DEFINITION of Inland Revenue
The Inland Revenue was the department of the British government responsible for collecting and administering direct taxes between 1849 and 2005. It was first established in the United Kingdom in 1849, but is no longer in existence under this name.
In 2005, the Inland Revenue merged with Her Majesty's (HM) Customs and Excise to form HM Revenue and Customs (HMRC).
BREAKING DOWN Inland Revenue
The Inland Revenue was an 1849 amalgamation of two former government boards: the Board of Excise and the Board of Stamps and Taxes. The Board of Excise, established in 1643, was in charge of collecting duties, that were levied at the point of manufacturing rather than the point of sale, on certain British products.
The Board of Stamps and Taxes was preceded by two separate boards which were formally combined in 1834. One of the boards was the Tax Board, which was set up in 1665. The earlier taxes imposed by this board included land and house taxes. Income taxes were later introduced in the late 1700s and early 1800s in several different formats, largely to support Britain’s war efforts. In 1816, due to widespread public protest, the government was forced to abolish income taxes. However, they were reintroduced in 1842 and are now renewed yearly in the Finance Act. The second board was the Board of Stamps which was established in 1694. This board served to collect stamp duties which were imposed on various items at the point of sale.
Responsibilities of the Inland Revenue
Once the Inland Revenue was established, it handled the collection of taxes including income and capital gains tax, as well as corporate tax, inheritance tax, and stamp duty. Until 1909, the Inland Revenue managed the excise affairs of the nation. However, in 1909 a new board (the Board of Customs and Excise) was established and at that point matters relating to excise were transferred.
The Inland Revenue administered certain payments that were available to eligible recipients. Since 2003, a benefit called the Working Tax Credit (WTC) has been provided to working individuals, couples, or families with low income. Another credit system previously handled by Inland Revenue is the Child Tax Credit, which were paid to families by the Inland Revenue until the inception of Her Majesty's Revenue and Customs (HMRC).
HMRC now handles all the duties previously conducted by both the Inland Revenue and the Board of Customs and Excise, bringing all of the nation’s taxation related matters under the governance of one department. Some of the responsibilities of the HMRC include making sure that money is available to fund the public system in the UK and provide for families that need financial assistance; administering statutory sick pay and statutory maternity leave; facilitating legitimate international trade; recovering student loan repayments; and administering Child Benefit.
HMRC seeks to maximize revenues, and one of the ways it accomplishes this objective is by cracking down on tax avoidance by fixing loopholes in its tax policy. HMRC designed the Disclosure of Tax Avoidance Schemes (DOTAS) to know what types of tax avoidance schemes are in circulation. This requires the promoter (i.e., the person who designs or markets the scheme) of a scheme to disclose the main elements of the scheme to HMRC. The HM Revenue and Customs department would then review and amend their current tax policy to block any schemes which the government considers unfair. This way, the tax policy is consistently amended to minimize the chances of individuals and corporations avoiding taxes.