- HMRC is being elusive about the amounts due on specific offshore compliance penalties
- Either systems to track penalties don’t allow HMRC to evaluate effectiveness of specific initiatives, or this information is collated but FOI request was first declined and when challenged, delayed.
One of our main aims here at TaxWatch is to scrutinise HMRC’s performance on tax compliance and how it uses its powers to chase down revenues due, encourage taxpayers to comply and enforce the rules. Recently, we’ve been looking at issues of offshore compliance, and we submitted a number of Freedom of Information (FOI) requests to assess how successful HMRC’s efforts have been in this area. A pattern has emerged though – either HMRC can’t themselves track how effective certain initiatives have been, or they can but are using exemptions under the FOI Act to avoid disclosing these details. Anyone feeling reassured by this?!
For requesters of data from public bodies such as HMRC there are many frustrations in the process. Time is often spent second-guessing what information will actually exist, and the form in which it can be provided in a cost-effective way. There are also other exemptions the organisation may decide apply to particular areas of interest.
For our article on HMRC’s approach to compliance in relation to offshore income and gains, our FOI requests were designed to help us understand how successful the Requirement to Correct (RTC) legislation has been. This was introduced after the offshore disclosure facilities finished, but before the arrival of the first Common Reporting Standard (CRS) data. RTC required individuals to correct any previous tax returns where offshore income and gains had not been returned at the right time.
In its response, HMRC essentially told us that it did not know how many people had made disclosures in relation to the RTC legislation, as they were made in the same format as many other disclosures and couldn’t be separately identified. We also asked for details of the penalties subsequently charged under specific new legislative powers relating to a failure to comply with the RTC legislation. In response, HMRC told us that the information about such penalties was not held centrally, but only in each individual case, so the manual work involved would be excessive.
In fact, HMRC said that this excessive cost would allow them to refuse to provide any of the information also requested in that FOI, but it actually offered some information ‘on a discretionary basis’. HMRC selected some of the additional aspects of the request and provided that information, but did not explain why they provided some but not all of the other items requested. It did provide details about numbers of nudge letters (issued to people requiring them to check that all offshore income and gains have been disclosed) and consequential disclosures. However, we had also requested the amounts recovered from investigations following the issue of nudge letters, which was not provided.
In respect of the RTC penalties, we requested an internal review of HMRC’s response to our FOI request. We did this because of our understanding of its internal penalty recording systems, as well as a review of the instructions provided in HMRC manuals. We also asked it to reconsider providing the value of disclosures arising from nudge letters, which it had declined to provide originally, preferring to disclose other aspects ‘on a discretionary basis’.
A response to an internal review should be provided within 20 working days, and HMRC’s acknowledgement indicated it would explain any delay to that and provide a revised response date. This initial acknowledgement referred to the request as a new FOI, so we had to point out that this was a review of the original request – not a new one with a new deadline. HMRC then missed the deadline for the review, with no response three working days after it had passed. At this point we chased, prompting a half-hearted apology for the delay, but no explanation as to why the statutory deadline had been missed, and confirmation that it would respond ‘shortly’.
This one FOI exchange raises a number of issues. First, there is a suggestion that new legislation and procedures were introduced without taking into account how the success (or otherwise) of such legislation would be measured. In the absence of data, it’s impossible for HMRC to evaluate what works and what doesn’t, which is a worry given that offshore compliance is an area which should be high focus.
Secondly, HMRC refusing the total of an FOI request because any single part exceeds the cost limits is also a concern, as it means that to be certain of getting a response an individual has to know for sure what information is available in an easily-accessible format. Not knowing this allows HMRC staff to pick and choose the bits they do wish to respond to.
Also, the fact that HMRC did not initially describe the review request as a review suggests that it doesn’t regularly get requests for reviews, so they’re used to their responses being accepted without challenge.
Finally, its failure to respond by the deadline is interesting, as it’s supposed to have looked into these issues previously, in order to respond to the original request.
If we were feeling really cynical we might suggest that HMRC was scrabbling around to find a way to continue to reject the request, because the results might not make them look good. We also have to assume that either HMRC’s systems are built in a way that precludes them from evaluating the effect of new powers, or that the systems are built to separately track the revenues raised by specific legislative provisions, but that the amounts collected are considerably lower then one would expect. We have no idea what the HMRC FOI team means by ‘shortly’ – hours, days, weeks?
We await the response with great interest, and will write more on this issue soon.
