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HM Revenue And Customs

Updated on January 29, 2024
Article byPrakhar Gajendrakar
Reviewed byDheeraj Vaidya, CFA, FRM

What Is HM Revenue And Customs (HMRC)?

HMRC, or Her Majesty’s Revenue and Customs, is the British government agency responsible for collecting taxes and defining customs laws and regulations regarding minimum wage and childcare benefits. They are also in charge of monitoring the tax system.

HM Revenue And Customs

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HM Revenue and Customs is also known as Her Majesty’s Revenue Services and is the official tax authority of the United Kingdom government. The HMRC enforces several important laws to ensure efficient public services and compliance with employee rights. It oversees the administration of a well-devised tax system in the UK. It maintains a smooth flow of money to the Chancellor of the Exchequer with continuous fund movement in the treasury.

Key Takeaways

  • HMRC refers to Her Majesty’s Revenue and Customs, the UK government’s official tax authority.
  • Apart from collecting taxes, it is also responsible for minimum wage enforcement for businesses, regulating tax and customs laws, and providing childcare benefits.
  • It is one of the largest employers in the UK, with over 66000 employees across the United Kingdom.
  • All public services, construction projects, and facilities provided to the United Kingdom’s citizens come from the taxes collected by the UK government.

HM Revenue And Customs Explained

The HM Revenue and Customs is the United Kingdom’s tax authority with the primary objective of collecting taxes from individuals and businesses. The money collected is further reported and utilized by the government to provide public services, better facilities, and a robust social infrastructure to the people of England. Every country has its tax authority. In the US, it is identified as the Internal Revenue Service (IRS). In India, it is referred to as the Central Board of Direct Taxes.

The UK’s tax system allows people to get a refund if they wrongly paid more by claiming the HM Revenue and Customs tax refund. It is also known as a tax rebate. The services of HMRC are not limited to tax collection. From building dams, constructing roads, and offering childcare and healthcare benefits to initiating educational programs, every facility provided by the UK government is majorly funded by the tax collected by the HMRC department. It also ensures adequate funding for hospitals, community centers, and public utility services. The department also undertakes projects across property management, human resources, digitalization, communications, etc.

Taxpayers usually file a claim and receive money when they have paid more tax than required. For instance, an individual paying taxes on the income/salary earned, receiving monetary benefits from a foreign source, or having annuity and pension receipts are among other specific situations. At times, a claim needs to be filed when a taxpayer uses the HM Revenue and Customs self-assessment return filing option to pay taxes.

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History

The HM Revenue and Customs was introduced under the Act of Parliament on April 18, 2005. It was created as a separate department, combining the Inland Revenue and the Board of Customs and Excise. It was primarily established in 1799 to collect taxes to support the expenses of the Napoleonic Wars. The income tax was officiated by William Pitt, the Chancellor for Exchequer, who also served as a UK Prime Minister for 19 years.

The merger of the Board of Stamps and Taxes and the Board of Excise led to the formation of Inland Revenue. In 1862, a committee was formed to evaluate whether merging the Inland Revenue and Customs and Excise would lead to a more efficient system. Initially, the recommendation under advisement did not receive approval. However, in 1909, the Department of Inland Revenue was relieved from handling excise duties. Instead, the Board of Customs and Excise was formed and made responsible for excise.

In May 1999, the Treasury Committee presented the benefits of a merger, which was declared in 2004. The newly established department was called Her Majesty’s Revenue and Customs, and it had responsibilities covering excise and customs under its purview. The HMRC was created in 2005. The department functions under the Commissioners for Revenue and Customs Act (CRCA). It holds the entire gamut of responsibilities of the UK tax system. The system was formally given powers that enabled it to simplify taxation in the UK.

Functional Structure

The HMRC has an official board to monitor and administer the HMRC department. The Board consists of two permanent secretaries and an executive committee. It has non-executive directors formally appointed to render advice and consultancy. Non-executive board members and non-executive committee members are also part of the setup.

Other groups within the department include Customer Services, Customer Compliance, and Customer Strategy and Tax Design groups. These groups have individual director generals to whom everyone reports.

The following groups are also associated with the department.

  • Chief People Officer Group with a Chief People Officer and other directors under it.
  • Chief Finance Office with a Chief Finance Officer and other subordinate directors reporting.
  • Chief Digital and Information Officer Group with a Chief Digital and Information Officer and other group directors.
  • Solicitor’s Office and Legal Services comprises a General Counsel and Director General.
  • Borders and Trade Group with a Director General and other directors reporting under them.
  • Other offices include Transformation and HMRC Communications, each with its Director General/Director and other directors/deputy directors.
  • Lastly, there is a Valuation Office Agency with a Chief Executive and other directors.

The Board can approve or cancel business plans and share management authority under the HMRC department. They discuss critical issues, taxation problems, and relevant agendas related to their departments.

Functions And Responsibilities

Listed below are the functions and responsibilities of Her Majesty’s Revenue and Customs.

  • The first and foremost function of the HM Revenue and Customs is to collect tax and monitor, maintain, and report the tax earning and spending to the parliament.
  • The HMRC is responsible for customs and excise.
  • HM Revenue and Customs functions to impose environmental taxes, including taxes on land and petroleum revenue, insurance premium, and corporate and capital gains.
  • The department ensures that child benefits are properly structured and offered to rightful citizens and entities.
  • The HMRC plays a key role in student loan recovery and repayments.
  • Under the UK government authority, the HMRC regulates and enforces the national minimum wage for the whole country.
  • It is also responsible for national insurance and trade statistics. People can call the HM Revenue and Customs number for general inquiries and tax-related problems.
  • The HMRC department is also responsible for anti-money laundering supervision, tax credits administration, and value-added tax regulation.

Frequently Asked Questions (FAQs)

1. Is HM Revenue and Customs a government agency?

The HMRC is a non-ministerial department established in 2005 by the Commissioners of Revenue and Customs Act 2005. The HM Revenue and Customs reports to the treasury minister, with the parliament being the final reporting authority. The minister is responsible for monitoring, assessing, and controlling the spending.

2. What is a letter from HM Revenue and Customs?

Whenever required, the HMRC department sends letters to relevant parties or taxpayers for varied purposes, including formal intimations and knowledge transfer. From filing errors to refund claims processing, the HM Revenue and Customs Department can send letters requesting information for verification. The receiving party must respond to the letter within the allotted period.

3. What is the HM Revenue and Customs compliance check?

The HMRC initiates compliance checks to ensure that every citizen in the UK pays the right amount of taxes, knows their rights, and receives the relevant benefits and welfare services, including tax reliefs and allowances. It aims to discourage and eliminate tax evasion. As an agency of the UK government, it ensures overall administrative efficiency and compliance.

This has been a guide to What Is HM Revenue & Customs. We explain its history, functional structure, functions, and responsibilities. You can learn more about it from the following articles –

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