The largest challenge facing HMRC this year is the enormity of the department’s modernisation agenda. At its heart lies the ‘making tax digital’ project which is intended to make HMRC one of the most digitally advanced tax authorities in the world: our responses to the autumn consultations, along with draft legislation, will be published shortly. The department is changing geographically too as it continues its consolidation into 13 regional centres. There remains a strong focus on combating both tax evasion and aggressive avoidance; 2017 will see the introduction of a new corporate offence of failure to prevent the criminal facilitation of tax evasion, and new sanctions for those who design, market or facilitate the use of tax avoidance arrangements which are ultimately defeated by HMRC. Finally, the department also stands ready for any challenges presented by Brexit.
HM Revenue and Customs has much to be proud of from 2016. In the last year, HMRC brought in record total tax revenues of £536.8bn and secured £26.6bn in compliance revenues – the money people try not to pay.
We also surpassed £3bn in terms of the money accrued from issuing accelerated payments notices and the tax gap we reported for 2014/15 of 6.5% is the lowest level ever, and one of the lowest in the world.
These are achievements worth celebrating, especially against a backdrop of one of the largest organisational change programmes ever undertaken and in circumstances where the department has made £210m in annual sustainable cost savings, so 2016 hasn’t been a year without its challenges.
We know for example, that some customers faced issues around their tax credits and suffered financial hardship as a result. HMRC took decisive action to correct this, taking back control of the process and clearing a backlog of cases.
And it was a challenging year on a personal level too, as I left the Ministry of Defence after seven years to lead HMRC.
Looking ahead, perhaps the largest challenge for HMRC is the enormity of our modernisation agenda. We’re striving to change a largely paper-based transactional organisation into one of the biggest digital businesses in Europe.
That involves changing almost all of our fundamental processes, how we work with our customers, and how our customers work with us. There are 15 interdependent programmes comprised of more than 260 projects that we have to make work and synchronise over the term of this Parliament.
At the heart of this transformation is ‘making tax digital’ (MTD): HMRC’s ambitious plan to be one of the most digitally advanced tax authorities in the world and to reflect the ways in which millions of businesses are already harnessing the opportunities of the digital age. MTD will make it easier for small businesses and individuals to get their tax right, and give them confidence they have done so – reducing tax lost through error, and the inconvenience and cost of an HMRC intervention.
When it comes to MTD, I share the sentiments of the Financial Secretary to the Treasury, Jane Ellison, who said ‘it’s just not right that our tax service should lag behind – stuck in an age of paperwork, letters and phone calls’.
I think many people agree, and want the same quality of digital experience with HMRC that they already get from many other service providers. There is plenty of evidence of appetite for these services: some seven million people have used the personal tax account since it was launched, only last year. Small businesses are using our digital help and support services in large numbers (more than 1m last year), people are renewing their tax credits and claiming tax repayments online too.
As Tax Journal readers are no doubt aware, over the last five years the government has prioritised the creation of a modern, efficient tax system. This has already seen the successful delivery of real time information (RTI), which changed the PAYE landscape, and now there’s MTD, and the introduction of business and personal tax accounts.
The aim is to create a tax system that supports business and promotes enterprise, and this requires a new approach to business taxation, one that is more efficient and integrated into the day-to-day running of a business.
I know there are concerns about MTD, in particular with the pace of change. We know that some feel we’re moving too quickly and there is an understandable focus on how businesses will move to MTD, as well as the transitional costs. That’s why we’re consulting at every stage, listening to stakeholders and taxpayers, considering their feedback, and keeping lines of communication open. Indeed early this year we’ll publish responses to our MTD consultation documents from autumn 2016 and we’ll also publish draft legislation.
Meanwhile this digital vision goes beyond the UK. HMRC continues to collaborate with a range of fiscal authorities in considering how digital services can shape the future of tax administration globally, including the relationship with tax service providers through the International Forum on Tax Administration (FTA).
But there’s more to our transformation agenda than just digital; we’re also changing geographically too, and we expect to make similar progress on this work this year. In 2016 we started our regional centres relocation programme which, over the next few years, will see us consolidate our existing office estate into just 13 state of the art regional centres.
This move is integral to our plans to create a tax authority fit for the future, but has nonetheless meant significant and widespread change to ways of working and, for colleagues in various parts of the country, some difficult decisions about their future.
Our 61,400 full-time equivalent employees were spread across 170 offices, many small and unsustainable. By 2021 they will be replaced with 13 large regional centres, four specialist sites, one London-based HQ, and six transitional sites.
The regional centres will provide stable, high quality jobs in new modern buildings with good transport links, and facilitate new ways of working, as well as training, promotion and career development opportunities without staff needing to move to London.
No one in HMRC underestimates the scale of this undertaking but we’re making good progress. In August 2016 we signed the lease agreement on our first regional centre, in Croydon. This site will house more than 2,500 tax specialists whose work will focus on compliance. We collected the keys to this site less than six months later and are now fitting it out to meet our requirements, ready for the first colleagues to relocate there in summer.
Encouragingly, staff who had the opportunity to tour the new premises when we received the keys were excited by the look and feel of the building, which will be a model for all our future sites.
In addition, HMRC has recently secured its second regional centre, in Bristol, where we expect up to 1,400 staff to take up occupancy from 2019, and we’ll be moving some London-based staff to a transitional site at Canary Wharf at some point later in the year. Meanwhile, negotiations are progressing on the locations for our other regional centres and we hope to able to confirm the sites for Belfast, Edinburgh, Cardiff and Liverpool early in 2017.
Looking back at the bigger picture, the change of government last year brought with it new ministers who maintain a strong interest in our work to combat both tax evasion and aggressive avoidance, and the department looks forward to continuing our close working on these issues.
Indeed, in October, we published draft guidance for the new corporate offence of failure to prevent the criminal facilitation of tax evasion and in December published a policy paper on strengthening sanctions and deterrents for tax avoidance.
While the vast majority of taxpayers in the UK comply in full with their tax obligations, a minority attempt to pay less than their fair and legal share by using aggressive tax avoidance arrangements. Most of these arrangements do not deliver the tax results they promise. They are developed, marketed and facilitated by a persistent minority of promoters, advisers and other intermediaries.
Proposals are in place for sanctions for those who design, market or facilitate the use of tax avoidance arrangements which are ultimately defeated by HMRC. The vast majority of professionals who provide clients with advice on genuine commercial arrangements will not be impacted.
The aim of the measure is to ensure that these enablers can be held accountable for their activities should the tax avoidance they have enabled later be defeated. The aim of the changes to the meaning of ‘reasonable care’ is to influence the behaviour of would be tax avoiders by ensuring that penalties are chargeable in all appropriate circumstances where tax avoidance is defeated.
The changes will come into effect over the course of the next year with legislation introduced in the 2017 Finance Bill.
Finally, it would be remiss not to mention that all of our work is being carried out alongside work to facilitate the UK’s exit from the European Union. This presents its own challenges in that, by necessity – as the government negotiates with EU partners, there isn’t a great amount of certainty at present, but that will clear. Nevertheless, HMRC has a skilled and knowledgeable team already in place to ensure the department is ready for any changes.
This is another huge year for the department, my first full year as CEO and my first opportunity to talk to Tax Journal. I hope to come back to you in a year’s time to report more significant progress on our transformation – both in terms of buildings and MTD – and with taxpayers receiving the service they deserve. We have plenty of work to do but are very much looking forward to the challenge.
The largest challenge facing HMRC this year is the enormity of the department’s modernisation agenda. At its heart lies the ‘making tax digital’ project which is intended to make HMRC one of the most digitally advanced tax authorities in the world: our responses to the autumn consultations, along with draft legislation, will be published shortly. The department is changing geographically too as it continues its consolidation into 13 regional centres. There remains a strong focus on combating both tax evasion and aggressive avoidance; 2017 will see the introduction of a new corporate offence of failure to prevent the criminal facilitation of tax evasion, and new sanctions for those who design, market or facilitate the use of tax avoidance arrangements which are ultimately defeated by HMRC. Finally, the department also stands ready for any challenges presented by Brexit.
HM Revenue and Customs has much to be proud of from 2016. In the last year, HMRC brought in record total tax revenues of £536.8bn and secured £26.6bn in compliance revenues – the money people try not to pay.
We also surpassed £3bn in terms of the money accrued from issuing accelerated payments notices and the tax gap we reported for 2014/15 of 6.5% is the lowest level ever, and one of the lowest in the world.
These are achievements worth celebrating, especially against a backdrop of one of the largest organisational change programmes ever undertaken and in circumstances where the department has made £210m in annual sustainable cost savings, so 2016 hasn’t been a year without its challenges.
We know for example, that some customers faced issues around their tax credits and suffered financial hardship as a result. HMRC took decisive action to correct this, taking back control of the process and clearing a backlog of cases.
And it was a challenging year on a personal level too, as I left the Ministry of Defence after seven years to lead HMRC.
Looking ahead, perhaps the largest challenge for HMRC is the enormity of our modernisation agenda. We’re striving to change a largely paper-based transactional organisation into one of the biggest digital businesses in Europe.
That involves changing almost all of our fundamental processes, how we work with our customers, and how our customers work with us. There are 15 interdependent programmes comprised of more than 260 projects that we have to make work and synchronise over the term of this Parliament.
At the heart of this transformation is ‘making tax digital’ (MTD): HMRC’s ambitious plan to be one of the most digitally advanced tax authorities in the world and to reflect the ways in which millions of businesses are already harnessing the opportunities of the digital age. MTD will make it easier for small businesses and individuals to get their tax right, and give them confidence they have done so – reducing tax lost through error, and the inconvenience and cost of an HMRC intervention.
When it comes to MTD, I share the sentiments of the Financial Secretary to the Treasury, Jane Ellison, who said ‘it’s just not right that our tax service should lag behind – stuck in an age of paperwork, letters and phone calls’.
I think many people agree, and want the same quality of digital experience with HMRC that they already get from many other service providers. There is plenty of evidence of appetite for these services: some seven million people have used the personal tax account since it was launched, only last year. Small businesses are using our digital help and support services in large numbers (more than 1m last year), people are renewing their tax credits and claiming tax repayments online too.
As Tax Journal readers are no doubt aware, over the last five years the government has prioritised the creation of a modern, efficient tax system. This has already seen the successful delivery of real time information (RTI), which changed the PAYE landscape, and now there’s MTD, and the introduction of business and personal tax accounts.
The aim is to create a tax system that supports business and promotes enterprise, and this requires a new approach to business taxation, one that is more efficient and integrated into the day-to-day running of a business.
I know there are concerns about MTD, in particular with the pace of change. We know that some feel we’re moving too quickly and there is an understandable focus on how businesses will move to MTD, as well as the transitional costs. That’s why we’re consulting at every stage, listening to stakeholders and taxpayers, considering their feedback, and keeping lines of communication open. Indeed early this year we’ll publish responses to our MTD consultation documents from autumn 2016 and we’ll also publish draft legislation.
Meanwhile this digital vision goes beyond the UK. HMRC continues to collaborate with a range of fiscal authorities in considering how digital services can shape the future of tax administration globally, including the relationship with tax service providers through the International Forum on Tax Administration (FTA).
But there’s more to our transformation agenda than just digital; we’re also changing geographically too, and we expect to make similar progress on this work this year. In 2016 we started our regional centres relocation programme which, over the next few years, will see us consolidate our existing office estate into just 13 state of the art regional centres.
This move is integral to our plans to create a tax authority fit for the future, but has nonetheless meant significant and widespread change to ways of working and, for colleagues in various parts of the country, some difficult decisions about their future.
Our 61,400 full-time equivalent employees were spread across 170 offices, many small and unsustainable. By 2021 they will be replaced with 13 large regional centres, four specialist sites, one London-based HQ, and six transitional sites.
The regional centres will provide stable, high quality jobs in new modern buildings with good transport links, and facilitate new ways of working, as well as training, promotion and career development opportunities without staff needing to move to London.
No one in HMRC underestimates the scale of this undertaking but we’re making good progress. In August 2016 we signed the lease agreement on our first regional centre, in Croydon. This site will house more than 2,500 tax specialists whose work will focus on compliance. We collected the keys to this site less than six months later and are now fitting it out to meet our requirements, ready for the first colleagues to relocate there in summer.
Encouragingly, staff who had the opportunity to tour the new premises when we received the keys were excited by the look and feel of the building, which will be a model for all our future sites.
In addition, HMRC has recently secured its second regional centre, in Bristol, where we expect up to 1,400 staff to take up occupancy from 2019, and we’ll be moving some London-based staff to a transitional site at Canary Wharf at some point later in the year. Meanwhile, negotiations are progressing on the locations for our other regional centres and we hope to able to confirm the sites for Belfast, Edinburgh, Cardiff and Liverpool early in 2017.
Looking back at the bigger picture, the change of government last year brought with it new ministers who maintain a strong interest in our work to combat both tax evasion and aggressive avoidance, and the department looks forward to continuing our close working on these issues.
Indeed, in October, we published draft guidance for the new corporate offence of failure to prevent the criminal facilitation of tax evasion and in December published a policy paper on strengthening sanctions and deterrents for tax avoidance.
While the vast majority of taxpayers in the UK comply in full with their tax obligations, a minority attempt to pay less than their fair and legal share by using aggressive tax avoidance arrangements. Most of these arrangements do not deliver the tax results they promise. They are developed, marketed and facilitated by a persistent minority of promoters, advisers and other intermediaries.
Proposals are in place for sanctions for those who design, market or facilitate the use of tax avoidance arrangements which are ultimately defeated by HMRC. The vast majority of professionals who provide clients with advice on genuine commercial arrangements will not be impacted.
The aim of the measure is to ensure that these enablers can be held accountable for their activities should the tax avoidance they have enabled later be defeated. The aim of the changes to the meaning of ‘reasonable care’ is to influence the behaviour of would be tax avoiders by ensuring that penalties are chargeable in all appropriate circumstances where tax avoidance is defeated.
The changes will come into effect over the course of the next year with legislation introduced in the 2017 Finance Bill.
Finally, it would be remiss not to mention that all of our work is being carried out alongside work to facilitate the UK’s exit from the European Union. This presents its own challenges in that, by necessity – as the government negotiates with EU partners, there isn’t a great amount of certainty at present, but that will clear. Nevertheless, HMRC has a skilled and knowledgeable team already in place to ensure the department is ready for any changes.
This is another huge year for the department, my first full year as CEO and my first opportunity to talk to Tax Journal. I hope to come back to you in a year’s time to report more significant progress on our transformation – both in terms of buildings and MTD – and with taxpayers receiving the service they deserve. We have plenty of work to do but are very much looking forward to the challenge.
