Tough times ahead for the taxman?

Is HMRC in danger of trying to do too much with too little? The body representing the chartered accountancy profession certainly thinks so.

It has described a report by the Commons Public Account’s Committee (PAC) into the taxman’s performance as “sobering reading”.

Comments from the committee’s chair Meg Hillier have highlighted the risks that HMRC faces from undertaking the largest transformational programme in Europe -while at the same time coping with the demands imposed by developments such as Brexit.

The Labour 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.”

The taxman’s transitional programme has been described by HMRC chief executive John Thompson as “pretty huge”.

It involves £2.1bn of investment  and 250 projects in 15 programmes, including the closure of HMRC’s  national network of offices and relocation to large regional centres, making tax digital for individuals and businesses, developing the new customs IT system, supporting the introduction of universal credit and implementing the tax-free childcare scheme.

The transformation programme was intended to be completed by the end of the decade. But HMRC has informed MPs that Brexit will lead to about 40 extra projects, equivalent to increasing its workload by another 15 per cent.

It is no wonder alarm bells are now ringing at the Institute of Chartered Accountants in England and Wales (ICEAW). It fears something is about to give.

Frank Haskew, head of ICAEW tax faculty, commented: “It was clear from the evidence the chief executive of HMRC gave to the committee that there is serious concern that the new demands on HMRC could be the straw that breaks the camel’s back.

“HMRC is currently undergoing a huge transformation programme to a very ambitious timetable, but is now also having to deal with Brexit and a myriad of other pressing matters such as Making Tax Digital (MTD) and the fallout from the Paradise Papers.

“The committee is rightly concerned about the impact of all of this on HMRC’s services, which had been improving in recent years but now risk going into reverse.”

He also warned: “HMRC is being put into a very difficult position. It looks clear from the CEO’s comments to the committee that the timetable for the transformation programme is too ambitious even without the extra demands now faced.”

He says there needs to be a “realistic assessment” of whether HMRC can deliver on all the demands now being placed on it and, if not, what work needs to be deferred or dropped.

It remains to be seen if anyone in the corridors of power heeds the warnings or the advice.

 

I manage the affairs of a portfolio of clients in a wide range of industries. In managing the audit and accounts department of WNJ, I always keep abreast of the latest technical information and legislative changes. Clients receive advice based on commercial awareness not simply historical reporting. Audit and assurance services for large range of clients, including charitable companies and pension schemes, Internal audit and systems reviews, Assisting and development of business start-ups.