Tax administration review must make system easier to navigate

The Government’s fundamental review of the tax administration framework¹ is a golden opportunity to create a tax system that is simpler for taxpayers and their advisers to navigate, says the Chartered Institute of Taxation (CIOT).

In its response² to the review CIOT is calling for practical improvements including:

• A single system for taxpayers to use to register and deregister for different taxes, to track the progress of applications and appoint one or more tax agents.
• A single customer account where taxpayers can see their tax liabilities and payments in one place, and which could reduce the need for taxpayers with simple affairs to have to complete a self-assessment return, with the same information being made available to their agents.
• Simplification of how tax liabilities are assessed and calculated, including consulting on moving the tax year from 5 April – either to 31 March or 31 December.
• A rigorous and secure system for HMRC to collect and use data from third parties to populate a taxpayer’s record, with taxpayers having the right to challenge and correct any inaccuracies.
• Greater clarity on when a tax position becomes final.

More broadly the CIOT argues in its response that obligations and processes across different taxes should be as consistent and simple as possible – and that alongside improvements to tax administration the Government should aim to simplify the tax system as a whole.

John Barnett, Chair of the CIOT’s Technical Policy and Oversight Committee, said:

“The UK’s tax system is creaking at the seams and this thorough review of the administration framework is long overdue.

“The Government is right to be seeking views on how legislation and practices underpinning HMRC’s administration of the tax system could be reformed to make it more effective and to provide a better experience for individuals and businesses. CIOT is offering a range of practical ideas of how to achieve this.

“But it is not just the legal framework that needs attention. Many of the problems with tax administration are to do with HMRC’s processes, systems, communications and guidance. These are just as important as the statutory rules and structures. We believe significant progress is achievable by making improvements in these areas, including to HMRC’s service standards, to help reduce burdens on taxpayers and build trust in the tax system. Improvements in these areas are all dependent on additional investment being made available to reform and improve HMRC’s systems.

“Making tax easier – which was of course the original name for the Making Tax Digital project, before the Government lowered their expectations – is not only about administration. The UK has one of the most complex tax systems in the world. Reviewing the tax administration framework should go hand in hand with a real commitment to simplifying the tax system.

“The Government needs to address some of the underlying problems with the UK tax system such as removing the differences in taxation of income from employment and self-employment to eliminate the tax incentives to move between them. Addressing fundamental issues such as this will enable a clearer picture to emerge of how the tax administration framework can support a reformed tax system.

“We encourage the Government to seek to build cross-party consensus on this. It is a 10 year project and will inevitably outlast this Parliament and the next. Tax is inevitably a political issue on which different parties will have different views. But all parties ought to agree that an efficient and effective mechanism for administering taxes is a long-overdue priority.”

The CIOT supports the Government’s objectives for the tax administration framework – these are very similar to the CIOT’s five objectives for the tax system³ – and welcomes the focus in the call for evidence on building trust in the tax system.

John Barnett continued:

“It is essential for building and maintaining trust in the tax system that the way HMRC use their powers and operate safeguards are monitored effectively and subjected to appropriate oversight.⁴ Similarly, trust in the tax system would be enhanced through simplifying and harmonising across all taxes the rules for challenging and amending tax returns, enabling taxpayers to understand when they can obtain certainty and finality over their taxes and ensuring that delays in the enquiry process are eliminated. These are just some of the problem areas we have identified that should be addressed during this review.”