LITRG press release: Training and education of HMRC staff key in Budget compliance drive
The Low Incomes Tax Reform Group (LITRG) welcome the announcement of additional funds for HMRC’s compliance work in today’s Budget but point out that the two main areas earmarked for money – Job Retention Scheme fraud and the loan charge – contain intricacies that need specialist case handling.
The Chancellor announced that the government will invest over £100 million in a Taxpayer Protection Taskforce of 1,265 HMRC staff to combat fraud within COVID-19 support packages, including the CJRS and SEISS, representing one of the largest responses to a fraud risk by HMRC.
In a separate announcement, the government said it will invest a further £180 million in 2021-22 in additional resources and new technology for HMRC, some of which will be used to continue to fund compliance work on the loan charge, historic disguised remuneration cases and early intervention to encourage individuals to exit tax avoidance schemes.
LITRG welcome the announcement of this extra funding for HMRC. But the group cautions that to use the money most effectively, the department needs to become fully conversant with the intricacies around the Job Retention Scheme and the loan charge.
Victoria Todd, Head of LITRG, said:
“HMRC have made good progress in terms of improvements to their general compliance work, but nevertheless cases can still be difficult and time consuming for staff, particularly where they are dealing with vulnerable taxpayers or those that need extra support. Moreover, while many compliance interventions can be dealt with by non-specialists, the Job Retention Scheme and the loan charge are not just ‘general’ compliance issues. They are one off initiatives in the system, that present complex, technical and often knotty issues.
“HMRC need to use the money wisely – to invest in education and training of their staff, which could help them direct their energy and resources most efficiently and effectively.
“Learning from the experiences of bodies such as LITRG or TaxAid for example, in dealing with employer queries over the last year, could help them differentiate between an employer who has made a mistake with their Job Retention Scheme grants, due to the complexity of the scheme, and one who has made a fraudulent claim. On the surface, the two can sometimes be difficult to distinguish between.
“For example, take John – a truck driver who was asked to set up a limited company by an agency he worked through. John, without the support of an accountant, had no idea how to furlough himself, how to calculate his furlough pay or how to account for the Job Retention Scheme funds received. Although he did his best to comply, the upshot is that he has no furlough paperwork, has probably applied for the wrong amount of support and had the support paid into his personal bank account rather than running it through his limited company’s payroll.
“At first glance, an HMRC officer might assume this is a case of fraudulent use of the scheme. Education and training could assist them in recognising that this is a complex support scheme and it is easy for people like John to make mistakes. We hope that HMRC will take a reasonable approach when dealing with taxpayers who have done their best to comply with the complex rules of each support scheme.
“Education and training at a corporate level on the inner workings of the labour market could also help HMRC deal with the outstanding loan charge cases and the ongoing usage of disguised remuneration schemes. It has become very clear to us during the course of our work that many of the people affected by the loan charge were put into loan schemes by their employers. This meant they were paid in loans by their employers (umbrella companies) without their knowledge.
“This may help explain the fact that HMRC have received nowhere near as many 2018/19 tax returns reporting the loan charge as they were expecting. In addition, many of those they have received are incorrect.
“If you look at the problem through this lens, it means HMRC’s communication, enforcement, penalty and compliance strategy are currently falling wide of the mark because they assume people proactively exercise a choice when entering such schemes. We are confident that this situation can be turned around if HMRC are able to recognise that disguised remuneration schemes can be driven by engagers bent on cost savings rather than traditional tax avoidance by individuals, which they may be able to do through some education and training about the different types of taxpayers involved.”
Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.