HMRC

Error message

  • Deprecated function: The each() function is deprecated. This message will be suppressed on further calls in _menu_load_objects() (line 579 of /var/www/drupal-7.x/includes/menu.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Notice: Trying to access array offset on value of type int in element_children() (line 6600 of /var/www/drupal-7.x/includes/common.inc).
  • Deprecated function: implode(): Passing glue string after array is deprecated. Swap the parameters in drupal_get_feeds() (line 394 of /var/www/drupal-7.x/includes/common.inc).

On the tax gap, in the Guardian

Published by Anonymous (not verified) on Fri, 24/06/2022 - 5:54pm in

My comments on the tax gap made yesterday were picked up in the Guardian which quotes me saying:

Richard Murphy, a tax expert, said the assessment of tax losses to the exchequer was “half-hearted” and a more comprehensive review would probably have found losses from the hidden economy were much higher. “The report found there was virtually no money that went missing during the pandemic. That cannot be an accurate reading of the situation,” he said.

They added:

The tax authority said a failure to take reasonable care, criminal attacks, non-payment and evasion were among the main reasons for the tax gap in 2020-21 in terms of behaviour.

Small businesses were responsible for nearly half of the tax gap, at about £15.6bn, according to HMRC’s data, with VAT underpayments accounting for the second biggest chunk of the total at £9bn. Losses from income tax, national insurance contributions and capital gains tax accounted for the biggest loss of £12.7bn in 2020-21, while fraud only accounted for £2bn.

And then noted:

Murphy said: “The chance that just £2bn is lost a year to tax evaders – out of £635bn paid – is utterly ludicrous. That’s a 0.3% evasion rate,” he said.

Before concluding:

Murphy continued: “With the greatest of respect to HMRC officials, they mark their own homework when it comes to the tax gap and it is simply impossible that the answer is always the same. That is especially true when it comes to a year when Covid fraud was rampant.”

HMRC is marking its own homework again on the tax gap – and very oddly found it did almost exactly the same as it always does

Published by Anonymous (not verified) on Thu, 23/06/2022 - 9:09pm in

It is HMRC tax gap day - which is the day when they admit how much tax they did not collect, in their estimation.

My standard joke of the last decade has been confirmed yet again today. Whenever I have been asked about HMRC's tax gap (which I used to be often, because I did extensive work on this issue from 2008 to 2015) I now joke that it's a number very close to £32 billion, whatever the true number might actually be. And so it was again this year:

With the greatest of respect to HMRC, they mark their own homework when it comes to the tax gap and it is simply impossible that the answer is always the same.

That is especially true when it comes to a year when Covid fraud was rampant - but apparently, this had no impact on the tax gap (although they do discuss the issue).

Breaking the figures down they suggest these are the taxes impacted:

And these are the HMRC 'customers' (I hate that term) who caused the loss:

No surprise there then. But all the flaws I have mentioned in earlier years remain. In particular look at some of the detail and the risk assessment linked to it:

There are some absurd claims in here. That VAT is subject to low risk is ridiculous: this is impossible when overall small business makes most of the errors. It also suggests that HMRC knows the exact size of the shadow economy, and I am quite sure that they do not.

I am very curious to know why large partnerships are high risk when smaller businesses are not: again, whatever games large partnerships might play I simply do not believe this.

And the chance that just £2 billion is lost a year to tax evaders - out of £635 billion paid - is utterly ludicrous. That's a 0.3% evasion rate.

I have argued before for an Office of Tax Responsibility to properly appraise the work of HMRC, the tax gap and now tax spillovers. It hasn''t happened. But a government that was serious about this would be putting one in place. All the time they don't we have to assume that they're happy for the tax abuse to continue, and that begs the question, why is that?

HM Revenue & Customs really do not want to collect tax from the wealthy

Published by Anonymous (not verified) on Mon, 30/05/2022 - 4:37pm in

I campaigned for automatic information exchange from tax havens for a long time. Perhaps my most important paper on the issue was published in 2009. It was written after a meeting at the Treasury where I was told data exchange from tax havens would not happen in my lifetime and I set out to explain how it could, and how the data in question might be used.

We eventually won automatic information exchange. The OECD driven Comprehensive Reporting Standard began reporting in 2016 and has been fairly effective on a widespread scale since 2018. It takes time for reform to happen: this is one that can be very largely attributed to pressure from the Tax Justice Network during the era that John Christensen and I ran it.

Now Dan Neidle has secured data from HMRC on the level of funds held offshore. The data looks like this:

He has also secured data on average balances held split between tax haven and non-tax haven locations:

So, we now know we were right to be concerned. Around £570 billion is held in tax havens. You might expect that to yield a useful tax return each year, split between tax on income and gains.

But, as Dan Neidle discovered, HMRC has no idea how many of these accounts are properly declared, and nor has it sought to find out. It's as if they don't care. Instead, they are actually offering excuses, suggesting for example that most such accounts are probably held by non-doms and therefore not a concern, when in itself that is simply not true.

As Dan correctly points out, it is not possible to be sure what tax is lost as a result of this indifference by HMRC. It is their job to work this out. But we can be quite confident most of the accounts are not held by non-doms: there are just not enough of them.

So, what to conclude?

First, HMRC is not trying to collect tax owing.

Second, there is no one holding them to account for that.

Third, no wonder we have growing inequality in the UK.

Fourth, no wonder too that we have a tax gap that is out of control.

Fifth, there can be no political direction on this. Clearly, ministers have never asked.

I hope that pressure is brought to bear as a result because right now it is apparent that HM Revenue & Customs really do not want to collect tax from the wealthy.

Country-by-country reporting is beating transfer mispricing, as I always said it would

Published by Anonymous (not verified) on Wed, 04/05/2022 - 6:21pm in

As Accountancy Age has reported:

A 49% uptick in the amount of extra tax collected from investigations into large corporates shifting profits overseas is an indicator that HMRC is ramping up its scrutiny multi-national tax avoidance arrangements, according to specialist law firm Pinsent Masons.

“HMRC is now much more aggressive in tackling what it sees as artificial profit shifting, and much more stringent in its interpretation of what makes an acceptable transfer pricing arrangement,” said Steven Porter, partner and head of tax disputes and investigations at Pinsent Masons.

According to new figures from the 2020/21 tax year, the amount of extra tax collected from transfer pricing investigations into multinational corporates increased from £1.45bn to £2.16bn – HMRC’s highest yield on record.

So, why the uptick? Because country-by-country reporting data is available, of course.  I first created country-by-country reporting in 2003. I campaigned pretty tirelessly for it from then until 2015 when the OECD adopted it, very largely as I first proposed it. The aim was to beat transfer mispricing. It is.

I should ask for a cut (that's a joke, by the way).

Is HM Revenue & Customs turning the payment of tax into a voluntary activity for some?

Published by Anonymous (not verified) on Wed, 30/03/2022 - 9:43pm in

AccountingWEB has a chilling article out this week by tax commentator Philip Fisher. As he notes:

In November 2021, the National Audit Office (NAO) issued the first salvo entitled Managing tax debt through the pandemic. Last week, using and updating some of the data from that report, the Public Accounts Committee (PAC) followed suit with its 48th report on HMRC’s management of tax debt.

Both are chilling in their conclusions that our taxing authority is failing to follow up debts in far too many cases. Indeed, during the early months of the pandemic, tax collection ground to an almost complete standstill, relying on those with tax liabilities to do the decent thing. In very many cases, they couldn’t or didn’t.

As he adds:

Pre-pandemic, HMRC was owed £16bn; that sounds like a terrifying amount, until you discover that the figure now stands at £39bn, having peaked at £67bn in August 2020. The number of taxpayers in debt had risen from 3.8 million to 6.2 million by September 2021 and the average duration of repayment is 14 months.

To put this in context, that is 20% of all taxpayers now, apparently, being in debt. To put that another way, that's all self-employed people and half of all tax-paying companies.

The average debt is £6,290, which is very high and must mean that there are some very big debtors out there.

The worry I have is a simple one. If the Public Accounts Committee are right - and they usually are - then what is happening is that HMRC is turning the payment of tax by those who do not have it deducted at source from their pay into a voluntary activity by those who wish to be compliant, leaving the rest to pick up the bill if others choose not to pay.

This matters. It means that the macroeconomy is destabilised.

The failure to collect tax owing means that inflation is permitted (and this may be an issue right now).

Non-payment of tax undermines the delivery of social, economic and fiscal policy.

It also provides an unfair subsidy to the businesses not paying.

And it fuels the deficit, which matters when we have a government looking for any reason to impose austerity through spending cuts.

And then I note the last point, and wonder whether this is simply deliberate policy by the government? Do they simply not care about operating a proper tax system? Is that really possible now? Given their failure, the possibility has to be considered. Why else are they so bad at collecting debt owing?

No accounting for taste: my podcast with AccountingWEB

Published by Anonymous (not verified) on Fri, 25/02/2022 - 6:16pm in

Tags 

Economics, HMRC

I recorded this podcast with AccountingWeb yesterday. I address some big themes in current tax and accounting, including the future of KPMG:

The UK needs a new tax politics

Published by Anonymous (not verified) on Fri, 11/02/2022 - 8:08pm in

HM Revenue & Customs is under fire from the Public Accounts Committee this morning, and rightly so. In a new report they say:

HMRC ignorance and inaction “rewarding the unscrupulous” and looks “soft on fraud”

In a report published today the Public Accounts Committee says “HMRC’s unambitious plans” for recovering a total of £6 billion it estimates it spent incorrectly in COVID-19 support payments – whether through fraud or mistakes - could lead to “government writing off at least £4 billion” taxpayers’ money. The PAC says this “risks rewarding the unscrupulous and sending a message that HMRC is soft on fraud”.  

The Committee says “yet again customer service has collapsed and HMRC’s recovery plans are not clear”, and it is extremely concerned about HMRC’s capacity to clear backlogs while tackling the “avalanche of error and fraud it now faces on the COVID-19 schemes”.

The report describes a litany of longstanding PAC concerns in HMRC’s fulfilment of its most basic remit of collecting tax owed including not responding adequately to tax avoidance schemes, failing on implementing or realising benefits from the ‘Making Tax Digital’ and other long-term transformation ambitions and programmes, and being without “a convincing plan for restoring compliance activity back to pre-pandemic levels”.

 The Committee also says HMRC simply doesn’t know why the cost of key tax reliefs has increased, or how much of that is due to abuse.

I have a particular interest in this issue because of the work that I do on tax gaps and tax spillovers.

One of the more controversial inclusions in the tax spillover framework was an appraisal of jurisdictions’ tax politics. This is a qualitative measure of the attitude of the political establishment within a jurisdiction towards its tax administration. Some have questioned whether this can be measured, but along with my co-author, Professor Andrew Baker of the University of Sheffield, I have suggested that in very many cases this measure is easy to appraise on the scale that we use. For example, it is easy to tell that there is a difference in the political attitude towards tax in Sweden and the Cayman Islands. As importantly, whether a jurisdiction, such as the UK, adequately funds its tax authority and simultaneously has an appropriate attitude towards tax transparency and tackling fraud is also something that is relatively straightforward to appraise.

The government objective with regards to funding HMRC has, for many years, been to cut its resources. It is treated as a cost centre, and not as a revenue generating activity, which is utterly bizarre.

Because the UK government is utterly indifferent to transparency, as indicated by the almost totally negligent management of Companies House by Department for Business, Energy and Industrial Strategy, which means that those wishing to undertake fraudulent activity can do so with almost total impunity, the chance of tax abuse in the country is very high indeed.

In the last week we have seen the Business Secretary claim that people in this country are not worried about fraud, presumably because he is not.

At the same time, HMRC publish a tax gap calculation which is not credible, firstly because no one should be marking their own work, and secondly because it always produces an almost identical figure, and has done for more than a decade, which leads me to doubt the credibility of any claim made. My own opinion, based on the VAT gap, is that the overall tax gap in the UK is more than double that suggested by HMRC.

The consequence of HMRC’s management focus being on cost saving, and its indifference towards any other issue including customer service, collecting the right amount of tax, tackling fraud, closing the tax gap or anything else, is the that appropriately summarised by the Public Accounts Committee in its expressed concern over the out-of-control management of Research and Development tax relief. As the Committee notes:

HMRC is responsible for administering Corporation Tax research and development (R&D) reliefs, which support companies that work on innovative projects. There is a scheme for small and medium-sized enterprises, and a research and development expenditure credit scheme, mainly for larger companies. Both schemes are complex and open up opportunities for abuse

It would appear that these costs have escalated, dramatically, in a way that appears unrelated to the likely scale of research and development actually going on within the UK economy, as this table shows:

I have long suggested that the only increase in research and development that this relief has created has been amongst accountants working out how to re-categorise expenditure as research and development. The consequence, as noted, is that £9.3 billion has been spent on this relief in the last tax year, and HMRC do not know why, or whether value for money was secured. As a consequence of HMRC mismanagement of this issue we have a national insurance increase that will create hardship for millions instead (and for those of an MMT persuasion, the two can be related to each other as MMT suggests a government should have total revenue target as part of macroeconomic management).

I have noted the various recommendations that the Public Accounts Committee has made in its report. Each is appropriate, in its own context. The difficulty that I have with them is that none appears to be systemic. What is wrong with HMRC is its management culture, which is modelled on that of a public company, with a board that sets priorities as if it was managing its affairs to minimise cost, which it does without consideration of consequence.

What we need in the UK is not some minor shifting of priority within HMRC, but a new tax politics. That should be based, first of all on a proper understanding of the role of tax in society, which I suggest to be:

1) To ratify the value of the currency: this means that by demanding payment of tax in the currency it has to be used for transactions in a jurisdiction;

2) To reclaim the money the government has spent into the economy in fulfilment of its democratic mandate;

3) To redistribute income and wealth;

4) To reprice goods and services;

5) To raise democratic representation - people who pay tax vote;

6) To reorganise the economy i.e. fiscal policy.

Then we need to resource our tax authority to fulfil these goals on behalf of society in a way that imposes minimum cost upon taxpayers, but which maximises the collection of revenue really due to ensure that we operate an economy in which everyone plays on a level playing field to ensure that we provide equality of opportunity for all, whether in or out of business, and whoever they might be.

In turn, that will require a change in attitude from Department for Business, Energy and Industrial Strategy  towards the management Companies House, but it will require a reorientation of focus within HMRC towards fraud, large scale tax avoidance and abuse by advisors, which must be behind much of the growth in research and development claims.

All of this is, of course, possible, but it does require a government committed to achieving these goals. My question is a simple one. When will we have such a government?

Labour’s John McDonnell on Google and tax avoidance

Published by Anonymous (not verified) on Wed, 27/01/2016 - 6:20am in

I wrote this post yesterday about the recent news about a tax deal reached between HMRC and Google. In the comments a reader alerted me to an interview on Channel 4 News with Labour’s Shadow Chancellor John McDonnell. He’s almost very good in it. As seems usual these days, no Government Minister was willing to … Continue reading Labour’s John McDonnell on Google and tax avoidance