cannot agree, and in reality they were the subject of an immense amount of consultation which brought about many, many changes the profession wanted. If I look back ten or 15 years, I do not think anyone would have expected this level of consultation and discussion.

On top of this there has been a huge increase in online filing (and that system has grown out of its initial problems), and when dealing with all businesses there is a much more joined-up approach across both direct and indirect taxes. Above all, it is HMRC staff who have kept the integrity of the tax system in place, while the organisation has plummeted from 99,000 staff, to around 65,000 now, and falling to 56,000 over the next period. Give at least some credit to the hard work that has kept the show on the road, and let us accept that it has been short term political decisions to slash resources that have been at the root of the problem areas we have seen.

The Bad.

Because, yes, there have been problems. Increasingly the Department relies on computer generated actions, which can cause mistakes, especially if there is no human eye to run a “sanity check” over the output. Where taxpayers ( yes, I will use “taxpayer” rather than “customer”) receive incorrect tax codes, or incorrect demands, these can be distressing and absolutely no-one from HMRC wants that to happen – but the cause lies firmly with staff reductions that go well beyond the savings created by new technology.

Equally, the closure of local offices has had a negative effect on the service that can be provided to taxpayers, and I think even more crucially, to the local agent community. In reality both the taxpayer and the Exchequer benefited from good local links between HMRC offices and accountants. Where it worked well, it was possible to maintain a good working relationship that solved problems quickly and efficiently, and stopped matters escalating into disputes. I think it is critical that better links are made between accountants and HMRC, and resources are needed to establish this – already efforts have been made to give better agent responses at contact centres etc, but on technical issues much more can be done. But that needs trained people who can build up that working partnership.

It is the loss of that relationship that is at the heart of the deterioration in trust that Anthony identifies. I have no doubt that with effort and resource, that trust can be rebuilt, and that this in turn will demonstrate that Anthony’s concerns about the new powers are overstated: if there is one thing that has not changed within HMRC it is the integrity and professionalism of its staff, who are determined to get the right amount of tax collected, not the greatest amount. We take that integrity for granted here in the UK, but you do not have to go far across Europe to see what happens where that level of integrity is missing.

Anthony mentions the agent strategy consultation document issued today, and which will run through to September. I agree that this has to produce something which is seen as fair but which also addresses the problems which my members come across occasionally. What I am in no doubt about is the determination from HMRC staff involved to get this right, and I urge people across the profession to take an interest and send in a response.

The Ugly.

Well, two things spring to mind here. Firstly, I do not think that the press handling of tax issues is fair or balanced. Too often the criticisms are launched at HMRC staff and managers for decisions taken by politicians – and as civil servants, the victims of these attacks are hardly able to respond openly. The Daily Mail will never see anything but bad in a tax collecting department. The papers generally seem now to feel they can launch personal and unpleasant attacks on HMRC people with impunity, and they are more interested in a good headline than in getting at the facts. My members in ARC have to take this, and once a press feeding frenzy has begun, no analysis or common sense can be allowed to spoil a good story. This really does not help the morale of people working in the department, and is all too likely to make everyone risk-averse and cautious – at exactly the time when we need to be bold in our decision making.

Certainly morale is at an all time low. Partly, this is the result of the savage cuts. Partly it is as a result of biased press coverage. However it is also partly down to the way the department is being run. There were bad mistakes made when Revenue and Customs merged, and the chairman at that time caused problems which his successors have struggled with. Additionally the year on year reductions, coupled with a press willing to leap on any mistake (and ignore anything good), has left the HMRC leadership team in a difficult place. Thus far they have responded with a command and control style, perhaps understandably in the light of pressures – but ARC have been trying to persuade the leaders of HMRC to empower and trust their staff more, to enable more local fast decision making and to get the best from our professional staff at all grades. I think they are listening, and I hope we see changes in the months ahead.

The Future.

If we do see such changes, perhaps we can start on the road to recovery. To make this truly work we need the government to respond with additional resources targeted at the areas where real improvements can be achieved – and we need to work with the profession across the country to re-build that trust which has fallen away in recent years. I agree that there should always be that “constructive tension” between the profession and HMRC which Anthony refers to. We come at issues from different perspectives, and that will always produce some conflict, but in a professional environment that can be a good thing. We both have a job to do. We both rely on each other to a large extent. We have a common agenda on getting the right number of professional, well trained individuals to operate our complex tax system well, and I look forward to working with Anthony and others across the accountancy world to achieve that.

Graham Black is president of ARC, which represents senior staff at HMRC

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