Advertisement
UK markets closed
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • FTSE 250

    19,884.73
    +74.07 (+0.37%)
     
  • AIM

    743.26
    +1.15 (+0.15%)
     
  • GBP/EUR

    1.1691
    -0.0003 (-0.02%)
     
  • GBP/USD

    1.2614
    -0.0008 (-0.06%)
     
  • Bitcoin GBP

    55,643.30
    -569.67 (-1.01%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • DOW

    39,807.37
    +47.29 (+0.12%)
     
  • CRUDE OIL

    83.11
    -0.06 (-0.07%)
     
  • GOLD FUTURES

    2,254.80
    +16.40 (+0.73%)
     
  • NIKKEI 225

    40,369.44
    +201.37 (+0.50%)
     
  • HANG SENG

    16,541.42
    +148.58 (+0.91%)
     
  • DAX

    18,492.49
    +15.40 (+0.08%)
     
  • CAC 40

    8,205.81
    +1.00 (+0.01%)
     

MPs slam HMRC for tax system 'quirks' leading to abuse and Brits missing out on COVID-19 relief

File photo dated 11/01/18 of a view of signage for HM Revenue & Customs (HMRC) in Westminster, London. More than �3.1 million has been spent by the Treasury, the City watchdog and HMRC on making their offices Covid-19 secure for staff, new figures have revealed. Issue date: Monday January 18, 2021.
A new report is calling on the government to consider the support it can provide for those taxpayers that have missed out on support from the COVID schemes. Photo: PA

Some groups of UK taxpayers have not received any financial support that has been offered to others by the government throughout the coronavirus pandemic due to “quirks” in the tax system, according to a new report.

Some of the workforce has “not had a penny” despite lockdowns and COVID-19 restrictions meaning some employees have been unable to work at all, the report by the Public Accounts Committee found.

The report points to freelancers and other groups of taxpayers that have missed out on more than £80bn ($109.5bn) in support that has been given to businesses and individuals, including through the employment support furlough scheme.

ADVERTISEMENT

Self-employed taxpayers who moved onto payrolls because of HMRC’s IR35 rules — a piece of legislation that allows HMRC to collect additional payment where a contractor is an employee in all but name — but were not employed at the relevant time may have become ineligible to COVID-19 support schemes, the report found.

“The UK’s hopelessly outdated tax system played a key part in ensuring over 1.5 million self-employed people were excluded from support,” said Andy Chamberlain, director of policy at the Association of Independent Professionals and the Self-Employed (IPSE) to Yahoo Finance UK.

WATCH: Sunak urged to extend furlough scheme before budget

“Because of the many quirks of this system, government has claimed it is too complex or prone to the risk of fraud to help people such as sole directors of limited companies, PAYE contractors and the newly self-employed.

“However, HMRC has never clearly explained the obstacles to getting support to these groups, and we welcome the Public Accounts Committee’s calls for them to do so. We also believe it is absolutely right for the Committee to push HMRC to outline steps to overcome these obstacles and get support to the many self-employed who are still desperately struggling.”

Some of those who moved onto payrolls, because of the pre-emptive actions of employers, could have received help through the Self-Employment Income Support Scheme had they remained self-employed.

READ MORE: UK inflation rate doubled in December despite struggling economy

Similarly, some other freelancers, with verifiable employment and tax records declared to HMRC, may also have been left out from the government’s Coronavirus Job Retention Scheme as in some sectors, such as the creative industries, freelancers often work on a series of short-term employment contracts with gaps in between.

The MPs report also highlights “some large companies that have taken taxpayer support have continued to pay out dividends and high executive salaries,” while some taxpayers have received no support.

The Committee is calling on the government to publish an explanation of why it can't help those who have been excluded from receiving financial support and to consider the support it can provide for those taxpayers that have missed out on support from the COVID schemes.

The report also calls for HMRC to maintain and improve its administration of the tax system as the pandemic has “put a huge strain on HMRC's day to day operations, with a significant impact on HMRC's performance evident in falling tax revenues, poorer customer service, reduced compliance activity and increased debt balances.”

The Committee said HMRC “spends too much patching up out of date and potentially risky IT systems rather than modernising them, and too often struggles to provide the reliable and timely financial estimates upon which good financial and operational planning depends.”

READ MORE: Britain unveils £23m funding for fishing industry

The report cites the examples of HMRC needing to retrospectively amen estimates of Corporation Tax revenues by £6.6bn in 2019-20, as well as “basic errors” in financial forecasting which saw it exceed its cash requirement control by more than £700m.

HMRC is also “uncertain what its estimate of fraud and error from tax credits should be and is some way off assessing the actual level of error and fraud from the employment support schemes, with planning estimates ranging from 5% to 10% in the Coronavirus Job Retention Scheme,” according to the report.

Meg Hillier MP, Chair of the Public Accounts Committee, said: “Obviously, the national system of revenue collection underpins all public spending and services.

“As public spending balloons to unprecedented levels in response to the pandemic, out-of-date tax systems are one of the barriers to getting help to a significant number of struggling taxpayers who should be entitled to support. And the system is going to struggle, and in many cases fail, to capture or deal with those wrongly claiming it.

READ MORE: Black and ethnic minority workers hit particularly hard by employment crisis

“HMRC needs to redress the balance in its spending and use of tech, and get ahead on the basic financial and economic metrics that we need to adapt and respond to this pandemic in real time. There is also a huge question about how our customs and revenue technology at the borders is coping, and will cope in the months and years to come.

“There isn’t really any breathing space — HMRC’s out of date systems need to catch up fast.”

WATCH: Why can't governments just print more money?