Meredith Tax LLP

Good example of 'misreporting' in the press.

NB I've always been struck by the question: why should someone's private tax affairs be made public? And why should AM forego an entirely legal (under Gordon Brown's 2008 tax legislation) election? Of course, no one should know if she ever did!

Not to mention the UK-India double tax agreement that taxes Indian nationals' Indian source income ... in India!

From 'Tax Advice Network' on LinkedIn:

"More Non-Dom fallacies - this time courtesy of the BBC 🙄

1️⃣ Who knew that wealthy individuals could simply "choose" a lower-tax country as their domicile? 🙄

2️⃣ We’re not sure that the former PM’s wife generates much in the way of “earnings” outside of the UK. 😳

We know the tax system is complicated. If it wasn’t then maybe we wouldn’t exist. 😉

But these issues are really not hard to explain accurately are they?🤔"

Now we have a new government it is the right time to consider whether urgent action is required, before there are significant changes to the tax system.

On the last changeover in 2010, when David Cameron's Conservatives took over from Gordon Brown's Labour, there was a Budget within weeks that made substantial changes. Likely targets now are capital gains tax (CGT) and stamp duty land tax (SDLT).

CGT rates will probably revert to Labour's previous levels (20% for basic rate taxpayers and 40% thereafter). This means CGT on sales of residential property will rise from 24% to 40%. Don't rule out a restriction of relief for sales of a main home, since the £50 billion in tax relief that it costs the Treasury might be just too tempting.

Other property taxes like SDLT and council tax are too easy to hike with little chance for a reaction or for any resistance.

Inheritance tax (IHT) is a potential target, with a rise in rates etc. a possibility.

There is also a fear that important business reliefs will be targeted, such as CGT hold over on a sale or transfer and even IHT business and agricultural property relief. The latter would have a devastating effect on the farming industry.

So, it is recommended that tax planning is considered, without delay.

Extract from an article in Taxation magazine by Katherine Bullock, advising taxpayers how to prevent HMRC considering that they have been 'careless', which could cost a lot in penalties!

This is from a former President of the Chartered Institute of Taxation (CIOT):

"Are some tax advisers paying more than they need to?

Some years ago on my first visit to Penrith, Cumbria, to present a talk to the local CIOT branch, I took a cab to the venue.

The driver asked me what I was doing in Penrith and I explained: “I’m here to give a lecture to a group of tax advisers”.

For a moment I was thrown as he seemed very miffed.

It then became clear from his reply that he had misheard me: “It would be nice to have been invited. I’ve been a taxi driver here for over ten years!” I was unable to keep a straight face!

I shared the story during my talk and at the tea-break one of the delegates came over to explain she’d had a similar problem recently.

When arranging her car insurance by phone, she was astonished by the premium quote. It was more than 8 times what she had paid the previous year.

She queried the figure and was told this was due to her profession, and the risks inherent in this. “What are the inherent risks of being a tax adviser?” she asked.

At which point it became apparent the insurer had thought she said she was a ‘taxi driver’. "

Mainly on the basis of listening to the Chancellor’s Budget speech, I noticed a few eyebrow-raising tax changes.

The most significant is extending the 100% capital expense scheme to leased assets. This is a fundamental change for businesses. Previously, the lessor claimed allowances and factored that into the rental costs.

The VAT registration threshold is being increased from £85,000 to £90,000. Although the threshold in the UK is a lot higher than the EU average, this is long called-for. However, what affected businesses would really like to see would be some sort of phasing in of the abrupt VAT charge, which affects their interaction with retail customers.

Nothing in particular on research and development tax credits, but there is a huge change coming in this April for SMEs.

The abolition of furnished holiday lettings (FHLs) tax rules means that they will no longer be a deemed trade for income tax purposes and will lose all related capital gains tax reliefs for trading entities. Note that FHLs have never had a special inheritance tax (IHT) status.

The abolition of multiple dwellings relief for SDLT from 1.6.24 will affect a lot of people. This expensive tax already costs £tens of thousands, for even modest purchases of residential property. Removal of this relief will often double the SDLT cost. The reason given for the change was that it was supposed to encourage the purchase of residential properties for let, but has been ‘abused’. But interest relief restrictions are the real reason for the decline in that sector!

The non-dom tax rules are being amended from 6 April 2025 (these rules were actually introduced by Labour in 2008). This is a major change, and will spark pre-emptive tax planning to avoid it (despite the offshore excluded property trusts rules being tightened up). But new arrivals will not pay any tax on overseas income and gains for four years, so the tax take might fall in the short-term. IHT liability on worldwide assets will depend on residence, not domicile (more planning!)

The change to the child benefit claw back tax is welcome (the Chancellor’s point about two lower earners vs one higher earner has been the criticism of this tax ever since it was first introduced!). This at the expense of more information powers for HMRC.

The 2% cut in NI is clearly political, applying throughout the UK (income tax being England and Northern Ireland only). On a £40,000 salary the now total 4% saving is about £1,200 (£100 a month) - I would be grateful if somebody could explain why that fails to make up for the “freezing in tax thresholds”? e.g. the personal allowance might have gone up by £500 over a five-year period (tax £100, less than £10 a month!)

So - small print to study!

Well, it's only taken 20 years, but from July double-cab pickup trucks will be classed as company cars, not vans. It's interesting how often changes to tax are so often reported as affecting "loopholes". Naughty Gordon Brown! I think he'd be horrified to hear he was responsible for a tax loophole!

When he, stalwart Labour Chancellor as he was, changed the taxation of company cars to emissions based (from engine size), two things happened. First was the upper limit of 2 litre engines no longer being an issue* (if you didn't care about the tax anyway) but more importantly, it was discovered that said double-cab pickups were classed as vans (not primarily designed as passenger vehicles) so only £1,500 tax not nearly £7,000!

Now the Court of Appeal has decided they are cars. Cue a collapse in THAT market!

* Under the old rules, straying over the 2 litre limit caused a 50% uplift in the tax charge. Once emissions based, there wasn't much difference going from e. g. 2 to 3 litres.

I'm not one to send updates on the Budget or in this case Autumn Statement - nowadays I read others' versions - but I couldn't help noticing in the small print (page 13 of 14 of the paper on the status of announced legislation - some of us read that doancha know!) ... (under Management of Taxes): description "To improve the data HMRC collect on employees [over and above RTI???] and OMB shareholder dividends [Wait What???]"; announced "To be in the 'Autumn Finance Bill 2023' "; and effective "not earlier than 2025-26". [RTI for dividends??? But interim dividends can be cancelled ... ]

Whatever it is, no doubt we'll all comply!

I notice the next announcement in the list is about "new criminal offence for failure to comply" (... with a stop notice).

First offence? Crucif*xion?

IHT planning using gifts out of income. Easy to do, if care is taken to do it correctly - but often overlooked.

Tax Advice Network on LinkedIn: The Telegraph reports that: "This potent way to avoid death duties was… The Telegraph reports that: "This potent way to avoid death duties was used by just 430 families last year". Is that true actually? Misreporting or just…

Revolutionary tax reformer

- reduction of tax rates (corporation tax was at 52%!) and capital allowances

- abolition of capital transfer tax and development land tax (DLT) (Gordon Brown flirted with its reintroduction). I remember being gathered in a room at Price Waterhouse listening to the Budget on the radio. One of the managers was reading a very thick book on DLT, because of an urgent client query. When Nigel announced its immediate abolition, she looked up and promptly threw the book into a bin!

Not so nifty with interest rate rises to curb excessive property prices and stop an inflation fuelled boom and bust (leading to the 1989-92 recession)!

Radical tax-cutting UK chancellor Nigel Lawson dies at 91 Revered by many Tories as a small-state revolutionary, he fell out with Margaret Thatcher on economic policy

Mallalieu v Drummond [1983] 57 TC 330 comes to mind ...

SHE failed on the 'dual purpose' test.

I shan't make any comments! ...

Tax Advice Network on LinkedIn: Accountants and tax experts will be frustrated by this story about an… Accountants and tax experts will be frustrated by this story about an 'OnlyFans' performer who has CLAIMED tax relief for a 'b**b job'. And the BBC report that…

Leeds Business Forum doing our bit for Mental Health Awareness and Yorkshire's Brain Tumour Charity.

Some of our members donning our Yorkshire flat caps for the cause (ltr) Martin Bate, Oh yes that's me, Nigel Cork, Deby Jackson, Andrew Milburn and Steve Simmons

"Splashed the cash" (not much really!) on a bit of advertising ...

Interesting visit to a client's new offices at Leeds Dock.

New indeed! Definite tech company slant.

Good to see lots of growing activities in this place. When it was new it was a ghost town but now the cafés are full and there is a vibe.

Well done Chancellor on the Full Capital Expensing idea. Now, expenditure on plant & machinery will get a 100% deduction (instead of the 130% super deduction). Not spent that much anyway? Well, you always had the 100% AIA ...

Didn't catch Are Rachel's response ... bet it was perceptive!

I have responded to HM Government's consultation on research and development tax reliefs. Their proposal to merge the schemes (in favour of the large company RDEC rules) will unnecessarily complicate claims for small owner-managed businesses. The motivation seems to be to reduce fraud and error but better compliance checks and a simpler approach would yield more results. Even a House of Lords Finance Committee agrees on that point!

Claiming that small company decision making and the attraction of outside investors (which are issues for large FTSE 100 multinationals) will benefit from the RDEC 'above the line' tax and accounting disclosure only serves to demonstrate that HMRC does not understand business. It is imagining that the local corner shop is like Tesco, only smaller.

Attached is my letter, summarising my main points.

R&D claims - urgent action required and HMRC investigations into prior amounts overclaimed by unscrupulous 'agents' - "you have been warned!":

The system for claiming Research and Development (R&D) tax credits is changing from 1 April. Companies are encouraged to get claims competed and submitted, before this change takes place i.e. by 31 March. Rates of claim are also changing, for accounting periods commencing after 31 March.

I have much experience in the preparation and submission of R&D claims. Currently, I am involved in 8 separate projects, all looking to be completed and submitted by the end of March. Specializing in claims for small owner-managed businesses, I have processed tax repayment claims from £4,000 (for a very small company) to £50,000, and one of the current projects is looking to claim a £90,000 tax repayment. Great care and expertise is put into the claim narrative, and all amounts claimed are rigorously justified. My work includes dealing with any HMRC queries, to agreement.

Even after the end of March, claims can still be processed and the chance to recover substantial tax repayments should not be overlooked.

The following discusses an HMRC R&D claims 'nudge' i.e. a letter sent out to bring taxpayers' attention to possible errors they have made, which they are invited to 'put right', at a cost!

"The R&D tax credits scheme for small companies has been abused by criminals who submit inaccurate and fraudulent claims on behalf of genuine companies. HMRC estimate that £496m was lost through fraud and error in the R&D schemes in 2021/22 alone.

Company directors are often duped by so-called expert R&D advisers, who submit wildly inaccurate claims, then disappear with a large slice of the tax refunded.

In late January and early February 2023 HMRC wrote to over 2000 company directors whose companies have claimed R&D tax credits in the past, asking them to review the claims submitted against this checklist:

Who helped with the supporting R&D report and are they qualified to do so?
If you worked with a third party to make a claim, have they answered your questions satisfactorily?
Have you read the R&D report, and do you agree with its contents?
Do you understand what you’re claiming for?
Have you read and understood the HMRC guidance on R&D?
Have you considered the conditions for making an R&D claim?
Are you happy that the R&D project is seeking an advance in the field of science and technology in general, not just an advance for your company?
Does this R&D claim seem to be too good to be true?
HMRC suggests the director should contact HMRC by email with any questions, but your client should be advised to talk to you before making an approach to HMRC.

If the R&D claim does need to be corrected this should be done by amending the corporation tax return online within 12 months of the filing deadline.

Where the R&D claim was made for an earlier period, which is now out of time for an online amendment, a separate disclosure will be required to HMRC."

The Autumn Budget on November 17 is almost impossible to predict. However, there are strong rumours of capital gains tax (CGT) changes. Rates are likely to go up, so that the 10/18% rates become 20% and the 20/28% rates become 40%.

There is also a hint that entrepreneurs’ relief (now called business asset disposal relief - BADR) will be further restricted. This would be very surprising, given the recent reduction in the lifetime allowance from £10 to only £1 million. Within that limit, business disposals attract a reduced rate of only 10%. It is possible that might be raised. However, given the 2008 robust response to the abolition of CGT taper relief, in a joint letter, by the ICAEW, the ICAS, the CIOT and the TUC (thousands of Asda employees were facing an 80% tax rise) It would be a brave Chancellor indeed who dared to tinker!

There is a precedent (2010) for CGT rates to be altered mid-tax year. It makes sense, if deals are progressing, to sign unconditional contracts before 17 November, if at all possible. This should preserve the current lower rates, including BADR. For example, I am currently involved in company sale negotiations and both parties have agreed to try to conclude the deal and complete the paperwork before the 17th. So, consider urgent action!

As a practitioner, my observation is that the 100% exemption from tax on sales of main residences is too generous. Sellers are pocketing profits of £’000,000 and paying no tax. This costs the Treasury £tens of billions. Leaving all the rules and calculations in place, a reduction of the exemption from 100% to 75% would be a simple way of helping to plug the hole in the government’s finances. It might help to reduce house price inflation as well!

Assuming there are no more changes to previous announcements, the dismantling of the Truss bandwagon does involve:

• Corporation tax will go up to 25%, as previously expected. The 19% rate is preserved for profits below £50,000 but note that the “close investment-holding companies” regime is being resurrected.
• The 45% additional rate of income tax will be retained and the cut to the basic rate of income tax to 19% will not happen. Going further, the 20% basic rate will now remain unaltered indefinitely (it was due to be reduced in April 2024).
• Dividend tax rates will remain at least at the levels previously announced (8.5%, 33.75% and 39.35%, respectively - there is a chance rates might be increased further, and fears that the £2,000 exemption is to go).
• The “off-payroll” rules introduced in 2017 and 2021 will stay. This means that the business engaging the contractor will continue to be responsible for making decisions on employment status. This is likely because HMRC want the burden of this to remain offloaded. These rules have been causing severe problems and many contractors have gone out of business. However, it does seem to have stopped the BBC from bending the IR 35 rules. Also, thousands of NHS employees, including nurses, used both the off-payroll rules and later loan scheme arrangements to avoid tax, but this practice appears to have been stopped.
• Duties on alcohol will go up again.

Changes that are staying include: the ‘generous’ £2,500 reduction in stamp duty on residential property purchases; cuts in National Insurance rates; and the permanent establishment of the Annual Investment Allowance at £1 million.

SEPTEMBER 2022 BUDGET

UPDATE 18 OCTOBER (!)

So much of this has been reversed I am waiting for things to settle down. Tax planning is extremely difficult at the moment, to say the least!

ORIGINAL COMMENTS 28 SEPTEMBER:

Studying the tax announcements, what catches the eye are:

- the abolition of the Health and Social Care Levy

This would have kicked in next April.

NB the increase in the NI threshold will remain.

- abolition of the 45% additional rate

Not overall of much impact to the Treasury but not applicable in Scotland, although it is expected they will follow suit.

The mooted increase in the higher rate threshold to £80,000 was not mentioned. That WOULD have been an expensive measure! However, there was a hint of further tax reductions to come.

- reduction of basic rate tax to 19% from 2023

Aligns with the company tax rate and is accelerated by a year. Transitional relief for charity and pension fund tax repayment claims.

- reduction in dividend tax rates and abolition of the dividend additional rate

Applies to the whole of the UK.

- corporation tax to remain at 19%

- capital allowances

AIA to be permanently £1 million but super deductions appear to be due to cease in March 2023. Careful planning required, and care with forestalling provisions.

- Seed Enterprise (SEIS) limits

Generous increases in the limits for obtaining 50% income tax relief and for individual company investment.

- SDLT

Minimal changes, with only a (maximum) reduction of £2,500 on residential purchases. Rates for additional properties unchanged and nothing for commercial or mixed properties.

First time buyers could save a maximum further £6,250 but restrictions to making a claim are unchanged.

- IR35

The recent changes (2017 and 2021) are to be reversed, so the tax rules become self-reporting again (and not imposed by the contracting organization). Too late for many contractors and for many commercial arrangements!

SEPTEMBER 2022 BUDGET

There's no doubt this will be a tax slashing Budget, in the 'race for growth', which was last seen under Chancellor Anthony Barber in the Heath government, which ended in tears (high inflation mainly, because demand outstripped supply).

I get reversing the corporation tax hike, to attract investment, but

- Reversing the NI levy? This will not affect earners up to £35,000, because they don't pay it. But e.g. £100,000 earners will save over £100 a month.

Mind, I remember Labour opposing, and lying about, the levy, saying it was "a burden on the poor". Which it plainly wasn't. So they should be rejoicing its demise, which of course they won't. Especially as it was going to be spent on social care!

- Reducing SDLT "to help first time buyers"? That'll just push up house prices, and give rich people more to spend on the fish pond.

I like the rumoured raising of the higher rate income tax threshold to £80,000, because this is where it should be, if it had risen properly over recent years. Too many ordinary taxpayers have suffered the 40% rate. It will also have a knock on effect for CGT and dividend tax.

One thing's for sure, this will be a budget for the better off, in terms of 'feeling t'benefit'! Whether it will benefit businesses, or anyone else, will remain to be seen.

And, in that vein, thinking of recent budget predictions, there's no way CGT rates will go up, nor will there be any restriction on private residence tax exemptions.

Can't be an attempt to lure the traditional Tory vote back into the fold, could it ...?

A new(ish!) debate - but not without its timeliness!
https://www.linkedin.com/posts/tax-advice-network_do-you-think-fewer-adults-would-have-tax-activity-6945320665990221824-3gbn?utm_source=linkedin_share&utm_medium=member_desktop_web

Tax Advice Network on LinkedIn: Do you think fewer adults would have tax problems if tax was given Do you think fewer adults would have tax problems if tax was given more prominence in the school national curriculum? This is something that comes ...

Lots of interest in our successful property investment webinar ...

https://www.linkedin.com/posts/idealhouseshare_landlord-property-servicedaccommodation-activity-6930873119435841536-_IqL?utm_source=linkedin_share&utm_medium=member_desktop_web

www.linkedin.com

I am speaking at a property tax webinar tomorrow on the interesting subject of SDLT

https://www.linkedin.com/posts/idealhouseshare_property-landlords-propertywebinar-activity-6929805319208378368-we5L?utm_source=linkedin_share&utm_medium=member_desktop_web

Ideal Property Group on LinkedIn: #property #landlords #propertywebinar We are grateful to say that we now have very limited spaces on our webinar. If you are in any form interested in property and curious of the benefits that...

The international world of tax shifts into gear - hats off to Poland!

A little-publicised change came in the Budget, affecting Class 2 NI, which is in effect a further small reduction in NI for lower earning self employed people (expected to benefit 500,000 people). Instead of paying Class 2 (about £150 pa) if profits fall between the small profits threshold (£6,725) and the Class 4 lower profits limit (LPL) (£11,908), payment will no longer be required, but the NI record will still be credited as if the full annual contribution has been paid.

Profits above the LPL will continue to attract both Class 2 (flat rate) and Class 4 (profits based) NI contribution payments.

All employees will benefit from the uplift in the Class 1 threshold, as will self employed people from the LPL uplift. This means that earned income of less than £35,000 should see a reduction in the associated NI charge, compared to 2021-22, despite the 1.25% 'social charge'.

Full details (from the Tax Faculty of the ICAEW):

"Voluntary class 2 national insurance contributions are unaffected by the Spring Statement changes, but don’t forget that class 4 losses might need recording separately.

HMRC has confirmed that individuals with adjusted trading profits up to the class 2 small profits threshold (SPT), which for 2022/23 is £6,725 (£6,515 in 2021/22), will continue to be able to make voluntary class 2 national insurance contributions (NIC) in 2022/23 of £3.15pw as is presently the case (£3.05pw in 2021/22). This will include traders who make losses, because a trading loss is equivalent to a profit of £nil for class 2 NIC purposes.

This follows the Spring Statement announcement that from 2022/23, traders with profits between the SPT and the class 4 lower profits limit (LPL) will not have to pay class 2 NIC but will nevertheless receive credit for that year in their national insurance contributions record. The credit in the contributions record will entitle them to claim state pension and contributory state benefits. In effect, it is a nil rate band, like the one for employees. The LPL for 2022/23 will be £11,908 and for 2023/24 onwards will be aligned with the income tax personal allowance of £12,570. Regulations will be laid in due course.

By way of reminder, traders who make tax adjusted losses can carry them forward against future profits of the same trade when calculating class 4 NIC in subsequent years. ICAEW’s Tax Faculty suggest that where software does not capture the information, a record of losses for class 4 NIC purposes is maintained separately from losses for income tax because income tax losses and class 4 NIC losses can be offset differently (eg, income tax losses can be used against income not subject to class 4 NIC)."

This week's press release from HMRC seems to be an attempt to address concerns about how long 'customers' have to wait when they call. I'm unclear why it hasn't had more publicity as the new system comes into operation today.

All calls to HMRC will now go initially to a new service using a private routing internet language. This will enable 'customers' to short-cut the tedious waiting time, simply by using the keypad on their phone. There are some technical issues for optimum operation liaison.

But, in essence if you don't press one of the numbers immediately you will then be transferred back into the standard queuing system.

So choose wisely:

Press 1 if you have never called HMRC before

Press 2 if you have called before but gave up after waiting on hold

Press 3 if you don't mind waiting but want to choose the music you have to endure

Press 4 if you are a regular caller

Press 5 if you are still waiting for HMRC to do what they agreed to do last time you called

Press 6 if you are calling on behalf of a sanctioned Russian oligarch

Press 7 if you have an offshore account and have forgotten to tell HMRC about it

Press 8 if you are a tax agent and understand how the tax system works

Press 9 if you recognise the initial letters of: A Private Routing Internet Language For Optimum Operation Liaison.

It's not often that we hear "direct from the horse's mouth" but this is an insight into where HMIT currently are, in terms of policing tax fraud.

It was clear at the time that there would be a trade off between effective help and exposure to false claims. It was a case of get help out quickly to prevent economic disaster.

HMRC have not given up on the £5.8 billion lost to error and fraud - but if the taxpayer has disappeared there's not much can be done.

The fault that is behind the sad cases of people so unable to cope with the loan charge regime that they have taken their own lives, has to lie with the government, for their headlong rush to close down tax avoidance schemes and collect money by force, bypassing due legal process through the courts. Reining back on the regime has come too late for those people but perhaps lessons can be learned.

The tax world's 'Windrush'?

# # # # # # # # # # # # # # # #

"HMRC’s chief executive told the Treasury select committee this week that it was “inevitable” billions of pounds of Covid-19 support would be lost to fraud and error, and there was nothing the agency would have done differently during the pandemic.

Jim Harra told MPs the tax inspectorate hadn’t given up chasing down the £5.8bn it had identified as incorrectly allocated, but the number of small claims that added up to huge sums made reclaiming the money almost impossible.

“We expect to recover about £1bn,” Harra told lawmakers on the Treasury Select Committee scrutiny panel on Wednesday. “It’s not realistic of me to expect us to reclaim all of it.”

When pressed that the number was high, some £3 of every £4 gone to either criminals or paid out erroneously, Harra said HMRC’s systems relied on self assessment, with little third-party checks carried out.

“We were up against a potential chilling effect on employment if we had not acted fast,” he said. “Difficult decisions were made about the controls introduced. People we would want to help would otherwise have been excluded.”

The Treasury recently revised down the amount it expects to recover by 2023; just 25% of a total £5.8bn paid out due to fraud and error in relation to the coronavirus support schemes.

Asked if there was anything his office could have done differently, Harra said “no”.

“Error and fraud are not acceptable, but were inevitable,” he said. “If we had the luxury of more time, we could have collected more third-party data to verify what we were told, but it wasn't realistic to do much more.”

Committee chairman Mel Stride said it was “troubling” that HMRC appeared to accept the loss of billions of pounds of public money without any admission it could have done better.

Customer service “back to normal”

The agency is increasing its compliance numbers, although it takes on average 18 months to fully train up an inspector, and it said the full benefit would not become apparent for at least two years.

It also said it will continue to nudge people away from phone-calls and letters when trying to contact the agency, instead directing them towards the HMRC website and chat bots.

Despite constant criticism of the agency’s customer service from the industry throughout the pandemic, as highlighted frequently by the AccountingWEB community, HMRC bosses said normal service has resumed.

“We are on track to deliver pre-pandemic levels of service,” said Angela MacDonald, deputy chief executive and second permanent secretary, HMRC. “Our aim is to get an on-target position, with about two million items. It sounds enormous, but we get about 1.8m pieces of post every month.”

MacDonald admitted that HMRC’s online guides were in need of improvement, and said it was often a case that if a question isn’t phrased exactly right, it will not be answered.

“We’ve invested in more innovative technology to find out what you want to know, and the artificial assistant will offer you the guidance back,” she said. “We’re at the early stages of that bot-type process.”

Harra repeated a statement he had made earlier in the year that HMRC’s “not resourced to give brilliant service, but decent customer service.”

“We have call handling up to 85%, so one in five people has to call back as their call isn’t picked up the first time. 100% would be a brilliant service, I do not have the resources to do that.

“From our customer scores we are getting a high level of satisfaction, particularly with the digital services. I'm not funded to be on a track to deliver a brilliant service.”

Despite its apparent success with customers, HMRC has the lowest staff engagement in Whitehall and still suffers from turnover. Harra said morale had improved under his watch, but accepted that current engagement levels were not good enough.

Targeted enforcement

HMRC’s approach to prosecuting tax avoidance schemes was also under scrutiny, and Harra’s team said the future strategy is to go after the most egregious, high-net worth offenders over smaller-scale cases.

Harra said it was not in the remit of HMRC to request a review of the controversial loan charge, but that collectors were attempting to reclaim funds in “the most sympathetic way” they can.

“We are aware of a number of people involved in tax avoidance who have taken their own lives,” said Penny Ciniewicz, director general for customer compliance. “We do take this very seriously.

Although prosecutions for tax fraud have fallen, Ciniewicz said the agency had taken a decision to focus on more complex and sophisticated cases.

“We are increasing the number of investigations of wealthiest and most sophisticated tax evaders,” she said. “We’ve gone from 50 [investigations of high-net worth avoiders] in 2017 to 430 in March last year. We’re not prosecuting as much low-level fraud, instead we are going after the higher end, wealthier taxpayers. The money involved has increased fivefold.” "