Reputational risk is big in the corporate world. And rightly so. Ignore that risk and all will be lost. But you tend not to think of that same process when it comes to, for example, organisations like HMRC, the nation’s tax gatherer.
Earlier in the year RSM summed up HMRC’s problem. ‘Reputation is as fragile as public perception is fickle,’ it noted. ‘HMRC, accustomed to calling taxpayers its “customers”, may find its brand is as susceptible to being damaged as the household name companies and individuals who have received so much adverse tax publicity over the last 20 years.’
It is easy to see that risk growing. ‘HMRC’, says George Bull, senior tax partner at RSM, ‘expects everyone it deals with to do everything right, first time, on time. That is fundamental to their approach. And there is a full range of penalties for those who do not comply.’
But that is only one side of the bargain. ‘The tax system’, says Bull, ‘has to command respect. That respect is easily lost and taxpayers feel let down if the tax authority gets itself into a muddle. And that is what we have been seeing over the last few years’.
It is easy for HMRC to feel content. Over 90% of tax is collected without any intervention. The risk is all down to how it looks to the taxpayer. If it doesn’t look fair then it won’t be followed: the disaster of the poll tax almost 30 years ago reminds us of that. And we are in the midst of more unease among small businesses over VAT and HMRC’s ‘Making Tax Digital’ initiative, MTD. As one seasoned observer put it to me: ‘HMRC has really been abysmal about MTD’. And, Bull says, ‘There is brand damage’.
All VAT-registered businesses had to have their VAT systems digitalised by the start of April. Small businesses are not good at this. Teresa Graham, chair of the Administrative Burdens Advisory Board, a government body that acts as a ‘critical friend’ to small business in its dealings with HMRC, notes that its recent survey found ‘far too many businesses hadn’t heard of MTD’. But they have to. ‘It is only when small businesses are about to fall off a cliff that they realise that they need to do something,’ she says. A system of ‘soft landings’ has been arranged for the first year ‘but we will have a messy, pretty chaotic year’, says Bull.