A new report from the UK Parliament's Public Accounts Committee has highlighted concerns for customer service, tax credits recipients and more as HMRC undergoes major change.
HMRC is undertaking 15 major transformation programmes and, together with the Treasury, will have to make tough decisions on how it allocates limited resources to its operations to increase tax revenues, protect performance levels, prioritise its transformation and estate programmes, and invest in measures to tackle tax evasion, fraud and error.
The PAC is particularly concerned about the impacts on the ordinary taxpayer from the growing challenges facing HMRC, and whether HMRC is doing enough to support vulnerable Tax Credits recipients, especially as they transfer to Universal Credit.
Committee chair, Meg Hillier MP, said: "HMRC's transformation programme would have been less risky had it not attempted to do everything at the same time. What was already a precarious high-wire act is now being battered by the winds of Brexit, with potentially catastrophic consequences. Action arising from allegations in the so-called Paradise Papers could also significantly increase the authority’s workload.
"HMRC accepts something has to give and it now faces difficult decisions on how best to use its limited resources—decisions that must give full consideration to the needs of all taxpayers. In particular we are concerned about the effect on people simply trying to pay their fair share. HMRC’s customer service has improved on the appalling levels of recent years but its claims about call-answering times don’t stack up. Any new deterioration would be wholly unacceptable."
She concluded: "These are serious, pressing challenges for HMRC, requiring swift and coordinated action in Government. As a matter of urgency the authority must set out a coherent plan and demonstrate it is fit for the future."
The report also criticised the lengthy pace of HMRC's tax investigations, in particular with regards to the Paradise Papers.
Miles Dean, managing partner of Milestone International Tax, noted that as enquiries are becoming more complex, more input is needed from scarce specialist staff, including those who deal with overseas tax authorities.
"This can add months to an investigation, and obtaining answers to queries can take an age. This slowdown is exacerbated further by an atmosphere of heavy governance, as well as the increasing number of inexperienced enquiry staff who will take longer to deal with issues.
"With HMRC's inflexible bureaucratic approach to enquiries that are increasing in complexity, coupled with scarce specialists and lower levels of experience in their front-line compliance staff, it's no surprise that matters are taking longer to settle."
The report makes several recommendations including setting target levels for reduction of the tax gap; reevaluating original assumptions and amend its forecasts for its transformation programme and set out the financial implications of this for the Committee by April 2018; introducing a new set of measures that better reflect the actual experience of customers as well as setting out a new strategy for tackling tax credits error and fraud.
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