Tax: Dealing with HMRC

Donald-Drysdale By Donald Drysdale for ICAS

3 October 2016

Simpler taxes and a radical new approach to taxpayer support are needed, suggests Donald Drysdale, not only to protect taxpayers but also to transform HMRC.

How not to treat taxpayers

In July HMRC published their performance statistics for 2015/16. These showed that, following a catastrophic drop in service standards between April and June 2015, there had been some improvement.

Over the year, HMRC had planned to answer 80% of phone calls made to them and actually answered only 72%. For an organisation that claims to be “customer-centric”, it’s astonishing that nearly one-third of incoming phone calls were not answered at all! For those that were, average waiting times until pick-up (i.e. before any automated messages) ranged from 20 minutes in June 2015 to an improved but still disappointing 6 minutes in March 2016.

HMRC have two distinct targets for measuring their success in clearing incoming post. In 2015/16 they aimed to clear 80% within 15 working days of receipt, and 95% within 40 working days. Over the year they failed on both counts, clearing only 52% within 15 days and 87% within 40 days; these even fell short of the levels of 70% and 94% attained in the previous year.

A case in point

Although a First-tier Tribunal judgment creates no legal precedent, it is nonetheless interesting to note the decision in McNamara Joinery Ltd [2016] UKFTT 0529 (TC).

The taxpayer encountered unexpected cash flow problems, and tried to follow HMRC guidance which states: “If you can’t pay the full amount of VAT due on time, contact the Business Payment Support Service before the due date for payment.”

The taxpayer’s agent tried to phone HMRC in time to apply for time to pay, but the line kept disconnecting. The same problem recurred the following week until the agent finally managed to contact HMRC and a two-week extension was granted – but too late to prevent HMRC from seeking to impose a surcharge.

At the Tribunal, HMRC contended that the company and its agent should have anticipated the large volume of calls being made to HMRC immediately before the due date. The Tribunal rejected this, observing that (a) HMRC do not publish times when their lines are likely to be busy; (b) rather than expecting delays, it is reasonable for a taxpayer to expect phone calls to HMRC to be answered without delay; and (c) HMRC should have arrangements in place to deal with the higher volume of calls promptly.

In the Tribunal’s opinion the company had established a reasonable excuse for its late payment of VAT.

Low morale at HMRC

It is hardly surprising that taxpayers, unable to communicate properly with tax administrators, are frustrated by the experience. Likewise, HMRC staff working in these conditions are hardly likely to be proud of the organisation for which they work.

When Jon Thompson, HMRC’s newly-appointed chief executive, made his first appearance before the House of Commons Treasury Select Committee in June, he reported that staff morale had improved but was still below the civil service average. As a newcomer to HMRC he felt that they didn’t deserve all the flack they had attracted, but admitted that they need to do more to improve customer service.

Referring to discussions with 3,000 out of HMRC’s 66,000 staff, Thomson said: “What we’ve discovered is that staff are very positive about their jobs and their immediate team leader, but have very little trust in the senior leadership.”

The Civil Service People Survey for 2015 was more revealing. The civil service median for employee engagement (i.e. how proud staff were of their organisation, and how much it inspired them ) was 58%, while HMRC at 45% was the lowest of seventeen organisations surveyed (Source: Civil Service World).

Could it be that the UK’s tax system is simply too complex for HMRC to administer in its existing form? In the UK government structure, the behemoth created by Gordon Brown in 2005 dwarfs all other non-ministerial departments and most ministerial departments, but it isn’t coping. We’re accustomed to blaming those leading HMRC, or (even worse) their long-suffering employees.

Perhaps it’s time instead to lay the blame where it really belongs – with successive Chancellors whose Budgets have added layer upon layer of new complexity, and the MPs who enact these. It’s time for a fresh approach – a new broom to sweep away decades of creeping growth in our tax laws, and make our taxes genuinely simple at the point of delivery to the taxpayer.

The benefit of a fresh start

Revenue Scotland was established in 2015 as the body responsible for administering taxes devolved to the Scottish Parliament – currently land and buildings transaction tax (LBTT) and Scottish landfill tax (SLfT). This new tax authority is bound by a Charter of Standards and Values defining its relationship with taxpayers – not “customers”.

In September Revenue Scotland’s annual report for 2015/16 confirmed that it had established a robust online tax system which had exceeded expectations and received widespread praise. It accepts returns online or on paper, and during the year 98% of returns were submitted online. Average waiting time was 10 seconds for phone calls to Revenue Scotland, and 96% of all written communications were responded to within 10 working days.

Are there lessons for HMRC from this new tax authority with its highly motivated staff? Revenue Scotland hasn’t created a myth of “serving customers”. Instead it concentrates on its role as a tax administering body, working within the Scottish government’s four key fiscal principles – certainty, convenience, efficiency and proportionality to the ability to pay.

HMRC believe their ‘Making Tax Digital’ (MTD) programme will bring improvements, but this won’t happen simply by imposing MTD against the will of taxpayers. As an essential, the staff at HMRC need to be refocussed to provide a tax administration role that motivates them and offers genuine convenience and efficiency to taxpayers.

Lies, damned lies, and statistics

On a lighter note, if you don’t always believe HMRC’s performance statistics you might like their digital blog of 22 September claiming that robotics and people make a great combination.

At the time of writing, this estimates that the latest agile build of their Digital Mail Service (DMS) saves up to 9 seconds per mail item affected. With 3,000 cases a day, they claim that this would equate to “a saving of 450 hours per day - a real result!” It’s unclear whether this conclusion was reached by a robot or a person, but on checking the arithmetic you’ll see that the daily saving was only 7.5 hours.

Article supplied by Taxing Words Ltd

Image credit: nui7711 /


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