Margaret Hodge, chair of the Public Accounts Committee (PAC) has said that HMRC has an unfair tendency to target small businesses over larger corporations. Hodge made the comments during a grilling of Edward Troup, tax assurance commissioner, Dave Hartnett, who formerly held the role of HMRC’s permanent secretary.
Hartnett, who appeared first, and Troup were providing testimony for an investigation into the way HMRC had targeted businesses avoiding tax. When targeting tax avoidance offenders, Hodge claimed, “SMEs aren’t treated equally” with HMRC often choosing to target them more readily than their larger, multinational counterparts.
Over the course of the grilling, Hodge took an uncompromising stance and was openly critical of certain aspects of the way in which HMRC had conducted its activities. She accused Hartnett of being part of an “old way” which is now “unacceptable” in the opinion of many people. At one point during proceedings, she proclaimed herself to be “aghast.”
Hartnett accepted that “the process” that HMRC had followed in pursuing larger businesses and those taking part in offshore tax avoidance practices had left him with regrets. Upon being asked why more prosecutions had not followed when HMRC was directly handed a list of 1,000 holders of offshore accounts with HSBC, he confessed that this was something he himself “would like to understand.” However, he denied any personal accountability, saying “I’m not here to get off the hook as I was never on the hook.”
While Hartnett bore the brunt of Hodge’s questioning on HMRC’s alleged failure to pursue tax evasion prosecutions against big businesses, it was Troup who drew the bulk of criticism for disproportionate targeting of smaller enterprises. In his testimony, he praised HMRC’s recent efforts to overcome bank secrecy, and pointed out that tax evasion prosecutions had been increased fivefold over five years. This, however, only led Hodge to cut him off and question whether small businesses had been disproportionately targeted in adding to the list.
“What we’re interested in,” Hodge said, “is equality of treatment, SMEs aren’t treated equally.”
In response to this line of questioning, Troup maintained that the idea that smaller and medium-sized enterprises are treated differently from big businesses is only “perception,” though he refused to go into details of the way HMRC operates in this regard.
Richard Bacon, Conservative MP for South Norfolk, was also present and joined Hodge in her criticisms. Following Troup’s comments that the different treatment of small and large businesses is only perception, Bacon said: “It is not merely a perception – it’s a fact that the way small enterprises are treated is different.”
“For you to sit here and claim that it’s perception,” he continued, “makes you look rather out of touch.”