There are big changes under way at HM Revenue & Customs – but it’s ordinary taxpayers who should be worried, rather than large scale tax dodgers such as those exposed by the Mossack Fonseca leak.
As Public and Commercial Services (PCS) union members at HMRC reminded colleagues and passers-by in Edinburgh last week, 17 tax centres and 2,000 jobs are being cut in Scotland over the next five years as the network is consolidated into new regional centres in Edinburgh and Glasgow.
HMRC has already cut its workforce by around a fifth since 2010 and previous closures north of the Border include that of the last HMRC inquiry centre, leaving Scotland without a single HMRC facility where people can make enquiries in person.
This of course comes at a time when HMRC’s resources are being stretched even further by its administration of the Scottish rate of income tax. The revenue will no doubt be happy if the SNP continues to treat Scotland’s expanding tax powers as an inconvenience rather than something they can actually use.
When the office closures were announced a few months ago, one accountant told me that they would make it “almost impossible” for ordinary taxpayers to deal with HMRC in person.
HMRC customer service is “abysmal” and getting “even worse”, according to a Commons Public Accounts Committee (PAC) report last year, which noted that half of taxpayer calls to HMRC go unanswered.
Almost a third of people surveyed last year by Which? said they had been kept on hold by HMRC for more than an hour, with another 30 per cent waiting between 46 and 60 minutes and a quarter for up to 45 minutes.
With such meagre resources, it is hardly surprising then that the PAC last week warned that HMRC is making only “limited progress” on tackling fraud losses of £16 billion a year. That figure is almost half the £34bn tax gap, the difference between the amount of tax HMRC should collect and the amount it collects in reality.
But while the wealthiest can avoid and evade with impunity, the low-hanging fruit is becoming more plentiful, because George Osborne, who once pledged to simplify the tax system, has done anything but.
HMRC estimated that half a million people claiming child benefit would have to file annual self-assessment forms as a result of child benefit changes introduced in 2013, while the new personal savings allowance will drag yet more people into the self-assessment system.
As the system is made even more complex, mistakes are even more likely, which means incorrect tax codes, which increases the chances of you paying too much or too little tax and being punished for no fault of your own.
That particular issue is compounded by the fact that it’s your responsibility to spot any errors. If you don’t and you’re landed with a penalty as a result of the mistake, your chances of a successful appeal are slim.
HMRC has long been accused of having one rule for big companies and the wealthiest individuals, and quite another for the rest of us. HMRC needs to prosecute more wealthy tax evaders, said the PAC, but the “modernisation” programme will merely let them off the hook while further undermining trust in the UK tax system.