HMRC's Small World of Large Business

 

I was lucky enough to spend some of my career in HM Revenue and Customs working in Large Business. As I’ve said here, HMRC was a lot like a collection of small villages. But some villages are always more select than others. 

Working on the principle of allocating risk to resource, HMRC (and before it the Inland Revenue and Customs and Excise) concentrated a proportionate slice of its attention on the 200-or-so businesses responsible for the biggest pot of tax. 

It’s not that there were a lot of staff in Large Business; just that in proportion, compared to the staff dealing with the bulk of punters, they got to spend much more time looking at each business. 

Large Business was sometimes loathed by the HMRC staff who had to deal with the day-to-day punters. Sometimes with justification. It wasn’t always clear that a subsidiary company was part of a Large Business, and sometimes Local Compliance could be halfway through dealing with a company when they suddenly got a curt message to “get their hobnail boots out of it.”

There was also the idea that Large Business gave their traders an easy ride. That they got too cosy with the company and let them off when they should have been hit with an assessment. Part of this is down to the principle of Resource to Risk. Even Large Business had only so many hours in the day, and sometimes a risk which would be “eye-watering” to Local Compliance would be a teardrop to Large Business. (Equally, an assessment which a large trader could pay immediately would bankrupt a corner shop)

But, when it comes to the accusation of cosiness, you’ve also got to remember that Local Compliance had even less time to spend with their traders. When you can only spend a day on a trader, something might look like an error that deserves a penalty. When you can spend a week, maybe you can see an ambiguity in the guidance and the error starts to look reasonable. It’s all about, the right tax at the right time, not just about raising revenue.

And also, Large Business had the room to anticipate problems and clear the way of obstructions. If the company was planning to do something and didn’t know if it would have tax implications, they could drop an email or phone up one of their allocated officers and talk it over.

There was a story went round, and I don’t know if it’s true. Each Large Business had a Client Relationship Manager assigned to be a direct point of contact. Because of the different grading structures in the Inland Revenue and Customs and Excise, when HMRC was formed, most of the CRM’s were ex-Inland Revenue. 

While they could often get their heads round VAT (perhaps because it was all about invoices) other taxes like excise and customs were a mystery, so they generally had an ex Customs and Excise manager under them to act as interpreter and make sure everything stayed on track.

But, one CRM was a fast track appointee, obviously determined to make their mark. Early on, Large Business promised the punters they would get a risk scoring at the end of the year, and the lower the risk, the lighter the touch they would receive. The ultimate aspiration was to be a 'Light Touch Trader' who would be spared the inconvenience of audit officers coming in and looking at their systems.

So, the story goes that the fast track CRM marched into the very first risk review meeting with their Large Business. And informed them that their risk score was so good that they would be the very first “light touch” Large Business. For the next year they would receive no attention from HMRC! 

For a couple of minutes there was contented purring from the executives at the top of the table, obviously anticipating an early lunch. And then, there was muttering down the other end, from the people who actually did the work. The people who knew just how many of their staff contacted HMRC on a daily basis to sort out the unpredictable clutter. 

“This light touch. Does it mean you won’t contact us or we can’t contact you?”

And so it was agreed that “light touch” meant that HMRC would not bother the trader, but they could carry on as before with HMRC.

Some people might think that it was unfair that the Largest Businesses got this special attention. But it was all about resource to risk. And of course, if every punter was given that sort of treatment you’d have to employ a whole lot more civil servants than you do at the moment.

I said at the start that I was lucky to have worked in Large Business – and having worked both in-and-out, I can say that it was better both in terms of job satisfaction (the work was more interesting) and the way staff were treated. I don’t know if that’s the case now, but I wouldn’t be surprised if it is.


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