Introduction to His Majesty’s Revenue and Customs (HMRC)
HM Revenue & Customs (HMRC) is the tax authority of the U.K. government, responsible for collecting taxes, distributing certain benefits, regulating tax and customs laws, and enforcing the payment of minimum wage by employers.
Founded in 2005 following the merger of the Inland Revenue and the Board of Customs and Excise, HMRC has a significant impact on the financial framework of the United Kingdom.
Key Highlights
- National Tax Authority: HMRC serves as the primary taxing authority in the U.K.
- Benefit Administration: It administers various benefits and tax credits for U.K. residents.
- 2005 Merger: HMRC was created through the merger of Inland Revenue and the Board of Customs and Excise.
Understanding the Role of HMRC
HMRC collects a diverse array of direct and indirect taxes in the U.K., including income tax, corporation tax, capital gains tax, inheritance tax, value-added tax (VAT), excise duties, stamp duty land tax, air passenger duty, and the climate change levy. It is comparable to the Internal Revenue Service (IRS) in the United States.
The agency ensures efficient tax collection and fund transfers to the Treasury, thereby facilitating the availability of revenue for public services. Employers must submit Full Payment Submission (FPS) and Employer Payment Summaries (EPS) with each payroll to document payrolled benefits and deductions comprehensively.
Educational Initiatives
HMRC also plays a crucial educational role by informing the public about their tax responsibilities.
Key Divisions within HMRC
- Government Banking Service: This division ensures accurate cash management through detailed reports to HM Treasury.
- Benefits and Credits: Manages the distribution of tax credits, child benefits, statutory sick pay, and maternity pay.
- Enforcement and Compliance: Enforces tax laws, recovers unpaid taxes, addresses tax evasion, and ensures the payment of minimum wage by employers.
- Customs: Oversees customs regulations and payments related to international trade, working to prevent smuggling and illegal trade of goods.
A Glimpse into HMRC’s History
Formed in 2005 under the Commissioners for Revenue and Customs Act, HMRC is a non-ministerial department reporting directly to Parliament and overseen by the Chancellor of the Exchequer. The agency resulted from merging the Customs and Excise with the Inland Revenue, consolidating direct and indirect tax collection.
Previously, a merger of tax departments was attempted in 1862 but didn’t last. However, changes to excise duty administration in 1909 led to the creation of the Board of Customs and Excise. A Treasury Committee report in 1999 recommended merging the entities again to reduce public expenditure and compliance costs, culminating in HMRC’s establishment in 2005.
Governance and Oversight
HMRC reports directly to Parliament and operates under the Treasury’s supervision, specifically managed by the Chancellor of the Exchequer. The Treasury provides budget oversight for HMRC.
Key Historical Facts
- Establishment: HMRC was formed through an act of Parliament in 2005.
- Headquarters: The organization is headquartered in Westminster, London.
Conclusion
His Majesty’s Revenue & Customs (HMRC) stands as the U.K.’s pivotal tax authority, managing the collection of all direct and indirect taxes and administering benefits and tax credits. Formed from the merger of Inland Revenue and the Board of Customs and Excise, HMRC plays a crucial role in ensuring financial compliance and supporting public services.
By implementing efficient tax systems and providing public education on tax obligations, HMRC maintains a robust economic environment in the U.K.
Related Terms: Inland Revenue, Board of Customs and Excise, tax credits, minimum wage, customs duties.
References
- HM Revenue & Customs. “Services and Information”.
- U.K. Public General Acts. “Commissioners for Revenue and Customs Act 2005”.
- “Payroll information to report to HMRC”. GOV.UK.
- HM Revenue & Customs. “Charter”.
