Tax: HMRC's plans for Scotland
As HMRC undertake a seismic transformation of their UK-wide operations, Donald Drysdale looks at some of the repercussions for Scotland.
Scottish Affairs Committee inquiry
In my last article, I considered some of the broad implications of HMRC’s current transformation programme. Changes proposed are likely to have major repercussions for taxpayers and their agents, and these will vary in different parts of the UK. This article looks at what is expected to happen in Scotland.
When the House of Commons Scottish Affairs Committee decided to conduct an informal inquiry into the impact of HMRC’s reorganisation in Scotland, it met and took oral evidence from ICAS (represented by Paul Gallagher CA, a Partner with EY); the Public and Commercial Services (PCS) Union (John Davidson); and HMRC (Jim Harra and Ravi Chand).
The Scottish facts and figures
Scotland has 8.4% of the UK population, but around 12% of HMRC’s current UK workforce. This comprises more than 8,500 staff spread across 18 Scottish offices. By 2021 they plan to have a reduced staff complement of around 6,300, mostly located in two regional offices in Edinburgh and Glasgow. In addition, a smaller HMRC unit will be retained, working alongside police and other agencies at the Scottish Crime Campus in Gartcosh.
From October this year HMRC has been operating as three distinct UK-wide work streams:
- Customer Strategy and Tax Design – including customer strategy, tax policy, process design and tax assurance teams, led by Jim Harra;
- Customer Services – an expanded group bringing together all the main operational teams, led by Ruth Owen; and
- Customer Compliance – tackling non-compliance and enforcement for all customer groups, including large businesses, led by Jennie Granger.
It is unclear as yet what functions HMRC’s various regional offices will perform, and whether or not the offices in Edinburgh and Glasgow will include activities within all three work streams.
Certain Scottish communities will be particularly hard hit by the forthcoming office closures, and HMRC have been accused of failing to carry out proper impact assessments of the effect of their plans on local economies. For example, there are currently 2,700 HMRC staff in three offices in East Kilbride, and 1,000 in Cumbernauld; closing these completely (as they plan to do by 2025/26) could have massive repercussions. On a smaller scale, the PCS Union has estimated that closure of HMRC’s Bathgate office where 600 employees work will take £1m a year out of the local economy.
Impact on HMRC staff and service standards
There may be significant disruption to HMRC services while their employees, already suffering from low morale, address the issues raised by office closures. Many HMRC employees will face difficult personal decisions. Some may face long commutes, subsidised for only a limited period by inadequate (and taxable) daily travel assistance. Others may be offered relocation assistance, but no details of this are yet available.
Staff currently based in Inverness would be unable to relocate to Edinburgh or Glasgow without moving house. Even employees relocated from Dundee to Edinburgh would face daily commutes in excess of ‘reasonable daily travel’ according to HMRC guidelines. And the last time an HMRC office closed in Dundee, not a single member of staff opted to relocate.
HMRC are seeking to ensure that employees at risk of redundancy are given career transition workshops and an outplacement programme, preparing them for the external jobs market. HMRC will also try to help them find job opportunities in other government departments; for example, the Department of Work and Pensions (DWP) is a significant alternative public sector employer in Scotland. However, scope may be limited because all public-sector bodies are under pressure to reduce their staff numbers.
As in previous HMRC reorganisations, an anticipated effect is the loss of older, more experienced tax staff for whom continuing an established lifestyle may be more attractive than any chance of future career progression in an alternative location. Loss of their tax experience could have a serious detrimental impact on the quality of HMRC services.
Impact on business sectors
While HMRC’s transformation will disrupt the lives of many existing HMRC employees, it may not be so immediately obvious that it will cause problems for taxpayers and agents. After all, HMRC is already organised UK-wide by tax-specific functions and specialist industry sectors.
Nonetheless, the reallocation of HMRC workloads can create new obstacles. This is particularly so for large businesses and high net worth individuals for whom HMRC provide customer relationship management (CRM) functions and opportunities for face-to-face contact, since any shift of work from one part of the UK to another may cause them inconvenience and cost.
The oil and gas sector is important to Scotland; currently HMRC serves the entire industry from London, but they have plans to transfer some of this work to Glasgow over the next few years. Likewise, in the financial services sector there has been a trend in recent years for HMRC staff to deal with some insurance tax work out of Edinburgh and Glasgow, and this is thought likely to accelerate. However, HMRC’s Scottish-based work within these specialist sectors is not restricted to Scottish businesses but extends to some others elsewhere in the UK.
While some of HMRC’s large business work is being moved into Scotland, other CRM roles have been reallocated elsewhere in ways that seem designed to suit HMRC requirements rather than those of taxpayers. For example, a large Glasgow-based group has reported the recent transfer of its CRM function from Glasgow to Belfast to help HMRC offer career progression in Northern Ireland. In some cases the distance between a taxpayer and their CRM might seriously jeopardise the service available to the taxpayer or even the quality of their compliance.
Impact on tax agents
It is in the interests of agents everywhere to be able to work with a tax authority that has able, well-trained and well-motivated staff with sound career opportunities.
It seems unfair that HMRC’s CRM services are restricted to the largest businesses and the wealthiest individuals. ICAS has called for existing CRM services to be improved and also cascaded down to a wider range of businesses – for example larger private companies.
A key complaint from tax agents remains HMRC’s continuing failure to provide them with a named CRM, available for face-to-face contact where required. Agents need clarity as to whom to speak with at HMRC, and ready access to that person. If the current reorganisation helps advance these goals, then that would be welcome.
Article supplied by Taxing Words Ltd