Putting taxpayers' charters to the test

HMRC Charter
Donald-Drysdale By Donald Drysdale for ICAS

24 January 2016

Worrying shortcomings in HMRC’s service standards have been published by HMRC itself, reports Donald Drysdale.

Do you know whether HMRC’s standards of service are meeting those expected under the taxpayers’ charter? And are you aware of substantial changes made to the charter this month? Asking these questions has set me wondering about the value of the taxpayers’ charters. Do they really make a difference?

HMRC’s Charter

HMRC’s predecessor bodies (the Inland Revenue and HM Customs & Excise) jointly issued a non-statutory non-binding taxpayers' charter in 1986. It set out the principles and standards of service which both departments aimed to achieve in handling taxpayers' affairs.

The charter went through several iterations over succeeding years. Then from 2009 HMRC was placed under a new statutory obligation to prepare a charter including standards of behaviour and values to which it (HMRC) aspired, and to review the charter regularly, and revise and republish it when it considered it appropriate. HMRC must also report annually on the extent to which it has demonstrated the standards of behaviour and values set out in the charter.

While this degree of statutory backing was new, the individual charter provisions from 2009 onwards have remained non-statutory and non-binding. Nonetheless HMRC’s annual charter reports are illuminating. The report for the year to 31 March 2015 was published earlier this month.

In what the HMRC’s annual accounts for 2014/15 described as “another good year for HMRC”, it missed its overall targets for answering phone calls and dealing with post. This will come as no surprise to taxpayers and tax agents alike. An astonishing 27.5% of all phone calls to the tax authority were not even picked up – an increase from 21% the previous year. Only 70% of incoming post was turned around within 15 days, compared with 83% the previous year. These figures are deplorable by any standards. A private sector organisation operating this way would have gone to the wall years ago.

.In annual surveys from 2011 to 2015, no more than 41% of tax agents felt that HMRC had achieved the required standard in any year.

It is noteworthy that HMRC’s worst performance statistic was its perceived failure to do all it could to keep the cost of dealing with it as low as possible. In annual surveys from 2011 to 2015, no more than 41% of tax agents felt that HMRC had achieved the required standard in any year. This ought to have inspired HMRC to make a serious effort to change its ways. Instead its opted for an easier course – simply publishing a new charter which omits the obligation altogether.

HMRC’s new taxpayer charter was published this month. A new Charter Committee (as a direct sub-committee of HMRC’s Board) will hold HMRC to account on its compliance with it, and is to hold its first meeting in February.

While making changes from the pre-existing charter, HMRC has chosen not to publicise or explain these. I’m grateful to tax author Rebecca Cave for analysing the changes in her recent article on AccountingWEB.

The omission of HMRC’s previous obligation to do all it could to keep the cost of dealing with it as low as possible comes at an interesting time. It may even be a deliberate ploy to accommodate the government’s new digital tax accounts, which are expected to impose substantial extra compliance costs on taxpayers. I hope this point may come to the fore on 25 January when Parliament debates a public petition on digital tax accounts.

In other respects the new charter subtly shifts responsibility from HMRC to the taxpayer without drawing the changes clearly to the attention of taxpayers and tax agents.

Revenue Scotland’s Charter

Revenue Scotland is responsible for administering Scotland’s devolved taxes – although not the Scottish Rate of Income Tax, which remains part of the UK income tax regime administered by HMRC.

Revenue Scotland’s Charter of Standards and Values is based broadly on HMRC’s charter as it was before the latest changes. It is less threatening than HMRC’s new charter. It includes an undertaking that Revenue Scotland will work hard to minimise the taxpayer’s costs in dealing with them, and will respond promptly and conclude matters as quickly as possible.

It is early days yet, but indications so far suggest that Revenue Scotland intends to work hard to meet its charter commitments.

Worldwide developments

As long ago as 2003 the OECD published a practice note on Taxpayers’ Rights and Obligations setting out the elements that might be found in a taxpayers’ charter or commonly existed even in those countries without such a charter.

These included the rights of taxpayers, such as their right to be informed, assisted and heard; their right of appeal; their right to pay no more than the correct amount of tax; and their rights to certainty, privacy, confidentiality and secrecy.

As recently as July 2014, the European Commission reported that it was ‘working intensively’ on a European Taxpayers' Code as a blueprint for relations between taxpayers and their tax administrations.

It also covered the obligations of taxpayers, such as their obligations to be honest and co-operative; to provide accurate information and documents on time; to keep records; and to pay taxes on time.

It was also common for a taxpayers’ charter to set out the risks to the taxpayer of non-compliance with the obligations. Typically these included provision for penalties and/or interest to be imposed, and for prosecution in more serious cases.

As recently as July 2014, the European Commission reported that it was ‘working intensively’ on a European Taxpayers' Code as a blueprint for relations between taxpayers and their tax administrations. While most member states already had national taxpayers' codes to define tax rights and obligations, these varied considerably from one country to another, making it hard for citizens and companies to understand their rights in different member states and comply with their tax obligations in cross border situations.

The EC considers that a pan-EU code would assist companies operating in the single market, and be an asset to member states in reducing the risk of mistakes and improving tax compliance. The aim is to have a Code which promotes best practices in developing co-operation, trust and confidence between tax administration and taxpayers; ensuring greater transparency on rights and obligations for taxpayers; and encouraging a service-oriented approach.

This new European Taxpayers’ Code has not yet been issued. When it appears it may be expected to influence future fine-tuning of the UK’s taxpayer charters. Perhaps this might be exactly the sort of external nudge needed to persuade HMRC to take its service commitments to taxpayers and tax agents more seriously.

Article supplied by Taxing Words Ltd

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