Oh dear ... Rachel won't be riding to your rescue

as HMRC get Labour on-side for a future of MTD supported by AI

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Lots of news snippets this morning after Rachel Reeves set out the highlights of Labour's tax plans by speaking on Radio 4's Today programme (of course)!

So I turned to the official source, labourlist.org, which states:

"Labour says its plan to close the tax gap will see up to £555m of additional funding go to HMRC each year to increase the number of compliance officers working out of the tax office by up to 5,000.  It says this will enable more investigations, tackle fraud and ensure tax owed is collected.

The funding will also cover investment in digitisation of the tax office to improve compliance rates and customer services, and free up resources to focus on more complex cases.

The party additionally plans to work with businesses, the tax profession and digital service providers to “bring a new focus to HMRC’s modernisation”, including greater use of AI.

Its plan will also outline legal and regulatory changes that a future Labour government “would consider introducing” to tackle tax avoidance, including requiring a wider range of tax schemes to be reported to HMRC under the disclosure of tax avoidance schemes regime.

According to Labour, the plan would raise a net £0.7bn in 2025/26, rising to £5.1bn a year by the end of the parliament."

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Lots of good intentions there but, despite me not being politically-biased in either direction (opinions as to likely efficacy I leave up to others), it certainly looks as if Rachel Reeves has taken the hook proferred by HMRC (and no doubt 'supported' by consultancies & software companies), and is not so much merely swallowing it but is intent on seeing if she can consume the whole line and rod!

Although you might notice the usual politician's use of expedient qualifiers ... "*up to* £555m of additional funding" ... "*up to* 5,000 (increase in number of compliance officers)" ... but "(that) funding will *also* cover investment in digitisation" and so on and on ...

If you were resting your hopes on a new party in power to see the light and cancel (or at least severely water down) MTD, then your hopes are predictably dashed ... although you may yet be able to rely on a mix of HMRC incompetence and taxpayer intransigence to eventually put it back in the box marked 'Return to Sender'.

[where's that fingers-crossed emoji when you need it]

Replies (20)

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DougScott
By Dougscott
09th Apr 2024 13:46

I thought Labour have previously said they would raise the MTD threshold to the VAT threshold which is more than the Tories have said.

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Replying to Dougscott:
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By FactChecker
09th Apr 2024 14:16

Trouble is all politicians say a lot of things (frequently contradicting themselves or at least their party's then current policy) ... but I wasn't aiming to get into a political bunfight of he said/she said.

My point was addressed to those (quite a lot of them on here) who over the last few years have pointed to previous Labour policy statements that apparently were unequivocal in their commitment to halt or even cancel MTD ... and so were hoping that Rachel (or whoever finally gets the job) would mount their trusty steed and ride to their rescue like a knight of old.

It would seem that the Harra and acolytes have got their bid in early ... and the barbs have taken root ... so that no longer looks the route to safety.

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VAT
By Jason Croke
09th Apr 2024 14:09

Increasing funding to HMRC so that it can employ more staff which can then carry out more investigations, checks and tackle fraud, this is great to hear.

As for more digitisation and AI, depends on what she really means. If she means using AI to scrape the internet and identify potential tax avoidance schemes and frauds then that is worthy of investment, to use Ai to spot patterns and repeat offenders, the ones who regularly close down their Ltd leaving debts and start anew the next day, etc.

But if she means more of this terrible online interactions with HMRC, then I agree with FactChecker that she has fallen for the con that is digitisation of HMRC.

Also the contradiction in that the whole point of digitisation was to reduce staff numbers and make tax collection cheaper, but if Rachel is now spending £500m every year on new staff, then why do we need the digitisation? Does that mean digitisation has failed if HMRC are unable to close the tax gap or prevent frauds?

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Replying to Jason Croke:
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By FactChecker
09th Apr 2024 14:30

Spot on, Jason, as always.

Of course I endorse extra investment - and there are plenty of good ways to do this, but I fear if they were interested in your sensible suggestions then these would have started by now (even within meagre budgets). The fact that they haven't indicates, to me anyway, that they still wouldn't even if the taps were fully opened.

HMRC are still completely convinced that digitisation replaces the need for fully trained/competent staff to provide advice/support/trouble-shooting for members of the public who are trying (with or without agents) to do the right thing.
What makes it worse is that they then 'lose' those staff/skills *before* the digital alternatives are developed (let alone launched/de-bugged/improved/made fit for purpose) ... which of course is a failsafe way of ensuring that staff can't cope AND the systems never get to a reliable state.

Real investment (not just figures brandished in soundbites) would recognise and plan for a period of transfer from one channel/method to the next - with regular checks on progress and occasional revisions based on experience - but that's not the HMRC way.

Personally I think your final para sums it up nicely ... whatever the soundbites, HMRC's motivation behind digitisation has nothing to do with closing the tax gap - it is entirely about showing a direct annual 'saving' in costs (however illusory).

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Replying to Jason Croke:
RLI
By lionofludesch
09th Apr 2024 15:06

Jason Croke wrote:

Increasing funding to HMRC so that it can employ more staff which can then carry out more investigations, checks and tackle fraud, this is great to hear.

Yes - I only hope that they carry it out.

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By AdamJones82
09th Apr 2024 14:18

No mention in there about MTD at all

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Replying to AdamJones82:
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By FactChecker
09th Apr 2024 14:42

Not directly, but it is their flagship for 'everything digital' and will certainly be a major part of "working with businesses, the tax profession and digital service providers to bring a new focus to HMRC’s modernisation" - so it's implicit.

BTW today's update on GOV.UK to "Find software that works with Making Tax Digital for Income Tax" shows the number of software suppliers on the 'Software available now' list has increased to 5 ... albeit only 2 of those aren't predominantly bridging software (i.e. reliant on spreadsheets).
And my confidence is not exactly high with any of those given that HMRC still haven't issued a full specification of how the whole cycle should operate (i.e. there are plenty of bits still marked 'undecided').

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Replying to FactChecker:
By Duggimon
10th Apr 2024 10:07

FactChecker wrote:

Not directly, but it is their flagship for 'everything digital' and will certainly be a major part of "working with businesses, the tax profession and digital service providers to bring a new focus to HMRC’s modernisation" - so it's implicit.

No it isn't. HMRC is not digital enough, the system is not digital enough, there's far too much rubbish and human error in the system, far too much bloat and delays caused by staff and a lack of staff and far too little that we as agents can meaningfully affect with our access to their systems.

An increased focus on digitising HMRC is essential to improving the tax system, HMRC's specific project for Making Tax Digital as it currently exists and is proposed is ludicrously ineffective, wasteful, and ill intentioned but in a more broad sense, making tax digital as a concept is vital, and these 'plans' are very much just a broad outline.

We don't have to post in returns, we don't do payroll with those wee books, we can look up what people owe in seconds, clients can authorise us to act directly without involving a person from HMRC, the digitisation of the tax system is working in many ways to improve out interactions with HMRC, so let's not presume that because Making Tax Digital is stupid that the general idea of making tax digital is stupid.

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Replying to Duggimon:
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By FactChecker
10th Apr 2024 17:02

You misunderstand my concern with (nay dislike of) HMRC's 'everything digital' mantra. And I certainly don't disagree that "there's far too much rubbish and human error in the system".

It's not a matter of too much (or too little) being digital data ... no-one in their right mind would prefer all the returns/records/etc to be written in ink and stored in boxes on dusty shelves (as I well remember from my youth).
BUT data on its own is useless.
You need systems ... to cross-check it, to analyse it, to post/link it to other systems, to update it, to interrogate it, to scan it for trends indicative of fraud, to identify what has somehow changed between what you sent and what has been recorded and more.
AND so many of these systems are either so old as to be unreliable (and in many cases not linked to each other) or so new as to be incomplete/unstable (as they are no longer properly tested prior to release).

PLUS most of all, on the day-to-day basis that many of us experience, we need access to systems that allow us ... to correct errors (whether that originated with the taxpayer or within HMRC), to locate the most relevant guidance if unsure partway through completing a form/return, and the *really big one* to know that when you actually get to speak to an HMRC employee, you will *both* be able to see the same data (regarding return contents or payments or whatever)!

In short, my 'concern' (aka near despair) is that the policy-level in HMRC (and in the Treasury) have no concept of any of these mundane practicalities ... they have simply bought the soundbites, and charge ahead without any attempt to quantify or prioritise what makes the ship creak.
And in so doing, they jettison the remaining knowledge of trained staff - but don't hire/train replacements as they won't be needed if 'everything is digital' (even though those new systems haven't been specified, designed, developed or tested - so may never arrive and may not work if they do)!

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Replying to AdamJones82:
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By Tom+Cross
09th Apr 2024 16:20

As always, the devil will be in the detail. However, as I took my early morning walk, and heard the Today interview, with Simon Jack, I was left in no doubt, that the "theme" of the conversation, was all geared to MTD.
What Labour will probably overlook, at their peril, is that HMRC isn't fit for purpose and will likely fail, at anything that they're asked to achieve.
And that's not wishful thinking. It's a sad reality.

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By David Ex
09th Apr 2024 14:31

FactChecker wrote:

"Labour says its plan to close the tax gap will see up to £555m of additional funding go to HMRC each year to increase the number of compliance officers working out of the tax office by up to 5,000. 

Wow! £110,000 pa! Where do I apply?

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Replying to David Ex:
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By FactChecker
09th Apr 2024 14:47

If only!

But we're definitely in the 'wrong game'. Current issue of P Eye mentions (apropos a completely different story) that:
* AI-specific tech internships in US companies are remunerated at around $100k pa
* the median compensation for software engineers at OpenAI is greater than $500k

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Replying to FactChecker:
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By David Ex
09th Apr 2024 15:05

FactChecker wrote:

If only!

But we're definitely in the 'wrong game'. Current issue of P Eye mentions (apropos a completely different story) that:
* AI-specific tech internships in US companies are remunerated at around $100k pa
* the median compensation for software engineers at OpenAI is greater than $500k

Sadly true!

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By Justin Bryant
09th Apr 2024 15:58

As I said in another recent thread, you should never underestimate people's stupidity etc. (especially where politicians are concerned).

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By 356B
09th Apr 2024 19:41

They don't need more investigations, they need to concentrate on day to day stuff.

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By mbee1
10th Apr 2024 10:20

I see that she has a "team of experts" looking into HMRC. I do hope this includes members of the tax profession who work on the shop floor and not so called "experts" from big business who are out for themselves and want it running their way. They need to out the HMRC career staff who really don't know much and bring in people who know about tax.

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Replying to mbee1:
By Duggimon
10th Apr 2024 11:34

LOL, don't be daft, it'll be Fujitsu.

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Replying to Duggimon:
RLI
By lionofludesch
10th Apr 2024 12:30

Duggimon wrote:

LOL, don't be daft, it'll be Fujitsu.

[chuckle]

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By Payroll Pete
10th Apr 2024 11:51

"will see up to £555m of additional funding"

555 - just a made up number with nothing behind it, plucked out of the air to back up a 'say-nothing' PR piece just so they can say they've beaten Hunt's trap.

HMRC will walk all over R. Reeves

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By JustAnotherUser
10th Apr 2024 15:18

If we all start called it Making Double Cab Pick ups Digital they may cancel it.

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