HMRC must set out a tax reform roadmap, says LITRG

LITRG is concerned that people need to know where they stand when dealing with HMRC and their tax affairs. HMRC’s plans in the next 10 years include more use of data from third parties in working out tax bills. Under the present tax administration system, a person’s own tax is largely (with some exceptions) their own responsibility. But with more pre-population of tax forms, people will potentially believe that HMRC ‘already knows everything’ and the taxpayer may not add to or correct this information, fears LITRG. The present lines of responsibility therefore need to be closely considered and potentially re-drawn. Taxpayers will also need clear guidance, on which they can rely, to understand their tax obligations.

On the issue of responsibility, Victoria Todd, Head of LITRG, said:

“Individual taxpayers will need guidance from HMRC about what they are ultimately responsible for in relation to their tax affairs, especially when some information is collected from third parties and presented to them.³

“In defining these responsibilities, it is important to remember the relative power and resource of the parties involved, which in the case of low-income, unrepresented taxpayers, is currently weighted heavily in HMRC’s favour.”

LITRG welcomes HMRC’s attempts to seek a wide range of engagement. The group feels that the next step is for HMRC to set out a clear plan for reform. Victoria Todd said:

“HMRC must set out, at an early stage, a clear roadmap for reform which sets out longer term goals as well as incremental changes needed towards those goals. It is important to make key decisions, such as whether to change the tax year end, before embarking on further steps.

“It is especially important for HMRC to recognise that to build the reputation they seek as a trusted and modern tax authority, they must tackle urgently some problem areas in the present system.

“For example, there could be a greater focus from HMRC on employer compliance when operating PAYE and determining the status of workers as employed or self-employed. Currently individual taxpayers are sometimes left to deal with the consequences from others’ mistakes or non-compliance.”

LITRG wants to see a focus on low-income unrepresented taxpayers and their experiences with the tax system and the difficulties people face interacting with the system, in any reform. Victoria Todd said:

“Accurate and comprehensive guidance is critical in terms of helping people ensure they pay the right amount of tax and building trust in the tax system. We have long held serious concerns about the standard of GOV.UK guidance and the extent to which taxpayers can rely on it and other channels of guidance and advice now provided by HMRC such as Twitter and community forums.”

Victoria Todd added:

“The tax system must be designed for all from the outset. For example, those who have difficulties using digital systems need to be catered for from the start, rather than as an afterthought.

“It is important that HMRC recognise trust in the tax system is often based on people’s experience of dealing with HMRC. Poor customer service, such as long telephone delays, inadequate guidance, poorly drafted letters and a lack of support to get things right are likely to erode trust in the system even if work is done to reform the underlying administration framework. HMRC must prioritise these areas and ensure that adequate resource is available.

“We look forward to continuing to engage with HMRC on all of these issues.”

Notes for editors

1. LITRG’s submission on Call for evidence: Tax Administration Framework Review is here.

2. HMRC’s call for evidence document The tax administration framework: Supporting a 21st century tax system is here.

Taken from that HMRC document, examples of important future reforms set out in the 10-year strategy include:

“• the extension of Making Tax Digital will help to move the UK towards a fully digital tax system that works closer to real-time

• improving our use of real-time information will allow taxpayers to have a more up to-date understanding and greater certainty over their tax position, with capacity for real-time risk assessment

• the timely payment of tax will allow people and businesses to pay the right tax with ease in ways that fit with how they live their lives and go about their business

• delivering a secure and easily accessible single digital account/customer record will give taxpayers a single and complete financial picture bringing together their different taxes and data sources, and enabling HMRC to deliver more personalised services

• improving services for agents and representatives will enable HMRC to design in access for appointed agents and representatives from the outset, and support efforts to ensure high standards within the tax advice market.”

3. LITRG commented further on the use of third party data in its recent (6 July 2021) press release concerning the Office of Tax Simplification’s report on the topic: https://www.litrg.org.uk/latest-news/news/210706-press-release-third-party-data-clarity-needed-who-carries-responsibility

4. Low Incomes Tax Reform Group

The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.  

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 19,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Contact Hamant Verma, External Relations Officer, 0207 340 2702 [email protected]