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KEY POINTS
- HMRC want to help smaller businesses.
- Finding the right person at HMRC to talk to.
- Agent dedicated helplines could be improved.
- HMRC need to be open when difficulties arise.
- More self-service for advisers.
Taxation was invited to report on a round table discussion at 11 Downing Street between tax practitioners, mostly from smaller practices, and the Financial Secretary to the Treasury, Stephen Timms.
The Financial Secretary to the Treasury opened the meeting by saying that creating a tax system that was ‘better for business’ meant improving administration as well as tax law.
To do that the Government needed the help of the profession. He was conscious of the three perspectives of the practitioners around the table:
- as taxpayers themselves;
- as the owners of small businesses; and
- as agents, seeing that things were not always as they should be when dealing with HMRC on behalf of their clients.
HMRC’s business tax focus has recently been on large business, where they have had considerable success. They need now to do the same for smaller businesses.
So what did the agents present think about the service they receive from HMRC, how could it be improved, and what new things could HMRC do, or what old things could they start to do again, which would make the service better?
He wanted the conversation to be frank, and for that reason neither agents nor HMRC officials would be named although their comments could be reported (the Chatham House rule).
Finding the right person
The first part of the meeting was spent discussing what within HMRC worked well in agents’ experience, and what could be improved. Most agents had positive things to say as well as proposing improvements.
The new agent account managers (AAM) who help the agent contact the person they need to in order to solve a client’s problem, (where normal routes for escalation had been exhausted), were thought to be working well, although so far the numbers were limited.
This was a Working Together initiative, and it was good to be able to talk to someone and develop a relationship in the same way that, in the past, one could contact the local district.
However the AAMs must be well trained, and it was suggested that they should all spend at least a week in an accountant’s office. This suggestion was received with enthusiasm by HMRC.
The pilot had started with two AAMs: there are now twelve, and by the end of April there will be 40. At the start of the pilot HMRC had avoided giving it publicity in case the AAMs were swamped, but when the 40 are in place their existence would be publicised more widely.
However, since there are 43,000 firms of accountants, that could mean more than 1,000 firms per AAM.
Furthermore, while AAMs have some training, they are not in that sense equivalent to the old district inspector (DI).
If the return from them was good enough – in other words, it cut costs by getting agents to the right person quickly and reducing extra contact – then they would be retained, but in the current climate if they turned out to be a ‘nice to have’ they probably would not.
Agents commented that the time saved in accountancy offices should also be factored in when making this measurement, and HMRC said that some agents might be asked to keep records of this.
Effective
The standard letters sent out by HMRC had significantly improved. The provision of client details online was very good, but if more and more is to be done online this should not be at the expense of being able to make personal contact. Agents deal with problems, and it is taking longer to get these resolved.
The Business Payment Support Service, for arranging time to pay, has been very effective, with agents reporting that clients did not feel under pressure to pay up when they could not afford to.
Others, however, felt that there were problems, particularly with partnerships, and that the service could be inconsistent depending on who dealt with the call.
The experience of self-assessment online in January was generally positive.
However, the improvements made in self assessment now need to be implemented in PAYE and VAT, giving agents access to the same information about progressing payments and returns. For payroll, in particular, access to payments made would help.
Dedicated helplines
Two telephone initiatives, the agent dedicated lines (ADLs) for self assessment and PAYE and the specialist helplines (where available), were both praised, but some also pointed out that the former could not actually deal with many of the queries raised by agents, and did not allow callers to speak directly to the person who was handling an issue. Instead a call back is promised, which is supposed to be within three days but is often in five.
Some agents said that more than half the time the promised call back never came, and if it came when the agent was out, the whole process had to be started again.
There is also the practical problem of having so many files on the accountant’s desk waiting until the call back is received. The answers received are often not complete, and if another member of staff in the accountant’s office takes the call but is not sufficiently aware of the case, he might not ask the necessary questions to get a full response.
HMRC said they need to achieve greater consistency with the ADLs. The helplines are receiving 1.5 million calls a year, but according to agents a very large percentage of those are progress chasing or basic exchanges of information. HMRC are analysing why this is the case and what could be done to improve it.
One possibility being considered is segmenting calls to ADLs so that agents call different numbers for different issues. HMRC suggested segmenting by industry, but the agents felt that, with the exception of a couple of areas such as construction and farming, it would be better to segment by type of tax.
They said that the specialist offices dealing with research and development or the enterprise investment scheme, for example, really know what they are talking about.
Again the comparison was made with the old DIs, where agents use to have the telephone numbers of experienced DIs ‘which we jealously guarded’, who could be rung for a considered opinion. HMRC warned that DIs were not about to make a return…
Greater support
The next part of the meeting considered how the support could be strengthened for the great majority of businesses which want to pay the correct tax. In particular, HMRC wanted to hear what would help new businesses.
The main problem raised by agents was the processing of 64-8s. While this had improved, there was a sense it was now getting worse again, with some cases taking 12 to 14 weeks to be processed.
HMRC accepted that there are some problems and that, because of this, agents were resorting to workarounds. If the process could be made to work properly so that the forms were processed promptly it would be reasonable to insist on the proper process being followed.
The department is also working with the national Working Together steering group to identify reasons for any fall in performance.
HMRC realised that the start of a business was a critical moment, as some SMEs ‘took a view’ as to whether they were going to join the tax system or not, so the more their path into the system could be smoothed, the better.
On a larger scale, there was considerable support among agents for merging income tax and National Insurance in order to reduce the complexity for a business contemplating taking on its first employee.
One agent pointed out that, on forming a company, the director gets a big package all about PAYE, but does not realise that he is an employee of his own business, and so eventually gets a penalty for not submitting his P35.
HMRC said the merger idea should be considered, but that they thought more could be done by reducing the burden of administration.
The issue of HMRC using email was raised. The problems of full e-mail for HMRC were recognised, but surely there could be a structured system for sending e-mails to a generic address which could then be internally routed?
Coding problems
The recent problem with PAYE codes also loomed large for the agents present. Some estimated error rates to be more than 50% and explained that each one needed 15 to 30 minutes to correct. HMRC should be more open when things go wrong; the admission of problems with coding notices came late.
HMRC explained that, although some problems had arisen with the implementation of a new computer system, the main cause was the poor quality of their existing data.
Sometimes this was HMRC’s fault, sometimes it was that of the employee/employer who had not passed on information. This will continue to be a problem for a few months as HMRC are reviewing the whole PAYE database for cases that may have been affected by these data problems.
HMRC had not realised the extent to which inconsistent data could affect coding notices, the number of workarounds being used, and the impact of problems such as ‘phantom jobs’ where employees said they were starting a new job and then did not.
It might have been possible to cleanse the data in advance, but HMRC had sought to balance upfront contact with the customer at a very high cost and the extent of the data problem – agents pointed out that the cost had then fallen on the agents.
HMRC accepted that they could have publicised the problem better, but said they had been quick to inform key stakeholders of the issue and then keep them regularly informed.
One suggestion made by agents was that they should be given access to HMRC’s systems so they could set the codes for their clients on a ‘self-service’ basis similar to self assessment.
HMRC were keen to explore this in the context of a new deal for agents which would allow them access to more processes, but said there would also have to be more safeguards. How would agents be validated to access this ‘new deal’ and what training would be required?
Keeping track
Agents said they would like access to allocate tax payments, to track progress of issues they had raised, and in particular to track post that they had submitted.
Post is a major problem, and agents criticised the use of holding letters, which meant the targets for sending a reply were met, but no substantive progress had been made.
The result is that an agent might make nine or ten calls to ask why a letter has not yet been dealt with. Refunds are a particular problem, with agents being told that a repayment is ‘going out tomorrow’, meaning not that it was to be sent to the client, but that it was moving on to the security checking process.
HMRC commented that post is very difficult to process effectively, and that a solution is likely to require clear signals to agents about which processes to use, for example using electronic communication rather than letters in some cases.
It was accepted that there is a genuine problem of a minority of rogue agents, but most agents around the table felt this was a very small number. It was argued that professionally qualified agents in particular would not jeopardise their qualification by breaking the rules for one client.
The argument that professionally qualified agents should be admitted automatically and others vetted was disputed by non-qualified agents at the table, who felt that they often paid more attention to their training, and knew from the cases they took over that not all qualified agents do a good job.
HMRC pointed out that the agents around the table were not representative of the community as a whole.
Unfortunately most major investigations involve a crooked agent, most of whom are qualified, and a lot of tax is at stake.
HMRC have suffered significant attacks on its online self-assessment system, so there would need to be higher security if agents were to be allowed greater access.
HMRC did not have the capacity to act as a regulator in this way, and yet there are some very competent people, particularly those working for organisations such as the Low Incomes Tax Reform Group, who do not need the hard regulation being suggested for unqualified agents.
Agents, however, emphasised that any system needed to start from the point of view that it aims to identify and exclude a small minority of bad agents, rather than trying to lay down criteria that a good agent would automatically meet.
Useful meeting
The Financial Secretary said he had found the discussion very helpful and it would help shape future developments in HMRC.
