Only death and taxes are certain, they say. But Dave Hartnett tells Ruth Keeling that the profession isn’t that predictable
Tax officials are never going to be popular characters, as HM Revenue and Customs (HMRC) permanent secretary for tax Dave Hartnett knows only too well. As the figurehead for the tax profession – “the person that the nation recognises as the head of tax administration” – he has to lead on “some of the biggest disputes we have”.
Unfortunately for Hartnett, if he is not being cursed in a company board room for sticking his nose where it isn’t wanted, he is being attacked for being too soft on big business; he is the face of the government’s new, more flexible approach to big taxpayers, whereby inspectors remain at arm’s length from companies they have judged to be low-risk.
Hartnett – who joined the Inland Revenue in 1976 as a tax inspector, moved up the ranks, and became chairman of HMRC when his predecessor stepped down in the wake of 2007’s scandalous data loss – is unrepentant about the changes he has overseen at the department over the last few years.
“We were a bit stiff and rigid in our approach,” he says. “Three or four years ago big businesses would have accused us of lacking any business sense. They wouldn’t accuse us of that today.”
That change has required tax inspectors to treat the businesses they are examining as customers, rather than suspects. Hartnett insists that “we have not gone soft on compliance, but we have tried to develop customer-focused approaches.” This process of changing the very culture of tax inspection has not been simple. “It has been quite difficult at times,” says Hartnett – but the work continues. Hartnett believes the light touch approach – whereby firms which have a good track record have less regular conduct with HMRC than those judged to be more likely to indulge in tax avoidance – will continue “to change the role of the [tax] profession quite significantly”.
This changed approach has big implications for tax inspectors, as well as their customers. For example, the programme of placing senior people on secondment with FTSE 100 companies is to be extended to more junior staff. Don’t expect a quick end to Private Eye and Guardian criticisms that HMRC is too close to business for comfort; Hartnett thinks that kind of closeness and understanding is “very important” in improving the organisation’s operations.
Having said all this, HMRC is still ready to get into the kind of disputes that mean Hartnett must get his hands dirty and lead the negotiations. And when that happens, tax inspectors must face the large(r) teams of expert legal and tax experts which multi-million businesses can afford to employ.
A few years ago, Hartnett says, there were concerns that HMRC’s tax inspectors were not keeping up to date with the latest developments going on around them, because the training they were getting was inadequate. “The worry was that they were falling behind some of the major accounting firms,” he says.
In fact, the tax profession “was becoming a bit of a poor relation in the department”, with management training making a more regular appearance than tax on the timetables of HMRC’s in-house training centre. “We needed to raise the game on tax,” says Hartnett. “We felt we owed it to staff, and society, to improve the training available.”
This has resulted in a foundation-level course in tax inspection, equivalent to an A-level, receiving accreditation from the Association of Accounting Technicians. HMRC is currently in the process of negotiating with further education suppliers over accreditation of higher-level qualifications which will, broadly speaking, be of degree-level standard and take staff around three to four years to complete. This drive for professionalisation is to be rigorously applied, says Hartnett. “If people don’t pass the programmes, then they’re not going to be able to do their jobs,” he says. Existing, unqualified staff will be comforted to know that exceptions will be made for those who can demonstrate experience and a proven ability to do the job.
Hartnett says this overhaul of training “is helping to drive up knowledge and performance”, and HMRC intends to keep a close eye on the skills that are needed by people carrying out particular roles within the tax profession. In fact, Hartnett believes this focus on learning and development is “one of the most significant and successful things we’ve done”. And with the economic downturn requiring the government’s tax experts to think on their feet and in very new ways – HMRC developed the banking payroll tax in just five weeks, for example, and has allowed billions of company tax bills to be deferred – many would argue that this sharpening of skills is very well timed.