Anecdotal experience of HMRC delays encountered by businesses has been supported by information obtained under Freedom of Information provisions which shows that the average length of time taken to resolve a large business dispute is almost three years. Delays, unfocused responses and an impractical approach mean uncertainty and unnecessary costs for taxpayers, which goes against HMRC’s customer-centric approach to resolving disputes.
HMRC’s response to the criticism appears to be that they are collecting significant additional revenues, and complex international enquiries take time. Both are true but neither justify unacceptable delays. In any event, not all enquiries and disputes are about international issues and the delays are not restricted to large corporates and tax avoidance arrangements, they are hitting all businesses and individuals.
The introduction of the Litigation and Settlement Strategy (LSS) was intended to bring more rigour and consistency to dispute-handling and resolution. It also heralded HMRC’s fundamental objective of working collaboratively with all taxpayers whenever the taxpayer is equally committed to this approach, to improve the effectiveness of dispute-handling.
HMRC rightly acknowledges collaboration is a two-way process. Its guidance does not however recognise the possibility that it could be HMRC that is not working collaboratively. Most businesses and individuals want a good collaborative working relationship with HMRC. However, significant delays by HMRC (or the taxpayer) do not foster this.
Taxpayers are often frustrated that they are subject to strict and relatively short timeframes for responses while HMRC can delay responding for several months. HMRC’s customer relationship managers with overall responsibility for the taxpayer’s affairs often appear powerless to compel a timely response due to over-stretched head office technical specialists, policy owners, or the Solicitors’ Office. Indeed, they can be as frustrated as the taxpayer, being responsible but with no direct control over progress when specialist input is required.
So, what can be done? A taxpayer has two options - either to force action by requesting a closure notice requiring HMRC to state its conclusions or to complain.
However, taxpayers often do not want to force the issue, being understandably wary of backing HMRC into a corner, which could result in a knee-jerk ill-considered reaction. HMRC doesn’t want this either, as it prefers to engage informally with its customers. It makes no sense for HMRC to force its customers to adopt this route through the lack of timely response or an unwillingness to engage in a meaningful dialogue.
Also, even if HMRC issues a closure notice it is not the end of the matter unless HMRC agrees with the taxpayer, it simply triggers another lengthy process of getting the dispute into litigation which can easily take two years from a decision to a hearing, longer if HMRC want to delay as the courts are also over-stretched.
Taxpayers are also often reluctant to complain for fear of damaging the relationship. However, in appropriate cases it is often the only means to generate a response.
Indeed, some long-standing cases have been settled within a few weeks following a complaint. It is regrettable that, without any other driver to change the existing dynamic, drift can become the status quo.
Whilst settlement is ideal, if that cannot be achieved then all taxpayers want is a timely and well-articulated description of the case against them, including reasons why HMRC will not settle. That is not too much to ask of a customer-centric policy. If this issue is another example of resource pressure, then accepting the status quo will mean it is unlikely that HMRC will get the additional resource it seems to need to meet its customer-centric policy.
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