UK Committee Weighs In On HMRC Compliance Efforts
The UK’s Public Accounts Committee (PAC) has criticized what it says has been “unacceptably slow” action from HM Revenue and Customs (HMRC) against tax avoidance and has recommended that the Department be more transparent about its compliance yield estimates.
In a new report, PAC said tax revenues are being placed at risk. For instance, it listed the example of the Liberty scheme, which, although it began in 2005 and was closed in 2009, was only tackled at a tax tribunal in 2014. The Committee noted that HMRC is introducing an accelerated payments scheme, which will require those in marketed tax avoidance schemes to pay their tax bill up front. It has asked that HMRC report on the use of these new powers.
The Committee also said HMRC should have done more to tackle international tax avoidance structures. In particular, the report raised questions over the robustness of the UK’s controlled foreign companies (CFCs) regime and company tax residence tests. The PAC has requested that HMRC provide it with an update on how these matters are being addressed, as well as information on the actual costs and benefits of recent changes to the UK’s tax system.
On an administrative level, the PAC found that HMRC is “not properly transparent and clear about the different levels of certainty around [the] compliance yield that it reports.” The finding came after HMRC made a GBP1.9bn (USD2.98bn) error when it established its baseline and set targets for its compliance work, which led HMRC to overstate an improvement in its performance in its 2011-12 and 2012-13 Annual Reports and in its May 2014 Fast Facts publication.
The PAC welcomed HMRC’s decision to invite the National Audit Office to provide independent assurance in future about the quality of the compliance data it reports, but stressed that the Department must not rely on such assurance as a substitute for effective internal checks.
The Committee recommended that HMRC ensure the “governance arrangements around its key performance indicators are sufficiently robust, and subject to adequate internal and external challenge, before they are reported publicly.” It also advised that HMRC “be more transparent about its compliance yield estimates by publishing more detail about how it calculates compliance yield, being clearer about how much it has actually collected in cash terms, and explaining how uncertainty affects its estimates.”
Committee Chair Margaret Hodge said: “HMRC must do more, faster. It should report on the progress it has achieved by using new powers granted by Parliament to tackle tax avoidance and show that it is using its existing powers with sufficient urgency.”
