Making HMRC fit for the twenty-first century

19 September 2016

Colin Haslam, Professor of Accounting and Finance at the School of Business and Management at QMUL, and one of the report’s academic advisers, observed that the report highlights the extent to which: "HMRC has suffered from a considerable reduction in funding and this is compromising its capacity to close a growing tax gap".

This report reveals the extent of this tax gap and makes a series of recommendations to: enhance transparency surrounding corporate tax disclosure, strengthen HMRC’s governance and increase funding to make HMRC 'fit for purpose'. More specifically, the report recommends that tax returns of large companies be made publicly available. This aims to increase transparency, and to allow parliamentary committees access to better quality information when assessing HMRC’s effectiveness in meeting its objectives.

The report also notes the effect higher prosecution quotas has had on the complexity of the cases taken on by HMRC. Under pressure from the House of Commons Public Accounts Committee, HMRC agreed a target to increase prosecutions by 1,000 a year by 2014-15. However, it appears that this has led to the targeting of less complex cases, with more than two thirds of the cases concerning less than £100,000 of tax and making up less than 1 per cent of all cases by value. By comparison, the Commons Public Accounts Committee found the number of prosecutions for offshore tax evasion to be "woefully inadequate".

According to the report, chaired by Professor Prem Sikka from Essex University, "HMRC performs a vital task in collecting taxes, enforcing tax laws and delivering services to taxpayers.  Against a background of reductions in resources, it has experienced considerable difficulties in meeting the service expectation of taxpayers and challenging organised tax avoidance".

The full report is available online: Reforming HMRC: Making it fit for the twenty-first century