House of Commons Treasury Committee
Appointment of Edward Troup as Executive Chair of HMRC
Third Report of Session 2016–17
HC 498
House of Commons Treasury Committee
Appointment of Edward Troup as Executive Chair of HMRC
Third Report of Session 2016–17
Report, together with formal minutes relating to the report
Ordered by the House of Commons to be printed 28 June 2016
HC 498 Published on 1 July 2016 by authority of the House of Commons The Treasury Committee The Treasury Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of HM Treasury, HM Revenue and Customs and associated public bodies.
Current membership Mr Andrew Tyrie MP (Conservative, Chichester) (Chair) Mr Steve Baker MP (Conservative, Wycombe) Mark Garnier MP (Conservative, Wyre Forest) Helen Goodman MP (Labour, Bishop Auckland) Stephen Hammond MP (Conservative, Wimbledon) George Kerevan MP (Scottish National Party, East Lothian) John Mann MP (Labour, Bassetlaw) Chris Philp MP (Conservative, Croydon South) Mr Jacob Rees-Mogg MP (Conservative, North East Somerset) Rachel Reeves MP (Labour, Leeds West) Wes Streeting MP (Labour, Ilford North)
Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk.
Publication Committee reports are published on the Committee’s website at www.parliament.uk/treascom and in print by Order of the House. Evidence relating to this report is published on the inquiry page of the Committee’s website.
Committee staff The current staff of the Committee are James Rhys (Committee Clerk), Chloe Challender (Second Clerk), Gavin Thompson (Senior Economist), Marcus Wilton (Senior Economist), Dan Lee (Senior Economist), James Mirza Davies (Committee Specialist), Shane Pathmanathan (Senior Committee Assistant), Amy Vistuer (Committee Assistant), Elektra Garvie-Adams (Committee Support Assistant), Toby Coaker (Media Officer/Committee Specialist on secondment from the NAO), David Hook (on secondment from HMRC), Foeke Noppert (on secondment from the FCA), George Barnes (on secondment from the Bank of England) and Victoria Sena (on secondment from the Bank of England).
Contacts All correspondence should be addressed to the Clerk of the Treasury Committee, House of Commons, London SW1A 0AA. The telephone number for general enquiries is 020 7219 5769; the Committee’s email address is [email protected]. Appointment of Edward Troup as Executive Chair of HMRC 1
Contents
Introduction 3 Our inquiry 3
1 HM Revenue and Customs 4 First Permanent Secretaries at HM Revenue and Customs 4 Independence of HMRC 4
2 The appointment of Edward Troup 6 Background on Edward Troup 6 Our evidence 6 Conclusion 7
Formal Minutes 8
Witnesses 9
List of Reports from the Committee during the current Parliament 10
Appointment of Edward Troup as Executive Chair of HMRC 3
Introduction
Our inquiry
1. This Report considers the appointment of Edward Troup as Executive Chair and First Permanent Secretary of Her Majesty’s Revenue and Customs (HMRC). On 24 February 2016, the Chancellor announced the appointment of Edward Troup as Executive Chair of HMRC. Together with Jon Thompson, who was appointed in parallel as the Department’s Chief Executive, he will act jointly as First Permanent Secretary.1 His term of office began in April 2016.2
2. Given HMRC’s status as a non-ministerial departmental body, the importance of its work to the taxpayer and the recent changes to the management structure of the Department, the Committee has decided that it would be suitable to publish a report on the appointment of Mr Troup.
3. We took evidence from Edward Troup and Jon Thompson on Wednesday 8 June 2016. We thank them for their evidence.
1 Mr Thompson’s appointment is considered in a separate Report 2 HM Treasury Announcement, 24 February 2016 4 Appointment of Edward Troup as Executive Chair of HMRC
1 HM Revenue and Customs
First Permanent Secretaries at HM Revenue and Customs
4. HM Revenue & Customs (HMRC) is a non-ministerial department. It was created by the Commissioners for Revenue and Customs Act 2005 (CRCA), which merged Inland Revenue and HM Customs & Excise. The Act vests the legal powers and responsibilities of HMRC in the Commissioners for Revenue and Customs, who are appointed by the Queen on the advice of her Government.3 These Commissioners form the Department’s top management.
5. Prior to April 2016, HMRC was led by a Chief Executive. Since 2016, following the resignation of Dame Lin Homer as HMRC’s Chief Executive, the leadership has been shared between the Chief Executive and the Executive Chair. As a result, the Department now has two first Permanent Secretaries.4
6. One of the First Permanent Secretaries now serves as Executive Chair of HMRC, and is responsible for “creating and overseeing the strategy of the Department”. The Executive Chair also chairs the HMRC Board, which advises the Department’s management, and holds it to account.
7. The other First Permanent Secretary serves as Chief Executive. He or she chairs the Department’s Executive Committee and has responsibility for the implementation of the Executive Chair’s departmental strategy.5
Independence of HMRC
8. The status of HMRC as a non-ministerial department is intended to safeguard the “fair and impartial” administration of the tax system.6 Under CRCA the Commissioners of HMRC, including the Chief Executive, are Civil Servants.7 They are subject to the Civil Service Code, requiring them to abide by four core values: integrity, honesty, objectivity and impartiality.8
9. HMRC is a non-ministerial Department with qualified, but not full, independence from Government. In setting its general strategy the Department liaises closely with the Treasury, which has a statutory power to issue HMRC with general directions.9 When collecting tax however, the Department’s primary relationship is not with Government, but directly with millions of individuals and companies. It has been held by successive Governments that political or other interference in that aspect of tax collection would prejudice the enforcement of the tax code and lower the yield.
10. Parliament recognised this risk of political pressure when Inland Revenue was merged with HM Customs & Excise in 2005. When passing the CRCA, Parliament placed a high premium on HMRC’s ability to administer the tax system fairly and free from
3 Commissioners for Revenue and Customs Act 2005, s1 4 HM Treasury Announcement, 24 February 2016 5 Ibid. 6 HMRC, “Our governance”, accessed 14 June 2016 7 Commissioners for Revenue and Customs Act 2005, s1 8 Civil Service Commission, “Civil Service Code”, accessed 20 June 2016 9 Commissioners for Revenue and Customs Act 2005, s11 Appointment of Edward Troup as Executive Chair of HMRC 5
interference by Ministers or officials. It specifically sought to protect the Department from any external pressure to treat an individual taxpayer in a certain way by enshrining the principle of taxpayer confidentiality in law.10
11. Section 18 of the 2005 Act prohibits the disclosure of information held by HMRC, except under very limited circumstances.11 This prohibition also encompasses disclosure of taxpayers’ details to Government Ministers or any Civil Servant outside of HMRC. Breach of this obligation of confidentiality by HMRC staff is a criminal offence.12 The confidentiality of individual taxpayers’ information prevents HMRC from being pressured to change the way it treats a taxpayer, or its assessment of the correct amount due.
12. There has been significant controversy in recent years around HMRC’s tax settlements with large corporations. HMRC need to apply the law fairly and consistently. Where tax legislation produces unfair or perverse results, it is the Department’s duty to advise the Government of potential remedies (albeit without naming the taxpayers affected by those results). It must do so with demonstrable independence from political and other pressure. The Department’s First Permanent Secretaries have an important role in defending HMRC’s impartiality and independence in this respect.
10 http://www.publications.parliament.uk/pa/cm200405/cmstand/e/st050111/pm/50111s06.htm#end 11 Commissioners for Revenue and Customs Act 2005, s18 12 Commissioners for Revenue and Customs Act 2005, s19 6 Appointment of Edward Troup as Executive Chair of HMRC
2 The appointment of Edward Troup
Background on Edward Troup
13. Edward Troup is a qualified solicitor who started his career in the private sector within the tax department of law firm Simmons & Simmons in 1981. He remained with the firm for 14 years, specialising in personal, corporate and indirect taxes. Mr Troup joined the Treasury as a special advisor on taxation in 1995. In 1997, he returned to Simmons & Simmons as its Head of Tax Strategy. He re-entered the Civil Service in 2004 following his appointment as the Treasury’s Director of Business and Indirect Taxation, and was subsequently promoted to Director-General of Tax and Welfare in 2010. Mr Troup became Second Permanent Secretary and Tax Assurance Commissioner at HM Revenue and Customs in 2012.
Our evidence
14. Mr Troup took up his new position in April 2016. In this Report, the Committee has considered the appointment of Mr Troup for his role as Executive Chair against the criteria of his professional competence and expertise. In addition, Commissioners of HMRC should be fair and impartial in their administration of the tax system. They should be capable of resisting pressure to disclose information about individual taxpayers in response to political or public pressure.
15. It is clear from the public record that Mr Troup has had a distinguished career as an expert on taxation. He has 21 years of experience in the private sector, serving as partner and Head of Tax Strategy at a major law firm. Within the Civil Service, he has fulfilled demanding roles at both HM Treasury and HMRC. In particular, in his role as Tax Assurance Commissioner between 2012 and 2016, Mr Troup demonstrated an ability to act with fairness and impartiality.
16. On 8 June 2016, the Treasury Committee heard evidence from Mr Troup as part of its scrutiny of HMRC. In oral evidence, the Committee questioned Mr Troup about his priorities in his new role. In particular, the session covered the following topics:
• Administration of the tax system and changes to HMRC’s information technology infrastructure.
• Levels of customer service for taxpayers, in particular in light of a report by the National Audit Office on service levels in 2014–15.
• Staff morale. The most recent Civil Service Staff Survey, published in December 2015, showed that staff morale at HMRC remains well below the Civil Service mean. Only 27 per cent of staff thought the Department was managed well, compared to an average across the Civil Service of 45 per cent.13
13 HMRC, People Survey Results 2015, 3 December 2015 Appointment of Edward Troup as Executive Chair of HMRC 7
• General anti-avoidance rules to minimise tax avoidance. The Committee asked Mr Troup about an article he wrote for the Financial Times in 1999, while employed as the Head of Tax Strategy at Simmons & Simmons, in which he criticised contemporary proposals to minimise tax avoidance.14
• The size and composition of the tax gap, in particular the distinction between tax which goes uncollected due to unintentional behaviour (i.e. error) and intentional behaviour (i.e. fraud and evasion).
• The adequacy of HMRC’s resources to tackle tax evasion, in particular in light of the disclosure of the “Panama Papers”.
• The lessons learned from the Offshore Disclosure Facilities for undisclosed taxable assets in the Crown Dependencies (the Isle of Man, Jersey and Guernsey) and Liechtenstein.
Conclusion
17. In his evidence to the Committee, Mr Troup was clear that he fully supports the General Anti-Abuse Rule as enacted by Parliament through the Finance Act 2013. He emphasised that this rule is substantially different from the proposals which he criticised in the Financial Times in 1999.
18. The importance of protecting HMRC’s ability to enforce the tax code fairly and impartially is paramount. The Department must be demonstrably free from political interference in its treatment of individual taxpayers. The confidentiality of individual taxpayers’ details must be protected, in accordance with the Commissioners for Revenue and Customs Act 2005.
19. Mr Troup already has significant experience of HMRC’s governance of tax settlements, having served as Tax Assurance Commissioner from 2012 to 2016. The Committee will expect Mr Troup to continue to uphold HMRC’s duty of confidentiality in accordance with his statutory obligations, as he has done in the past.
20. The Committee is content that Edward Troup has the professional competence and expertise to act as Executive Chair at HMRC. He has 35 years of experience of the intricacies of the UK tax code and the workings of HMRC. We wish him every success in his role.
14 Financial Times, “Why the Chancellor is missing the point”, 15 July 1999 8 Appointment of Edward Troup as Executive Chair of HMRC
Formal Minutes
Tuesday 28 June 2016
The Rt Hon Andrew Tyrie MP, in the Chair
Members present:
Mark Garnier George Kerevan Helen Goodman Mr Jacob Rees-Mogg Draft Report Appointment( of Edward Troup as Executive Chair of HMRC), proposed by the Chairman, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 20 read and agreed to.
Resolved, That the Report be the Third Report of the Committee to the House.
Ordered, That the Chairman make the Report to the House.
Ordered, That embargoed copies of the Report be made available (Standing Order No. 134).
[Adjourned till Tuesday 5 July at 9.45am Appointment of Edward Troup as Executive Chair of HMRC 9
Witnesses The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications page of the Committee’s website.
Wednesday 8 June 2016 Question number
Edward Troup, Executive Chair, and Jon Thompson, Chief Executive, HM Revenue & Customs Q1–91 10 Appointment of Edward Troup as Executive Chair of HMRC
List of Reports from the Committee during the current Parliament All publications from the Committee are available on the publications page of the Committee’s website.
Session 2016–17
First Report The economic and financial costs and benefits HC 122 of the UK’s EU membership Second Report Appointment of Jon Thompson as Chief HC 232 Executive of HMRC
Session 2015–16
First Report Reappointment of Robert Chote as Chair of the HC 459 Office for Budget Responsibility Second Report The appointment of Dr Gertjan Vlieghe to the HC 497 Monetary Policy Committee of the Bank of England Third Report The re-appointment of Ian McCafferty to the HC 498 Monetary Policy Committee of the Bank of England Fourth Report Appointment of Tim Parkes as Chair of the HC 735 Regulatory Decisions Committee Fifth Report Appointment of Angela Knight as Chair of the HC 734 Office of Tax Simplification Sixth Report Spending Review and Autumn Statement 2015 HC 638 Seventh Report Reviewing the Office for Budget Responsibility HC 514 Eight Report The Treasury Committee’s scrutiny of HC 811 appointments Ninth Report Re-appointment hearing of Dame Clara Furse HC 895 and Richard Sharp