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KEY POINTS
- What is HMRC’s 'Purpose, vision and way'?
- HMRC are tax assessors and collectors, not policy-makers.
- We are taxpayers not customers.
- When is bending the rules illegal?
- HMRC are assuming too much authority.
HMRC published a business plan for 2009/10 in April, entitled ‘Delivering our vision’. It refers to HMRC’s ‘Purpose, vision and way’ (PVW), a document which the ICAEW described as ‘published, without public consultation, by HMRC and its new senior management team in November 2008’.
The ICAEW and the CIOT have separately expressed their disappointment at the way in which the PVW document seems to have hijacked the consultation on the taxpayers charter, which in their business plan HMRC refer to as the ‘HMRC charter’.
The PVW document seems to have hijacked the business plan as well, so it is about time an informed debate was started on the document, especially as it is clearly so wrong.
In this article, I will explain why the November PVW document is wrong and I welcome disagreement if readers think it is actually me who is wrong.
Little noticed
The PVW document appears to have been slipped under the wire to some extent. I thought perhaps I had missed it as I was out of action for a while in November, so I googled it.
Apart from HMRC’s own contributions and a couple of satirical websites, the only noteworthy comment I found came from the Low Incomes Tax Reform Group. In an article on 9 February, the LITRG accurately observed:
'Today’s HMRC takes to itself what some might describe as a political role. The functions of “making sure that the money is available to fund the UK’s public services”, and “helping families and individuals with targeted financial support”, some might have thought were both prerogatives of Parliament. It is for Parliament to determine taxes; HMRC’s role is to assess and collect the taxes decreed by Parliament. Similarly, Parliament decides what financial support should be targeted on which families and individuals; it is then up to HMRC to pay it correctly and promptly. In short, the law is made by or with the authority of Parliament; HMRC enforces it.
‘We understand that the PVW was put together by the senior management team within HMRC. We worry that if HMRC purports to act as lawmaker in determining what the taxpayer should pay, and what the benefit claimant is entitled to receive, that is bad for all citizens, but particularly for those on low incomes who lack influence and cannot easily get redress.’
If someone at HMRC really believes that HMRC’s purpose is to ‘make sure that money is available to fund the UK’s public services’, then perhaps he or she could answer this question: who ‘makes sure that money is available’ to fund wars, bank bail-outs and myriad Government projects of dubious popularity?
Tax pays for whatever the Government thinks fit, and you will not make paying it any more popular by trying to link it only to pubic services.
One might wonder why it is that we are faced with this propaganda onslaught (for that is what it feels like). I can only speculate, but it seems to me not unrelated to justification for the emerging view that HMRC should ‘maximise the tax take’.
This view was reported to have been explicitly expressed by Dave Hartnett at a Tax Faculty event last year; see The Dave channel.
I cannot be alone in believing this is wrong. I support the pursuit of taxes that are due but unpaid whenever that situation arises, but I have concerns about HMRC deciding to seek the maximum possible whenever they can.
I suspect there are those who would justify it on the basis that tax advisers think it is fair enough to plan for the minimum possible. But I still feel HMRC should be focused on the right amount according to the law rather than the maximum.
The Vision
This leads to the Vision. Here, the predominant aspiration is to ‘close the tax gap’. Much has been written about the concept of a tax gap. The problem is that this expression is not properly defined and incapable of accurate measurement.
If it cannot be measured, how can it be closed? I agree with many of Simon McKie’s observations in his article My richest gain..., where he argues that tax ‘avoided’ is not ‘lost’ and cannot therefore be part of any tax gap.
HMRC say the tax gap is the difference between tax actually paid and the tax that HMRC think should be paid. Self-evidently, an obvious problem with that is that HMRC are not always right.
I may be old-fashioned, but I still believe that it is for Parliament, supported by the courts to decide what tax is due, not an unelected body that we already suspect thinks ‘maximising the take’ is fair game.
I cannot leave Vision without repeating that, no matter how many times it is repeated, I will never be a ‘customer’ of HMRC. This disregard for the English language irks just about every tax professional I come across. We must never surrender to this!
A ‘customer’ is defined in my dictionary as ‘a person who buys goods or services’. As Al Murray would say: ‘The clue’s in the name’. When I have the option to take my custom elsewhere, you may call me a customer (or then, more likely, an ex-customer).
I am a taxpayer. I am starting to think they do it deliberately, just to annoy us. I invite everyone who agrees with me on this to write personally to Lesley Strathie at HMRC and ask her to put a stop to it.
The Way
Next there is the ‘Way’. There are nine aspirational bullet points relating to this in HMRC’s document. Although it is expressed in the present tense (‘we do’) it is obviously what senior management wishes HMRC staff to aspire to.
I fully support eight of these nine aims without reservation, and wish HMRC every success in achieving them. However, the fourth contains something else that is wrong.
HMRC should indeed be ‘passionate in helping those who need it’. They should also be ‘relentless in pursuing those who break the rules’. But what, exactly, is meant by ‘those who bend the rules’?
I can hazard a guess, but it does seem to me that a tax rule is either broken or it is not. Whether or not anyone considers it is immoral or anti-social to take an aggressive tax position is not relevant here.
It feels like the deliberate confusion of avoidance and evasion: behaviours that are fundamentally different and too important to confuse when risk assessment is the order of the day.
One would hope that it was apparent to all tax people that evasion is the greater evil. I would not expect a tax avoider to be treated in the same manner as a criminal, and one does not have to be a promoter or user of tax schemes to identify with the problem this Way creates.
If anyone doubts the veracity of what I am saying, then pause and ask yourself whether you consider that the Joneses (in the Arctic Systems case) bent the rules? HMRC think they did.
HMRC relentlessly pursued them all the way through the system to the House of Lords, where they were found to be in the wrong.
Arbitrary decisions
This is not a defence of tax avoidance, although I agree with Andrew Hubbard, the president of the CIOT, that a proper informed debate on this subject is perhaps overdue, and maybe this article will contribute to that debate.
However, for my money, it is dangerous to accept that HMRC can decide what this term means. I commend Andrew’s article in Simon’s Tax Briefing, 13 April 2009 to readers who are interested in this subject.
I would add a further thought on bending the rules. Until recently, it was thought by just about everyone that taking advantage of a statutory relief was something envisaged by Parliament and could never constitute tax avoidance.
Paying additional pension contributions is an excellent example of this. Now, though, it is clear from HMRC’s Guidance for individuals dated 22 April, that if this is done in 2009/10, it will indeed be unacceptable for some people earning over £150,000.
Not everyone in that income bracket, though, because someone has decided there should be an arbitrary de minimis level, (although £20,000 is hardly trivial).
Something that was considered wholly unobjectionable last year is suddenly out of order, or to put it another way, ‘bending the rules’. I somehow doubt that these detailed provisions were thought up by MPs, whose pensions are in any event paid for by the taxpayer, but they may do their bit for maximising the tax take.
What do you think?
I am afraid this article is going to seem somewhat critical of the PVW. I think it deserves criticism and does few favours for HMRC’s people who are charged with ‘delivering against it’ in due course.
These are people with whom I sometimes disagree, but who, in my experience, remain as civil and professional as they have always been, (if a little frustrated), and do the best job they can, sometimes against the odds.
The modern world requires change in organisations, but not this kind of unilateral assumption of authority.
I have no wish to be unfair, so I invite readers to write in and disagree with me, or to put it another way, engage in the debate for which Andrew Hubbard has paved the way.
Andy Wells is head of dispute resolution at Venus Tax, based in Leeds, tel: 0870 114 2800. The views expressed are his own.
