HMRC: Good people, poor communications

HM Revenue and Customs [HMRC] gives the impression it would enjoy its work more if it could avoid communicating with the world outside.

The problem is not its people. The senior civil servants at HMRC I have met have been genial and intelligent. But beneath the feet of HMRC’s finest runs a thick sediment that keeps them from advancing. Worse, they accept the organisation’s reputation for poor communications as an orthodoxy that shouldn’t be opposed.

This is an example.

Earlier this month payroll specialists contacted me to say that HMRC was issuing incorrect penalty notices of £400 a time to thousands of employers because of IT problems. They said it was happening for the third year running; and each time it caused wasted time and expense for employers and agents.

Penalties for not filing annual employer returns are issued automatically by the Revenue’s systems when they don’t detect that a validated return has been submitted by 19 May.

Any failure is likely to be caused not by the IT directly but by defective processes. These processes should ensure that the penalty systems receive reliable information so they inhibit the issuing of notices to companies that have submitted validated annual returns within the deadline.

When I rang HMRC’s press office it denied there was evidence of incorrect penalties for the tax year 2006/7. Its spokesman said that if companies felt aggrieved they could go through an appeals procedure.

The spokesman conceded later that HMRC had issued incorrect penalties to thousands of companies. But its admission came only after we had pointed out that payroll websites were buzzing with complaints from agents that had filed their annual returns on time and had received penalties for not hitting the deadline.

Some good should come from mistakes. So I suggested to HMRC that it publish the lessons learned. It refused. I pursued the point; and it refused again. Hours later MP Richard Bacon, a campaigner for more openness over government IT projects and a member of the House of Commons’ Public Accounts Committee, was questioning Paul Gray, chairman of HMRC.

Richard Bacon put it to Paul Gray that HMRC has issued thousands of incorrect penalties three years in a row.

Bacon asked: “Will your Department publish lessons learned from IT-related failure document following the example of the Identity and Passport Service Operations Director, Bernard Herdan, who not only did that for the Passport Service but challenged other departments to do the same?”

The unpretentious Paul Gray, as much a victim of the organisation’s culture as any employee, did not answer the question directly. He replied:

“The latest position on the issue you refer to is that 11,000 penalty notices have been issued incorrectly … 5.4% of the total. This actually was not what you would regard as a pure IT problem. It was a process problem. We have already put in place a remedy for this. We are able to identity the employers who have been sent the incorrect penalties. We have written to them, conscious that they may not all have received their letters because of the postal difficulties. We have put information on our website to indicate that those employers need take no further action, and those incorrect penalties will be automatically cancelled. Obviously when a mistake like this occurs we look at it; we seek to draw lessons from it.”

Richard Bacon then asked: “Do you think there’s any purpose in doing what Bernard Herdan of the Passport Service suggested and publishing a lessons learned document – this is several years in a row?”

Still Gray was not jumping with joy at the idea. HMRC requires that its chairman welcomes open government until it means, well, being open.

Gray replied:

“In relation to this particular issue I am not sure – we will certainly be doing a lessons learned exercise. Whether it’s appropriate to do a formal publication – it’s something on which I will be more than happy to share with the committee if that would be helpful, what lessons we do draw.”

HMRC is aware that the Public Accounts Committee is imperfectly set up to handle documents that are not related directly to a forthcoming report or inquiry. So Paul Gray’s lessons-learned document could be forgotten. Except that Richard Bacon has a long memory.

Why is this episode important?

Employers and agents that deal routinely with HMRC regard it as accountable to nobody. Comments on websites such as Accounting Web, suggest that some payroll agents and software specialists dislike HMRC intensely. Not its people but the organisation.

Openness and progressive communications would be a sign that the staff and directors at HMRC are prepared to fight against the organisation’s backward-facing culture and traditions.

The Revenue will never be liked by those with whom it transacts. But it ought to be respected.


House of Commons transcript of exchages between Paul Gray, chairman of HMRC, and Richard Bacon MP, a member of the Public Accounts Committee

HMRC: we’re cancelling penalty notices centrally

HM Revenue and Customs – we’re not publishing lessons learned from IT-related problems

Passport Service director: Why we’re going public on things we didn’t always get right