HMRC under scrutiny

At last - good news for tax payers!

Government to set up standards committee to scrutinise HMRC powers

The government is putting its own HMRC under scrutiny. It’s appointing a new professional standards committee to oversee how the organisation tackles tax avoidance and evasion. How fairly does it handle its sweeping new powers? What safeguards are in place to protect the tax payer against excessive ill-judged penalties? There is increasing concern that the pendulum has recently swung too far in favour of an over-zealous HMRC and away from the fair treatment of tax payers.

Evasion vs Avoidance

During his term as Prime Minister, David Cameron dived into the dangerous territory of morality and taxation. For years, there had been a general acceptance that tax ‘evasion’ was illegal but ‘avoidance’ was OK – the latter being a perfectly legitimate way of interpreting tax laws to one’s own advantage. Following high-profile scandals, where celebrities pushed the boundaries of ‘avoidance’ too far, Cameron re-defined ‘avoidance’. He placed it firmly into the ‘evasion’ camp and announced a crusade against all attempts by companies and organisations to exploit loopholes.

The Prime Minister’s campaign led to HMRC being furnished with much stronger, some would say, ‘draconian’ powers. (An interesting footnote – Cameron’s puritanical stance took something of a knock when he was exposed for owning shares in an off-shore mutual investment fund). But now – the feeling is growing that HMRC is, on occasion, taking its powers too far. They need to be reined in. Hence the announcement of a new scrutinising standards committee.

Committee powers - yet to be announced

The committee will take advice from a range of independent experts. They will consider, among other things, the implementation of HMRC powers.
Although the new committee will be publishing their precise remit in the autumn, they’ve already made it clear that they won’t be looking at individual cases or government tax policies.

The concept is part of a package of measures revealed in a written statement on HMRC powers and taxpayer safeguards made by financial secretary to the Treasury, Jesse Norman. In his statement, he highlighted the need to ‘maintain and develop public trust in HMRC’s operations’.

He wrote of ensuring that HMRC’s powers are ‘exercised in a way that maintains public trust, with appropriate oversight and operational checks and balances, and statutory safeguards that enable taxpayers to dispute HMRC’s decisions or complain about their treatment.

How has this need for oversight arisen?

In a report at the end of 2018, the House of Lords economic affairs committee produced a report claiming that ‘perhaps due to reduced resources, HMRC has been granted some broad, disproportionate powers without effective taxpayer safeguards. High penalties, designed to deter some taxpayers from continuing appeals against tax liabilities, are a tax on justice.’

Increased transparency

The committee was especially worried about a topic we’ve covered extensively in recent blogs (and will continue to do so in the future) – the application of the loan charge on disguised remuneration schemes.

Jesse Norman also expanded on plans for the new committee to focus on the transparency of HMRC’s operations – ‘This year … HMRC will expand the range of performance and management information they publish in their monthly and quarterly performance publications … HMRC will publish further information, including but not limited to, their debt management, registrations and repayment services.’

HMRC will also be reporting on the effectiveness of its extra support service for vulnerable taxpayers and will review taxpayers’ experiences during compliance enquiries.

How independent will the committee be?

Here at Most Money, we welcome these new measures. They should provide stronger safeguards against the misuse of HMRC powers and strengthen public trust in the tax authority. Just one note of warning. Ideally, this committee would be an independent supervisory body. In reality, its nature is consultative and not independent of HMRC. But at least it’s made up of independent experts. So, we see the committee’s formation as a forward step.

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