A parliamentary committee has called on HM Revenue and Customs to undertake an inquiry into staff conduct after concluding some HMRC enforcement staff tackling tax avoidance and evasion did not meet the department’s standards for behaviour.
In a report examining the powers of HMRC, the House of Lords Economic Affairs Committee's members said that they “fully support HMRC’s efforts to recover tax owed and deter” tax avoidance and evasion but added there need to be better systems in place to identify and address any problem behaviours as a matter of urgency, as there was evidence that “in compliance and enquiry cases the behaviour of some HMRC staff falls well below the standard set in [HMRC’s own] charter".
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As part of its efforts to boost tax collection, HMRC has recently been given greater powers, and is being asked by ministers to collect more tax with fewer staff.
However, the report concluded that the government does not appear to discriminate effectively between the full range of behaviours and circumstances it describes as tax avoidance, despite what it called “a clear difference in culpability between deliberate and contrived tax avoidance by sophisticated, high-income individuals, and uninformed or naive decisions by unrepresented taxpayers”.
The peers concluded that “cultural drivers” to increase tax yield “may have pressured staff to take a more aggressive approach to tax collection, and in doing so impaired the ability to be fair to taxpayers and act in accordance with charter values”. HMRC’s charter requires it to respect taxpayers and treat them as honest; provide a helpful, efficient and effective service; be professional and act with integrity; and deal with complaints quickly and fairly.
The committee also heard concerns that there was no longer the right balance of powers between taxpayers and HMRC, with instances of “mission creep” where powers that were initially limited being subsequently extended more widely, including naming and shaming provisions.
Accelerated payment notices (where HMRC believes the recipient has been involved in a tax avoidance scheme and must pay the amount of wrongfully avoided tax stated within 90 days) and follower notices (issued to taxpayers who have used a scheme similar to one that has been found in another case to be unlawful, in order to resolve litigation) were highlighted as examples of disproportionate powers, in particular the lack of a right of appeal to the tax tribunal.
Ruth Stanier, HMRC’s director general of customer strategy and tax design, told the committee that 54% of complaints about HMRC are upheld. Although peers acknowledged this suggested HMRC’s internal complaints process can be effective, it also mean that in a majority of cases HMRC staff are getting it wrong. even after internal reviews and assurance processes.
The committee therefore called on HMRC to undertake “a full inquiry into behavioural trends and cases of aggressive treatment” to ensure it maintains the charter’s requirements.
HMRC should then publish a clear statement of which leadership behaviours, training or policy clarifications are required to ensure all staff are aware of what is and is not acceptable behaviour towards taxpayers, the report concluded.
It should also use the creation of the new customer experience committee, which is replacing the committee that oversaw the charter, to include more input from major tax bodies and the involvement of the Adjudicator’s Office, which undertakes independent reviews of complaints against HMRC.
Responding to the report, a government spokesperson said: “We’ve taken unprecedented action to crack down on avoidance and evasion, making sure people pay their fair share of tax and securing funding for our vital public services.
“Parliament has given HMRC powers it needs to tackle businesses and individuals who do not pay their fair share, and it uses them responsibly and subject to appropriate checks and balances.”
An HMRC spokesperson told CSW that the department sets “very high professional standards for our compliance officers, and we take meeting those professional standards very seriously”.
"This means that as well as taxpayer rights as set out in legislation, HMRC also has extensive internal checks to ensure we get things right."
“If we fall short of our high standards, we have a rigorous complaints process in place,” the spokesperson added. “If people aren’t satisfied with our response to their complaint, they can refer it to the Independent Adjudicator’s office.”