Do you have views on the consultation that the Chancellor announced in Budget on the drive to modernise the powers and safeguards of HM Revenue and Customs (HMRC)?

"Working with Tax Agents" aims to ensure that as many as possible of the returns and claims submitted by agents are accurate and viable. HMRC thinks this is in the interests of the profession, taxpayers and HMRC and that inaccurate returns damage the standing of the profession, inconvenience taxpayers and waste HMRC resources.

The review will affect anyone involved in the preparation of tax returns. HMRC wants anyone with an interest to have their say. As part of this commitment Dave Hartnett, Permanent Secretary for Tax, and Simon Norris, Head of Review of HMRC Powers, will take part in a live web chat on 18 June at 2pm. This is not intended to be a one-way street. Dave and Simon want to hear from anyone with a constructive view about how the review should be conducted.

H: Jayne Constantinis, host
D: Dave Hartnett, Permanent Secretary for Tax
S: Simon Norris, Head of Review of HMRC Powers

H: Hello and welcome to this special program brought to you by HM Revenue & Customs. I’m Jayne Constantinis. Now, HMRC wants to consult as widely as possible with you, the UK tax and accountancy profession, as it continues to develop modern powers for the 21^st century. In today’s program we’re looking at the working with tax agent’s consultation document, published at the budget, and I’m delighted to be joined by Dave Hartnett, the Permanent Secretary for Tax, and by Simon Norris, who’s Head of the Review of HMRC Powers. Thank you very much, both of you, for coming in

D: You’re welcome

H: And of course we’re live so if you have a question type it in the box on your screen, send it to us, with your name of course, we’ll get through as many as we can during the course of the show. I must say though that we’ve had literally dozens of questions already in. Many of them are along similar themes, so we’ve grouped some of those together. We’ll get through as many of those as we possibly can and of course we can’t discuss individual cases. So let’s start with the basics really – tell us about the Consultation Document?

S: I think there’s three things I’d like to say. Firstly the document deals with tax agents. We acknowledge right from the start the vital role they play in the UK tax system. Basically ladies and gentlemen, we couldn’t do it without you. Secondly there is an area, a group within the tax profession, a very small group who don’t keep themselves up-to-date or get things wrong, and a tiny, tiny minority who actually go across the line of what’s legal. And it’s only right as with other areas of the tax system, that those people are policed. And thirdly it’s about actually getting a better relationship between ourselves and tax agents, a working relationship where we really do trust one another.

H: Now it’s interesting that you raise that as your third point, because Dave, I’m guessing that many people feel this kind of consultation actually undermines your relationship with tax agents. What would you say to that?

D: I’d say I’m really puzzled by the notion that it could do that. Why are we doing it now is I think the crucial question, and the answer to that is we worked hard with tax agents and their representative bodies at improving the relationship over the last year or two? I think it would be fair, looking back further to say that it hadn’t been as good as it’s been in the past, we identified the things we need to do, to improve our contact centres for tax agents, to get together more often locally to deal with issues. And I see this consultative document as a very positive thing. And I don’t see there’s a risk of undermining at all.

H: And you started to talk about why now, why specifically now?

D: Well it feels like – it feels like the right time. We’re looking at all the powers of HMRC. Why did we start doing that? Because two departments merged with different powers, we didn’t want to pick up powers of one department rather than the other, so this is new powers, modern powers for the 21^st century, and given the crucial role of tax agents in the administration tax system, we had to get to our relationship with tax agents. Internationally there’s been a lot of discussion about that which much of which the UK has led. This felt like the right time

H: Simon, you’ve acknowledged the great work that most tax agents do, but there is a degree of cynicism from them with regard to an exercise like this. A lot of people think that you’re just paying lip service to it. Not just you but many such consultation documents, and that you’ve actually already decided what you’re going to do. Is that the case?

S: Most certainly it’s not the case, and in fact we’ve been working on this project for four years now, and I think this is the 17^th document we’ve actually issued to the general public. And what we do, it’s not just about consultation; we will hold workshops with the representative bodies of the accountancy profession and tax agents. Face-to-face meetings, dozens of them, and a further consultation. And all through this process, the proposals, we worked up in tandem with tax agents, and that’s what we’ve done before and received a lot of praise from the agent community about the way we have changed things in light of what they’ve said.

H: And when will the process be finished? When can people expect to see the results of it?

S: The – this consultation will finish on the 7^th August. There will probably be another consultation in the autumn and we’ll be looking to probably tying things up in the finance bill next year

H: Ok. Now the word “accuracy” and I have looked at the consultation document, the word “accuracy” comes up quite a lot and you know the phrase pot calling the kettle black springs to mind – what would you say to that?

D: I’m not sure who’s the pot and who’s the kettle here frankly. We make mistakes, sometimes we’re let down by our systems and I wish that didn’t happen. But tax agents make mistakes as well. I want us to be able to learn from the mistakes we all make, and improve the system. I certainly don’t want us to be tough on people who make innocent errors, and I’d like tax agents sometimes to be a little more understanding that our people can make mistakes as well. The risk we have to manage is that if you end up somewhere, somewhere in the country with a tax agent who is serially making mistakes, we want to help them improve. We want to help them direct; we want to help them through their professional body if they have one. Similarly I want tax agents to tell us about our mistakes so we can improve too. So pots and kettles doesn’t feel right to me.

H: And in fact that leads me into a question that was sent in earlier that echoes many others. “It appears to be one-way traffic. When are we going to get the opportunity to “– little bit facetious obviously – “to bill HMRC for our time spent sorting out your mistakes.”

D: People can do that now. Not for sorting out mistakes, but if we get something seriously wrong and one of our customers, a tax payer, incurs a lot of expense then we have the power to compensate them for that. What we won’t compensate is if we’re not helped to understand something and we make mistakes as a result, if you know sometimes it’s like drawing teeth to get information, if it’s like that, that’s a bit different, but if we make a serious mistake, we compensate

H: Why is it like drawing teeth? Is it fear? Are people afraid of making contact with your department?

D: Well I mean I think it’s sort of a given that Simon and I probably aren’t the most loved men in the country given our calling, but I think if you look back over time, there’s been a great history of cat and mouse tactics. Probably on both sides, if sides is the right term. And we’re trying to break that. We want tax to seem as simple as possible for tax payers, tax agents have got a role in that, we’ve got a role in that, and to condemn cat and mouse tactics, and the sort of ritual dance, if I can mix my metaphors that follows, we want to condemn that to the past and work in a different way

H: Ok. Another question in about similar sort of theme. There appears to be an increasingly cultural perception in HMRC that all agents, not just a few bad apples, are a major problem. Do you think that’s where this feeling of suspicion comes from? You don’t agree with that?

S: I just don’t see that at all. I mean again it’s something which we’ve made quite clear, that we recognise that an agent has to represent their client, and part of that is probably being adversarial, actually being strong and supporting your client. Now that is part of a way we expect people to act. Agents wouldn’t be doing their job if they didn’t, and there are times that we have to be forceful as well. But I think that’s – I mentioned earlier about a relationship of trust. If you trust one another, then you can do that and still not break that trust I think. It’s important. So I don’t think that’s an issue at all

H: Yes. No that’s a very different issue isn’t it to the bad apples that we’re talking about?

S: Yes

H: And does that then touch slightly on the avoidance versus – what’s the other word?

D: Evasion

S: Evasion

H: Oh that’s the word, avoidance / evasion debate?

D: There’s more heat and passion in this debate than I think anything else that’s around. We’re accused regularly of muddling the two up or not being prepared to distinguish the two. I think they distinguish themselves really easily. Evasion is about dishonesty, it’s about concealment, and all sorts of other things that you’d never want to see. And some dishonest tax payers and some dishonest tax advisors will go to prison. It’s as simple as that. Avoidance is about using the tax system in ways that was never intended, about juxtaposing particular parts of the tax code, and about reducing tax bills. Lots of people might see that as reprehensible but I mean it’s not dishonest activity, and that’s the crucial difference.

H: Thank you. And I must just say that we’re getting a lot of questions coming in, so we’re getting through as many as we can during our 20 minutes. Forgive us if we don’t get to yours. We’re also trying to group together questions that are along a similar theme. And we’ve got one here that reflects that as well. “How will you make sure that HMRC fully understands the role and breadth and – of knowledge of agents’ work?” Do you feel that you do that already?

S: I think we do, and also increasingly we’re using secondments into agent’s offices and we’re very grateful for firms of agents who are prepared to do that. But people like Dave and myself over the last few years, we’ve been out getting to small groups of accountants, through the various tax organisations, talking to them, debating with them, and understanding what their problems are. I mean first time we did it I think there was a need for flat jackets; it’s not quite so bad now

H: You are allowed out of the office then?

S: Yes. Oh occasionally yes! With a minder!

D: I have a fond memory of doing a presentation to about 200 tax agents in Huddersfield on a change proposed in the tax system. And I remember a young woman standing up saying she’d been in practice for six years, she’d got a good business model, and then explaining how the change would actually damage her business model. And I understood for the first time the concern we’d heard from others as well, and it’s absolutely vital for us that tax agents tell us what’s going to work and what doesn’t work. Not what they like and what they don’t like, but what can be made to work as well, and they’re important, and our people will listen

H: And that’s what you’re hoping to get from this consultation process

D: Absolutely

H: Yes. Let’s have a look at the next question. There’s a lot of frustration out there in the time it takes HMRC to firstly respond to requests for information from agents, and the formal responses. Some talk of it taking up to two months. What can be done about that?

D: Well it does take us time to reply. Some of the questions are actually nearly impossibly difficult, and sometimes agents ask us questions to which we will never know the answer. We get questions like “how do I convert a personal pension into a company pension fund?” Well our people don’t know the answers to that, I don’t want them looking to the answers. And I want agents to understand that it’s not our job to answer that. Having said that we get asked other questions which we should answer faster. One of the biggest issues for us at the minute is the service out of our contact centres. A little while ago it was pretty poor, it’s rapidly improving, but we want to work with agents so that everyone better understands how to make use of our contact centres, and to stream the really difficult questions that might take time, and otherwise to help agents get the question on the table quickly, get the answer off the table quickly

H: Yes that actually slightly answers a question that we had in earlier, or a point really. “There’s a lack of good service at your call centres. Before you closed local tax offices inspectors knew which advisors were reliable? We’re all human and we all make mistakes sometimes.” So I suppose that’s talking about a much more local approach where people know individuals. Has it become too impersonal?

S: I think there’s two issues there, I mean one is that actually are we looking back with rose-coloured glasses at the days of local offices, and as it was called the inspector’s nose, that you could sniff things out. I don’t think we were quite as good as we were then, as we thought we were then, and now we’ve moved over to a more risk-based approach, we’re assessing risk and doing that on a national basis, and I think that’s going to be a better way of doing it.

H: And tomatoes tasted better in those days as well didn’t they?

S: They did indeed, they did indeed yes

H: They tasted of something

S: And the call centres, I mean agents do now have a dedicated line into our call centres and I think we’re getting something like a 90% rate back on people saying it was a good service

H: Ok great. Another question here which you might want to think about – are there plans to create a distinction between firms which have professional qualifications and a good record, and those that do not? A system where you had some sort of grading would help. Any plans to implement that?

D: WE get asked this almost every day. I think there’s a perception in the big wide world that qualified tax – tax advisors with qualification are good and tax advisors without a qualification are uniquely bad. And it’s just not like that. Different tax payers need different services and there’s a place for everybody. If I look at one of our bigger problems at the minute, and sadly we’ve got it, is fraud in repayments, there are tax advisors with qualifications at hearts of some of those frauds, and there are tax advisors without qualifications. I think it’s probably fair to say that some unqualified tax advisors might be better following other professions, and I think as we go forward we’re going to help them to do that more. We might think at some stage in the future at how we manage risk with tax agents better than we do now. We’ll want to talk to tax agents about that and get their ideas; we don’t want to do it on our own. But we’ve no real plans to say qualified over here, unqualified over there

H: Ok. A question here which has reflected what a lot of people are commenting on – “when does Mr Hartnett plan to exercise his renowned zeal for tax gathering on MPs?”

D: Gosh I’m really glad I’ve got a fan club out there. Well Mr Hartnett has no particular plans because we haven’t dealt with MPs different from any other tax payers. We have special security arrangements in relations to MPs but they get enquired into in exactly the same way as other tax payers, so no special zeal to be applied there

H: Just a general zeal obviously! Just going back to the consultation document and the process again, can you briefly please talk us through the areas, the specific areas that are covered in it where people might have an opportunity to comment and make suggestions?

S: I think there are – one area is how we can actually work better with tax agents, should we be sharing more of the risks that we know about with them, should we be looking at some of their processes and helping that – in helping them design processes to get it right for tax payers? Clearly when we get into the area of – of the agents who may not be doing a good job, there I think there are some real issues about how do we – does the profession itself, what can they do with such agents, should there be penalties, should there be other sorts of sanctions? How do we – there’s a whole range of possibilities in there, and I think it’s about what will work and what will make sense for people, and certainly we recognise that in all the consultations that we do there are safeguards, and I think there have to be additional safeguards here because very easy if we start investigating an agent’s client base for them to lose their reputation, so I mean we need to avoid that as much as possible, you know what are the ways round that?

H: Ok

D: Can I just add one or two things in this sense? Clearly our document has managed to spook some tax agents. We’d love to answer their questions because we don’t want anyone spooked by it. Clearly for another group, there’s sort of a Pavlovian response to anything we produce and they really, really want to know what we’re truly up to because clearly we’re up to something other than what’s in the document

H: Clearly

D: And then the third and by far the largest group would be really upset if we didn’t consult them about something that’s as important as this to them. So we’re managing quite a mixed audience here, or trying to manage a mixed audience, but we want to hear from them all. Particularly if we can disabuse anyone of misconceptions of what we’re trying to do

H: Ok well here’s somebody sending a question in, in fact this again reflects a number of similar questions, about tax repayments being subject to security checks. “These take too long. And it’s not unusual to have to remind a tax office that they’ve overlooked to actually issue said repayment.” Any thoughts on that?

D: I’ll pick that one up. And this is a slightly sad story which is a tale of our times – the tax system in the UK and in many other countries now is under attack in a way that it’s never quite been under attack before, from people creating false repayment claims. I mean one I saw just the other day, our people showed me, someone who sent in a tax return which wasn’t sent to them, so who knows where the tax return came from, which showed income of £100,000 from which £40,000 had been deducted. It showed losses from a trade that we knew nothing about, and asked us to repay the £40,000 tax, setting the losses against the income. Whole thing was bogus. So our repayment cheques are vital. We’ve had to increase them because of the scale of the attack on the tax system. We’re looking to refine them in any and every way we can, and as I said earlier on and I think it just bears repeating, for all those honest and this is the overwhelming majority, of tax agents out there, some of their colleagues in some places, are at the centre of these frauds and for those good tax agents, for their clients and customers and for the tax administration, we have got to stop this and find out whose perpetrating it. So I’m afraid it’s an important part of protecting the country

H: Ok well I hope that answers that question because we’ve had a number of people asking along a similar sort of lines. How radical do you expect the findings from the consultation document to be, and will you be prepared to implement them?

S: I hope they will be radical. I think some of the things we’ve done over the last 3 or 4 years, being the first tax administration to introduce suspended penalties and things like that have been radical, and I really hope that people do come up with interesting and useful ideas because that’s the way to progress. I mean this is about having a system that will last the next 25 years or more

H: Great. Good to hear. Another question here. “I know that four round tables are being held about the working with tax agents’ consultation document in London, Nottingham, Leeds and Glasgow. Are there going to be any more in other parts of the country so that more people can attend (not everybody can afford the travelling times and expense to the other venues).

D: I’m pleased we’ve got 4 and the bodies working with us on those, I’m really grateful to. I’d like to hold more, and we may try to do that, but I mean the question brings out one of the big issues. People keep saying to us you’re actually consulting too much now. You know when are we going to get our work done? And we understand that so we’re trying to strike a happy medium here. We may not have quite got it right yet; we will get it right but very conscious of that travelling time and by implication money cost issue that was raised

S: Can I just add one thing, it’s relatively easy for us to get members on the professional bodies and talk to them, it is really difficult to get to the people who aren’t members of bodies, the individual tax agents out there and you know if any of them want to contact us we would be very glad to get a group together to get their perspective on things

H: And how should they contact you?

S: Using I think you’ll be putting up the web –

H: The website, the web address at the end. Fantastic. And in fact that leads beautifully onto a question that’s just come in, “how will the many experienced agents who are not members of a professional body be affected by the review?”

S: I would expect them to be affected by the review just in the same way that those who are – by and large – those who are in a professional body. We should not be distinguishing between them; we cannot under the law of course

D: I think it’s really important to say given that question that I can’t envisage a world where they’ll be one rule for those who are qualified and member of a body, and one rule for those who aren’t. The tax payer, our customers, are our focus, agents are the people who help them, and I think if we try to segregate the rules in relation to the agents in that way, we’d end up in a horrible mess

H: Ok. We’re just about out of time; we’ve got through a large number of questions which is fantastic. Just to sum up now if you would – what are you hoping that people will take away from this consultation exercise as it were, what do you want them to do now?

S: Read it

H: Read the document

S: And take the message that we really, as in other previous consultations, we really are open about what the answer’s going to be

D: For me it is that tax agents, as we’ve said three or four times, in the last few minutes, are a crucial part of tax administration in the UK and in other countries. As Simon says, read it, but respond. Let’s have the ideas. Many tax agents have years of experience of making the system work and sometimes you do actually have to make it work. We want to hear about it

H: Great. Thank you very much indeed

D: You’re very welcome

H: For coming in to talk to us about it, and thank you for joining us as well, and to everybody who sent in a question we’ve had dozens of them, thank you very much. If you’d like more information or if you’ve got any feedback on today’s show then go to the address at the bottom of the screen. Thank you for watching. Goodbye.