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Public Accounts Committee savages HMRC

MPs on the Public Accounts Committee have savaged HMRC in a report published today on the handling of tax disputes.

Margaret Hodge, who chairs the committee, said the report was “a damning indictment of HMRC and the way its senior officials handle tax disputes with large corporations. We uncovered both specific and systemic failures which must be addressed.”

However HMRC have hit back aggressively at the report, saying it is based on “partial information, inaccurate opinion and some misunderstanding of facts.”

One of the report's criticisms which is highlighted in a number of the papers is a claim that there is more than £25 billion outstanding in unresolved tax bills. HMRC claim this is "a ballpark estimate of maximum potential tax liabilities, before a full investigation of the specific facts has taken place, and before applying any reliefs or allowances. It is not actual tax either owed or unpaid."

The report is the front page lead in both the Telegraph and the Mail today and features in most of the other daily newspapers.

Leaving aside the criticisms, the report’s main recommendations* for future action are:

  1. HMRC must set out in greater detail its policy reasons for not disclosing information about specific corporate taxpayers. It must explain the circumstances in which it would consider disclosure and how it will fulfil its statutory obligations to account for its actions to Parliament.
  2. HMRC must ensure that its revised procedures to separate out the roles of those involved in settling tax disputes are applied to all cases without exception. It should report back to the PAC before Christmas.
  3. An independent assessor, or assessors, to carry out independent review of settlement proposals (all settlements over £100m and a random sample of those over £10m) should be set up a.s.a.p. in shadow form, and formalised in legislation as quickly as possible. Assessors should report annually to Parliament on their work.
  4. HMRC must exercise better judgement over how it manages its relationships with large companies – especially in relation to accepting hospitality – to ensure it avoids the perception of conflicts of interest.
  5. HMRC must carry out its promise to look into the treatment of different groups of taxpayers – such as large companies, small businesses and tax credit recipients – in terms of its fairness and reasonableness. It should report back to the PAC on any actions taken to address the wider policy or process issues identified as a result of its examination.

George Crozier
CIOT External Relations Manager
Tuesday 20 December 2011

* distilled by me from the Conclusions and Recommendations section of the report


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