Archives For penalties

By Jason Piper, technical officer, ACCA

To people of a certain age, programmable digital computers were The Future, promising 3 day working weeks, the end of manual labour and untold leisure time. For another generation, they are all about social interaction, and keeping in touch with all your friends and contacts from the comfort of your own sofa.

But for one group of people, computers are the cause of misery, delays, frustration and expense, the cause of longer working hours and a replacement for human interaction. Those people of course are tax agents, taxpayers and in fact anyone who has any dealings with HMRC. Over the past few years, HMRC has pushed technology as the solution to all its woes, and the replacement for all (well, a sizeable chunk) of its staff. And has the computer really improved things?

Case study 1: Penalties. In October 2008, the Revenue computer sent out a penalty notice to a taxpayer, in the name of Mike Christensen. Unfortunately, Mike Christensen had retired that August, and so the penalty was invalid and had to be withdrawn. But because no-one had told (ok, reprogrammed) the computer, it had issued several months worth of invalid penalties – and Mike Christensen was the Area Director, so it had probably issued thousands of invalid demands to taxpayers in that time. Verdict: an embarrassing error, though many of the actual penalties had probably been rightfully assessed and could have been reissued.

Case Study 2: CIS refusals. Up until a couple of months ago, HMRC routinely refused building companies the benefit of “Gross Payment Status” in the Construction Industry Scheme for three technical failures in tax compliance – and the letters were sent out automatically by the computer. However, the tax tribunals pointed out that the legislation required HMRC to exercise some discretion, and that meant human intervention into the process. To their credit, the CIS team instantly dropped all their ongoing disputed cases where the computer had issued refusal letters (around 50, an indication of how dissatisfied businesses were with the computer’s decisions), and revised the process so that judgement is now exercised by an HMRC officer. Verdict: A failure to fully appreciate the terms of the underlying legislation, but a prompt and reasonable response by HMRC.

Case Study 3: Debt Collection. Described by one MP as “scaring old ladies and pensioners”*, one of the computer’s finest moments came when it started sending threatening letters out to taxpayers, warning them of impending bailiffs and auctions of their goods to settle tax debts. Not only were the letters short on contact details for the taxpayers to respond, they were also light on the details of the tax debt. For the very good reason that in many cases, there wasn’t one. Verdict: No excuse. A basic programming error left the machine responding incorrectly to nil submissions. We can and should demand better of a publicly funded body.

So what’s the overall conclusion? No doubt computers have a (huge) role to play in administering tax in the UK – I haven’t listed the tax code debacle under NPS (National Insurance and PAYE Services System) above, for the reason that I still believe NPS is a Good Thing; the coding issues arose from HMRC failures in project planning and communication. But taxpayers (and their agents) are all, ultimately, human. We need human contact, and the good sense that humans can bring to the mind numbing complexity that is the UK tax system. Maybe we can’t go back to a Dixon of Dock Green style policing of our tax system, but we need to stop the headlong rush into the Big Brother ‘steel plate in the wall’ dystopia. Digital by default is fine as a communication channel, with humans at each end, but must not become a digital abyss into which taxpayers time, money and efforts are poured with no guiding mind to make sure that things run sensibly. Administrative efficiency is only useful so long as it is also effective, and computers cannot measure that, only properly trained Revenue officers.

*Taken from uncorrected committee evidence