The turn of the year is a time for resolutions and personal betterment. Of course, this particular new year also marks the advent of HMRC's Making Tax Digital, the IR35 reform and the loan charge, plus a controversial honours season to boot.

Many contractors (and their advisors, accountants and insurers for that matter) are outraged that HMRC’s CEO Jonathon Thompson is receiving a knighthood.

The outcry has arisen for a plethora of very understandable reasons - however, this high-profile travesty is quietly concealing another, much more controversial nominee.

HMRC knighthood controversy

While Mr. Thompson’s OBE nomination is scandalous, considering the revenue-grabbing schemes cooked up and inflicted upon working people of late, it should come as no surprise – you have to go back over 10 years before you find a non-knighted holder of the post.

It has allowed another, more critical controversy to pass the majority of commentators by though.

Originally brought to light by Tom Wallace of HMRC dispute specialists WTT Consulting, the knighthood of Patrick Michael Mears falls somewhat outside of the established rules when it comes to OBE nominations.

These rules allow the civil service to recognise outstanding employee achievements in a way commercial organisations can’t. Generally, the accolades are earned through the individual’s service to Britain, who are chosen via a list of nominated staff from each department of Whitehall and then forwarded to a nominations committee for approval.

The typical profile of an honours list nominee is a senior civil servant at director level or above. There may be a smattering of junior staff nominated for charity work but generally, it’s a case of high-level work achievements – many posts, especially within the government, almost come with an OBE as part of the remuneration package.

Mr. Mears' nomination has raised eyebrows in the tax profession because he’s an HMRC contractor with a substantial conflict of interests.

HMRC contractor snub

In the honours list citation, Mr. Mear’s job title is specified as ‘External Consultant, HM Revenue and Customs’. His nomination is ‘for services to Preventing Abusive Tax Avoidance.’

Generally, the term ‘consultant’ is understood to refer to a non-employee, meaning that services are engaged with a clear brief as to what the engager (in this case, HMRC) wants to achieve. While the nomination isn't necessarily illegal, it’s an unusual move that’s made more contentious with the current tumultuous contractor-taxman relationship. It also raises a pertinent question as to why HMRC has nominated someone not permanently employed by the department.

Contractor UK did some research into how often this kind of nomination really happens.

They wrote that they ‘can find no recent examples of HMRC nominating accountants, insolvency practitioners or barristers who engage with them on a far more regular basis than the GAAR panel. So, by nominating Mr Mears does HMRC believe that he is in public service and effectively a civil servant? This would again undermine the independence of the panel.’

False protection of the taxpayer?

Mr. Mears also holds the position of chair of the General Anti-Abuse Rule (GAAR) panel. GAAR was enacted in 2013 to consider tax cases that HMRC thinks could be abusive; if the panel decides that the tax arrangements can’t be ‘reasonably regarded as a reasonable course of action’ (referred to as the ‘double reasonableness test’), then HMRC is free to correct the taxpayer.

This panel is referred to as ‘independent’ by HMRC. As the panel was formed for the protection of the taxpayer, it’s important that this distinction is made; by law, they need to be inerringly impartial to cases put forward by a historically trigger-happy HMRC. So why has Mr. Mears, the chairman of said panel, been put forward for an OBE for services to HMRC?

This apparent conflict of interests is very troubling indeed.

Again, we reiterate that the GAAR panel is there as a safety precaution. Without the protection they offer, HMRC would be unleashed on the working population to rule any arrangement as ‘abusive’ should it not suit them.

For this protection to have any integrity whatsoever, it cannot service HMRC in any way – including (or, perhaps, most importantly) accepting rewards from HMRC itself. Unfortunately, this nomination smacks of inducement.