Amazon and HMRC: the cloud without a silver lining


Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Such is the degree to which we rely on technology nowadays that it’s difficult to imagine at times how we’d live without it.

Imagine the impact of an IT-free life for businesses of all sizes, especially those which count on computers to process essential administrative functions, in particular.

That’s certainly true of HMRC.

Back in 2015, the then Chancellor of the Exchequer, George Osborne, heralded “the end of the tax return” due to a new policy which he dubbed ‘Making Tax Digital’.

Under the initiative, taxpayers would be obliged to make their submissions online.

The idea of reducing the sheer amount of paper involved is, on the face of it, a worthwhile suggestion but the idea of substituting hard-copy forms for more frequent digital returns was greeted by consternation.

Objections grew to the point that proposals to make it effective from next year were dropped from the current Finance Bill, while the scale of those companies affected has been significantly redrafted (https://www.gov.uk/government/news/next-steps-on-the-finance-bill-and-making-tax-digital).

Nevertheless, HMRC has pressed ahead with the sort of changes to its digital infrastructure required to cope with an extra volume of work.

Even so, in keeping with the critical press which it has generated in recent years, it stands accused of failing to put its money where its USB ports are.

For HMRC has decided to ditch a UK-based cloud computing contractor in favour of Amazon Web Services (AWS) (https://www.theregister.co.uk/2017/10/24/datacentred_went_under_due_to_hmrc_move_to_amazon/).

The Revenue’s business reportedly made up 85 per cent of the total turnover of the UK firm, Datacentred. So severe has been the impact of losing the contract that it went into administration in August.

Media coverage has been scathing, in part because the decision appears to undermine the last Government’s stated intention of giving small domestic businesses fair access to public sector contracts.

Almost coincidental to George Osborne unveiling his ‘Making Tax Digital’ scheme, the Cabinet Office was promising to spend one in every three pounds with small British firms (https://www.gov.uk/government/news/big-opportunities-for-small-firms-government-set-to-spend-1-in-every-3-with-small-businesses).

However, most of the controversy surrounding HMRC’s decision concerns which overseas business has been awarded the sort of services which Datacentred had provided.

The Revenue, you see, has opted for one branch of the very firm which seems to have been repeatedly embroiled in tax rows.

Only last month, this ‘blog reported one such dispute, prompted by the fact that Amazon had managed to more than halve its Corporation Tax payments in the same period that its UK turnover rose by 54 per cent (https://www.etctax.co.uk/online-off-limits-row-amazons-tax-bill/).

One MP, Margaret Hodge, the former chair of the same Public Accounts Committee which has subjected HMRC’s top brass to a number of dressing-downs, hasn’t minced her words.

She accused officials of “blatant hypocrisy” and being seen to reward conduct by what she described as “some of the world’s biggest and most immoral tax avoiders” (http://news.sky.com/story/hmrc-accused-of-blatant-hypocrisy-after-signing-deal-with-amazon-11096308).

If that wasn’t embarrassing enough for the Revenue, news of Amazon’s appointment coincided with the revelation that the taxman was experiencing severe issues with its e-mails (https://www.accountancylive.com/hmrcs-email-system-hit-network-issue).

HMRC might have explained the Amazon deal as an advance in services for taxpayers but if it comes amidst an inability to correspondent with the Revenue, those same taxpayers will no doubt be wondering whether its progress at all.

It goes to show that when IT fails, there is a lot to be said for a pen and paper, no matter how time-consuming it might be by comparison and anyone who believes differently surely has their head in the clouds.


If you have any queries about this article, or on any tax related matters, then please do not hesitate to get in touch.

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