Accountants seem locked in a never-ending struggle with HMRC over its service standards, but chief executive Lin Homer tells Caroline Biebuyck that the organisation has listened and learned
Ah, the good old days. Those golden times when summers were long and hot, when beer was cheap – and so was fuel. The days when you could pick up the phone to HMRC and get through to someone who knew what you were talking about – and what they were talking about too.
Poor service standards have been a bone of contention between accountants and HMRC for some time. The situation hit a low in 2011, when the Treasury Committee issued a damning report on HMRC’s efficiency and effectiveness. In a publication that was frank about the problems, the message was clear: HMRC needed to turn its service standards around, and it needed to work with its stakeholders to do so.
This gave the impetus for professional bodies (with ICAEW at the fore) and tax charities to approach HMRC. The different bodies pooled their expertise to identify how HMRC could improve standards, set service targets and agree a timetable for improvements.
The personnel at the top of HMRC may have changed since those first steps were taken but Lin Homer, who took over as chief executive in January 2012, has continued what she describes as an open collaboration with the joint initiative members to get an external view on how HMRC is performing. In particular she says she is grateful for the time and skills individuals and organisations have invested in the project.
HMRC responses to taxpayer calls and letters have improved, although Homer admits that progress has come from “a low base”. A mere 36.8% of post was answered within 15 days during 2010/11, rising to 63.7% the following year but still below the target of 80%.
Shockingly, less than half (48%) of calls to contact centres were answered during 2010/11. While the numbers rose to 74% in 2011/12, the other side of this statistical coin is that one-quarter of calls were still not being answered by March 2012.
However, Homer is confident that the decision, announced in August 2012, to bring an extra 1,000 staff into call centres will help bring forward HMRC’s target response rate of 90% of calls being answered by a couple of years to the end of March 2013.
Tax accountants have access to dedicated agent lines which have better response times than those of lines open to the general public. HMRC figures for the quarter ended June 2012 show that 90% of calls to agent-dedicated lines are answered, and 99% of these received a response within two minutes.
But despite the shorter time they are kept on hold, accountants are far from satisfied with HMRC’s service. Surveys of ICAEW and Tax Faculty members show most respondents are fed up about the same issues: poor levels of HMRC staff training, the lack of ownership of specific cases, and the inability to communicate by email.
These ongoing frustrations felt by members are forcing ICAEW to keep up the pressure on HMRC to improve service, leading to frank exchanges between the two. The Institute sees its role as that of an honest friend who is prepared to speak up when things are not as good as they could or should be. But how does HMRC view the relationship?
Homer is happy that the collaboration between HMRC and professional bodies has become increasingly open. “I think we’ve come out of our shell a bit and found that having good critical friends is good for you. And I think we’ve had serious investment in time and skills from individuals and organisations which has been helpful to us.
“Are we going to agree all of the time? No, and we probably wouldn’t be trying hard enough if that were to happen. Can we maintain the level of collaboration and benefit? I hope and believe we can.”
She points to a report in an internal HMRC publication about one of a series of initiatives in which an HMRC staff member spent time working alongside a tax adviser. “Both parties said they found this to be useful. The agent’s view was that our staff member really listened and understood the problems and when he came back to our office some of the things that had been causing problems got solved. We’re really keen to keep these kinds of exchanges going.”
Collaboration is all well and good, but the reality in tough economic times is that the pressure is on HMRC to bring in the money. “We expect to do so in an efficient and professional way, and to do it in a way that’s even-handed and fair,” Homer explains. “We have to give value for money while recognising that the country is trying to get back on its feet.”
Many of the efficiencies that Homer points to are the result of increasing systems automation. Some of these have been painful; witness the chaos caused by the introduction of the new payment system which has taken years to resolve. And the drive for bigger and better IT processes is far from over.
Under a new PAYE reporting system called Real Time Information, currently in a pilot run and due to go live in October 2013, businesses will have to make an electronic return as or before a payment is made to an employee, with penalties for late returns.
ICAEW is concerned about the costs to business of switching to RTI. Another worry is that despite HMRC making concessions allowing certain types of business seven days to complete their filing, many small firms will find it hard if not impossible to meet the deadlines.
While Homer is sympathetic to the plight of small entities, she is adamant that RTI is a vital step for all organisations. “If your data is in good shape then it’s going to be easy for you to access RTI,” she says. “A small business that is not moving into the digital world is not doing itself any favours.”
Homer sees RTI as part of a trend for taxpayers to take greater responsibility for their affairs, something HMRC is trying to encourage through, for example, simplifying the online self-assessment process and providing more detailed web-based advice on one-off events such as starting a business.
But she says RTI has the goal of helping business sort out its PAYE affairs sooner rather than later. “It’s harder to sort out problems when you’re getting information a long time after the event. Even if the end-of-year reconciliation worked perfectly, someone could be in an erroneous situation for almost a year before our current system would clock that.”
Homer has seen the future of public service, and it lies in greater automation. “We’ve moved from a system heavily dependent on individuals to something more automated. This is challenging for staff and customers but is innately more effective and the way a mass service has to be delivered in a modern world.”
Tax avoidance hits the headlines
Recent news headlines have screamed about the low rates of corporation tax paid by mega-multinationals such as Starbucks, Amazon and Google. Websites and newspapers normally better known for celebrity gossip have turned their attention to arcane issues such as transfer pricing, intellectual property and controlled foreign companies. Indignation abounds at how these groups are able to structure their affairs to lower their tax payments.
Homer has tried to explain that the rules for taxation of multinationals are more nuanced than a simple application of the tax rate to corporate profits suggests. “Companies are required to pay corporate tax in the country where they carry on their economic activity, not necessarily where their customers are located,” she told a somewhat incredulous Treasury Sub-Committee on 2 November 2012.
She thinks it’s important to look behind the figures in the tax gap, the difference between what HMRC collects and what it should collect. HMRC calculates that the total tax gap per year is £32bn, of which £4.1bn relates to corporation tax. “Our tax gap shows we have the best compliance levels of anywhere in the world,” she says. “There are few places except for very small countries that have a smaller tax gap. Most taxpayers are paying compliantly and voluntarily and they deserve a system that helps them do that.”