Accountants say Revenue's tax-NIC merger failed to deliver

The Institute of Chartered Accountants for England and Wales has criticised the Revenue for failing to deliver benefits it promised to taxpayers when the Income Tax and National Insurance Contributions offices merged three years ago.

When the merger of the two offices took place on 1 April 1999, the Revenue claimed the move would:

• Reduce the burdens on businesses and people;
  
• share experience, knowledge and skills in combating avoidance and making better use of resources;
  
• enable a more joined-up approach to customer service;
  
• achieve a gradual alignment of the tax and NIC rules.

The Tax Faculty supported the merger and agreed it should be phased in over a three-year period.

Three years on, the Tax Faculty has stated it is 'concerned the stated merger benefits have not been achieved and the performance of the merged NIC office has deteriorated.'

The ICAEW says it has received complaints of:

• Long delays in dealing with correspondence;
  
• correspondence not being dealt with;
  
• the NIC employers' help-line being 'less than helpful';
  
• a lack of consistency between local offices, head office and the employers' help-line;
  
• NIC issues and problems being downgraded in importance following the merger;
  
• key NIC personnel moving on, leaving a gap in the understanding of NIC issues in the merged operation;
  
• claims for repayment of NIC becoming more complicated.

Peter Bickley, Technical Manager at the Tax Faculty, said: "There have been some benefits of the merger, noticeably that PAYE and NIC audit visits are now unified, there has been some alignment of the income tax and NIC rules and steps have been taken to counter avoidance schemes. However, we are concerned that the stated merger benefits are slow in coming through and that in some respects the NIC service appears to have deteriorated. Now the merger has bedded down, the Tax Faculty would like to see clear action taken to satisfy the original objectives.

"We are also concerned that burdens on employers have increased rather than reduced. There is a pressing need to take further steps to align definitions for income tax and NIC and to ensure that items are treated consistently. There are also major issues outstanding, for example adopting a consistent treatment for pension contributions and expenses.

"In spite of raising more revenue than VAT, and more than corporation tax, CGT and IHT combined, National Insurance Contributions appear to be regarded as the 'Cinderella' of taxes. The handling of NIC matters appears if anything to be getting worse, with a knock-on effect on the burdens placed on business and those who pay NIC. It is essential that steps are taken to ensure that the merger achieves its objectives and reduces burdens, otherwise there is a danger that the merger will have failed to deliver the promised benefits."

The Inland Revenue said it was unable to respond at the time of going to press.

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Richard Powell, UKTECH