Tax campaigners urge HMRC to strengthen taxpayer guidance

The paper – Good guidance: The importance of effective guidance for unrepresented taxpayers¹ – says good guidance is essential for the tax system to function effectively and that it is especially important for low-income taxpayers, many of whom may be unable to afford professional tax advice. 

The report considers the role of guidance in a well-functioning tax system and takes a deep dive into the question of what makes good guidance. It sets out 40 recommendations to improve how guidance is developed and then communicated to the public, with the aim of ensuring that good guidance is, for example: 

• Clear, accessible, comprehensive and technically accurate 
• User-tested, with examples to help taxpayers understand their obligations
• Regularly updated to provide the most up-to-date position 

Although a 2021 review by the Office of Tax Simplification² acknowledged that ‘considerable progress’ had been made by HMRC to improve the availability of guidance to taxpayers, 78 per cent of people who have contacted LITRG for tax help since 2017 have said they did so because they were unable to find the answer to their queries on GOV.UK.³ 

Victoria Todd, Head of LITRG, said: 

“Unrepresented taxpayers need clear guidance to help them understand their rights and responsibilities and the implications of their actions or inactions. This needs to be coupled with wider initiatives to raise awareness of that guidance.

“Those taxpayers who cannot afford to pay a professional tax adviser to help them through the tax system rely on such guidance, so when it does not exist or falls short, it means that the tax system cannot function effectively. 

“When this happens, we see non-compliance, confusion, frustration and the erosion of trust. Too often, low-income and unrepresented taxpayers find themselves in these gaps. It does not need to be like this.” 

In making its case for improved guidance, LITRG highlighted a number of current or recent examples where taxpayer guidance on GOV.UK may be inaccurate, ambiguous or misleading.⁴ They include: 

• An inaccurate starting threshold for Class 2 (self-employed) National Insurance contributions being displayed on GOV.UK for nine months after the threshold was increased at the March 2022 Spring Statement
• Taxpayers being advised they ‘do not pay tax on your savings interest if you’re on a low income’. Such a catch-all statement does not recognise the fact that it is possible for those on incomes under £20,000 per year to have savings capable of generating taxable interest
• Guidance on reporting thresholds for property income which uses the word ‘income’ to mean both gross and net income simultaneously.

Victoria Todd continued: 

“HMRC’s ongoing efforts suggests that they are committed to improving the guidance that is available to taxpayers. In particular, the creation of an external Guidance Strategy Forum in 2021 and the appointment of a Head of Guidance to lead this work had led to some improvements. While this is welcome, it is clear from our experiences that there is much more that can be done.

“HMRC’s recently published discussion document on modernising their income tax services acknowledges that HMRC data shows correlations between low GOV.UK satisfaction and contact demand. HMRC phone lines have been under pressure for some time, with taxpayers reporting significant delays in trying to contact them. Following the recommendations in this report to improve guidance should lead to fewer people needing to phone HMRC.

“Therefore, we urge HMRC to review how their work on guidance can incorporate our suggestions for improvement and ensure that our attributes of successful guidance are at the forefront of their minds at all times.” 

Judith Freedman, Oxford Emeritus Professor of Tax Law, who wrote one of the forewords to the report, said: 

“This report, based on the wide experience and knowledge of LITRG, and illustrated by specific examples, identifies a number of key attributes of good guidance and uses those as a benchmark to evaluate the current state of HMRC guidance. 

“The report makes 40 valuable and practical recommendations for improving clarity, accessibility and reliability, ranging from an improved search function and better links and cross references, to greater consistency and accuracy and speedier updating of guidance. 

“The final recommendation follows that of the Office of Tax Simplification in proposing a public consultation on the issue of reliance on guidance. Consideration of the scope and management of guidance and the degree to which it binds HMRC should be a significant element of the ongoing HMRC Tax Administration Framework Review⁵ and this report makes an important contribution to that work and to the public debate.” 

Notes to editors: 

1. The full report can be found here.
2. The Office of Tax Simplification published its report Guidance for taxpayers: a vision for the future in October 2018, and an update paper in April 2021 on the progress on its recommendations. 
3. This figure is based on an analysis of 4,418 queries received via the LITRG website since August 2017
4. Further information on these examples can be found in Chapter 3 of the report
5. Discussion document: Simplifying and modernising HMRC’s Income Tax services through the tax administration framework