Tax simplification and HMRC's recent struggles

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The Office for Tax Simplification (OTS) recently released a report on how taxes on savings income can be simplified. This report found that there are many parts which taxpayers find difficult and confusing, with much of the complexity caused by interactions between the many reliefs and allowances in the system. The suggestions the OTS makes to remedy the complexity include that HMRC should improve guidance on the taxation of savings to help people make more informed choices when deciding how to save or invest their money.

It can be pointed out though, that if for example there was only one form of Isa, as AAT is calling for, it would be considerably easier and require much less work to educate people on how the benefits apply to them. This need for simplification does not only apply to the Isa system. Other taxes are also overlong, such as VAT, which runs to hundreds of pages worth of different rates.

HMRC has had some bad press recently. In May it was reported that around 4 million calls to the organisation’s helpline, mostly from the self-employed, went unanswered last year. It has also come under fire because of it’s spending on external consultants to help complete certain key projects. The CEO Jon Thompson recently admitted that the service is starting to creak under the strain of all the work it has to carry out, which is why the government needs to listen to calls for tax simplification.

HMRC has had its workload increased by Brexit, already having to put Making Tax Digital for individuals on hold as a result of the need to free up staff to prepare for the UK to leave the European Union. This is also the reason they have had to bring in the external consultants they are being criticised for. Instead of being criticised, HMRC needs more support and funding from the government to be able to hire the skilled people needed, to reduce its dependence on external contractors.

AAT members and MPs are united in wanting HMRC to have more support. A recent survey of AAT licensed accountants highlighted that one of the most important changes they would like to see is an increase in the skills, training and number of HMRC tax inspectors and call centre staff;  this echoes results from an AAT survey of MPs in December 2017, which showed 73% of MPs believe there is a need to increase the number and skills of HMRC staff.

The OTS report mentions that the department would like to see a full review of the Isa landscape. AAT would welcome this. However, such a review should surely be broadened out to look at all taxes. In a post-Brexit environment there are a number of other areas where simplification could occur, such as with VAT.

About Brian Palmer

brian palmer

Brian is Tax Policy Adviser for the AAT (Association of Accounting Technicians) and CEO of Tax Policy Advice. He has considerable all-round experience of the UK tax system, gained from the unique perspective of being an agent in the field and a tax policy adviser.

Experienced in providing guidance on consultation documents as a tax policy adviser, Brian is also the public-face of the AAT on tax-related matters. This role demands leading the primary relationship with HMRC and key stakeholders to help formulate conclusions and recommendations for AAT to implement.

In 2013 Brian received the Tax Transparency Award from HMRC..

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By gmmalta
11th Jun 2018 11:35

Is the tax free dividend allowance of £2,000 from April 2018 (introduced in 2016 as £5,000), automatically applicable to a citizen in a commonwealth country as per common wealth agreement?

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18th Jun 2018 10:49

Unfortunately we are unlikely to get simplification in any useful form until HMRC is forced to publish their view of a particular situation, with reasons, and not be permitted later on to change that view, unless a Court decides that it is incorrect.
HMRC has a habit - one noticed and mentioned in most of the submissions made to the current TSC inquiries going on - of arriving at an analysis that produces maximum tax, rather than the "right" tax. Often that analysis arrives several years after the event, despite the fact that information was available to HMRC under the DOTAS or other reporting regimes.
I suspect that HMRC love to have this ability and to argue that the complexity of the tax system means that it is essential.
Unfortunately for the taxpaying community, all this does is create uncertainty and gives the impression that often HMRC is engaged in grabbing as much money as it can, often by using dubious tactics.
Until simplification can be paired with certainty, we are condemned to - in some instances - taking a guess at any given situation but knowing that HMRC will go for whatever produces the biggest bill.

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By rbw
18th Jun 2018 11:11

Why point the finger at HMRC for complexity? HM Treasury has had responsibility for tax policy since 2005. Since then it's Treasury officials who have had the main incentive to think up wizard wheezes which catch a Minister's eye. And of course it's Ministers who want to announce changes, introduce legislation, and generally give the impression they are doing things - especially the Chancellor with the drama of the annual Budget.

But you have to give the Treasury credit. It still seems to be a golden rule across all policies and programmes that, no matter what goes wrong, the Treasury's never to blame.

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to rbw
18th Jun 2018 11:28

Certainly agree that Treasury is Teflon coated.

I do not believe that a Treasury type looking for this years' money raiser, does so without input from HMRC. The Counter Avoidance teams in HMRC are full of "interim" people who are doing their time there before moving up the greasy pole to "mandarin". They know that they can suggest a charge and be safely gone by the time Treasury and HMRC realise that they have created a means for the unscrupulous to exploit the unknowing.

So I see this as a closed loop. HMRC is asked how they can raise more money, they tell Treasury who shape a "policy" and sell it to the politicians, explaining that tax is so complicated that they should not waste time understanding the detail. The policy is agreed and HMRC told to draft legislation and implement. The policy is perhaps flawed (surely not I hear you cry?) and to cover themselves, HMRC reinvents the "intention" of Parliament, many years later, creating complexity and uncertainty.

I know that sounds cynical but unfortunately it is borne out in practice.

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