Calls grow for a UK version of the US Taxpayer Advocate Service to support taxpayers facing HMRC’s heavy-handed tactics
UK taxpayers, especially freelancers and the self-employed, may soon see better protection from the taxman if calls for a UK Taxpayer Advocate Service (TAS) are heeded. In a recent meeting, the HMRC’s Professional Standards Committee heard from Erin Collins, the National Taxpayer Advocate of the United States, who outlined the role and benefits of the TAS in the US. This has sparked fresh debate on establishing a similar independent body in the UK.
The Loan Charge and Taxpayer Fairness All-Party Parliamentary Group (APPG) has been a vocal advocate for such reforms. The APPG met in February 2023 to discuss the benefits of adopting a Taxpayer Bill of Rights, similar to that in the US, which includes ten fundamental taxpayer rights, such as the right to pay no more than the correct amount of tax and the right to a clear conclusion of tax disputes.
MPs and APPG Co-Chairs Sammy Wilson and Greg Smith stated jointly in a letter directed to the Chancellor of the Exchequer Rachel Reeves on 13 November: “The way HMRC currently treats taxpayers is deeply concerning. There’s a glaring need for an independent body that can hold HMRC accountable and protect taxpayers’ rights. The US model, where the Taxpayer Advocate is funded by, but operates independently within, the tax office, shows it can be done successfully.”
The MPs expressed in the letter that there is a “serious systematic problem with the way that HMRC treats taxpayers, all too often seeking tax through intimidation and the threat of court action with the ability to use unlimited amounts of taxpayers’ money to fund expensive and often excessive legal representation.”
The letter offered examples of abuses of power, not only with regards to the whole Loan Charge Scandal but also the ‘IR35’ cases taken against contractors and freelancers, plus its treatment of individuals. The APPG Co-chairs are calling for a “glaring and pressing need for a system of independent taxpayer advocacy as well as enshrining basic taxpayers’ rights – rights that are too often denied or negated – into law.”
What does the US Taxpayer Advocate Service offer?
The US TAS model is designed to help taxpayers navigate the complexities of the tax system and resolve disputes with the tax office. It is empowered by a taxpayer code that obligates the IRS to prove tax is due, rather than the taxpayer proving it is not. Furthermore, the TAS operates independently and reports directly to Congress, ensuring transparency and accountability.
This model is seen as a way to level the playing field, especially for freelancers, contractors, and small business owners who often face disproportionate scrutiny and enforcement actions from HMRC. The introduction of a similar service in the UK would offer much-needed support and protection, particularly for those who feel outmatched by HMRC’s resources.
The need for an independent UK advocate
Critics argue that HMRC’s current approach to tax collection is overly aggressive and lacks accountability. There have been numerous reports of freelancers and self-employed individuals facing undue pressure, particularly in cases involving IR35, VAT disputes, and overpaid child benefits. The Loan Charge scandal, which left many taxpayers facing significant debts, has further highlighted the need for systemic change.
Smith and Wilson stated: “Too often, we hear of HMRC using its vast resources to intimidate taxpayers. We need a genuinely independent Taxpayer Advocate that answers not to HMRC but to Parliament, ensuring fair treatment and protection for taxpayers who are simply trying to run their businesses.”
Benefits for freelancers and the self-employed
For freelancers, contractors, and small business owners, a UK Taxpayer Advocate Service could be a game-changer. It would provide an independent mechanism to challenge HMRC decisions, ensuring that taxpayers’ rights are upheld. This could mean fewer lengthy and costly disputes, quicker resolutions, and a fairer system overall.
Concerns over HMRC’s role in reform
Despite support for these reforms, there are concerns that any new taxpayer advocate service might not be genuinely independent if it is established under HMRC’s oversight. The APPG has stressed the need for such a body to be free from HMRC interference.
The minutes from the Professional Standards Committee meeting on 29th July reveal a cautious approach from HMRC, noting that members were interested in exploring how a taxpayer advocacy function might look. However, the APPG criticised the language used, with one MP labelling HMRC’s mention of “advocacy offerings” as out of touch.
The letter highlighted that in the minutes of the Professional Standards Committee meeting on 29th July, it states “The members thought this was a good introduction to how the TAS functions and what their service provides and looked forward to this being the beginning of a valuable conversation as HMRC considers its advocacy offerings”.
Smith and Wilson found this statement “revealing and troubling”. They said, “advocacy offerings” is a very odd phrase and the idea that UK taxpayers will be assisted through any conversations that HMRC may have, is “laughable considering how many taxpayers have face unfair treatment from HMRC (something that is an all-too-common issue in MPs’ post bags).”
One recent example the letter offered was in July 2024 when the Exchequer Secretary to the Treasury heard a Loan Charge victim talk about their experiences of using the HMRC loan charge “helpline” and how rather than being a point of contact for a person in crisis it would be more accurately named a “HelpYouPay Line”.
The path forward: government action needed
The APPG is urging the Treasury to take decisive action, including a comprehensive review of HMRC’s accountability. They argue that simply strengthening political oversight, such as the recent appointment of James Murray as Chair of the HMRC Board, will not be enough to address systemic issues.
Emily Darlington MP, Vice-Chair of the APPG, stated: “We welcome the Government’s engagement with the US Taxpayer Advocate, but it is Ministers who must drive these reforms forward. We need statutory protections and a taxpayer advocate that operates independently from HMRC.”
The APPG believes that such reforms would not only benefit individual taxpayers but also improve trust in the tax system, especially among the self-employed sector, which has often felt unfairly targeted by HMRC enforcement actions.
In an unrelated development, Wilson is being investigated by Westminster’s standards commissioner for “allegedly breaching lobbying rules.” According to the BBC, Wilson is being investigated for “failing to declare an interest when tabling a question on the Turkish Republic of Northern Cyprus, after making a visit to the area.”
A fairer future for UK taxpayers?
Dave Chaplin, founder of The Taxpayers Fairness Campaign said in a statement: “The power imbalance between taxpayers and HMRC in the UK is very worrying so we support the APPG’s request for a Taxpayer Advocate Service as part of desperately needed reform.”
Chaplin said ministers and Parliament must now take action to “refine” the tax system to provide greater clarity and fairness for taxpayers and “ensure HMRC are unable to abuse their powers like we saw in the Post Office scandal.”
Chaplin’s argument is “fairness demands a transparent and accountable tax administration that is built on statutory processes and independent oversight, which the UK does not currently do well enough.”
He continued, “A Taxpayer Advocate Service must be truly independent and answerable to Ministers, not the tax authority it is meant to oversee. Anything less would be a conflict of interest and undermine the purpose of such a vital service for taxpayers.
“The Loan Charge and IR35 cases serve as a stark reminder of the human cost when HMRC’s powers are not scrutinised effectively. Meaningful reform is long overdue.”
As calls for a UK Taxpayer Advocate Service grow louder, the Government faces increasing pressure to act. By learning from the successful US model, the UK could offer freelancers, small businesses, and ordinary taxpayers much-needed support in their dealings with HMRC.
While it remains to be seen whether the Government will take these calls seriously, one thing is clear: the current system is not working for many, and taxpayers deserve better protection and advocacy in their interactions with the tax authority.
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