HMRC, integrity and consistency

thony Thomas wrote about where he sees HMRC being at the start of 2012. He didn’t pull his punches, criticising us on several fronts, though expressing hope in our recent joint working with agent professional bodies to improve service standards. This article and media comment focus on the questions: ‘Why doesn’t HMRC just make large business pay what they’ve got to pay? And what about the little guy?’We all hear these questions. There is a widely held and growing perception that HMRC’s approach to the assessing and collecting of large business taxes is too collaborative. There is also a view that we are not sufficiently sympathetic to the difficulties faced by many taxpayers in today’s economic climate.HMRC is very careful to treat our customers even-handedly, using the understanding of behaviours that we have gained through research, to target risk. At the heart of HMRC’s compliance work lies the goal of voluntary compliance – where taxpayers freely meet their obligations, cheaply and easily, and without the need for intervention from us. In strategic terms, this means that we will support those who are honest and open with us as well as those who need help, while relentlessly pursuing the cheats – irrespective of their size.We work with customers and their agents to reach a settlement of open tax issues or enquiries. The term ‘settlement’ itself risks becoming pejorative, appearing to represent a compromise that is second best to litigation. This is wrong. HMRC’s tax settlements are underwritten by a Litigation and Settlement Strategy that means when matters are clear, and established principles are at stake, we will not settle under any circumstances. However, if we reached a place where every case went to court to settle, tax administration would be severely hampered. This would result in the flow of corporate tax revenues slowing to a trickle, and customers undoubtedly seeing long delays before they had certainty. Reaching appropriate settlements makes sense for us all.Such a position would also reflect very poorly on the level of trust between business and HMRC and I entirely agree with Anthony’s insistence on the importance of ‘trust’.But compliance strategies are not a one-size-fits-all approach. We would not seek to apply our SME strategy to large business or vice versa. Large Business generally prefers to relate to HMRC directly, with in-house expertise supported by external professionals. In contrast, most SMEs don’t have the time or inclination to deal with us direct, and employ accountants to do so. We understand that, and that’s exactly why we are so determined to get our relationship with agents right.We completely agree with Anthony that consulting properly with agents is vitally important if we are to deliver the quality of tax system to which we are all committed. Of course, consulting does not mean simply accepting: it means being genuinely aware that we don’t have a monopoly of good ideas and insight, and being open to changing our position. It means having a mindset predisposed to genuine engagement.The success of the joint work on service standards is evidence of that mindset in action. HMRC officers have been visiting agents’ offices to see processes from the agents’ end and understand the impact of our processes. Similarly agents visited our offices and saw the bulk handling processes in full operation. They were able to offer insights and suggestions for improvement as well as seeing what they could do to improve efficiency for their clients. The joint steering group agreed a plan of action and changes are starting to happen as a result. We are building on this approach with the established ‘Working Together’ network, to ensure we have more meaningful interactions in future that prioritise and achieve process improvements.The Agent Strategy recognises the vital role played by agents – paid and unpaid – and in delivering the UK’s tax system. It aims to strengthen the relationship between HMRC and agents. The main proposals are:n to secure enrolment and segmentation of agents to differentiate between those who are in business, those in the voluntary sector and people acting on behalf of family and friends;n increasing agents’ ability to self-serve, which will reduce time and cost for all parties;n creating an ‘agent view’ from information on HMRC systems to enable us to provide support and education for agents where it is most needed;n to help maintain and raise standards for the few agents whose performance is below what might reasonably be expected.We consulted with agents and agents’ professional bodies on the strategy as we developed it and we are continuing to do so. We have listened and heard concerns about some of our proposals. For example, on professional competence, we heard concerns about the need to consult more and so we will take more time working with agents and the professional bodies to agree the right way forward. Some strong views were also expressed about formal qualifications.Many agents felt HMRC should look to accommodate those who are ‘qualified by experience’ as well as those with formal qualifications. We agree. There was overwhelming support for independent oversight and safeguards for any sanctions that HMRC might seek to impose if agents were considered to be acting unprofessionally and I can assure Anthony that we have no plans to become a kind of fiscal MI5.When it comes to staff training, Anthony is pushing at an open door. We currently spend £96m a year on training. In addition, we are proud of the fact that our people spend time with large accountancy firms and agents, seeing the world through our customers’ eyes to better understand the impact of our approach and attitudes on those we serve.Our purpose, vision and way makes it clear that HMRC is passionate about helping those who need support and relentlessly pursues those who bend or break the rules in order to make sure that money is available to fund the UK’s public services. We ensure consistent outcomes in addressing risks across different customer groups, while tailoring our approach to identify and resource those risks for each customer group in order to achieve those outcomes. Our tailored approach is built on our detailed understanding of customer behaviours and the range of complexity of their affairs. This is the most cost-effective way to improve tax compliance and the customer experience and to support growth.Integrity lies at the heart of the tax system. We challenge all taxpayers to be open and honest with us and we in turn must demonstrate integrity at every level of the organisation. HMRC’s challenge in the coming months and years is to prove, through our words and deeds, that we are an efficient, even-handed and listening organisation. Working closely with tax agents, I’m convinced that we are up to this challenge 

Anthony Thomas wrote about where he sees HMRC being at the start of 2012. He didn’t pull his punches, criticising us on several fronts, though expressing hope in our recent joint working with agent professional bodies to improve service standards. This article and media comment focus on the questions: ‘Why doesn’t HMRC just make large business pay what they’ve got to pay? And what about the little guy?’

We all hear these questions. There is a widely held and growing perception that HMRC’s approach to the assessing and collecting of large business taxes is too collaborative. There is also a view that we are not sufficiently sympathetic to the difficulties faced by many taxpayers in today’s economic climate.

HMRC is very careful to treat our customers even-handedly, using the understanding of behaviours that we have gained through research, to target risk. At the heart of HMRC’s compliance work lies the goal of voluntary compliance – where taxpayers freely meet their obligations, cheaply and easily, and without the need for intervention from us. In strategic terms, this means that we will support those who are honest and open with us as well as those who need help, while relentlessly pursuing the cheats – irrespective of their size.

We work with customers and their agents to reach a settlement of open tax issues or enquiries. The term ‘settlement’ itself risks becoming pejorative, appearing to represent a compromise that is second best to litigation. This is wrong. HMRC’s tax settlements are underwritten by a Litigation and Settlement Strategy that means when matters are clear, and established principles are at stake, we will not settle under any circumstances. However, if we reached a place where every case went to court to settle, tax administration would be severely hampered. This would result in the flow of corporate tax revenues slowing to a trickle, and customers undoubtedly seeing long delays before they had certainty. Reaching appropriate settlements makes sense for us all.

Such a position would also reflect very poorly on the level of trust between business and HMRC and I entirely agree with Anthony’s insistence on the importance of ‘trust’.

But compliance strategies are not a one-size-fits-all approach. We would not seek to apply our SME strategy to large business or vice versa. Large Business generally prefers to relate to HMRC directly, with in-house expertise supported by external professionals. In contrast, most SMEs don’t have the time or inclination to deal with us direct, and employ accountants to do so. We understand that, and that’s exactly why we are so determined to get our relationship with agents right.

We completely agree with Anthony that consulting properly with agents is vitally important if we are to deliver the quality of tax system to which we are all committed. Of course, consulting does not mean simply accepting: it means being genuinely aware that we don’t have a monopoly of good ideas and insight, and being open to changing our position. It means having a mindset predisposed to genuine engagement.

The success of the joint work on service standards is evidence of that mindset in action. HMRC officers have been visiting agents’ offices to see processes from the agents’ end and understand the impact of our processes. Similarly agents visited our offices and saw the bulk handling processes in full operation. They were able to offer insights and suggestions for improvement as well as seeing what they could do to improve efficiency for their clients. The joint steering group agreed a plan of action and changes are starting to happen as a result. We are building on this approach with the established ‘Working Together’ network, to ensure we have more meaningful interactions in future that prioritise and achieve process improvements.

The Agent Strategy recognises the vital role played by agents – paid and unpaid – and in delivering the UK’s tax system. It aims to strengthen the relationship between HMRC and agents. The main proposals are:

• to secure enrolment and segmentation of agents to differentiate between those who are in business, those in the voluntary sector and people acting on behalf of family and friends;
• increasing agents’ ability to self-serve, which will reduce time and cost for all parties;
• creating an ‘agent view’ from information on HMRC systems to enable us to provide support and education for agents where it is most needed;
• to help maintain and raise standards for the few agents whose performance is below what might reasonably be expected.

We consulted with agents and agents’ professional bodies on the strategy as we developed it and we are continuing to do so. We have listened and heard concerns about some of our proposals. For example, on professional competence, we heard concerns about the need to consult more and so we will take more time working with agents and the professional bodies to agree the right way forward. Some strong views were also expressed about formal qualifications.

Many agents felt HMRC should look to accommodate those who are ‘qualified by experience’ as well as those with formal qualifications. We agree. There was overwhelming support for independent oversight and safeguards for any sanctions that HMRC might seek to impose if agents were considered to be acting unprofessionally and I can assure Anthony that we have no plans to become a kind of fiscal MI5.

When it comes to staff training, Anthony is pushing at an open door. We currently spend £96m a year on training. In addition, we are proud of the fact that our people spend time with large accountancy firms and agents, seeing the world through our customers’ eyes to better understand the impact of our approach and attitudes on those we serve.

Our purpose, vision and way makes it clear that HMRC is passionate about helping those who need support and relentlessly pursues those who bend or break the rules in order to make sure that money is available to fund the UK’s public services. We ensure consistent outcomes in addressing risks across different customer groups, while tailoring our approach to identify and resource those risks for each customer group in order to achieve those outcomes. Our tailored approach is built on our detailed understanding of customer behaviours and the range of complexity of their affairs. This is the most cost-effective way to improve tax compliance and the customer experience and to support growth.

Integrity lies at the heart of the tax system. We challenge all taxpayers to be open and honest with us and we in turn must demonstrate integrity at every level of the organisation. HMRC’s challenge in the coming months and years is to prove, through our words and deeds, that we are an efficient, even-handed and listening organisation. Working closely with tax agents, I’m convinced that we are up to this challenge.

Dave Hartnett, Permanent Secretary for Tax, HMRC