EVERYONE SEEMS to be bashing HMRC, from David Gauke to the Treasury select committee to the House of Lords to BBC’s Watchdog. So what better time for the new president of the Chartered Institute of Taxation to declare relations between the taxman and the institute have never been worse?
WHAT HAS HAPPENED?
When questioned about the CIOT’s new president Anthony Thomas, one of the first words used by ICAS head of tax Derek Allen was “diplomatic”. In that case, HMRC officials present at Thomas’s inaugural presidential speech must be wondering what would happen if the institute ever appointed an undiplomatic leader.
It was certainly an interesting introduction. He denounced the “special relationship” between HMRC and the professional bodies as a “myth”, more akin to that “between the UK and US governments. It is more perceived than real and always favours one side and that side is not ours!”
The merger between the Inland Revenue and HM Customs & Excise has been “disastrous” and the staff – of which there are too few – “often lack proper training and the skill to make appropriate judgements”, according to Thomas.
It didn’t end there. “HMRC are happy to have closer working when it suits them and to continue to use the scarce and valuable resources of the institute to fill in gaps in their own thinking, while at the same time ignoring some sensible suggestions and recommendations.”
But, perhaps most damningly, “the trust between the professional community and HMRC is at risk… My discussions with members suggest that the relationship between HMRC and members has never been worse.”
Thomas has a strong standing in the profession and is not known for his trouble making. So, on its own, this would represent a blow for the reputation of the service provided by HMRC.
But this comes at the same time as Exchequer secretary to the Treasury David Gauke has asked the Office of Tax Simplification to look into the tax administration for small business. “I would like this report to examine closely small businesses’ experience of tax administration and their contact with HMRC at key stages of their annual cycle,” he said in his letter to the OTS. This will look into areas that businesses find most “frustrating”, and the “barriers” that prevent them from getting certainty in their tax affairs.
John Whiting, the tax director of the OTS, said this could be a help for the taxman in becoming more efficient. But HMRC could be forgiven for being burdened by help – the Treasury select committee and a House of Lords committee are also enquiring into HMRC service levels.
WHAT HAPPENS NEXT?
A fractious relationship with the CIoT will not help the taxman. The institute is understood to be releasing a report on the taxman’s use of threatening letters, mentioning possible auctions, for taxpayers who often have no debts, following on from reports in the past couple of weeks on BBC’s Watchdog, the Daily Mail and this very website.
Thomas foresees a change in the dynamic between the institute and HMRC. His goal is to “turn the tide” of the relationship, “to return to that “healthy tension” between HMRC and the tax profession which existed 10-20 years ago”. There will be “no special relationships; no cosy conferences; no favours, deals and understandings; no inside tracks and private access”.
So what does this mean for the taxman? For one, the target of raising an extra £7bn a year means it is unlikely to change its harder line on collecting debts – something that will not be welcomed by Thomas and the institute.
But do not be surprised at a change in service levels, perhaps through extra funding provided by the Treasury. Gauke is unlikely to ignore conclusions from the OTS if they say that funding is necessary to simplify the administration of tax, which everyone states is essential for small business.
Of course, the government has been articulating the line of greater efficiency in Whitehall, which equally applies to HMRC.
But the tax bodies, despite being critical of HMRC service, could be an important ally in countering these claims and boosting its budget. Thomas’s concerns have been echoed by Frank Haskew, head of tax at the ICAEW, who told the Lords last week that “our members have seen deterioration in service standards. That is a serious matter of concern”. Fellow attendee Chas Roy-Chowdhury, head of tax at ACCA, agreed with him. However, both men were strident that they have “sympathy” with the Revenue’s position. Achieving better service would not be possible unless the budget cuts stop, they both claimed.
So this gathering storm of criticism of HMRC service, most controversially put by Thomas, could perversely help out the taxman. A chancellor who claims to be small business friendly will not be able to ignore the cries of the professional bodies for much longer while emphasising the importance of simplification. And it may be this that turns the tide of this not-so-special relationship.