THE MONDAY INTERVIEW: Richard Jones; The taxman with his sights on a clear picture
Fair but firm: That's the motivation behind the Revenue veteran trying to make sure large companies pay the right amount of tax
Monday 18 December 1995
"I underline all the time that this isn't a blitz," he says. "What we're trying to do is to organise ourselves to make sure they are paying the right amount of tax."
The office focuses on domestic banks and insurance companies and the UK branches of their overseas counterparts, the Stock Exchange, Lloyd's of London and large industrial concerns. The idea is that by concentrating responsibility for these organisations in one place rather than scattering it among various districts as before, businesses are able to forge better - and more efficient - working relationships with the Revenue. Companies see the advantages of being able to channel their concerns through one area, he says.
Nevertheless, while reorganising in this way - as Mr Jones puts it - creates a greater appreciation of the way that business does things, it also leads to a "better awareness of what they are doing." Especially since his department is better able to see the bigger picture through also including two units that were previously under separate control - the special investigations section, responsible for countering corporate tax avoidance, and the national PAYE audit group, which checks on deductions made for employees by big employers. He would, he adds, be "very disappointed if it didn't make us better able to keep up with determined avoiders."
Though the official line is that it is too early to tell how the unit is working, it is estimated to have helped bring in an extra pounds 4bn to the Exchequer last year. The total recovered by the Revenue's compliance unit - of which it forms a part - was pounds 6.1bn - equivalent to 3.5p on the basic rate of income tax. A clearer sign of how it is viewed will come if a review, just completed, of Mr Jones's department leads to the approach being extended from the 33 district offices to the 37 outside London.
For the moment, though, the attention of the tax community is largely focused on the pounds 1.6bn "technical adjustment" that formed a significant part of the Large Groups Office's contribution to the national coffers. Though the amount is understood to relate to several years, speculation is rife about who could have incurred it. Mr Jones will only say that such adjustments come from looking at companies' affairs and reaching agreement with them. "Maybe there's a genuine misunderstanding of the tax implications of something. A lot of them relate to complex negotiations in difficult areas of the law," he says.
Displaying the fair-mindedness one would expect of a man who has judged many competitions associated with his enthusiasm for photography, he insists that equity is the driving force behind his work.
Getting companies to pay the right amount of tax - "no more, no less" - is the key. The problem is that business's affairs can be so complicated that deciding what is the appropriate amount can prove difficult. Indeed, it is dealing with this complexity that lies behind the establishment of the Large Groups Office.
In the past it has not been unknown for 15 different arms of the Revenue to be looking at a single case at one time and to be talking to each other "in a poorly co-ordinated way." The response is the development of co- ordinated casework - known in Revenue parlance as CCW. Under this, the individual district forms a strategy for looking at a case and calls on specialist skills in such areas as pension schemes, profit-related pay and transfer pricing as required. "We're bringing a much clearer business approach into the way we deal with compliance and customer service," says Mr Jones. While pooling of information may help with the detection of avoidance schemes, it can also lead to the detection of "red herrings" and so rule out further investigations.
Efficiency is also another important driver, because of the tight spending controls with which senior managers in both private and public sector have become familiar. Though he will not say how much is available to him, he points out that the establishment of the unit did not lead to any increase in funds and that he must bid for his operating budget next year.
Although he has previously been a regional controller, this 40-year veteran of the Revenue confesses that he did not really know what he was getting into when he first took on a position that puts him just a few rungs below the chairman of the Inland Revenue Board. Like most of the 450 people under him, he is a career tax inspector. Now a grandfather, he joined the organisation at 19 and after passing his examsgained experience in various regional offices.
It is only in the past nine months that he has "got a handle on how best to deal with these matters," he says. After all, it is not as if the Large Groups Office is a lone innovation. It forms part of a fundamental change in the Revenue's culture that Mr Jones characterises as becoming "not more professional, more businesslike."
Pay and File is being introduced as the first step towards a corporate version of the self-assessment system about to start for individual taxpayers. A plan to simplify the tax system was published last week. And there is a generally more commercial attitude abroad. He hopes that the changes help the Revenue meet business's needs, but is probably hindered by the fact that only a handful of inspectors have direct experience of the companies they are looking into.
While movement between the private and public sectors has been actively encouraged for some time, few tax specialists from accountancy firms or commerce have joined the Revenue. By comparison, the leading firms are full of former inspectors able to give their new colleagues fresh updates on the methods of operation.
But Mr Jones appears unfazed. Though he feels that pressure to bring in people from outside might increase the number of people with external experience, he currently relies on the closer contacts being forged with business.
A full-scale survey aimed at discovering reaction to the new system is being planned for next year. But there have been surprisingly few complaints, he says.
"Companies themselves appreciate it and the professionals like the more co-ordinated approach," he adds, pointing out that they are particularly drawn to the fact that there is a special individual to whom they can complain: him. In addition, he feels that his own staff enjoy being able to take an overall look at the organisations for which they are responsible. As for himself, he does not have the time that he would like to visit the Devon of his roots - and the pictures that adorn his office walls - but he is convinced that this is "a job that's worth doing."
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