HMRC research indicates ’emotional’ small businesses are feeling its fear factor

The fear factor of dealing with HMRC as a small business has been laid bare in new official research euphemistically titled ‘Exploring perceptions of the burden of tax administration’.

Commissioned by HMRC, the research was made by data firm Kantar and, awkwardly for a tax man far behind in the PR stakes, he says frightened taxpayers are their own worst enemy.

“Very inefficient”

In particular, fears of delays, scrutiny or threats from HMRC in their letters cause people to go into ‘cognitive overload’, leading them to develop ‘highly inefficient processes’.

Tending to reassure the nervous (against errors or the risk of penalties from HMRC), these processes that taxpayers are proposing take “unnecessary time”, the report berates.

Disclaimers in the research that the opinions expressed are those of the authors and not those of the tax authorities do not calm the Twitter storm of the HMRC-commissioned report which finds tiny traders to blame if the levy appears to be taxing.

“Perception of HMRC burden driven by emotion”

But beyond 40 pages, the search is another blow to HMRC clients.

“Perceptions of burden appear to be driven primarily by emotional rather than practical considerations,” the report, based on 47 “in-depth” telephone interviews with small businesses, says.

The researchers add, “The emotional response to these fears pushes people into a state of reduced functionality, or ‘cognitive overload.’

“[Such] the fears are driven by the underlying perception of HMRC as a punitive rather than supportive organisation.

“Debtor non-engagement is when HMRC shows its teeth”

Online, an adviser suggested people base their fears on their past experience of dealing with the taxman, not something imaginary.

Referring to the £42bn of unpaid tax debt that the NAO said HMRC faces having to collect, Simon Bonney, chief executive of Quantuma said:

“HMRC’s biggest problem is when debtors don’t commit. [And] when is it [HMRC’s] teeth come out. »

“Scaring taxpayers too much is the end of the game”

Also reflecting on the findings of the NAO, which revealed that HMRC did not have enough staff (to clear pandemic debt), a former tax inspector suggests the fear factor plays a key role.

“HMRC [knew it could give up] on proper staffing when he gave them ‘psychological training’ and took a dungeon approach to taxpayers,” says ex-civil servant, Carolyn Walsh.

She also told ContractorUK: ‘When taxpayers become self-sufficient, because they are too afraid of not paying their taxes, HMRC’s job is easy. And I’m sure it’s game over [for the government agency].”

“Threatening and Passive-Aggressive”

But it’s not just taxpayers who are at the forefront of resource-conscious income.

‘We cannot do this for ALL customers,’ said accountant Jeri Williams, while quoting an HMRC officer present who she asked to put in writing her request for an address from one of the small business customers of his business.

Smooth Accountancy founder Ms Williams reflected on her refusal to cooperate: “Frankly, I’m not going to be intimidated by…[a] threatening and passive-aggressive [HMRC officer] at my office”.

“Serving our customers well”

Having already taken the investigative route for the tax authority, Ms Walsh, now director of CWC Solutions, says an old internal plan may still be in place at HMRC as revenue matters more to the department than rave reviews.

“Years ago HMRC came up with a plan to increase revenue at lower cost, although staffing in recovery sections has increased, staff losses elsewhere are making up for this, but HMRC might believe it appears to be working based on its “tax gap” figures show that the gap is closing year on year.

“But,” she added, “whether the department is serving its clients well today as an outlet for the overall downsizing process is another matter.”

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