Her Majesty's Revenue and Customs (HMRC) is a non-ministerial department of the British Government primarily responsible for the collection of taxes, some forms of state support, some aspects of UK frontier protection and import controls.

HMRC was formed by a merger of the Inland Revenue and Her Majesty's Customs and Excise and came into formal existence on 18 April 2005.

The department is responsible for the administration and collection of direct taxes including income tax and corporation tax, capital taxes such as capital gains tax and inheritance tax, indirect taxes (including value added tax), excise duties and stamp duty land tax, and environmental taxes such as air passenger duty and the climate change levy.

Other aspects of the HMRC's responsibilities include National Insurance contributions, the distribution of child benefit and some other forms of state support including the Child Trust Fund, payments of Tax Credits, enforcement of the national minimum wage and collection and publication of the trade-in-goods statistics.

HMRC has three targets for the period 2005-2008:

• to improve the extent to which individuals and businesses pay the amount of tax due and receive the credits and payments to which they are entitled
• to improve customer experience, support business and reduce the compliance burden
• to strengthen frontier protection against threats to the security, social and economic integrity and environment of the United Kingdom in a way that balances the need to maintain the UK as a competitive location in which to do business

HMRC collected £404 billion for The Treasury in 2005/06.

HMRC don't make the law, they just carry out the Government's wishes. If you don't like that vote for a different Party! This is what they do:

• Work on behalf of the Government
• Collect the taxes
• Ensure that Umbrella companies & contractors operate within the law.

One word of advice, tempting though it is, don't break the law. The probability of being caught is very high. You will be fined and also could end up as a guest of HM Prison Service. It will mean the end to your contracting career, and maybe a lot more.

Contractors and Umbrella companies are currently under the spotlight. But as a contractor, if you've chosen a compliant Umbrella company to work for, this shouldn't be a problem.

Be under no illusion HMRC will hold you personally accountable if you don't comply with the regulations and try to pass the buck to your Umbrella company. Ignorance is no excuse in the eyes of the Judge who will be sentencing you.

There is a massive amount of legislation that affects you as a contractor. If you want to find out more, visit HMRC's website. Unless you're an employment and legal specialist prepare to be confused.

Strictly speaking your Umbrella company should deal with HMRC on your behalf and you shouldn't need to bother them.

The next round of cost-cutting targets for the taxman to face has been announced.

HM Revenue & Customs, which is battling to make annual savings of £500m by 2007/08, mainly through cutting 12,500 jobs, will now have to achieve net annual savings of £700m by 2010/11.

The targets are in line with earlier projections of 5% savings in real terms across the chancellor's departments, which include HMRC, the Treasury and National Savings & Investment.

But there are other problems. The government's watchdog, the Public Accounts Committee, has questioned the veracity of claimed efficiencies by the departments.

And the taxman has been battling against an increasing VAT gap, and bugs in its IT systems. Morale in the department has recently hit an all-time low, according to public sector unions.

What's happened

HMRC bosses said the department was on target to meet its 2008 efficiency targets, while also improving service levels. Yet in April the Public Accounts Committee heard from tax advisers and unions about problems caused by staff cuts at HMRC.

Routine requests by advisers were taking longer to process, claimed PricewaterhouseCooper's John Whiting.

'Staff feel undervalued,' said Peter Lockhart, HMRC group secretary for the Public and Commercial Services Union. 'Our members feel there isn't a great deal of certainty or future.'

Upgrading HMRC's PAYE systems has proved difficult and glitches led to an extension of PAYE's end-of-year filing deadline. But while HMRC repeatedly stated it was on track to meet its savings, PAC said last week that figures across government were questionable.

Of a total of £13.3bn efficiencies claimed by the government, the PAC believes only £3.5bn of those savings are robust, and there was evidence that the cost efficiencies had reduced service levels.

What's going to happen

The new targets for HMRC and the rest of the government, revealed in the pre-Budget report, have already seen the PCSU in aggressive mode.

It said the targets for HMRC and DWP would hit frontline service through mass job cuts. The cuts have heightened the possibility of further strikes among civil servants.

The PAC, following its scathing findings into the government's efficiency figures, has called on the Treasury to work more closely with departments to put in place a more coherent framework to manage the programme going forward.

Using IT to drive efficiency at HMRC will now be the responsibility of Deepak Singh, who has taken over as CIO following Steve Lamey's promotion to COO.

For more go to www.pcs.org.uk and for the PAC report go to www.parliament.uk