Earlier this year the chancellor held the UK’s first Tax Day in which HMRC released several calls for evidence on the future of the tax administration framework.
ACCA published a call to members and received around 70 written responses. In addition, it held three Talking Tax sessions with members outlining the proposals from HMRC and discussing how these new policies could be structured to support their businesses and clients.
Informed by member feedback, ACCA submitted three responses to HMRC, which make a number of suggestions for improved customer engagement and trust, and simplification of tax, as well as highlighting a number of potential risks.
ACCA has now begun follow-up engagement with HMRC and will continue to work with officials on implementation. Below is a summary of some of its key comments and links to the full responses.
Raising standards in tax advice
While HMRC’s proposed requirement for anyone offering tax advice to hold professional indemnity (PI) insurance will provide a baseline level of protection, it should not be regarded as a solution to taxpayer protection without consideration to standard setting for agents, monitoring of advisers, disciplinary measures and sanctions.
45% of members cited partial or high levels of distrust in the UK tax system and HMRC’s administration of it
These measures should also be applied alongside a programme of taxpayer education about the benefits of advisers who hold professional body membership, offering additional routes for recourse.
It is vital that the proposed measures do not apply additional burden of proof or compliance on advisers who already hold professional body membership (and therefore PI insurance). ACCA already collects this and can provide assurance.
ACCA supports an existing legislative distinction between advice and guidance and defer to the Financial Conduct Authority definition.
It recommends an HMRC portal for taxpayers enabling them to check an advisers’ PI insurance before engaging, to positively identify advisers that have failed to comply with PI insurance requirements, and to identify advisers’ professional body membership.
HMRC is proposing new methods for timely payment of tax – for example, bringing the calculation and payment of tax on Corporation Tax Self-Assessment (CTSA) and Income Tax Self-Assessment (ITSA) closer to the point of when the income or profit arises, paying tax based on the taxpayer’s current year position using up-to-date data where possible.
ACCA supports HMRC’s proposals for a modernised system for more timely payment of tax. It recommends that this also include repayments and refunds to customers, providing an opportunity for HMRC to uphold its commitment under the charter to be more responsive and improve customer trust.
It is absolutely essential that HMRC prepares its infrastructure to deliver reforms
Of the proposed options, a majority of members were supportive of a quarterly payment regime modelled on energy provider payment regimes, whereby customers are able to build up credit or debit throughout the year, with subsequent payments adjusted to reflect under or over-payment. ACCA clarified that it would be keen to explore the detail around interest, penalties, reliefs and allowances under such a system.
It warned of potential difficulties of maintaining real-time information for digitally isolated communities. It requested that HMRC consider the impact and available resource for the agent and practitioner community that will be needed to meet the administrative demands of timely and more frequent reporting of tax.
It also highlighted the severe impact that many ACCA members believed this would have on cashflow, in particular for those with seasonal demand and those that require working capital to replenish stock, such as hospitality and retail.
Read ACCA’s full response.
Creating a 21st-century tax system
HMRC is considering how tax administration could change to create a trusted, modern tax administration system. This includes creating a better experience for individuals and businesses, enabling opportunities to further reduce the tax gap, and helping build greater resilience and responsiveness to future crises.
When surveying members in the formulation of its response, ACCA found that 45% cited partial or high levels of distrust in the UK tax system and HMRC’s administration of it. We highlighted commonly cited issues, such as outdated routes for customer engagement, inconsistent messages from HMRC staff when resolving queries, systems triggering unnecessary inquiries and the accuracy of data held by HMRC systems.
This reform offers an unmatched opportunity to improve accessibility and engagement with the tax system. Members were keen to see simple changes such as allowing taxpayers and authorised agents to view historical tax records, allowing customers to link personal and business accounts to improve user access, and improving agent authorisation processes as well as the ability of customers to easily appoint new representatives.
ACCA supports HMRC’s focus on simplicity, clarity and certainty for taxpayers. However, to achieve these aims it is absolutely essential that HMRC prepares its infrastructure to deliver reforms. These may include basic system functionality for data capture, turnaround of calculations and assessments, countermeasures for providing corrections and up-to-date figures and basic levels of staff training on compliance.
Members were keen to see reliable communication with HMRC to support the implementation of such a system change. ACCA suggested that HMRC should consider more transparent and accessible CRM systems as well as mechanisms (preferably digital solutions) for taxpayers and agents to better track HMRC case progression where investigations or inquiries are raised against taxpayers.
Read the full response.