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What Goes Around...

TW Ed warns that HMRC may not be able to capitalise on the public's distate for perceived tax avoidance if it cannot help the ordinary taxpayer to navigate several significant changes to the tax system in the coming months.

I think this week it is worth reflecting a moment longer on the Public Accounts Committee (PAC) and Mark’s comments in his Editorial - That's Entertainment! I think I see things a little differently to Mark. We have each spent a long time advising clients and some of the comments made in that meeting with the “Big 4” had a certain “man in the pub” feel to them. I can certainly see Mark’s point that more progress might have been made, or the record might have been set straight, if the Big 4 representatives had instead been interviewed by tax and/or accounting experts.

But I think that one of the main themes raised in that meeting goes some way towards explaining why the public might perhaps feel differently. The Committee was clearly concerned about the relationship between the large firms and HMRC / The Treasury, and how experts from those firms were seconded to government to advise on technical aspects of developing legislation – the inference drawn by the Committee was, I think, that there were risks either of undue influence being exerted, or ‘insider information’ being stored up for later avoidance strategies to exploit loopholes in that legislation – or both.

In that context, the public might take quite a dim view of a panel of experts taken from the same industry that is under scrutiny. I think that the PAC, comprised of politicians, perceives a developing role to play.

This perception of risk may be unfair and inaccurate but I do think that the PAC has captured the mood of the general public quite ‘nicely’. I also think that, perhaps unfortunately, it has served to amplify the mood as well.

HMRC is arguably enjoying the fact that the general public seems to agree that paying tax is good, and that larger businesses – multi-nationals in particular – should be paying more tax. But I don’t think that this detente will last. Over the next year or so, we have the tax clawback of Child Benefit and the introduction of Universal Credit – alongside various other benefit restrictions. My understanding is that these will hit a large proportion of individuals in the UK. Some will be taxpayers and some will not. But either way, many individuals will be feeling a pinch in their own pockets, if not already. The Telegraph suggested in January that HMRC had allocated 400 staff to deal with taxpayer queries arising from the Child Benefit clawback. But it is estimated that 500,000 people will be affected – so one HMRC person for 1,250 taxpayers.

In its recent report Reducing Costs in HM Revenue & Customs, the National Audit Office highlighted that HMRC is unsure how many staff members will be required to deal with the introduction of Real Time Information for the c2 million ‘small’ employers, and Universal Credit. This against a backdrop of a significant and ongoing reduction in HMRC’s staff headcount. I suspect the public mood will darken further, if HMRC is unable to help people with their new obligations – which for many will mean reduced personal incomes.

Regards all,

TW Ed