What Is His Majesty's Revenue and Customs (HMRC)?
Let me explain to you what HMRC is. His Majesty's Revenue and Customs, or HMRC, acts as the tax authority for the UK government. I want you to know that this agency handles collecting taxes, paying out child benefits, regulating tax and customs laws, and enforcing minimum wage payments by employers.
You should note that HMRC came into existence in 2005 when the Inland Revenue and the Board of Customs and Excise merged—these were the previous bodies managing internal taxes and customs.
Key Takeaways
Here's what you need to remember: HMRC serves as the national taxing authority of the UK. It also administers certain benefits and tax credit payments to UK residents. And as I mentioned, it was formed in 2005 from the merger of Inland Revenue and the Board of Customs and Excise.
Role of the HMRC
Understand that HMRC collects all direct and indirect taxes in the UK, such as 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.
I should point out that HMRC is the British equivalent of the IRS in the United States. The agency oversees the efficient collection of taxes and transfers funds to the Treasury to support public services. Employers submit Full Payment Submission (FPS) and Employer Payment Summaries (EPS) with each payroll, detailing payrolled benefits and deductions from wages.
Additionally, HMRC educates and informs the public about their tax obligations.
HMRC Divisions
- Government Banking Service: Provides reports to HM Treasury for accurate cash management.
- Benefits and Credits: Administers tax credits, child benefits, statutory sick pay, and maternity pay.
- Enforcement and Compliance: Handles non-payment of taxes, recovers unpaid student loans, implements systems to reduce tax avoidance like DOTAS, and enforces the minimum wage.
- Customs: Enforces customs payments and regulations for international trade, collecting revenue and suppressing smuggling in goods like tobacco, alcohol, and petroleum.
History of HMRC
Let me walk you through the history. HMRC was established in 2005 under the Commissioners for Revenue and Customs Act as a non-ministerial department. It reports directly to Parliament through the Treasury, led by the Chancellor of the Exchequer. This setup merged the Customs and Excise with the Inland Revenue, combining direct and indirect revenue functions.
A similar merger was overturned in 1862. In 1909, excise duties shifted from Inland Revenue to combine with the Board of Customs, forming the Board of Customs and Excise. A 1999 Treasury Committee report suggested merging again for savings in public expenditure and compliance costs.
The 2004 announcement to merge Inland Revenue and the Board of Customs and Excise faced skepticism due to their differing histories, cultures, and legal structures.
Who Oversees the HMRC?
You might wonder about oversight. HMRC is a non-ministerial department that reports directly to Parliament through the Treasury, under the Chancellor of the Exchequer. The Treasury supervises HMRC's spending.
When Was the HMRC Established?
As I said earlier, HMRC was established by an act of Parliament in 2005.
Where is the Headquarters of the HMRC?
The headquarters are in Westminster, London.
The Bottom Line
To wrap this up, HMRC formed in 2005 from the merger of Inland Revenue and the Board of Customs and Excise. It stands as the UK's national taxing authority, collecting all direct and indirect taxes while administering benefits and tax credits to residents. HMRC also collects and records Full Payment Submissions (FPS) and Form P45 from employers to document employee benefit payments.
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