HMRC – Treating ‘customers’ fairly?

The reason I’ve decided to write this paper is not one of a personal nature. Indeed I own a Tax Resolution business, I require tax disputes and HMRC enquiries for my business to exist. Furthermore, it is not looking to unnecessarily cause embarrassment to the Civil Service. As I’ve publicly stated previously, I’m a firm believer in the requirement of a taxation system. Unfortunately, despite all efforts from many thousands of people to convince HMRC of the need for change, it’s now reached the stage where I am unable to consider the current service delivered by HMRC to be open and fair. The following is simply evidence of why I regrettably reach this conclusion.
The morality of a society is not judged by the behaviour of an oppressed class but by the rules and laws made by the state, which either protect or exploit…
– Asma Jahangir, Human Rights Lawyer
HMRC – an executive branch of UK government – loves labelling UK taxpayers ‘customers’ and boldly pronounces in its Charter that it “wants to give…a service that is fair, accurate and based on mutual trust and respect.” Further, it states that it “want[s] to make it as easy…to get things right.” (1)
It then lists out what customers can expect from HMRC, namely:
• Respect and treating customers as “honest”
• Provision of a “helpful, efficient and effective service”
• Professionalism and integrity
• Protecting customers information and respecting their privacy
• Acceptance of representation by someone else
• Quick and fair handling of complaints
• Tackling those who are bending the rules
Granted, on the surface that list reads very well, and I would not feel the need to write the following article if HMRC adhered to its own charter. However, the customers charter could not be further removed from what’s actually happening: HMRC is at the cusp of complete cultural failure.
This is in stark contrast to one of HM Treasury’s sister divisions, the Financial Conduct Authority (FCA), which since 2010 has strongly pursued Banks and other Financial institutions for NOT treating customers fairly. This further then morphed, with the advent of the FCA (previously the FSA) in 2013 into “conduct risk” and more recently has been further enhanced as part of the Senior Managers’ and Certification Regime (SMCR).
I am firmly of the view that If firms regulated by the FCA (a sister organisation to HMRC, both sitting within HM Treasury) would exhibit similar behaviour to what we are seeing on a daily basis from HMRC, towards its “customers”, they would have been closed down a long time ago, heavily fined for professional misconduct, and senior management would have been removed.
Yet it’s seemingly business as usual for HMRC, with no visible or perceived oversight by UK Parliament and behaviours exhibited that would smack the FCA’s SMCR or, in fact, any consumer and human rights organisation in the face. Some of the behaviour and attitudes that have surfaced recently are particularly concerning. Twenty years retrospective taxation also throws the core fundamental democratic principles of Westminster system into doubt. Taking a step or two back, one may also point the blame for all this fairly and squarely at the UK government. One may also question its lack of duty of care towards UK taxpayers, i.e. ordinary citizens.
In summary, in my opinion HMRC’s Charter is nothing more than a romanticised vision of how it would like to be seen. For me, the daily reality of dealing with the human victims of this cruel system has led me to conclude it is simply not sustainable and not fit for purpose and something has got to give.

The Righteous and the Wicked

My professional journey started in late 2001 when I joined the civil service as a rather nervous yet energetic youngster. My first post for HMRC (Inland Revenue as it was then known), was probably the most pleasant working environment I’ve ever experienced. As a proud civil servant, it felt like a job of real public responsibility and worth, resulting in a great career that continues to this day as a tax partner specialising in the resolution of tax investigations.
Regrettably, the only vivid feelings that remain from the 14 years at HMRC is a great sense of shame. Tragically, this is solely rooted in the fact that the once great establishment of the Inland Revenue no longer exists. It has been replaced by something astonishingly unrecognisable known as HMRC. Why did this once organisational beauty turn into such a beast? It’s all about organisational culture and the behaviours it ultimately displays.

Behaviours and Taxation

We hear a lot of talk from HMRC about the importance of behaviour. Penalties they apply are based upon ‘reasonable care’. Abatements to such penalties directly based on (HMRCs) determination of the Taxpayer behaviour, and we even hear that they will help and support those that are open and honest. This all sounds reasonable but like any rules, regulations and laws, it’s the application which provides us with the truth.

HMRC Charter 1.6 – We will deal with complaints quickly and fairly.

There have been numerous complaints made to HMRC as of late, that are primarily (but not always) due to the ongoing implementation of the April 2019 Loan Charge. The complaints are from a range of affected parties such as individual taxpayers, advisors and Members of Parliament (more of which later). Analysis of HMRC’s response to the huge majority of these complaints highlights repeated issuance of template letters which fail to even acknowledge the existence of the specific questions being presented. A Civil Service which refuses to provide straight answers to simple questions cannot, even by the most generous of definitions and despite its own Charter, be considered fair, respectful or honest.
Further, this may also raise questions as to whether the taxman today is altogether fit for purpose both from a professional competence as well as an emotional intelligence perspective. Sadly, the number of examples pointing towards perceived professional misconduct on a daily basis is on a sharp rise: Just take a look at the recent ongoing public inquiries conducted by the Treasury Select Committee (TSC). The number and content of these submissions paint the picture of horrific mistreatment of taxpayers. (2) Tellingly, one inquiry aptly has “conduct” in the name, suggesting something is going seriously wrong. Assuming now that only a very small minority are actually willing to speak up and write to the TSC, chances are the numbers of taxpayers suffering at the hands of HMRC runs into the tens, if not hundreds of thousands of UK citizens.

Example 1

We have hundreds of examples in this vein but the most recent question HMRC have simply refused to answer (to both a client of mine and also their MP) is: Can HMRC clarify the date that they consider the amount paid (to the individual) became taxable as an emolument of employment? It’s an extremely basic question which can simply be answered by providing a date. For unknown reasons, but a suspicion this may have to do with the 20-yrs retrospective nature of the 2019 Loan charge, HMRC simply refuse to answer (reason being I suspect is that if they do it will destroy their own clearly flawed argument that the loan charge isn’t retrospective – again, more of later). This is not how tax is supposed to work – how is the constant refusal to answer the most basic of queries ‘fair’? This particular client faces certain bankruptcy due to HMRC, the least they could do is explain to him why.

Example 2

One of the admittedly more shocking cases is also still ongoing. We’ve set this out to HMRC numerous times and not received any response other than the following (I’m paraphrasing throughout but without altering the reality of the discussion)
Counter Avoidance (“CA”) – ”It’s a DMB (Debt management) matter now we can’t help”
DMB (which I add is still within HMRC so why they cannot just talk to one another is a mystery I’ve been unable to solve) – “We agree and can see what you are saying but until CA inform us in writing to stop we will keep on chasing the amount”
Counter Avoidance – “Sorry as we said, it’s out of our hands now”
The matter they are discussing is where my client is being chased for an alleged debt. I say alleged but even that is generous as both CA and DMB have individually admitted that the amount repeatedly being demanded is incorrect. In other words, no living person thinks that this amount is actually due. This doesn’t seem to have stopped DMB phoning my client and demanding he reads out his credit card number.
Furthermore, HMRC repeatedly turn up at my client’s door demanding money with the threat of taking goods. My client has had to have cameras installed to capture such behaviour and has informed me that he isn’t going to hand the footage to me or HMRC but to the police. The (arguably understandable) reason for this is apparently the definition below:


Extortion is the crime of obtaining something from someone, especially money, by using force or threats.
That in itself is a prime example that another Charter-based commitment – professionalism and integrity – is non-existent. Behaviour repeatedly displayed by counter avoidance and DMB teams highlights siloed culture and organisational internal non-alignment that results in unfair treatment of customers, often with a highly detrimental impact. These are not one-off cases where HMRC is falling short of its own promises given in its Charter. Quite the opposite, these, shocking as it may seem, are the norm.
It could be argued that as his advisor, we should solve this situation and I’d normally agree, that’s exactly what we are paid to do. We’ve emailed, spoken to and even approached the point of begging HMRC for help in solving this. All in return for more monotonous and templated responses that would make David Walliams proud of his character catchphrase of ‘computer says no’. Yet again HMRC are simply refusing to communicate in a manner that could even be vaguely considered to be approaching fair. If they calculated the correct amount due (which we have done for them and provided to both of the above mentioned teams), then the client would instantly pay and without argument (despite the underlying enquiry still being open he’s just had enough and some may state that was perhaps the plan by HMRC all along).
The saddest part of this though isn’t that this unfortunate client is being harassed for an amount that nobody considers due, its not even that the field officer (who is simply doing as they are told by their employer and neither me nor the client blame them for that) is having to undertake such bizarre tasks, but it’s that this situation no longer shocks me. It’s pretty much expected. This is an almost daily situation in the ever increasingly outrageous world of HMRC.
This brings us on to the question of why is this behaviour occurring?
The answer is arguably explained by a cultural paradigm shift caused by replacing an old Inland Revenue aim of “collecting the correct amount of tax, not too little and not too much’ to ‘Maximising Revenues’. As a natural consequence of HMRC’s overzealous quest for “maximising” revenue, taxpayers’ residual disposable income/funds are reduced to a minimum and this is where such an overzealous culture becomes downright dangerous, if not to say, an existential threat to many taxpayers that are on the receiving end of HMRC’s continuous attempts to extract maximum revenue from them. HMRC are using all sorts of techniques in pursuit of those goals: template responses (grinding people into obedience), bullying letters, often timed to arrive just before the weekend, bank holidays or public holidays such as Easter or Christmas and the active use of DMB field officers to encourage tax payers to pay – 78% according to HMRC’s own sources is “spurious debt”. (3)
To summarise, HMRC has been and continues to use ‘methods’ to obtaining money – with the aim of maximising its revenue – from taxpayers by routinely using force or threats. If you think you’ve heard/ read this somewhere before, scroll up one page under the header “extortion” and compare with the previous sentence.
The only difference is the missing word “crime” in the latter. One could now argue that there is no crime without a victim, yet the reality looks quite different. There are certainly hundreds if not thousands of victims and the recent emergence of victim support groups, for instance the Loan Charge Action Group (LCAG) are clear evidence that something is seriously wrong and many are suffering.

Maximising Revenues

Maybe, “maximising revenue” is an impossible organisational objective to achieve, representing an unsolvable conundrum, at least not without a detrimental impact on taxpayers?
Clearly HMRC would counter by stating that they mean the ‘maximum revenue due’, but that doesn’t really match the reality. APNs (and for anybody that knows me – I firmly acknowledge my own background in this area), are specifically only issued where a dispute still exists, regardless of whether the amount claimed is actually due. These APNs have brought in approximate £7bn to the treasury and other than where HMRC have later withdrawn the notices themselves (6,000 cases and rising) does anybody really expect to see that money ever again? Trying to get a refund from HMRC is becoming a battle of perseverance and argument rather than a discussion of facts and law.


National Insurance Contributions (“NICS”)

Many people have been reclaiming NICS claimed by HMRC via the use of APNs. It was soon noted that the Statute of Limitations Act 1980 undeniably meant the issuing of these APNS were an ‘error’ (due to the 6-year limitation being in place). I have seen a number of individuals, with absolutely identical situations, being issued with the exact same letter of reclaim. The responses by HMRC have been contradicting to say the least.
On one set of responses HMRC claim the date that the 6 years run from the date of any original appeal was settled. The justification (again a template letter) is as follows:
In your case, you took corrective action under Follower Notices and withdrew appeals in respect of Income Tax and Class 4 NICs assessed for tax years ended 5 April 2002 and 5 April 2003. Those appeals were determined on * *** 2017 and treated as settled by agreement under Section 54(1) Taxes Management Act 1970 on * *** 2017 when the Income Tax and Class 4 NICs became payable as set out in Section 59(4) TMA 1970. Therefore the limitation period, or rather the “cause of action” as outlined in Section 9(1) Limitation Act 1980, accrues from * ***2017, rather than from any earlier date.
Leaving aside that this argument goes against all previous HMRC enquiries (in that once a case has been settled in HMRCs favour, its noticeable that interest has ran from original due date rather than the date of settlement/agreement reached), this argument has not been used in otherwise identical cases. Instead in these cases we have seen situations where NICS have been refunded or at least an agreement has been provided where the following wording is used:
“In the present circumstances, enforcement action in relation to NICs could potentially be met by a defence based on the limitation act 1980…”
We have checked, double-checked and analysed numerous times and there is no reason for this contradiction within these cases. We are not just talking a few, we are talking thousands. Fairness and equality simply isn’t being applied. We have no idea of, nor can think of a reasoning behind, this bizarre behaviour by HMRC. Either they believe their interpretation is correct or they do not. Legislation does not discriminate so what fits for one person must fit for all.

APN Representations

It’s no secret that representations to APNs are, unless an absolute clear error by HMRC can be recognised, somewhat of a time consuming and worthless exercise. As with many other areas of our current taxation system they are simply met with template letters.
The legislation on this matter is incredibly clear and the most noticeable line is at s222 (3) (highlighted below).

S222 FA 2014

(1)This section applies where an accelerated payment notice has been given under section 219 (and not withdrawn).
(2)P has 90 days beginning with the day that notice is given to send written representations to HMRC—
(a)objecting to the notice on the grounds that Condition A, B or C in section 219 was not met, or
(b)objecting to the amount specified in the notice under section 220(2)(b) or section 221(2)(b).
(3)HMRC must consider any representations made in accordance with subsection (2).
We often hear HMRC speak about the ‘spirit’ of the law and ‘what Parliament intended’ (with regards the drafting of legislation). Applying such a consideration here, its surely beyond reasonable doubt that the requirements of s222(3) are that each individual representation made should be reviewed on an individual basis. Indeed if somebody sends HMRC a representation they will receive an initial acknowledgment from a ‘Review Officer’ which strongly implies that this is the case. However, once the responses are finally issued by HMRC (minimum 6 months later is the normal time frame) we see that in reality they are simply template letters which have instead been created by an unknown employee of HMRC.
When questioned on this matter HMRC of course do what they do best, they supply a rather cryptic standard line which doesn’t address the question on hand at all.
Again I state that APNs have made HMRC approximate £7bn in little over 3 years. It seems that the ‘Spirit of the law’ only exists in one direction. As for the much more suitable ‘rule of law’, this brings us onto the already somewhat infamous HMRC 2019 Loan Charge.
So, coming back to the unachievable conundrum of “maximising revenue” maybe a change of HMRC’s strategic objectives and/or the ‘tone from the top’ is urgently needed to rebalance this in keeping all stakeholders, including tax payers (the customers) in mind.

Loan Charge

My life is now dominated by this particular piece of legislation and I’ve previously spoken about it at length. This is the area where I feel HMRC’s behaviour has reached new depths.
If you are reading this then I’m sure you understand the technicalities, so I will not repeat them in detail again. Instead I shall point out some areas that are unarguably failing to meet HMRC’s Charter promises in spectacular fashion. I have today sent a few questions to HRMC and await a clear response to each. While responses previously have not addressed the questions raised, often being simply template responses, I hope that HMRC may be reminded of their taxpayer charter and recognise their responsibility to provide a more detailed and specific response.
HMRC had sufficient enquiry powers/windows to challenge these Disguised Remuneration arrangements at the time. In many cases enquiries were opened and never completed, and in many other cases, never even opened. This is HMRCs failure and this failure cannot be hidden by the later use of retrospective tax to simply mop up their own mess. To state that the loan charge ‘does not change the tax position of any previous year’ whilst simultaneously utilising it to tax an amount that has clearly arisen in a previous year, and we all agree (as per Rangers) was chargeable in that year, is remarkable. Why is it the case that for many, no enquiries were opened to inform the individuals that these schemes ‘did not work?’ It is unquestionably reasonable for people to have assumed that if no enquiry was opened then, once the enquiry window had shut, the use of these schemes had been accepted by HMRC.
In the recent case of Alleyne v HMRC I note the wording of Para 53 “a reasonable person would be entitled to assume that a nearly eight year silence from HMRC meant that there was unlikely to be much of a chance of having to pay the tax … and certainly not within a few months of a demand for tax coming out of the blue”

Retrospective Taxation

The Loan charge is retrospective/retroactive. Its quite frankly a nonsense that HMRC keep stating otherwise. Despite repeating the mantra “the Loan Charge is a new charge” etc. it is, in its effect, retroactive.
HMRC’s own guidance states “The loan charge of 2019 will see employment related taxable loans made by third parties on or after 6 April 1999 brought within Part 7A ITEPA 2003 if they remain outstanding on 5 April 2019”. Part 7A was introduced with the Finance Act of 2011 (December 2010). Therefore, to apply this to loans going back to 1999 is, by even the most layman terms, retrospective taxation. Furthermore, the loan charge legislation itself was clearly not in existence until 2017 (date of Royal Assent).

Examples of HMRC Behaviour

We have already discussed how HMRC refuse to answer simple questions. I’d be delighted if they prove me wrong in this instance by answering those at the bottom of this letter. However, I will also be immensely shocked.
We are not alone in believing that HMRC behaviour is now unacceptable. Have a read of the earlier referenced submissions to the Treasury Select Committee regarding HMRCs conduct in Enquiries. QC Keith Gordon’s would be a good place to start.
When the Loan Charge was first introduced HMRC released an impact statement which stated “this measure is expected to have minimal impact on family formation…”
When challenged on this clearly incorrect statement (thousands of people losing their homes/heading into bankruptcy) their response was to claim they were meaning it would have minimal impact if compared to the entire population of the UK. That quite frankly is ridiculous. To state that a measure has a minimal impact on a selection of people that clearly aren’t affected by it is the most pointless exercise possible. The loan charge is destroying the lives of those affected and HMRC simply don’t seem to either recognise or worse, don’t care.
This weekend I have dealt with 2 more clients who are suffering from suicidal thoughts. One was at 11pm on Saturday evening. I don’t mind doing this but as well as not being qualified, I have to ask why HMRC are not providing the 24-hr helpline that Stephen Lloyd MP asked them to set up? I can provide the evidence that it is required if HMRC wish to request it. In fact, i’m travelling to London (without charging) on Monday purely as I’m concerned and wish to help a client who has stated that they are suicidal. Do HMRC wish to join me? They can supply a professional counsellor if they like, as I’m not one, I’m just a normal person trying to do his best for fellow humans.
In response to this request (for a suicide helpline) HMRC replied to state that people can call to ‘sort out their tax affairs’ (insultingly missing the point) and this was only between 9:30- 16:30 Monday to Friday (please don’t be suicidal outside of office hours and not on weekends/ bank holidays?!).
The most telling part of it all though wasn’t the wording of the HMRC response. Considering that HMRC apparently have Welfare Officers, one would expect a response from these professionals – unfortunately not – the response came from Julie Elsey. For those who are unaware, Julie Elsey is the head of Counter-Avoidance. If ever anybody required more evidence of HMRCs behaviour reaching unacceptably low levels, this letter was it. (4) And it took more than 3 weeks to respond (vs 2-3 victim calls per week dealt with), which derails HMRC’s Charter promise to be dealing with complaints “quickly and fairly”. Never mind people’s lives are literally on the line, HMRC has taken its time to send another standard template response that does not address the underlying issue or offer any help.

Members of Parliament

Stephen Llloyd MP opened an early day motion (EDM) against the retrospective nature of the Loan Charge. It has now, at the time of writing, been signed by 79 cross-party MPs.
HMRC felt the need to write to all of these MPs with their normal ‘it’s not retrospective’ stance.
Mel Stride, Treasury Minister, managed to go one better than this, he stated to Parliament that “these schemes have never been legal” (5) . This declaration which immediately and incorrectly tarnishes up to 100k contractors as ‘criminals’ is highly worrying. Either it’s a slip of the tongue (which he is yet to correct, potentially as it’s quite an embarrassingly basic mistake for somebody in his position to make), or it was a purposeful move to justify the heavy handed HMRC approach thus far. The question he was being asked by the way wasn’t about the legality of the schemes, it instead all stemmed from the query about the need for a suicide helpline (which he also managed to avoid answering). Like I say, Mel Stride is the Treasury Minister.

General HMRC Behaviour

We are not alone in feeling that HMRC behaviour is now unacceptable.
Instead of offering my opinion on these I shall provide those of a leading QC
“I am very concerned about the tone of HMRCs latest letters which amount to demanding info with menaces. This is not the way a government department should operate in 2018 in a modern democracy”
“It’s never easy to stand up to HMRC, but when they act no better than the playground bully, they should be responded to accordingly. The UK tax system works because of trust – HMRC are abusing that trust and will cause long-term damage to the system as a result.”
As a further example of this unnecessary tone being applied in HMRCs letters, this week my client received a letter for an amount owed of under £4k.
The letter is remarkably aggressive considering that the client has already been in touch with HMRC:
…We can take action to collect what you owe. The law allows us to take things you own and sell them and we charge you loans for doing this.
Just to add to the absolutely outrageousness of it all the letter end
If you have already paid us, thank you, if not act now to stop us….
Depressingly, criticism of HMRC isn’t difficult to find, all I have mentioned are examples from within the past few months, as is the statement that HMRCs behaviours were “unforgivable” from the Judge Richard Thomas in J&L Benson Building Services Ltd v HMRC TCO6546.

Example & Questions for HMRC

We shall start with a very simple example that applies to all of my following questions.
• Mr X worked for ‘Y Ltd’
• Year 1/1/2000 Y Ltd pays £100k into trust for Mr X
• Year 1/1/2001 Mr X takes all 100k.
• Mr X declares this loan on his Tax Return at the time.
• HMRC State this is disguised remuneration and never a loan as the scheme ‘never worked’
Now HMRC are adamant that this scheme (to use their own terminology) ‘did not work’.
Therefore, and as shown in the ‘Rangers’ case this amount was always income (emolument of employment as per s62 ITEPA 2003). There is an argument that HMRC should initially be asking the employer for the payment via a reg 80 but leaving that aside as we will, for the sake of discussion, accept the final liability is on the employee.
If the scheme never worked, and the income arose in our example on 1/1/ 2000 then this is the date from which it is taxable. HMRC agree this is the case (as per their letters stating it is the Rangers Ruling that justifies the loan charge), Legislation states this is the case and previous case law informs us of this fact also.
Furthermore, If a person wishes to ‘settle’ with HMRC then they need to pay interest from the date in 2000 as this matches HMRCs opinion that the scheme ‘did not work’.
The fact that HMRC didn’t undertake the tasks of their job at the time and therefore are only just getting around to collecting the tax, it does not now cover up the fact it was clearly due from a time before the loan charge legislation existed.
Question 1 – From what date did the 100k become taxable income? (In other words, when did this taxable income arise)
Question 2 – Do therefore HMRC consider the money to be an emolument of employment/taxable income/disguised remuneration (whichever you may wish to call it) from the date of the answer to question 1?
Question 3 – If the answer to Question 1 is neither of the dates provided in the above example, please explain which date the income did arise as a taxable source.
Question 4 – If the answer to Question 3 differs from the dates provided in the example, please explain why the money was NOT taxable between either of the dates provided in the example and the date offered in response to question 3.
Question 5 – In HMRCs recent template responses we note that HMRC state that the Loan Charge takes the ruling of the Rangers case and applies it to the Disguised Remuneration Schemes to which the Loan Charge is being applied. Please clarify which paragraph of the Rangers case ruling applies a tax charge on a future date to charge the income to tax.
Question 6 – Do HMRC consider that, following your responses to the above questions, that the Loan Charge of April 2019 meets the CIOT definition of Retrospective Taxation (below).

Definition of Retrospective Taxation

…the legislation imposes (or increases) a tax charge on income earned, gains realised, or transactions concluded at a time before the legislation was announced.


Organisational culture starts with the direction, dynamics that are set at the top. For HMRC, that would put responsibility for HMRC’s actions fair and square into Jon Thompson, Mel Stride’s and Liz Truss’ court.
HMRC’s behaviour has for some time exhibited tell all signs of a failing organisation that portrays itself with its charter as ‘customer’ centric, yet in the daily dealings comes across at best awfully disorganised, misaligned and unwilling to display any signs of professionalism or at worse, some would state, as completely defunct.
Either way, change is urgently needed, it cannot continue like this. We’ve recently seen a series of government scandals where ministers have had to resign due to misleading parliament and the whole senior management of government bodies that had to be replaced due to misconduct and, in some cases, contravening the rule of law. If things do not change, HMRC is a prime candidate for the next big scandal. The Loan Charge together with some of the issues we’ve seen in the IR35 space are strong indicators for cultural, organisational and systemic failings.
Whilst HMRC themselves are unlikely willing (or able) to openly acknowledge where things are going wrong, Members of Parliament – representing the UK electorate and hence taxpayers at large – have a duty to act, and soon. It’s not too late to change, stop this rearing its ugly head, but whoever is put in charge next into sorting out this mess will have their work cut out to ensure taxpayers – let’s not call them customers anymore please, because they do not have a real choice in selecting their service provider – are treated fairly and in line with HMRC promises in its charter.
Sadly, for the time being, these remain all broken promises.
Phil Manley