What’s really needed at HMRC

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I note there’s a report in the Telegraph today saying big business is so unhappy with HM Revenue & Customs that 20% of them are thinking of leaving the UK. I’ve often thought about taking up basket weaving as an alternative career (only kidding). The chance of these companies leaving is about as likely as the latter. So let’s dismiss the nonsense and at he same time recognise that business of all size has a valid gripe with HM Revenue & Customs.

Big business admittedly gets by far the best service from HMRC – but even they’re not happy and as a very senior representative of business tax professionals who took me out to lunch yesterday suggested, it’s not hard to explain why. Once upon a time (yes, this a fairy tale, but with a sorry ending) big business enjoyed continuity in its relationship with its inspector of taxes. The current Customer Relationship Manager post in HMRC is meant to replicate that. But it doesn’t because that CRM works in the Large Business Service and as such has remarkably little discretion for action. So they follow the line. Which is the official explanation for why last week HMRC boss Dave Hartnett had to tell them to stop being so rigid about litigating with big business. All these people thought they could do was follow the diktat on tackling avoidance – laid down by Hartnett himself – and not use their discretion.

But when these Customer Relationship Managers were instead called District Inspectors – and had discretion in the action they could pursue as a result because they were, within reason, in charge – they used that discretion and things worked much better. They also stayed in post a lot longer.

And because they also, by and large, worked locally they had the knowledge to react locally.

And then along came David Varney and all that was swept aide in the name of efficiency. Central control – similar to that of large corporations – replaced local discretion. Uniformity replaced local knowledge. Relationships based on continuity were replaced by rotating specialists. And nothing worked as well is it might.

Why? Because just as centrally organised, target driven, big business does not understand entrepreneurial spirit – which is the preserve of the more effective small enterprise that as a result makes better returns on almost all measures that can be used (and even higher returns on those that can’t be measured) than big business so did local tax offices actually perform better than centrally controlled big ones.

But those who HMRC have engaged from big business have not understood that. Or the importance of relationships. Or the importance of location. Or the importance of local knowledge. And those are very good reasons why we have a tax gap.

Bring back the local and the discretion that went with it was the message I heard, loud and clear. Anyone listening at HMRC?