How should HMRC be reorganised?

13 September 2016

George Bull

To some people that’s an easy question. And the answer is equally easy: 'better than it has been during the last few years'. With the cultural groundswell running against HMRC, we were pleased to hear news of a proposed internal reorganisation by the UK’s tax authority.

HMRC’s initial public statement made it clear that, from October 2016, the department will be reorganising itself into three new groups:

  • a new customer strategy and tax design group, bringing together customer strategy, tax policy, process design and tax assurance.
  • an expanded customer service group, which includes all of HMRC’s big operational teams.
  • a customer compliance group which will tackle non-compliance and enforcement for all customer groups, including large businesses.

The three new groups will be supported by the existing transformation and corporate service areas.

HMRC have helpfully provided us with further information on how this is expected to work in practice. They are clearly serious in their intention to become an organisation which is truly focused on customers, even though many of those who are designated customers will continue to feel that they are taxpayers.

It’s difficult to get away from the impression that this reorganisation is being undertaken without the benefit of any additional resources. Cynics might say that HMRC is simply rearranging the deck chairs but that would not be to do justice to the amount of thought and good intention which has clearly gone into this. But the fact remains that HMRC can only do its work with the resources made available to it by Parliament.

HMRC seems intent on bringing together teams engaged in similar work so that they can improve the speed of response and deal more flexibly and quickly with changing customer needs. Having fewer groups with clearer responsibilities should make it easier for both HMRC officers and people outside the organisation to know who to talk to and to get their problems sorted out quickly. Without a doubt, there is a long way to go. We welcome the spirit behind this initiative: keeping things small, simple and customer-focussed clearly has much to commend it.

Equally, we remain of the view that the country deserves a more careful review of what we expect of HMRC and what resources are required to deliver that properly. The needs of the UK population are diverse, the tax system is complex and technology changes have to be factored into continuing service delivery over the coming years. Once requirements are known, resource levels can be determined. In this connection, we notice the coincidental publication by the All-Party Parliamentary Group on Responsible Taxation of its own inquiry into public perceptions of HMRC’s ability to collect tax fairly and effectively. With HMRC’s new organisational structure about to be implemented, it’s difficult to escape the impression that the APPG enquiry can only be backward-looking. But the point remains, there is a need for greater clarity as to what society wants the tax system to achieve, how the tax authority should be resourced and how that resource should be applied.

In a further coincidence, Revenue Scotland has published its first annual report which notes some key achievements which HMRC might usefully try to replicate. For example, Revenue Scotland records an average waiting time of 10 seconds (yes, 10 seconds!) for calls to its support team. And 96 per cent of all written communications were responded to within 10 working days. These response figures can only be aspirational for HMRC for the time being, and it will be interesting to see whether Revenue Scotland can maintain this performance record as its responsibilities grow. But they do show what is possible.

We also detect a change in emphasis in HMRC’s approach to the tax gap. In recent years, the public emphasis has been on tackling tax avoidance which is estimated to cost the UK around £2.7bn per year. By contrast, tax evasion and the hidden economy are thought to cost the Exchequer around £10.6bn per year. Tax avoidance, whether by corporations or wealthy individuals, may be an attractive target for campaigning groups. But HMRC seems to have recognised that deploying existing resources to tackle the continuing seepage of tax through evasion is also important. A spokesman told us 'we are more determined than ever to deliver an outstanding service to our customers while clamping down on the minority of tax dodgers who try to cheat the system.'

We commend HMRC for aiming high and for genuinely seeking to deliver an improved client service. Enhancing both customer satisfaction and the tax yield at the same time is a tall order. Within 12-24 months HMRC’s annual reports should show us all how well they are doing.

For more information please get in touch with George Bull, or your usual RSM contact.