HMRC modernisation programme: big is beautiful, or is it?

05 January 2017

George Bull

In November 2015, HMRC announced a modernisation programme aimed at helping it ‘become a tax authority fit for the future’. By 2027, 137 HMRC offices will have been closed, with staff concentrated in 13 new regional centres. HMRC estimates that this will generate estate savings of £100m a year by 2025. Each of the new regional centres will be equipped with the latest digital infrastructure and training facilities needed to build a more highly skilled workforce to ‘meet the challenges of bringing in more revenue from those evading tax and improving its customer service to the honest majority.'

At the time of the announcement, the precise location of most of the regional hubs had still to be decided, with HMRC yet to negotiate terms with landlords and contractors in a number of locations. With buildings now identified for the regional centres in Croydon, Newcastle and Birmingham the project is moving ahead at speed.

Much has been written about this but it seems to us that the key elements are:

  1. Consolidation of the property portfolio to achieve welcome but, it has to be said, not overwhelming savings. The average annual saving per office closed will be £730,000.
  2. A significant enhancement in training, supporting the development of highly skilled staff to improve customer service. Many outside HMRC will feel that this is long overdue, but the implications must be alarming for those within existing HMRC offices who will see their workplaces closed and as a result face potentially longer journeys to work, or redundancy.
  3. An improvement in HMRC’s IT networks which will face unprecedented demands as the tax authority continues the trend towards ‘digital by default’ in its dealings with all taxpayers.
  4. The specific application of greater resources to tackling tax evasion.

So what’s not to like? We have three concerns:

a) the rationale for such powerful concentration of resources is not clear;
b) customer service is likely to get worse before it gets better; and
c) arrangements for providing access for disadvantaged members of society have not been spelt out.

Clearly, property considerations are a crucial driver for the modernisation programme. What is less clear is the rationale for such powerful concentration in so few regional centres. A parliamentary debate on this is reported in Hansard but no clear conclusions were drawn.

Whatever the rationale for such extreme concentration of resources, it is clear that the modernisation programme marks a further significant reduction in the numbers of HMRC personnel. In 2016, HMRC employed approximately 58,000 people. The modernisation programme seems set to reduce the total workforce to no more than 50,000. Some estimates put the final workforce figure at around 41,000. That’s a headcount reduction of somewhere between 13 per cent and 29 per cent. Those job losses represent a huge amount of knowledge and skill built up by HMRC employees over many years.

The full benefits of all these changes will not be felt until the modernisation programme has been completed in 2027. The adverse customer service impact of the attendant job losses, recruitment, training and familiarisation with new systems will be felt almost immediately. We believe that HMRC’s resources should not be cut further in this way until the full benefits promised by digitalisation are being delivered.

In earlier editions of RSM’s tax brief, we have expressed concerns that the promised benefits of digitalisation may be elusive for those who are digitally excluded because they are vulnerable or have to content with a patchy internet service. HMRC promises to address this by providing mobile customer services for vulnerable individuals and for those with additional needs, but we have not seen any more specific proposals. It’s worth asking how a vulnerable person might register with HMRC to receive these mobile services. Online? Surely not. What criteria does the vulnerable person have to meet? And who will be the judge as to whether the individual qualifies or not? These are important questions which should be answered.

And then there are the practicalities of the fight against tax evasion which often requires visits to local businesses and other premises. Implied but not stated in HMRC’s published plans are expectations of a mobile force of tax investigators who will be tasked with conducting local interviews whenever required. We can expect to see these HMRC officers clocking up thousands of miles a year, based in cars and hotels. The same will apply to HMRC officers who have other enforcement duties. For example, in Northern Ireland HMRC has the lead in dealing with smuggled and laundered fuel. With only one regional HMRC office in Belfast, that’s a 200 mile round-trip to reach certain parts of the border.

Big may be cheaper, but HMRC really needs to show us all that it will be better.

For more information please contact George Bull, or your usual RSM contact.