Introduction

Some members in Enforcement and Compliance and more specifically Local

Compliance will recall the situation prior to the outcomes from the 2010 Spending

Review ( SR 10 ). A scenario of desolation , of drift towards a lack of quality work ,

locations closing and a lack of direction as we all understood it prior to Departmental

merger . A sense of deep frustration permeated most compliance staff that many

areas of compliance were not being tackled in any meaningful sense. The PCS

recognised and understood the extensive feedback from members at the time and

issued R&C/BB/185/09 asking members to let the PCS know their views about the

“compliance journey” .

The PCS received magnificent feedback and that produced R&C/BB/433a/09 which

published , publicly, a 20 page letter to the then Director of LC and the then Director

General E&C which had been sent a month earlier. The strategy to start the process

that resulted in the letter was initiated by the then AGS Compliance Margi Rathbone

and her compliance PCS team of Lynden Melrose , Kevin Eaton , John Barrett and

Chas Hay who then compiled and sifted the data to enable the letter to be sent .

From that letter sprung a notable sea change : we were at a crossroad and we took

the correct step on the path towards being a better and more successful organisation

with SR 10 . We gained a significant increase in many areas of compliance with

additional resources – unique in the public sector at the time - and we have

continued to see that in each successive fiscal event since then .

Things were not perfect – they never are – and the PCS in compliance has tackled

some major issues ( and literally countless others ) on behalf of members since then

The Future of HMRC Compliance Activity – A Vision for Success ?

notably reform of Tax Professional Qualifications – aspects of which in 2010 we

correctly indentified and informed the employer were major impediments to success

and that reform continues ; Caseflow - the journey to improve this continues and

ultimately to replace it ; Penalties – still not as simple to administer as they could be

and Grading – we have made major progress in setting the benchmarks across all

regimes for grading from AA to G7.

In this period we also saw the extensive and comprehensive trial and adoption of the

Single Compliance Process . This came from LC SME but has applications across

the board in all aspects of compliance in E&C and BT . It proved categorically , once

and for all , that visiting traders was the most productive form of intervention .

We have now reached another crossroad. The department has an estate strategy

http://intranet.active.hmrci/risk_intel/organisation/ecsu/ecsu_strategy.htm , a digital

strategy

http://intranet.active.hmrci/hds/organisation/digital_strategy/index.htm and a

compliance strategy

http://intranet.active.hmrci/risk_intel/organisation/ecsu/ecsu_strategy.htm . ( we have

used the RIS site for compliance strategy as it appears to be the one that gives the

best context for information purposes.

Now we have Building our Future :

http://intranet.active.hmrci/news/articles/2014/April/290414HP.htm

It is not for this paper to comment in any detail about this announcement suffice to

say this is the HMRC consultation with you about the changes and transformation

the employer is seeking to make and perhaps some detail – possibly.

Together with other strategies they form the basis of the 2020 vision of HMRC as

seen by ExComm . We are concerned in this document with the first 3 strategies

above – linked to BoF - and what they mean for you - the member who has to

deliver the real business of HMRC . We will now attempt to set out the vision the

employer has and explain our alternative and why we believe it is more pertinent and

a model for success rather than the employer’s . This is not to say we advocate no

change or that we as individuals or collectively will not change – we must . The PCS

vision is derived from feedback from members and we hope this document will

provide even more views and issues to finally absorb into a complete PCS

alternative vision of compliance in HMRC - made by those who really know and

understand - you – the rank and file member.

We intend to set out facts – whatever they are and however unpalatable they may be

. Only when fully informed can members contribute and we can formulate from your

contributions a real vision for success .

HMRC Vision

In this section will set out – without PCS comment - the scope and purpose of the

HMRC vision . It is as much as we know from either information from members or

discussions with the employer . It is our understanding of their vision .

To reach the vision and attain the goals necessary to reach that vision ; HMRC set

itself on the path of transformation – this is grouped into Change Portfolio Clusters .

These are : B&C , People Skills Culture and Location , Data , E&C , Digital , PT ,

Process Transformation , Corporate and BT. In many of the clusters there are

multiple sub programmes – sometimes managed together . We will touch on those of

relevance only to this document.

Estates – People Skills Culture and Location cluster

- Location Strategy sub programme .

The department is under pressure to adhere to the Government Property Unit

( GPU ) accommodation standard . This 8m2 per person and based on desk

sharing . There are minor exceptions but they are not material in the scope we are

examining. This is not within the gift of HMRC to change and it means that even on

current staff numbers we have ”too much” estate and that means – reductions .

Another driver in the estate arena is staff numbers. Overall HMRC has a settlement

with the Treasury to reduce staffing in ALL areas ( BT , PT and E&C ) by the end of

the fiscal year 2015/16 . There are additional plans – though not yet totally finalised -

to reduce staffing even further . To attain the GPU standard aligned to staff numbers

HMRC has the location strategy .

The HMRC location strategy is predicated on 16 major urban locations as a final

outcome. Preferably before 2020 . It will offer more career opportunities to staff in

these centres and it will offer flexibility but most of all it means HMRC can neatly

meet the “targets” for estates .

- Remote and Mobile sub programme

It remains in its’ infancy but is often quoted as the panacea for having no spread of

compliance locations and provides the path and adherence to 16 locations outcome.

There is , as yet , no formulated workable strategy . Members must note that it is not

the stated intention of HMRC to have “mass home working”.

Data Cluster and Digital Cluster

It is just 25 years since the advent of the World Wide Web and that has profoundly

impacted our lives in one way or another . There is a generation in their 20s who

know no different and the number like that will only increase. How the department

will interact with people will change but no-one should be “left behind” . HMRC obeys

the government agenda for the civil service - digital by default . They have no option

. There are profound implications for all the people who use HMRC from this agenda

but this document will confine itself to impact on compliance.

Should the digital products in relation to submission , collection , collation and

understanding of data come about ( In the Data cluster managed in 2 distinct sub

clusters of multiple sub programmes ) - it will provide a huge data store to be used in

a more accessible way by RIS . RIS will use increasingly sophisticated computerised

algorithmic interrogations ( mining and warehousing ) of multiple internal and

external databases coupled with behavioural indicators in a real time environment to

enhance and modify the interventions required in alignment with the compliance

strategy . If it works – then with viable , sustainable , verifiable and true yield being

realised at the compliance strategy stages – HMRC will reduce the right tax failed to

be paid at the right time. This approach can all be grouped under the heading Data

Analytics . This will free up resources to tackle those who have no desire to respond

to “help” – such as those using aggressive avoidance schemes and involved in

evasion. HMRC believes it will allow for the industrialisation of most interventions .

The recent advent of the Merchant Acquirer Data , additional Offshore agreements

and enhancements to CONNECT and ADEPT E&C are just some of the data that

HMRC believe will deliver the superior RISK modelling required . Much of the

change in the digital area is driven by outcomes from Spending Review 13 ( SR

13 ) .

A sub programme in the Digital cluster is the Whole Customer View – this will allow it

is believed for anyone in HMRC to see ( along with the customer ) all the interactions

with HMRC in one place.

E&C Cluster

A successor to Caseflow / CRMM remains a goal and is a sub programme in this

cluster as are the improvements being made to Caseflow and CRMM . There are

multiple other sub programmes in E&C many of which are familiar to members such

as CAD and Mid Size.

Compliance Strategy

In this section we will set out the strategy for compliance and also refer to Business

Tax and E&C Change Portfolio Clusters .

The compliance strategy is built on the phrase “Protect , Promote and Respond”.

Promote compliance by designing it into systems and process . Prevent non

compliance in real time using the data analytics and respond to non compliance as

appropriate and modified via data analytics.

This will change compliance so by 2020 ( starting from 2013 ) error and failure to

take reasonable care ( FTRC ) as corrected by HMRC will reduce from 18%

approximately of all taxpaying entities ( ATE ) to 10% approx . It must be borne in

mind that HMRC considered that 50% of ATE in 2013 make no error or FRTC or are

involved in avoidance or evasion. At the same time evasion will reduce from just over

10% ATE to less than 10% ATE. There remains a section of ATE - 25% in 2013

reducing to well less than 10% ATE by 2020 who make errors and FTRC that HMRC

is unable to discover. This will result in ATE who make no error or FRTC or are

involved in avoidance or evasion grow to nearly 70% of ATE . A compliance success

story .

There will be far more detail when the E&C Business Plan for the period 2014 to

2016 is published in very near future and we encourage members to examine that in

great detail and let us know your views.

LC Transformation / Change

In LC – changes have already taken place – the advent of Mid Size , Large &

Complex being split between Business Tax ( Large Business – Customer

Relationship Manager allocated businesses ) and Mid Size , the advent and transfer

of staff to Counter Avoidance Directorate ( CAD ) and the SME Transformation

Review.

- CAD

Bringing together all E&C resources to focus on marketed avoidance schemes

coupled with legislation designed to aid the overall avoidance effort will make major

inroads in the HMRC effort to combat aggressive avoidance.

- Mid Size

An area of the customer population that has required a more focused effort looking

at more sophisticated risk models and deploying resources where required to meet

the risk.

- SME Transformation

This has effectively sought to work within the estate and digital strategies by

ensuring that multiple objectives have or are to be delivered coupled with the

complete review of all the work areas in SME . The work areas were examined for

Location Specific / Non Location Specific ( LS and NLS ) and “Core” designations

coupled with the SR10 objective of a move towards Evasion.

From this has come the Intervention Centre - to be based at two locations –

Edinburgh and Newcastle . These will be hybrid centres ( in that they will compliment

existing and increased work by the Compliance Centres e.g. Campaigns )

undertaking NLS work in the error and FRTC arenas within the Compliance Strategy

of “Protect , Promote and Respond” and aided by the digital strategy. This will leave ,

what is considered to be , the resource intensive face to face intervention only to be

carried where required and mostly in the Evasion arena ( reference E&C Business

Plan 2013/14 and SR10 ) . The industrialised approach will in time operate in a real

time environment using understanding of the customer base to provide help when

required. HMRC will also seek to undertake evasion and complex cases via the IC

on a remote basis .

It is the intention of HMRC to also segment the compliance F2F activity reducing the

work of a F2F caseworker to purely compliance activity. The IC is intended to

undertake all non tax specialist compliance activity from this and a test and learn

pilot has commenced.

- Evasion

The capability in LC to deal with Evasion will increase substantially with varied work

patterns and exist in both LC and Taskforce arenas.

- Conclusion

This is , by necessity , an abbreviated summary of the future and just because

certain areas have not been detailed does not mean they will not exist or be part of

the future vision in HMRC and in LC in particular . Areas such as Individuals , Anti

Money Laundering , SEAT , TAPE etc will still be required and exist in the future.

This is , as was stated at the start of this section - the PCS outline from our sources

but it is , we consider , a true reflection of a huge numbers of things that are

happening or being planned . It has been given without direct PCS comment

wherever possible as this next section of this document will now attempt to set out

the PCS Vision.

PCS Vision

We will attempt to try and address , in sections , certain areas we see as incorrect or

where there are omissions of logic – as we see it - and at the same time detail our

vision for a successful HMRC.

Compliance Strategy

Is PPR the correct stance ? Yes. For too long we have worked mainly on

downstream risks – respond - by undertaking compliance activity via a less than

robust risk model . We do need to look at upstream risks and reduce them via “the 2

P’s” . But they cannot be a total panacea for compliance activity which also cannot

be undertaken in all fields by phone and letter. Frankly it has to be laughable to

imagine that an entity evading tax will respond to such an interaction. Compliance

activity , in the round involving IC/CC with face to face interventions will provide

greater coverage , productivity and results only when combined correctly with the

appropriate enablers .

Estates

We will start at the most basic high logic allowing for some currently immutable

factors. HMRC has to follow the GPU standard . If HMRC comprises “x” number of

staff then by the GPU standard this will require “y” number of m2. M2 costs money .

M2 is cheaper outside urban locations so it makes fiscal sense to ensure that where

Location Specific work is required that it is as local as it can be to where the work

has to be carried out not in only bare estate costs but also incidental fiscal costs

such as Travel and Subsistence.

The issue of remote and mobile ( home working ) , as was stated above , is in its’

infancy but certain things are known . It is not meant to be compulsory , will only suit

some people , will not cover any additional costs of working from home , may only be

allowed temporarily and cannot and must not be a vehicle to avoid redundancy . And

we have not even touched on the issues of “governance” and the real impact on

people potentially involved in the team and managerial context . It does not therefore

seem the “magic bullet” . To date ; HMRC have been clear that they do not envisage

mass “home working”.

So basing , even on a high level a core estate strategy , HMRC on 16 major urban

locations has deep flaws – fiscally , operationally and managerially. We will address

the rather spurious argument that only having 16 locations will offer all participants

more career opportunities in due course as we will with other facets of the strategy

later in this document.

Location Specific Work

Does this work exist – yes. Has this been categorically proved that this is the most

productive way of completing intervention cases and finding the maximum yield

across all areas of compliance ? – yes ( reference : the long trial of the Single

Compliance Process and the empirically measured outcomes ). Does this work for all

tax heads and all practices ? – yes ( same reference ) . This is where things now get

complicated as we must discuss Intervention and Compliance Centres and how they

fit into the compliance spectrum and how they should work with LS work and the

compliance strategy.

Let us start with the first question : should the IC and CC exist ? – most certainly yes

as they will be able to ensure far greater coverage than ever would be possible

without a number of intervention caseworkers reaching numbers that would negate

the cost effectiveness.

Can the IC and CC with the compliance and digital strategies really have an impact

on the FTRC and error markets by a: the overall tax gap and b: without the need for

F2F caseworker interventions ? The answer to a: is yes but that has to be qualified

and for that qualification we would refer you to the Yield section later in this

document. The answer to b: is an emphatic no. There will be many entities that will

not respond to a “nudge” or even seek to mislead via the method of contact ( phone

or correspondence ) that an IC or CC will use or will not respond at all . Do we ignore

these instances or do they begin to give an even more complex picture of risk that

does require on the ground F2F intervention - the answer to the former must be no

and the latter is of course yes . Even allowing for Affluent and Mid Size populations

outside of the normal work area here there are numerous entities that are just totally

unable to be dealt with via an industrialised process and require action to address

FRTC and error. That action is face to face interventions.

The recent comments made by HMRC that the IC will undertake evasion and

complex cases fly in the face of reality . Empirical evidence shows that SCP with

correctly trained and graded staff will realise the most yield and greatest

productivity . What we are seeing from the employer is a move to lower graded staff

doing higher graded work in a few major urban conurbations. We are changing the

work and becoming much less effective to meet estate strategies not using

established hard facts to determine the estate requirements. HMRC is completely

wrong in this approach.

When we discuss “segmentation” it is vital to be totally objective . Do we require too

much of our caseworkers that is incidental to tax specialist compliance activity ? Yes

will be the answer from members . The question is then do we reduce that ? Yes

would be the answer again. The next question is how ? Removing burdens by

separating out tasks may work but surely it is more about reducing time spent on

burdensome bureaucratic procedures via either outdated and outmoded IT ( of which

more below ) and also processes that are not required than removing them to an

IC/CC and without any evidence that this will actually enhance the productivity of

compliance. It is another example of moving work to fit the estate strategy.

Are F2F interventions really “resource intensive” ? It does depend on how you wish

to view and interpret such a statement but let us be honest : with risk assessment

being used to the fullest possible extent at any one time ( and we will discuss risk in

another section of this paper later on ) and with a trained caseworker(s) able to be

deployed and maximising their working day at the location required – then all data –

historically and current suggests that yield realised far outstrips cost ( and cost here

is approximately twice the salary of the caseworker(s) ) – so to conclude there is no

factual evidence that F2F are a resource intensive negative fiscal factor. It will be in

many cases the only way to find FRTC and error which overall account for , by even

the conservation HMRC estimate of approximately 40% of the tax gap . As stated

above – some 20% approximately of that is FRTC and error HMRC have been

unable to address – certainly that is where the IC and CC come into play . We

believe this will free up F2F resources to be concentrated via enhanced risking and

also referrals from the IC and CC to push up the strike rate . The strike rate is so

often still quoted as a reason to reduce F2F or even more strangely as reason that

compliance is increasing when it is patently obvious that is not the case.

It is also worthwhile to say that the HMRC data sets and extrapolations for tax gap

are based on disputed statistical models and there is every reason to believe that the

percentages are greater than declared.

We have mentioned travel and how that can be inefficient in terms of non

productivity but we have to discuss this in a little more depth to give a rounded

picture. Travel – extensive travel – day in day out – is not conducive to your all round

welfare . It is tiring and ultimately unhealthy . There is a clear duty of care to ensure

that travelling is kept to the minimum for wellbeing of employees. While on the

subject of travel it would be remiss not to say that if the employer can supply secure

access tablets you could work while travelling – provided you are not driving of

course - but as those with mobile phones , blackberry access and laptops know -

security has to the main consideration and in reality there is a real limit to what can

actually be done when using public transport. There remains no contractual

obligation to use a private vehicle for work purposes and there would be financial

consequences should this even be contemplated.

When we look at Taskforce work – much of that has to be location specific and even

where ostensibly not - the case can be concluded more speedily with some degree

of F2F contact . Evasion most certainly is F2F and LS.

We need for the medium to long term ( both the employer and the PCS have to

admit that looking further than 15/20 years into the future with any high degree of

certainty is not really a feasible or credible way of setting out a vision ) – face to face

intervention caseworkers. In fact we need to use the empirical findings to increase

such work across areas which currently do not undertake F2F . That is real

productivity increases that can be realised . That being the case then to maximise

their fiscal efficiency in the round and the entire case for that exists as per the above

- we need a network of offices enabling the vast majority of entities that HMRC deal

with to be reached within the day . We do not have that now and will not with the

proposed HMRC vision. That must change.

We are not saying we need to return to the network we had when HMC&E and IR

merged but we need to establish a credible network of locations . We cannot have ,

as we do now and will have under the HMRC vision , swathes of UK where we have

no presence . There has been , over many years , discussion of the deterrent factor

– it is currently negligible over most of the UK and we all know that . Increased

coverage and interactions from the IC and CC will address that in part but frankly it

will not really impact to the degree being predicted which in the real world will not

have anywhere the effect HMRC seek or desire. Combined with on the ground

interventions and the impact that has – then and only then can we address the tax

gap on a basis that has real and positive impacts . How we measure that is a

question as it is not just the “yield” we record but considering some of the , shall we

say , inventive measures currently in use – then it is not beyond the department –

with consultation – to arrive a measure that is robust for deterrence.

How we work

Where we based is but one facet of a much larger subject . How we work covers

what tools we have ( IT ) , training , careers , process tasks through to the structure

of compliance – to mention a few . Let is begin with Information Technology ( IT ) as

that is where we have had a huge volume feedback from members . We would refer

members to R&C/BB/XXX/ 12 which set out the need for reform on 3 major topics

which will be referred to below.

- IT

The digital agenda needs to focus not solely on the “customer interface” ( referring to

the tax paying entities we deal with ) but the internal “customer”. We need to replace

Caseflow and CRMM. Ideally we should be seeking in conjunction with the Whole

Customer View a platform for case handling and recording directly allied to that

allowing for the most rounded access and view for HMRC staff dealing with any

entity . This should be easy to operate with minimal page and task requirements and

designed with the full input of caseworkers. It will enable management information

and overall data collection linked to the production of any and all documentation

generated as result of our work . It should include automation as standard . It is not

beyond the wit of HMRC to actually focus the digital requirements and the money

they have for a real and vital project.

Successfully planned , involving all the user requirements ( and their direct

involvement in that planning ) will result in an easy to use , data rich and single point

system fulfilling a myriad of needs but most of all a vastly less bureaucratic system

rather than the monolithic off-the-shelf system of Caseflow. It must be a priority and

must happen.

- Training

Tax Professional Qualifications ( TPQ ) have been greatly reformed since they were

introduced and as predicted by the PCS to the employer way back in the heady days

when SR 10 was announced – that need for reform became vital in the last few

years. We not only predicted that need but also started the process for reform . We

are not resting however as there remains a fundamental core issue and several

other concerns that have to be addressed first before training becomes what it really

needs to be. We shall start with the main reform requirement . As a result of

R&C/BB/306/12 we had started to engage with all the interested stakeholders

looking to provide solutions to the situation compliance and our members found

themselves in . The real fundamental question at the heart of the problem is

associating training and the “passing” of that as a direct condition for the

confirmation of promotion in a tax professional role. We wrote a paper late in 2012

which clearly set out why promotion and training are two separate issues and should

never be conflated. The paper was submitted as part of the E&C problem solve for

TPQ and then again to the major review of training. It has never been refuted or

formally answered .

What it set out was simple and direct . A person is assessed for promotion via a

selection process based on competencies – a concept reinforced across the Civil

Service now with CS Competency Framework . In some cases this is

“complimented” with a statement from the applicant and /or an interview. After this

selection process HMRC then contends you are able to be promoted to the grade

you applied for . This process exists in all such exercises to a lesser or larger degree

– but it exists. The employer then insists you are able to carry out any and all duties

at that grade . If your post is in the tax professional area – you are trained for that –

as you would be in any area . To make the passing of exams , and assessing the

application of that , a further condition of promotion is out with the Civil Service and

even other areas of HMRC – where strangely enough you are trained too but not on

a conditional basis to promotion. It is a major negative engagement indicator and

exists , as far as we can tell , because “that is what we used to do in the past “ . We

are forced to conclude that Luddite tendencies are alive and well and not in the PCS

or the members we represent . Training and application are part of your job – that is

assessed via appraisal systems ( and it is not within the scope of this document to

comment on the current system ) and there are , for better or worse , “remedial”

actions able to taken by the employer to address training gaps. We are most

certainly not saying that those in training “must improve” . Current discussions with

the employer confirm that is not the case.

So to conclude – we have conditionality where it should not exist and it does not

create anything other than cost . Emotional , processing and fiscal costs . It should

be abolished forthwith as the anachronism that it is.

It also beyond the scope of this paper to comment too much on the application of

new and lesser terms of conditions of general service that are linked to promotion

but suffice to say when coupled with conditionality and exams and application – why

do we bother to even apply ? It is noticeable that even post the TPQ reforms – too

many posts remain unfilled – why is that we wonder ? – we think that is all too

obvious.

- Careers

It is true that having a critical mass of jobs in a location does provide varied

opportunities for members to choose career paths and that is all too often stated as a

reason by caring management for the proposed rationalisation of the estate to major

urban hubs. It is , however , simplistic in that context and in some respects untrue.

We are seeing greater and greater use of “flexibility” where members from LC ( and

other E&C directorates ) are being requested and sometimes made to “help” peak

periods in tax credits and PT . If one was to be churlish – this papers over the cracks

in resourcing in those respective areas but it far more easily accomplished by an

employer with large numbers of staff in a few locations . The issue of the impact of

members in LC who are tax professionals not undertaking compliance work is stark

both in terms of individuals and the workload and also the targets that LC has.

In our vision we will have major locations but also locations around the UK . They will

need to be staffed with numbers of caseworkers and support staff. They will

encompass the full spectrum of grades . That will allow progression on a local basis

but it is vital we have a method and ability for members to move around the UK to

progress their careers . Are we advocating a return to what was Crown Moves ? Yes

to a certain degree . There must be a fair system in place wherever possible to fund

moves of people around HMRC locations . There are a myriad of ways to facilitate

this which will provide value for money and will move from the current system of

Daily Travelling Allowance only being available in few circumstances and

discretionary by a Line of Business. There needs to a holistic understanding of what

career progression is really about and how the employer can benefit from that as can

our members - their most vital asset .

Conversely we need to look at current Non Location Specific teams ( different to

what we have outlined so far in this document which has , to a degree , focused on

LS work ) who find themselves not in a designated major urban location . Under the

current strategy – posts there are either not being filled or teams find their work

moved to an urban location and they then face the redeployment pool with all that

could actually mean for their employment. The PCS is totally clear on this – where

we have successful teams ( such as the Work Allocation Teams ) in non urban

environments then by having LS caseworker posts we offer more career paths for all

concerned – negating what is sometimes said in that posts cannot be filled at

managerial positions in some teams and being a reason to move the work . We also

must understand that a fulfilling career for the individual and the employer does not ,

by definition , mean promotion or changing of the job that a person currently

undertakes to a completely new one. Being experienced and productive in a job

which you enjoy is a career as well and that is seldom acknowledged. Certainly a

major urban location will have a significant number of people who are not promoted

and have not changed their job ( “flexibility” aside ! ) - it is just they feel worthwhile

and accomplished in the round in what they do. Too often a career is seen by senior

management through their own eyes without understanding the different levels and

issues in the word.

We also see another new and innovative way to ensure greater job satisfaction and

success for HMRC which can justifiably be encompassed in the term “career” and

that is in how we structure compliance.

- Structure

The structure we have in LC , E&C and HMRC has not really changed since merger .

We believe there are real and fundamental issues in this structure which inhibit a

better way forward for our members and HMRC. We will start at the E&C level first.

E&C should comprise ALL compliance activity with the exception areas that only

process data ( e.g. CT Ops ) . This would mean that Specialist PT and Large

Business – as examples - should be in E&C . The reasons they are currently not in

E&C are opaque and we know have generated debate at senior management levels

that have , ultimately , resulted in moves to Business Tax ( LB Transformation ) that

do not really make for clear transparent logic .

Leaving that to one side for the moment – is the structure we have in E&C the most

efficient and correct for the future and the “vision” ? In respect of CI , DMB , CAD

and RIS – certainly. In respect of SI and LC – no and we will set out why and what

we see as vision based on feedback and the experience of members. We will also

set it out in the context in how that fits with the PCS vision that is being expounded

here in this document.

In SI we have sections that deal with Fraud and Evasion – be they MTIC , Labour

Providers, Offshore , Excise , RFTU or even now called Fraud ( now that Avoidance

has moved ) and the question has always been “why do we have a separate

directorate” with all the managerial “overheads” when clearly there are close links to

what LC does. It was certainly the case that when SI came into existence there was

some separation of duties from mainstream LC but questions were asked prior to

SR10 which lead to the SI Transformation programme but as SR 10 impacted in LC

and various other strategies came into being ( e.g. Alcohol ) that separation became

far less obvious. In addition to this there was the perennial issue of “silos” and cases

not being actioned - often for legitimate reasons but to the extreme frustration of all

concerned . A classic example of de-motivation . We have heard of numerous recent

concerns about lack of consistent approaches to work areas resulting in confusion

and the hardening of silos. Yes – the normal approach to this is to get all the

stakeholders in the proverbial darkened room and thrash out new means of

communications and understandings but this merely continues the silos .

We are advocating full structural reform of SI and LC . Starting with the merging of

them with the resultant efficiencies that can realised across the board. Not for one

second are we saying that operational frontline staff are to be reduced . In fact we

see this as a way of protecting frontline posts across E&C from the “efficiencies”

required from SR13. There are direct synergies with every activity in SI with sections

of LC especially so when we consider the impact of SR10 on LC . We are sure that

the interested parties in SI at senior management grades will baulk at this idea but

change effects all regardless of grade and frankly – it makes sense to stop the

ridiculous divisions at the operational level , saves money and frontline posts , saves

costs and delays in referrals and simplifies many processes that only exist because

of directorate differences ( including but not exclusively CI referral routes ) and

ultimately provides for more flexible operational responses. If we fail to make

changes that save money with outmoded and redundant managerial models than it

is the operational frontline staff that , as usual , will face job losses.

In LC we need to adjust to this proposal especially in SME . SME needs to be split

between Evasion and Business As Usual ( BAU ) especially in the context of what

has been said in this document around FRTC and error.

Our next possible proposal is the most radical of all in some ways – we advocate

complete matrix management and deployment across what we will call the

“Compliance Directorate” . This means SI and LC in current terms – for a start. Let

us also confirm that we firmly propose that LB and CAD should be in E&C have a

part to play in matrix deployment but should be distinct management directorates.

Matrix management is where staff work to local managers but across regime or

activity . As an example this could mean staff working on various activities in a single

team ranging from evasion through to mid size and FRTC using specialist resources

as required. Each activity would have managerial and functional leads operating on

all the national requirements - it is a multiple command and control structure.

Management dislike this approach - which has been used before and successfully -

as it requires less managerial silos and reliance on working together and

stakeholders agreeing priorities. It makes targets more flexible and obtainable but

requires increased performance management of those targets - i.e. greater effort for

senior managers .

Silos create resource and target issues often leading to managerial issues that do

not help our members or their careers and futures. We want a more “one HMRC”

approach . A statement the employer often makes but in reality does not always

happen. We want flexibility ( another often used word ) and careers ( in the round

and as per the above section ) . This does not preclude or ignore Specialist teams as

reality always dictates we need people who have particular specialist skills.

- Specialist Teams

Many of these derive from current teams such as MTIC , TAPE , NMW ( allied to

labour providers ) AMLS and computer audit specialists ( currently SEAT and Data

Handlers but this artificial divisions needs to change and be collated into a world

class computer audit specialism such as existed prior to merger and it is appalling to

report that the number of data audits in LB , PB and many areas has fallen to

negligible numbers since merger and that grading remains a major and serious issue

) – and this is not an exhaustive list. They need a distinct but combined voice and

would be managed in a matrix management scenario but in have specialist “virtual

silos” for coherence in training and evolving work within the full aspects of PPR

compliance strategy. They will work on a sub contract basis to all relevant

stakeholders on a priority basis agreed at E&C level.

- Operational Models

We are going to try and set out how we see Compliance in the round being operated

and the impact that has. Using a matrix approach and non silo deployment –

compliance can be broken down into 2 main segments of activity. Desk based and

non desk based.

Desk Based - identified risks are recognised and dealt with by phone or

correspondence . This is non location specific and covers the areas of FTRC and

error. However there needs to be extremely robust escalation routes and firm

decision making by fully experienced caseworkers , at the appropriate grades , so

that when phone and correspondence routes have been exhausted or are non

productive in either failure of the taxpaying entity to respond or respond appropriately

that the risks are then moved to a non desk based response. It will also encompass

activities such a repayments which have been queried prior to payment that require

attention ( it must be said that some in this category will have to go direct to non

desk based responses and some will move from desk based to non desk based ) . It

will also include a myriad of other vital activities but with the overarching point that

clear and robust escalation routes are required to non desk based interventions and

that technology allows such a transference without negative productivity coming into

play and that the fullest single overview of an entity including risk interfaces are in

operation. This said – having this system will enable greater than ever coverage

while allowing the specialist resources to focused on where they are actually

required . There are also issues about ensuring that members in this area of

activities have front line operational experience to enable this to operate to the fullest

possible level of effectiveness

Non Desk Based – geographically based tax head specific caseworkers able to deal

with escalations from the desk based response but also covering the areas which

require in depth system analysis of entities of complexity and/or size that only by this

can assurance and yield be garnered ( e.g. Large , Mid Size and Public Bodies )

using a team based approach ( virtual or otherwise ) with the appropriate specialist

input ( SEAT / TAPE etc ) and also dealing with Fraud & Evasion ( in the fullest and

roundest sense and across all segments of the taxpaying population ) , Avoidance

referrals requiring inspection , NMW cases , CITEX , BRC , Taskforces etc. It has

been categorically proved via the Single Compliance Process trial that face to face

interventions are the most productive way of completing interventions with the

maximum possible yield being realised . The deterrent impact is also sizeable.

LB and PB have made a very logical case that the complexity of their sectorial

models and the complexities and changes in them are so rapid and complicated that

they require staff to be based in certain locations and operate nationwide. Staff being

based in these locations ban be kept abreast of the changes in the sector they

operate much better than if they were spread around the UK . With the realisation

that real and actual compliance activity in these two areas has to be undertaken

rather than them being mere processing activities alone this could mean excessive

travelling for our members. The PCS acknowledges the logic in what PB and LB say

about their current situation but investment in technology will enable greater sharing

of information in real time and access to policy and specialist sector centres of

expertise allowing a real productivity gain reducing travel and disruption to work life

balance .

Yield

We now come to the absolute reason for the existence of E&C . This needs to be

examined in several areas and firstly we will look at the Tax Gap ( TG ) . HMRC

predictions from their analysis have been outlined above in the HMRC Vision section

of this document. The TG is open to various academic interpretations as to the

ultimate value. Certainly it is the contention of the PCS that is it much larger than

HMRC and the Treasury say it is ( £32bn based on 2012 data ) but here we will look

at the customer segments of the TG and also using HMRC’s own data sets ; we will

extrapolate percentages of the TG to segments and how our vision will deliver far

more realisable value for money for UK Plc .

Segment : % of ATE : % TG :

Large 0.04 27

Mid Size 0.80 19

Small 99.1 54

There exists considerable concerns from members about the repeated statement

that HMRC now delivers more yield than every before but we must acknowledge that

any direct comparison with even the few years after merger is not really possible in

an empirical sense . Yield is now split into 3 categories “Cash Collected” , “Revenue

Loss Prevented” and “Future Revenue Benefit” . At and immediately after merger the

yield “count” was not that sophisticated or recorded in a manner ( be that

consequential or future ) anywhere near the basis that it is now. Anecdotal evidence

suggest that with a like for like comparison it is reasonable to assume that we are not

collecting as much as had been the case and the only way to really address that is

via our vision.

We have to also consider the Hidden Economy . It has been refreshing to see this is

becoming a much higher priority in HMRC with considerable effort by managers to

move this into a mainstream activity including working with other sections of

government. However the hidden economy is estimated to be worth £150 bn per

annum ( it is estimated that this equates 10% of national income not declared for tax

purposes ) – based on a 2012 study . HMRC estimates that £5bn of the tax gap can

be credited to the hidden economy ( we are sure members will note the disparity

between that value and what proportion of £150 bn is actual tax loss ) . As far as we

understand this is not included in the data by the segments noted above. It does

appear that HMRC has to increase its’ activities in this area and while campaigns

have a part to play in this , as does publicity and penalties , there is no evidence to

suggest that an extremely effective way of tackling this sector is not the visible and

viable geographical activities of intervention caseworkers.

We must also consider “monitoring” and the RLP that is accredited on a statistical

basis to this activity . We have no information from members that monitoring does

not have a place in the future vision but we do have real and serious concerns about

the values being accredited to this activity in areas of evasion – as an example and

the possible expansion to other activities . There are also concerns that this is not

backed up by action with the entity being “monitored” . We see this as a currently

flawed model that it not an answer to actual interventions and action – members

have said they see this as a way of diminishing real activity and it some cases –

failing to stop “incorrect activities” of the entities . It requires real reform to be part of

the PCS vision.

There is a real and viable risk that record yield totals are not robust and the

continuation or extension of many of the new forms of recording could pose serious

questions of HMRC . This is not to say that FRB and RLP should not be recorded –

they should - but without losing sight of “cash to bank” . We know that many

members share this concern.

Risk

We need to be very frank about this . The Strategic Overview of Risk ( SOR ) does

not provide a detailed geographical understanding of risk and how that varies by

geography and sectors . It does not enable of picture to exist of what resources need

to be deployed by activity or risk. There is some work underway to examine

deployment that might in time have this possible application to understand how to

deploy against risk by activity by geography . The best yardstick now is a

combination of the SOR , density of ATEs and intelligence ( local and national )

coupled with what you , the member , know about where you live. The picture that

has been given to the PCS is about a huge volume of risk not being addressed. This

is , in no way whatsoever , a criticism of our members in RIS . What it does show is

that HMRC has along way to go to actually understanding risk and until you do that

making decisions on operating models that are not inclusive and expansive and then

allied to estate decisions that are incomprehensible in the most reasonable

circumstances is deeply questionable .

The PCS maintains that risk in UK wide and vast . We need to understand how that

varies by geography and sector and by firmly and accurately establishing risk , only

then , can we deploy resources to meet the risk . Resources can then be empirically

measured against risk and more sought and got as required. We must never allow

risk to be manipulated to meet an artificial resource – as has been the case in the

past.

- Conclusion

We believe we face a stark choice and one that has to be made within a very short

time as to whether proceed with the HMRC vision – one we believe is flawed in

many respects and one that does not deliver for the core purpose of HMRC -

enforcement of the existing tax regimes – fairly and appropriately across all the UK

regardless of who we are dealing with. We believe we have set out a vision that we

now need to consult you , the members , about . We need your views and

concerns . The PCS vision here is not the finished article and will change because of

what you say and using your expertise.

It is right to also note that LC is conducting an exercise with all customer groups to

examine what work they undertake is location specific and what is non location

specific. This complements the work undertaken in the SME Transformation. The

PCS will be discussing those findings in detail in May and will report further to

members. It must be noted that we expect pressure to move work from LC to NLS in

line with the driver of the estate strategy and the force that has on LC senior leaders.

Members will also be aware that LC locations where all HMRC staff were asked in

November 2013 if they wished to volunteer for early release have now been formally

marked for closure. There are 8 LC locations , 7 of which undertake location specific

work. Naturally the PCS enquired of LC senior managers about the business case

for the closures - we were told there is no business case. Members are asked to

note this point carefully.

It is suggested this compliments all the concerns the PCS has detailed in this paper

not least with reference to the Irvine office ( this of course does not exclude the other

LC locations but it is the office where we have the most illustrative model of the

direction HMRC wishes to take ). Irvine was threatened with closure 2 years ago.

Thanks to the work of local PCS representatives and members , the PCS DTUS in

LC were able to have constructive and positive conversations with LC senior

managers where we all agreed that Irvine was a required location to deliver the LC

business. Since then yield has increased almost fivefold using the new SCP

methods and engaging local staff with RIS to identify risk and compliance activity .

To be told that the location must now close after the superb work of the local staff

and the real risk that exists has been devastating for PCS members. To be told that

digital and remote working will address the compliance risks is unfathomable to local

members and the PCS.

To finally conclude this paper - we outline the visions – It is the YEAR 2022 .

The PCS vision :

In this location - in an urban area but not one of the 16 ( although they will have

offices as well ) - we have 5 teams of 10 caseworkers each managed by a FLM .

The caseworkers cover all the tax heads . They caseworkers are from the grades O

to SO with the FLM being always of a higher grade than the team being managed .

There are G7 caseworkers , specialist computer auditors and in this case some

TAPE and CITEX staff plus a support team. All caseworkers have “evasion capability

“ . One team has specialist evasion capability covering cases in MTIC and Alcohol as

required. Virtual teams are created to cover all aspects of work as and when

required by the identified risk from FTRC/error through to Hidden Economy , Labour

Providers and NMW. Recently a team was formed to support taskforce activity

working 5 out of 7 days with much of the work outside normal office hours –

allowances were paid for the period in question . There has been several major

audits for large , mid size and public bodies , again with virtual teams brought

together to address the skills and specialism’s required – an audit of a local authority

with system overview and analysis coupled with extensive data extraction and

interrogation based on a recognised sector risk found total tax in excess of £1M -

cash to bank and RLP and FRB of some £300K. In large business – a system audit

at the business’ HQ found a coding error for tax liability on an EPOS that has

increased tax due from the numerous retail outlets all over the UK . Several major

CT interventions were speedily concluded by site visits utilising the increased and

technically advanced tablets allowing for instant video conferences with policy and

specialists actually while on site . The whole entity overview and dual case handling

platform accessible in real time access on the tablets allows reports and outcomes to

be processed in near real time . The staff are flexible in the virtual teams with

inherent specialist skills protected and delivered as required . All parts of HMRC

compliance activity is n undertaken from the office . The exception is criminal

investigation. The instantaneous data access and referrals has meant cases are

concluded in a speedy and very timely manner. Worklists of referrals from the

Intervention Compliance Centres have yielded impressive values in FRTC and error

and in one case has uncovered risking issues ( cases were not FRTC/error but

evasion ) which can be assimilated real time via automated means to risk modelling .

Several MTIC frauds have been intercepted and action taken on a civil penalty basis

( documents and process automated ) with more criminal referrals also done.

Several NMW/LPU activities have made serious inroads against the abuses of local

workers and the tax system . Real time intelligence databases have also uncovered

at the same time connections to other businesses not on HMRC registered

databases. It is rare to see single tax head activity on an entity . There is

comprehensive planning in place to deploy as many tax head specialist staff as

required to meet the risks . Staff have varied duties and a diverse career covering a

significant geographical area based primarily on ensuring that most of the working

day is spent working and not travelling . Some staff avail themselves of moves to

other offices around the UK via home moves assistance – some to this office and

others leaving . Functional matrix management ensures regimes and specialists are

catered for with all staff working flexibly . Training is comprehensive and not linked to

promotion . Morale is high . Results are impressive .

The HMRC vision ( number 1 ) – the office is closed and the space where it would be

is totally deserted of furniture and people. Yield is counted even more as statistical

exercise done on presupposed responses to “monitoring” and theoretical models of

response . The robustness of this model is constantly questioned - as is the reason

for HMRC. All work by HMRC is confined to the 16 locations with many of them now

under review .

The HMRC vision ( number 2 ) - results while appearing impressive have been

questioned to the extent that parcelled up locations with team working ( recall

SCS/104/05 anyone ?? ) are now being offered for either full privatisation or as part

of a joint venture with a top 5 accountancy firm . The firm of course is not controlled

by E&C but is part of BT and therefore the statement has been made “there is no

conflict of interest”.

This is not scaremongering . We live in very serious times for HMRC . The PCS has

told all senior E&C managers that our members fail to see their business delivery

model as a way forward for success - in purely professional and not emotional

terms . To be very fair - E&C does not have what they call the “granularity” to inform

that model at this time and work will be undertaken to fill in those “gaps” in the

coming year however the overriding main strategies are the real drivers.