David Ruffley MP questions Roy Alpin, Richard Bacon and Chas Roy-Chowdhury on the Administration and Effectiveness of HM Revenue and Customs

Tuesday, 8 February, 2011

On the 8th of February, David Ruffley questioned Roy Alpin, Chairman of the Institute of Chartered Accountants in England and Wales, Richard Baron, Head of Taxation, Institute of Directors, and Chas Roy-Chowdhury Head of Taxation, Association of Chartered and Certified Accountants, on the Administration and Effectiveness of HM Revenue and Customs.

Mr Ruffley: Yes, I will kick off. Mr Baron, the IOD came up with some interesting data on the countryÕs 770 largest business that deal with HMRCÕs large business service: you found that 86% of those large businesses rated HMRCÕs service as good or very good. That is quite a high figure. What do you attribute that to?

Richard Baron: Firstly, I should say that those were not our data. They were from someone elseÕs survey and we reproduced them. It wasnÕt our survey-I hope there is a footnote there to explain that-so not our data.

Mr Ruffley: Do you think that figure is right?

Richard Baron: Yes, it came from a perfectly reputable survey. I think that it is an impressive figure because, as we were saying earlier, the job of HMRC is to take money off you and therefore you are not likely to love them. But what has been done at the large end, introducing these personal customer managers who will co-ordinate the work of the different bits of HMRC who will have to interact with a large group, does seem to have been a big success story-to the extent that they have now extended it still further down the line into what they call the large and complex group who are outside the ambit of the large business service. So I think that illustrates very nicely what you can do when you have a small enough group of taxpayers who are individually significant enough that you can devote that kind of personal attention to them. What goes on in the large business service is not a mass production business. Of course, as we have been saying, that is what does not happen and, frankly, economically canÕt happen across all the millions of ordinary taxpayers.

Mr Ruffley: Sure. You also go on to make the rather interesting point that in 2008-09 20% of corporate tax revenues came from businesses with individual liabilities of less than £100,000; typically, the kind of small to medium-sized enterprises that Members of Parliament come across in their advice surgeries. They donÕt get similarly high levels of service from HMRC. Would you agree with that?

Richard Baron: Correct, yes.

Mr Ruffley: What do you think could be done to rectify that?

Richard Baron: I am afraid we are back to the problem of just looking at the economics of HMRCÕs resources. You cannot give them that level of individual attention because there are just too many of them. But of course they are very important. They employ lots of people and, as you have just noted, they do pay a significant proportion of the corporation tax revenue. Of course, HMRC is not a business that you can deal with or not deal with as you choose. We all have to deal with it and it has certain responsibilities as a public department for that reason. So I think that we are going to have to be in a position of saying, "Yes, it will be, to some extent, a mass production business. It has to be, dealing with the tax affairs of all of those small businesses. But we need to look again at whether we should be putting more into an exception, so that when the mass production system gets something wrong for you, you can be taken out of it and dealt with individually". Mr Ruffley: Sure, because you come to the conclusion, and I would agree with this, "The interests of smaller businesses should be given full weight when resources"-HMRC resources-"are allocated". How are you going to lobby for that?

Richard Baron: We will keep on pestering HMRC. When we do surveys or when we get anecdotes-obviously with anecdotes we strip off the identifying details that would tell them which taxpayer it was-we say, "Look, here is another one. Is this a systemic problem or is this just a one-off?" All we can do is keep on pestering them.

Mr Ruffley: Pestering perhaps is not a strategy. I just return to a point Mr Tyrie made: small businesses, SMEs, are going to be key in the export-led recovery that the current Chancellor of the Exchequer tells us will get the economy out of the mess it is in. Small businesses are the backbone of employment in this country, and it seems to me that they are not being accorded the necessary and appropriate level of respect, care and attention when it comes to HMRC delivering administrative services. Now, "pestering" is what you talk about. Is there any sense you get from all the other small business lobbying groups and organisations to make a united front to argue for better customer care, better levels of service, so that it more nearly approximates the excellent service, apparently, that HMRC gives to big businesses? I quite understand we can never get that bespoke approach from tax officials in HMRC, but to get nearer that gold standard, if you will. I want to understand what the IOD and others are doing to make the case. Pamphlets and submissions, no matter how worthy, are fine, but is anyone getting serious about this in the small and SME business world, apart from yourselves?

Chas Roy-Chowdhury: Can I just respond?

Mr Ruffley: Chas, please do comment, yes.

Chas Roy-Chowdhury: We had a meeting, which Paul was at, at the start of this year with the Exchequer Secretary, the CEO and Chairman of HMRC and others. At that meeting we made these points, not just about small businesses but taxpayers in general at the smaller end. One of the things that HMRC are going to be doing, while reducing in some aspects, is recruiting more people for the helplines-the right kind of people with the right kind of skills. So there are interactions going on that are more than, I would say, pestering. We are having concrete meetings, and we have these fairly regular meetings in general across a range of areas to drive home where the concerns are, where the problems are, as we have been discussing this morning. So HMRC are aware. I have not seen it written down, but there is a plan to try and do something about it. So, hopefully, we are getting somewhere and it is a matter of seeing if it does turn out to be effective. It may not be; we will have to see.

Mr Ruffley: But is there a particular piece of work that the Exchequer Secretary is undertaking? Is that what you are saying?

Chas Roy-Chowdhury: No, there was a meeting about the way forward: what HMRC are going to be doing with the new political administration coming in; with the cuts that are being imposed on HMRC, how they are going to deliver under those cuts.

Mr Ruffley: Can I just ask a question of any of you but particularly Mr Aplin. Is it the case that HMRC are going to roll out its big business model to smaller businesses? Do you recognise that?

Paul Aplin: I think there was an aspiration to do it a year or so ago.

Mr Ruffley: Is it a hard and fast proposal to roll out the big business service model to smaller businesses? That is not your understanding?

Paul Aplin: That is not my understanding.

Mr Ruffley: Okay. Sorry, it was just a note passed to me that suggested that they might. I just want to return very quickly to the Exchequer SecretaryÕs conversations with you. DonÕt you think it might be a good idea to hold the feet of the Treasury Ministers to the fire on this and, rather than have general conversations, to give them a target to produce something for you and colleagues who are interested in this area?

Chas Roy-Chowdhury: We will certainly be back, because this is part of the ongoing engagement. We will certainly be back-where things are not improving or they are not being addressed in the way we were told earlier this year-in a few monthsÕ time to revisit that meeting to see what the progress has been.