In support of the litigation and settlement strategy.
Sir, your report on practitioners’ views of HMRC’s handling of enquiries and disputes brings out some strong views from respondents. Those views no doubt reflect genuine concerns and real experiences. But, as a response to the Treasury Committee’s inquiry into HMRC’s conduct of enquiries and disputes, reducing complex issues to binary ‘yes or no’ questions risks ignoring the lessons of the recent history of tax disputes and reinforces too many misconceptions about how HMRC works.
As HMRC’s first tax assurance commissioner, let me defend my former department on its settlement strategy and its governance and offer some issues for further debate.
Some context and history: tax is the levying of an enforced payment (‘legalised extortion’ as I rather unwisely described it in a past article). It is not a commercial transaction capable of being negotiated and renegotiated, much as taxpayers and advisers might sometimes like it to be. The act of collecting tax is a unique one and the amount of tax due should not be determined by ‘wretches hired by those to whom the tax is paid’, as Dr Johnson so memorably described the imposition of excise. That should be the task of the judiciary and the courts.
The knowledge that HMRC will always rely on the law to settle tax liabilities and not determine tax bills through administrative discretion delivers the certainty which taxpayers expect and underpins public confidence in the tax system. It was the perception that HMRC was ‘doing deals’ rather than strictly applying the law which led to the introduction of the litigation and settlement strategy (LSS) in 2007 and the creation of the post of tax assurance commissioner in 2012.
That strategy – and the governance which goes with it – has stood the test of time. Your survey suggests that practitioners wish that HMRC would ‘be commercial’ or ‘meet halfway’. But the discretion inherent in such an approach would inevitably prove even more contentious than the strict application of the LSS. It would undermine the work done to restore confidence in HMRC over the last decade – work to which I am proud to have contributed. Let us stick with the LSS.
So, yes, I do believe that HMRC’S strategy is the right one. And while governance is rarely popular with those to whom it applies, the governance around tax settlements (set out in the various tax assurance commissioner’s reports) is designed to ensure the consistency of HMRC’s approach while making tax collection as straightforward as possible. It is in neither the taxpayer’s nor HMRC’s interests for any dispute to be prolonged or entangled in excess governance.
As your survey reveals, there are indeed questions about whether the governance processes strike the right balance between good customer service for the individual taxpayer and wider confidence for the public at large. There are questions about how enquiries should operate in a world where the traditional models of annual accounts preparation and tax returns are being replaced by digital submissions. And there are some perennial questions about how HMRC can best deploy its necessarily limited resources. All of these should be debated.
But alongside the hard and legitimate questions for HMRC, the profession should ask itself what it sees as the model for tax advice for its own clients and how it needs to adapt to the changing models of business and tax administration. Too many of the survey responses reflect a yearning for the past, rather than a willingness to embrace the future – challenging though that future undoubtedly will be for HMRC and for the profession.
The Treasury Committee’s inquiry should indeed be an opportunity to challenge HMRC on how well it works, but to do so in the context of a clear-headed examination of what the role and responsibilities of the tax professional should be in the 21st century.
HMRC, operating in the public sector, has the will to adapt but is often constrained by the resources and means it has to do so. Advisers, operating in a free and open market, have access to the resources and means. I hope that they also have the will.
Sir Edward Troup, former tax assurance commissioner (2012–16) and executive chair (2016–17), HMRC
(Editor’s note: The questions we asked in our survey were those raised by the Treasury Committee in its inquiry.)
In support of the litigation and settlement strategy.
Sir, your report on practitioners’ views of HMRC’s handling of enquiries and disputes brings out some strong views from respondents. Those views no doubt reflect genuine concerns and real experiences. But, as a response to the Treasury Committee’s inquiry into HMRC’s conduct of enquiries and disputes, reducing complex issues to binary ‘yes or no’ questions risks ignoring the lessons of the recent history of tax disputes and reinforces too many misconceptions about how HMRC works.
As HMRC’s first tax assurance commissioner, let me defend my former department on its settlement strategy and its governance and offer some issues for further debate.
Some context and history: tax is the levying of an enforced payment (‘legalised extortion’ as I rather unwisely described it in a past article). It is not a commercial transaction capable of being negotiated and renegotiated, much as taxpayers and advisers might sometimes like it to be. The act of collecting tax is a unique one and the amount of tax due should not be determined by ‘wretches hired by those to whom the tax is paid’, as Dr Johnson so memorably described the imposition of excise. That should be the task of the judiciary and the courts.
The knowledge that HMRC will always rely on the law to settle tax liabilities and not determine tax bills through administrative discretion delivers the certainty which taxpayers expect and underpins public confidence in the tax system. It was the perception that HMRC was ‘doing deals’ rather than strictly applying the law which led to the introduction of the litigation and settlement strategy (LSS) in 2007 and the creation of the post of tax assurance commissioner in 2012.
That strategy – and the governance which goes with it – has stood the test of time. Your survey suggests that practitioners wish that HMRC would ‘be commercial’ or ‘meet halfway’. But the discretion inherent in such an approach would inevitably prove even more contentious than the strict application of the LSS. It would undermine the work done to restore confidence in HMRC over the last decade – work to which I am proud to have contributed. Let us stick with the LSS.
So, yes, I do believe that HMRC’S strategy is the right one. And while governance is rarely popular with those to whom it applies, the governance around tax settlements (set out in the various tax assurance commissioner’s reports) is designed to ensure the consistency of HMRC’s approach while making tax collection as straightforward as possible. It is in neither the taxpayer’s nor HMRC’s interests for any dispute to be prolonged or entangled in excess governance.
As your survey reveals, there are indeed questions about whether the governance processes strike the right balance between good customer service for the individual taxpayer and wider confidence for the public at large. There are questions about how enquiries should operate in a world where the traditional models of annual accounts preparation and tax returns are being replaced by digital submissions. And there are some perennial questions about how HMRC can best deploy its necessarily limited resources. All of these should be debated.
But alongside the hard and legitimate questions for HMRC, the profession should ask itself what it sees as the model for tax advice for its own clients and how it needs to adapt to the changing models of business and tax administration. Too many of the survey responses reflect a yearning for the past, rather than a willingness to embrace the future – challenging though that future undoubtedly will be for HMRC and for the profession.
The Treasury Committee’s inquiry should indeed be an opportunity to challenge HMRC on how well it works, but to do so in the context of a clear-headed examination of what the role and responsibilities of the tax professional should be in the 21st century.
HMRC, operating in the public sector, has the will to adapt but is often constrained by the resources and means it has to do so. Advisers, operating in a free and open market, have access to the resources and means. I hope that they also have the will.
Sir Edward Troup, former tax assurance commissioner (2012–16) and executive chair (2016–17), HMRC
(Editor’s note: The questions we asked in our survey were those raised by the Treasury Committee in its inquiry.)
