Read my article for the Times Red Box on how HMRC must prepare for Brexit.
The challenge facing the government’s tax collector, HM Revenue and Customs (HMRC), as Brexit approaches, is a daunting one.
Today’s report by the public accounts committee examines the huge task ahead for HMRC as it prepares for both deal and no-deal scenarios, as well as managing a backlog of problems in its own backyard.
It’s not all bad news. It is two years since HMRC received new powers to access information to help tackle tax compliance risks. Large companies must now disclose how much tax they have paid wherever they operate globally. Two years on, HMRC’s risk assessments are more comprehensive and their enquiry process is faster as a result.
I still believe publishing company reporting should be mandatory. In 2021 the Department for Business, Energy and Industrial Strategy (BEIS) will introduce a register of people benefitting from property owned by overseas companies. That’s good, but HMRC should proactively use the register to tackle tax avoidance. It appears that their role in this so far has been limited.
However, the committee identified a variety of risks that HMRC faces, not least preparing its systems for a possibly catastrophic no-deal Brexit.
For a start, HMRC clearly needs to do more to ensure its flagship Customs Declaration Service (CDS) is ready for Brexit day, 29 March 2019. It’s not HMRC’s fault that it doesn’t fully know what it’s preparing for – that problem lies at the prime minister’s door - but the department must get its ducks in a row when it comes to its own systems.
When questioned, Jon Thompson, chief executive of HMRC, told the public accounts committee that CDS would not be ready for exports by January 2019. It may not even be ready for Brexit day. The committee’s chair, Meg Hillier, is in continued correspondence with HMRC on this. We will keep pushing until progress is made.
Despite the mounting fraud and error bill, HMRC seems to be washing its hands of tax credits, absorbed by the already maligned universal credit programme. The Department for Work and Pensions should not have to pick up a basket of problems from HMRC. HMRC needs to step up and drive improvements to the PAYE system, to reduce expensive human error.
HMRC appears to have no handle its large number of tax reliefs, and whether they offer actual value for money. Compiling the list of 424 different tax reliefs took years of badgering from the committee. We now know that 239 of these tax reliefs are not even measured. This is unacceptable.
Whether you’re a small business wanting advice or an individual requesting to change your tax code, hanging on the phone is annoying. Yet HMRC doesn’t even count the time wasted wading through automated menus in their call times, before you reach a human being. We’re suggesting a scorecard of performance measures to change this.
While Brexit poses new challenges and risks to the government’s tax collector, HMRC needs to look at problems of its own making to ensure tax collection works for every contributor. Otherwise it is just papering over the cracks.
Caroline Flint is a Labour MP and sits on the public accounts committee.
This article was first published in the Times Red Box on Friday 2 November 2018