One of my arguments in the Taxing Wealth Report 2024 was that HM Revenue & Customs should be transformed to make the UK tax system a public good. By implication, I made clear that it was a long way from being so at present.
The argument I made was that at least £1 billion should be invested into making help from HM Revenue & Customs more accessible to taxpayers who wished to be tax compliant but who found that hard because of the inevitable complexity of the UK's tax system. Tax compliance is seeking to pay the right amount of tax (but no more) in the right place at the right time where right means that the economic substance of the transactions undertaken coincides with the place and form in which they are reported for taxation purposes.
HMRC are clearly not listening. As AccountingWEB has reported today:
HMRC has announced that its self-assessment phoneline will close between April and September every year, while permanent cuts are also being made to both the PAYE and VAT helplines. The ICAEW and CIOT have strongly criticised the move. Between April and September, self assessment customers will now be directed to self-serve through HMRC's online services.
- between October and March, the self-assessment helpline will be open to deal with priority queries, with those that can be “quickly and easily resolved online” again being directed to the online services
- the VAT helpline will be open for five days every month ahead of the deadline for filing VAT returns – outside of this time, customers will again be directed to use HMRC's online services
- the PAYE helpline will no longer take calls from customers relating to refunds but will instead be directed to the online services
The goal of HM Revenue & Customs would appear to be to make paying tax as hard as possible.
This is not the way in which a democracy should behave.
This is not the way in which a tax authority should behave.
This is not the way in which tax revenues are maximised. This is, instead, a way to alienate people.
As I said in the Taxing Wealth Report 2024 report on this issue, there is much that can be done. We are moving in the wrong direction. This would be how to move in the right direction:
Brief Summary
This note suggests that:
- HM Revenue & Customs governance structures are no longer fit for purpose. They are based on the ethos of a public company and are focused almost entirely on meeting the needs of large companies and the wealthy. Both sectors are well represented amongst its non-executive directors; no other group in society is. That is no longer acceptable.
- HM Revenue & Customs has for too long emphasised cost control as its focus of concern rather than serving taxpayers or raising all the revenue owed to it. This has been inappropriate and has prevented the creation of a tax system suited to the needs of society in the UK.
- HM Revenue & Customs' drive to reduce the cost of collection of tax in the UK has largely failed but has as a consequence:
- Seriously reduced the quality of service that it supplies to taxpayers in the UK, with the quality of everything, from face-to-face services to the answering of telephone calls, to the time taken to reply to letters, all deteriorating significantly leaving many taxpayers without any of the help that they need to pay the right amount of tax that they owe.
- Seriously reduced the number of staff at HM Revenue & Customs.
- Reduced the average real pay of staff at HM Revenue & Customs.
- Considerably reduced the number of tax investigations undertaken each year.
- Lost control of some major parts of the tax gap, which is the difference between the tax that should be paid and the tax that is actually paid in a year.
- Tax gap measurement has been used by HM Revenue & Customs' management as the indicator of its success, but as has been explored in other parts of the Taxing Wealth Report 2024, the claims made with regard to the tax gap in general are open to question.
- One of the two tax gaps where it is very apparent that matters have got out of control is that for small companies, where around 30 per cent of corporation taxes owing now go unpaid each year, which is way in excess of any reasonable level of loss. The likely annual cost of this loss is now £5.9 billion per annum.
- Another tax gap that is likely to be out of control is that for the 5 million small businesses that pay their taxes via the income tax system. HMRC say this tax gap has fallen from around 32.5 per cent of these taxes owing going unpaid in 2014 to only 18.5 per cent being unpaid now. They have not, however, provided any convincing reason for this improvement in taxpayer compliance, which is not matched by improvements in equivalent rates for small companies or in the overall rate of timely tax return submission, half of which returns come from self-employed business owners. The claimed current rate of loss is unlikely to be realistic in that case and an excess loss of maybe £3.4 billion is likely to arise as a result in this area, largely because HMRC has withdrawn from local tax offices that previously supported these taxpayers and from active monitoring of their onsite activities through their now largely abandoned programme of business compliance visits.
- In combination, the losses from just these two tax gaps amount to maybe £9.3 billion and can be attributed to HM Revenue & Customs mismanagement of its activities in the community, whether that be through maintaining local offices where face-to-face help is available or by visiting businesses at their own premises.
- It also seems that HM Revenue & Customs' claims for the benefits of its Making Tax Digital programme seem to be seriously overstated, which is a fact repeatedly noted by the House of Commons Public Accounts Committee. The costs of creating this programme appear to be out of control. The costs it imposes on business taxpayers are excessive. Worst of all, it is likely to alienate millions of people from the tax system and most likely increase the tax gap as a result, rather than reduce it. It also makes the UK a significantly worse place in which to run a business, which is likely to impose serious costs on society at large.
- As a result, this report recommends that:
- That HMRC reforms its governance structures and objectives.
- HMRC restore its local office help centre presence in towns and cities across the UK, and widely advertise the availability of this support service.
- HMRC's should restore its programme of site visits of businesses to monitor their tax compliance to cover checking both PAYE and VAT records.
- HMRC should stop the rollout of its Making Tax Digital programme so that no business that is not VAT registered will never be enrolled in this programme.
- The cost of restoring these services will be very much less than the sums that might be raised by reducing the two gaps that have been noted to reasonable levels (i.e. those that were maintained during periods when HMRC was better resourced in the past), but since some of those sums capable of recovery have already been noted elsewhere in the Taxing Wealth Report 2024 no additional account of such recovery is made here. That said, because other tax gaps would also undoubtedly improve if HM Revenue & Customs were to re-establish its presence in UK towns and cities the likely cost of this programme – which might be £1 billion a year, or twenty per cent of the current cost of running HMRC - is not taken into account either. Nor is the likely significant gain from reducing taxpayer strain taken into consideration, or the gain from making the UK a more tax-friendly environment, to which considerable harm has been done since 2010.
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So the self-employed are being set up to fail. No doubt draconian penalties will be levied on those who, through no fault of their own, are alleged to have got their sums wrong. This is the weaponisation of the machinery of state against its citizens, no doubt implemented with a view to impoverishing them. More class war, in other words. The route to oligarchy becomes ever clearer.
Certainly turns principal agent theory on its head!
HMRC is meant to be our agent for goodness sake.
I reread the headline in the Guardian about four times thinking it must have been a typo, but no!
Really have no words.
I run a small payroll bureau, for which I am an HMRC registered agent. I don’t understand why people are so upset that HMRC has reduced the support it offers. For the last 3 years or so much of the advice given out by them is such garbage that anyone would be better off without any advice and making an informed guess, having spoken to the chap in the pub..
These changes will arguably put HMSO in breach of its own charter..
https://www.gov.uk/government/publications/hmrc-charter/the-hmrc-charter
Another obstacle be laid for an incoming government?
All I can see here is Neo-liberal based extremism.
Someone somewhere has argued that tax is an imposition that takes money out of the economy. So, because these fools are really believe there is ‘no money’, tax is to be sacrificed to increase the supply of money. I bet its as simple as that.
That’s how I read it.
Those of us who are more aware of what tax really does can be justifiably horrified. We all know who will benefit the most from this.
But the problem is that these numpties also believe that tax funds the NHS and other public services. Do I need to say anything else or is it obvious what will happen next?
I’m reading Abbey Innes book at the moment – I’m where she is describing the public money give away that is our education system. I am truly shocked by the revelations in it.
But who else is reading Innes? Certainly not the Labour party – that is for sure. Not the increasingly infantilised public who seem to appreciate salacious tales about royalty, porn and conspiracy theories instead. Labour fully believe in the same dogma the Tories and all the others believe. But then it pays for them and their fellow parliamentarians to believe doesn’t it?
The party funding changes are important – they are the coup de grace of the society that Clem Attlee created I think. I mean I heard BBC news characterising Mark Drakeford as a ‘divisive character’. Really? I just thought he was good at his job even though the Tories have had a vice like grip on his funding.
Parliament has just about gone I think. Even its committee system does not seem able to control people like Michael Gove.
What a mess.
As an HMRC caseworker working on VAT compliance in the SME sector I can tell you the following:
When we open an enquiry on traders (they are NOT customers!!!!), often because we can see from data available to HMRC that they are substantially underdeclaring their sales, we are supposed to do cross tax working with the VAT caseworker getting a CT/ITSA caseworker and an ED (employer duties) caseworker on board to work their tax heads on the case. If a trader is evading VAT through underdelared sales it is very likely that their CT will be underdelared and they could be breaking the NMW rules, paying people off the books etc. But guess what? There is no resource (ie. caseworkers) for CT and ED available!
So your point Richard about the loss of CT tax in the SME sector is correct. As for the helplines….
This is what under investment in the public sector produces. Perhaps someone should tell our appalling politicians? Oh hang on, no, this pack of clowns is busy telling the civil servants they’ve treated like shit for years that the priority is to be in the office at least 60% of the time because some propaganda rag pretending to be a newspaper says home working Is bad for the economy, needless to say with no meaningful evidence. I’m lucky in that for contractural reasons it doesn’t apply to me, but I can tell you it has pissed loads of people off, and is taking up loads of people’s time in trying to implement.
Thanks for conforming my suspicions.
And good luck with what you do.
Thanks Richard, I plan to retire soon so in some ways I’m past caring about the crap this verminous “government” dumps on us civil servants. But I feel for my fellow civil servant who are still working for these lousy bastards. And I’m appalled that HMRC is treating the public service of tax collection and advice as he same as a garage where self service has long been the practice. Filling your car is NOT like tax advice for god’s sake, expecting people to work it out for themselves via the web is ludicrous.
My partner gave up trying to talk to someone from HMRC about her own CT debt as she couldn’t get through to anyone on the phone. So the debt was never paid before her company was wound up. It wasn’t a big debt, but multiply her by thousands of other people and that’s lost revenue.
Third world, here we come.
Indeed
What I am now hearing time and again is of payments having been made to HMRC and not being allocated to taxpayer accounts and then being pursued for recovery – with the taxpayer being told they must sort this out through their own MTD account, which is impossible as the payment is lost in HMRC’s system.
Further to your last post Richard, that is disgraceful and ultimately dangerous to the proper functioning of the tax system. People will eventually turn round to HMRC and tell us to get stuffed, and who can blame them? Another scandal about a failing public service like the Horizon system coming up then? Caused by underfunding and an ideologically motivated contempt for the public sector. Well done the vermin party.
Never mind Richard, I’m sure new new labour will fix it eh? I bet Rachel Reeves is avidly reading your taxing wealth report 2024 and thinking that it’s time to properly fund HMRC, and that doing so would pay for itself many times over in tax recovered. And I’m sure she’s going to give the CS an immediate substantial pay increase to get real term pay back to 2010 levels to improve moral and wellbeing. And immediately implement the result of the pension scheme review in 2015 which found CS pension payments were higher than were needed to pay for the pensions and we were owed a reduction in our contributions of 2% which was blocked by Truss and has still not been paid. Oh yes, I have utmost faith that’ll happen.
They’ve gone back on it https://www.gov.uk/government/news/hmrc-helpline-changes-halted
Absurd and chaotic governing.
But even after reversal their whole approach is dire