What is HM Revenue and Customs (HMRC)?

6 mins

What Does HMRC Stand For?

HMRC stands for Her Majesty's Revenue and Customs. It refers to the tax authority of the UK government. Her Majesty's Revenue Services (HMRC) is a government agency that is responsible for the following:

  • collection of taxes
  • paying for child benefits
  • enforcing the tax and customs laws
  • enforcing the payment of minimum wage by employers

 

What does HMRC stand for? Formed in 2005, Her Majesty's Revenue Services (HMRC) followed the merger of the Inland Revenue and the Board of Customs and Excise. These were the government agencies that previously took care of internal taxes and customs collection, respectively.

 

What is the Meaning of HMRC?

HMRC holds the authority for the UK’s tax collection, payments, and customs, along with a vital purpose: to collect the money that pays for the UK’s public services and helps individuals and families with targeted financial support. HM Revenue and Customs does so by being impartial and increasingly efficient and effective in their administration. While the honest majority are helped by HMRC to get their taxes right, dishonest minorities may attempt to cheat the system.

 

In 2005, an Act of Parliament established Her Majesty's Revenue and Customs (HMRC) as a new department, replacing the Inland Revenue and Customs and Excise. HMRC, meaning HM Revenue and Customs, is a non-ministerial Department established by CRCE in 2005. The Commissioners for Revenue and Customs Act (CRCE) (2005) replaced the Inland Revenue and Customs and Excise. They gave the authority to the Commissioners, who were appointed by the Queen, to be the administration of the tax system. These commissioners are chosen straight from the department’s top management. HM Revenue and Customs report directly to the Parliament through their Treasury minister, who oversees the agency’s expenditure.

 

What are the Responsibilities and Priorities of HM Revenue and Customs?

‘Policy Partnership’ is a particular arrangement of policy-making, where the Treasury leads on strategic tax policy and policy development, while HMRC leads on policy maintenance and implementation.

HMRC is responsible for the following:

  • To safeguard the flow of money to the Exchequer through their collection, compliance, and enforcement activities
  • To fund the UK’s public services
  • To help facilitate legitimate international trade, and protect the UK’s fiscal, economic, social, and physical security (before and at the border), and also collect UK trade statistics
  • To administer Statutory Payments, such as statutory sick pay and statutory maternity pay
  • To help individuals and families with targeted financial support through payment of tax credits
  • To administer Child Benefit
  • To keep up with the high volume of business, since almost every UK individual or institute deals with HMRC directly
  • HMRC aims to administer an efficient tax system in the most comprehensible manner, which is consumer-focused
  • They also aim to administer the Government Banking Service.

 

What is HMRC? As for the responsibilities prescribed to the agency, HMRC is responsible for:

  • Different taxes, such as income tax, corporation tax, capital gains tax, inheritance tax, insurance premium tax, stamp, land, and petroleum revenue taxes
  • Environmental tax, climate change tax, aggregates levy, and landfill tax
  • Value Added Tax (VAT), which includes import VAT
  • Customs duty and excise duties
  • Trade Statistics
  • National Insurance
  • Tax Credits
  • Child Benefit
  • Enforcement of the National Minimum Wage (NMW)
  • Recovery of Student Loan repayments

Priorities

The top three strategic objectives of HMRC are:

  1. To collect due revenues and clamp down on avoidance and evasion
  2. To transform tax and payments for all of their customers
  3. To design and deliver a professional, efficient, and engaged organization

You can read their Single Departmental Plan, which is available on their official website. This sets out their objectives in detail, including how they plan to achieve them.

 

The Key Role of HM Revenue and Customs (HMRC)

The job of Her Majesty's Revenue and Customs (HMRC) is to ensure that the taxation system is implemented correctly and adhered to in an efficient manner. The job of HMRC is to oversee the tax collection and transfer of funds to the Treasury, while also ensuring that the revenue for public service’s funding is readily available. Another role of the tax-related sector of HMRC is to provide education and information to UK individuals and groups in relation to their tax-paying duties.

 

HM Revenue and Customs (HMRC) also administers the Government Banking Service. This service provides reports to Her Majesty’s Treasury in order to enable an accurate cash management system. The other divisions within the agency include the following:

  • The Benefits and Credits Division. This division, in particular, is responsible for the administration and payment of tax credits, child benefits, and statutory payments, which include statutory sick pay and maternity pay.
  • Enforcement and Compliance. As a division, enforcement and compliance handles diverse areas, ranging from taking action against the non-payment of taxes, to recovering unpaid student loans, implementing systems to reduce tax avoidance, and enforcing the payment of the national minimum wage. HMRC, as an agency, can investigate individuals and businesses that are suspected of evading taxes or committing financial fraud. If there is a possibility that the tax authority believes a taxable entity is purposely withholding information related to its income disclosure, then it can proceed further with a criminal investigation.
  • The Customs Arm of HMRC. The customs arm of HMRC focuses on the enforcement of customs, payments, and regulations for international trade in order to collect revenue and prevent the smuggling and illicit trade of illegal goods, such as tobacco, alcohol, petroleum, and so forth. They also need to facilitate the collection of trade statistics or legal international trade for the United Kingdom.

 

Special Considerations

What is HMRC? What are special considerations? A primary function of HMRC is to ensure that the money flows seamlessly from the Chancellor of the Exchequer via its tax collection, compliance, and enforcement programs. There will be a continual movement of funds into the Treasury due to tax collection and the enforcement of tax laws for cases where there is non-payment.

Also, the payment of benefits and tax credits provides practical support to families and individuals who are entitled to such assistance. The enforcement of customs and the pursuit of smugglers is to protect the nation's interests and encourage international trade that is above-board.

 

The History of HM Revenue and Customs (HMRC) 

Under the Commissioners for Revenue and Customs Act (CRCA) (2005), the commissioners, who were appointed by the Queen to take on the responsibility for the nation's taxation system, established HM Revenue and Customs (HMRC) as a non-ministerial department.

This is why the agency reports directly to the Parliament through the Treasury, placed under the leadership of the Chancellor of the Exchequer. In return, the Treasury supervises the financial spending made by HMRC.

Prior to the merger of Customs and Excise and the Inland Revenue, a case was presented by the Permanent Secretary of the Treasury. In 2004, the report mentioned that organizational change could offer various improvements in customer service, effectiveness, and efficiency. The merging of direct and indirect revenue departments has been implemented in the past: namely, in the 1849 case of the Board of Stamps and Taxes, which was merged with the Board of Excise, to create the Board of Inland Revenue.

Later, in 1862, a committee was appointed to investigate whether it would be advisable to combine the responsibilities of the Inland Revenue with those of Customs and Excise. However, this proposal was overturned at the instigation of the Inland Revenue.

Later, in 1909, the excise duties were taken from the administration of the Inland Revenue and combined with the Board of Customs, to form together with the Board of Customs and Excise. Yet, another report by the Treasury Committee suggested a merger, revealing the savings that could be made regarding public expenditure and compliance costs.

Finally, the decision to merge the Inland Revenue and the Board of Customs and Excise was agreed upon and announced in March 2004. However, it was met with some skepticism, as the departments had different foundations, be it historically or culturally, and were even different in their legal structures. There was also the fear that the merging could result in a loss of jobs, which became an ongoing reality.

 

Read More: The Financial Action Task Force (FATF) organization.

Read More: What is the role of a Money Laundering Reporting Officer (MLRO)?

Read More: Which countries are stated in the FATF Grey List Countries?

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