The recent announcement by Rachel Reeves, chancellor of the exchequer, that the government is proposing to recruit 5,000 new HMRC compliance officers is welcome, as anybody who has had to try and deal with the revenue over the past few years, whether as a regular taxpayer, employer or tax adviser, will recognise that HMRC has increasingly struggled to provide a high-level service over this period.
However, I would argue that the recruitment of more staff is only a small, initial step in fixing the UK’s tax system and will not, by itself, be sufficient to provide private taxpayers and businesses with the quality of service that they are entitled to expect.
Whilst on the one hand it is certainly true that HMRC has been understaffed for many years, it is much too simplistic to believe that understaffing is the only problem it has faced in the past five-plus years.
In particular, one has to recognise that the UK tax and national insurance system is incredibly complex and that different parts of our tax legislation can treat ‘X issue’ in different ways. For example, the tax and national insurance contribution treatment of some employment-related payments can be totally different.
Hence the need to train and continually up-skill all HMRC staff is a very real challenge and something that, at least in many cases, appears to have been largely missing for a number of years.
This also means that it will take the new compliance officers many months, if not years, to be fully trained and this assumes that HMRC has the expertise and internal structures to provide these new recruits with the detailed technical training that they would typically require when recruited, and ongoing continuing professional development, to ensure that they stay up to date with changes to legislation and new case law.
If, for example, their training is simply ‘go and read the relevant HMRC tax manual’, there is a real risk that the additional staff will cause taxpayers more problems than they solve, as HMRC’s manuals actually are often incomplete and often do not, for example, recognise new case law, which might substantively change the way in which a particular tax position should be treated.
These problems will realistically be compounded by the fact that the salaries HMRC is offering for these roles are not especially competitive, when compared to what is available in other fields and amongst firms of accountants and tax advisers, for example.
There is therefore a real risk that HMRC might struggle to recruit staff with the appropriate skills and, if they do recruit such individuals, there must be a genuine risk that they then subsequently leave HMRC after, say, two to three years, just as they probably start to be fully effective in their roles, for better-paid positions in the private sector.
Structures not up to scratch
Furthermore, one also needs to realise that HMRC needs to significantly improve its structures from both an operational and a technology perspective.
For example, tax advisers typically have numerous examples of documents that have been submitted to HMRC – including electronic submissions for which one has received a formal acknowledgement and reference number – subsequently having been lost by HMRC.
