If you are sipping on a drink or eating whilst reading this article, then I suggest you stop now because you may splutter or choke when reading the next line! HMRC have recently published their report and annual accounts for 2017-18 Annual Report and Accounts and contained within its first few pages is a statement that the department’s vision is to be a world class organisation. No, it’s true, they seriously believe they can become one of the best in the world.
In terms of becoming one of the best tax authorities in the world – that may well be achievable, but the other qualities that we associate with the words ‘world class’ are lacking in abundance within HMRC. The department tell us that they put taxpayers at the heart of everything they do. Well, of course they do because we are central to their operation, i.e. assess and collect tax from us.
The Revenue’s state of delusion enables them to boast that they already possess the values that underpin their ambition of professionalism, integrity, respect and innovation. Other than innovation, is that your experience of HMRC because it certainly isn’t mine. Given their agenda and modus operandi in IR35 enquiries, I would absolutely question their integrity.
In typical self gratulatory style, HMRC tell us that in 2017-18 they:
|Tax type||% of total revenue||Increase/decrease on 2016-17 (%)||Reason|
|Income Tax & NIC||31 & 21||6.8||Number of people in employment increased.|
|VAT||21||3.4||Higher receipts for oil, gas & mining, and leisure and business sectors.|
|Corporation Tax||9||4.3||Increase in company profits, particularly industrial, commercial & finance sectors.|
|Hydrocarbon oils||5||-0.4||Not given.|
|Stamp taxes||3||7.8||Continuing rise in house prices.|
|Alcohol||2||1.8||Increase in duty rates March 2017.|
|Capital Gains Tax||1.3||-7.1||Reduction in rates from 18% to 10% where a person is a basic rate payer.|
|Insurance Premium Tax||1||37.8||Rise in standard rate from 10% to 12%.|
Inheritance Tax, Bank Levy and customs duties account for the remainder revenue.
The UK’s tax gap is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid. In 2016-17, which is the latest year for which figures are available, HMRC collected 94.3% of the estimated tax revenue due, leading to the tax gap being maintained at its lowest level for 5 years.
Part of HMRC’s strategy is to segment taxpayers by type and size so as to tailor their services based on behaviours, capabilities and the level of risk. To this end, there are five groups of taxpayers:
|Number & type of taxpayer||Category|
|45M individuals||Income < £150K & assets < £1M|
|Excess of 5M small businesses||Turnover < £10M & < 20 employees|
|0.5M wealthy individuals||Income > £150K & assets > £1M|
|170K mid-sized businesses, charities & public bodies||Turnover between £10M – £200M or have 20 plus employees|
|2K large businesses||Turnover > £200M|
New legislation imposes a charge on disguised remuneration loans outstanding at 5th April 2019, through which HMRC expects to protect £2.5 billion of tax.
Once again, the normal mantra is repeated in that there is significant non-compliance with the IR35 rules leading to hundreds of millions of pounds in lost tax receipts. Of course, HMRC can’t prove this with any concrete facts and figures but rather continue to purport the myth to justify their methods.
In 2017-18 it is estimated that an additional £410 million of Income Tax and NIC has been collected as a result of the public sector ‘off-payroll’ rules.
HMRC say that they always resolve disputes in accordance with the law, their own published litigation and settlement strategy, and code of governance for resolving tax disputes. That is not the whole truth, as very recently the Institute of Taxation told the Treasury Sub-Committee a very different story.
The Revenue’s bottom line is that they treat all taxpayers fairly no matter how complex their tax affairs are. No they don’t. Just ask contractors who have suffered an IR35 enquiry if that’s how they felt both during and after their experience.
During 2017-18, HMRC received 46.7 million telephone calls to their contact centres, representing a decrease of 10% in demand to speak to an adviser.
This has been attributed to more people using the Revenue’s digital services. Whilst I don’t doubt there is truth in this, there will also be many that through past and desperate experiences, simply don’t bother contacting HMRC this way anymore, albeit that the department say their average speed in answering calls was 4 minutes and 28 seconds (within their 5-minute target).
This was however slower than the previous year of 3 minutes and 54 seconds. Of course, answering the initial call and providing a satisfactory response and service are two completely different things.
Of the 12.9 million pieces of post where taxpayers required a response, HMRC turned around 80.7% within 15 days and 97.1% within 40 days. Does anyone other than HMRC think that 40 days to issue a response is reasonable?
HMRC have a very long way to go to achieve its utopia, but even if it does, will anyone other than those in Whitehall ever acknowledge that their behaviour matches their dreams?