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AC Mole & Co's Paul Aplin files the first electronic self assessment tax return, 1997
Paul Aplin 1997

One click and tax was never the same again

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A quarter century after filing the UK’s first electronic personal tax return, Paul Aplin looks back at the Sliding Doors moment when tax stepped through the digital portal.

28th Apr 2022
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On Saturday 23 April, newspapers carried the obligatory stories about it being St George’s Day and Shakespeare’s birthday. As far as I am aware however, none mentioned that it was 25 years to the day since the filing of the UK’s first electronic personal tax return. 

I still have a photograph taken on that day back in 1997, shortly after the return had been filed. AccountingWEB’s Richard Hattersley describes the image as capturing “a Sliding Doors moment that changed the course of so much in the profession”. Tax practice has changed radically over the last quarter century and much of the change has been driven, as Richard rightly observes, by digitalisation.

One small click

I’d been alerted to the launch of the Inland Revenue’s Electronic Lodgement Service (ELS) by a news item in Taxation magazine. A couple of software suppliers were set to launch the service and one – Iris – just happened to be the software my firm, A C Mole & Sons, used. A call to Iris lined us up to become the first users of their beta-test software. At 3pm on 23 April Neil Sherman, our IT manager, was ready to go. A few keystrokes later, the return had been filed. Hardly dramatic in itself, but the essential first step in a revolution in UK tax administration. 

Not everyone was convinced at the time. Some were concerned about security; others were unhappy about the cost of equipment or about technology generally. One leading commentator saw limits, saying that ELS would be most efficient for simple returns and of most benefit to small practitioners. Others saw far greater potential and embraced it, adopting tax return preparation software and transforming their tax departments. 

That first year 901 agents used ELS, filing 42,938 out of the total of 8,190,071 1996/97 self-assessment tax returns. The next year twice as many agents used ELS and the number of returns that they filed quadrupled. Internet filing was launched in 2000 and ELS was switched off in 2006. Year on year, the number of e-filed returns steadily increased, reaching 6.5m by 2008/9. Last year, over 95% of personal tax returns were e-filed. The exception became the norm. 

Watershed moments

Lord Carter of Coles’ review of PAYE in 2001 and his review of HMRC’s online services in 2006 were watersheds, triggering the wholesale digitalisation of PAYE, VAT and corporation tax returns. Real Time Information (RTI) represented another such shift, as does Making Tax Digital (MTD). 

Digitalisation has transformed tax administration over the past 25 years, but not just in terms of how we file returns. It has also transformed how tax departments work (in firms of all sizes), reducing time spent on mundane tasks, automating computations and freeing time to focus on proactive advice. 

The next quarter century

Fears that digitalisation would take away jobs proved unfounded: my own experience was that it created more opportunities to upskill people and to encourage them to take formal qualifications. Few, I imagine, would want to go back to the world of paper filing.

For HMRC, the digital revolution of the past quarter century largely – and inevitably – focused on digitalising forms to capture data electronically. I say largely, because HMRC has also used data to better target interventions (through iXBRL tagged data for companies and by using its Connect system for example) or to share payroll information with the Department for Work and Pensions via RTI.  If what other tax authorities are doing is any guide, we can expect that going forward, HMRC will shift its focus to making even greater use of data analytics and artificial intelligence (AI) to gain insight from data, both to target interventions and to personalise support. 

More generally, we will see the tax system adapting to accommodate technologies such as Open Banking, Distributed Ledger Technology and cryptoassets. HMRC already has a cryptoasset taxation manual and recently seized non-fungible tokens (NFTs) in a tax enquiry. Few practitioners will have escaped a question about the taxation of cryptocurrencies. 

Digitalisation is also likely to change what we tax (because it will enable us to tax things we previously couldn’t) and how we tax (by using real-time information to tax closer to the point of a transaction). 

The innovations we will see over the next quarter century will be very different to those we saw over the past 25 years. Digital is now a core theme that runs through tax.    

Lost world

In the photo, John Coupe (a local tax inspector) and I are standing each side of a PC that now looks rather ancient. It brings me back to the Sliding Doors moment. 

Taunton had two tax districts in 1997. There was an enquiry desk. Taunton’s accountants knew Taunton’s tax inspectors personally. There was mutual trust and respect. That was why it seemed natural to me to ask John to come along and watch us process the tax return and witness it being e-filed. It was also why it seemed equally natural to John to ask me down to his office the next morning to see the “captured” return on HMRC’s system. And for the avoidance of doubt, wanting to make tax administration work as well as it could didn’t stop us from having a good argument over technical points on enquiries.  

That world is gone for ever and digitalisation is part of the reason it has gone. Pressure from governments to do more with less naturally pushes tax authorities down the digital route, to e-filing and call centres. That pressure will not ease and the direction of travel is therefore inevitable.

New world

But I am upbeat about where the next phase of digitalisation could take us.

The Single Customer Account, which I wrote about recently, holds huge potential for personalising tax administration and the consolidation of taxes onto HMRC’s Enterprise Tax Management Platform will help power it. AI could transform advisory work – in some areas it already has and there are some fascinating products currently in development.  

To get the best out of the future however, we need to take on board the lesson from that 25-year-old photograph: success is always a joint effort.

Replies (9)

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By Winnie Wiggleroom
28th Apr 2022 17:41

"success is always a joint effort"

With that 6 word hammer you have firmly whacked the nail's head.

When I started in 98/99 there was a mutual respect for the roles we all played even if sometimes we were on opposite sides, sadly over the years that has been eroded as more and more HMRC have tried to push agents out of the picture, and plowed ahead with various hair brained schemes regardless.

Now more than ever we need to work together (no pun intended).

I have said a number of times that operationally HMRC should be directed by a committee of small practice accountants, we have pretty much seen it all, we know where the pinch points are and we know what needs to change to improve both the tax system and its operation.

Unfortunately it will take quite some turnaround for HMRC to admit they need our help.

Thanks (7)
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
28th Apr 2022 18:16

I remember that picture! I was a freelance substitute tech beat writer on a well known accountancy tabloid. I'd only been working there for a few months and probably copied most of the text from a Transaction Technology press release. I may not have understood the full historical significance at the time, but at least I knew a good accounting tech news lead when I saw one.

The big event goes back too far for me to find in the live AccountingWEB database, but in a spirit of tech archeology, here's a link to the original story: https://www.accountancyage.com/1997/05/07/first-email-tax-return-arrives...

[On behalf of my greenhorn former self, I'd like to point out that I wouldn't have been responsible for the inaccurate headline... ELS was not an email-based mechanism, but these were new concepts for all of us back then.]

Perhaps Paul is too modest to mention it, but a quick check in the deepest Aweb archive vaults reveals that he and AC Mole ultimately led the way with two more filing firsts: after submitting the first electronic SA return, his firm was the first to use the Inland Revenue’s Filing By Internet (FBI) system in 2001. They later became the first to file an agent’s P35 return electronically using IRIS PAYE-Master.

I'm glad to see that after breaking down so many digital barriers, Paul is still lobbying HMRC to properly research, develop and support its tech initiatives before inflicting them on the public and their professional advisers.

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By johnjenkins
29th Apr 2022 11:32

Great article, Paul.
Yes I was one of the first, with IRIS. Never looked back (not with IRIS, too expensive). What a mess we have now all caused by mandatory MTD. It really is a shame that something that would have evolved over time has caused so much resentment. All for what?

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By paddy55
29th Apr 2022 12:52

Interesting re first UK filing of electonic tax return on 23rd Ap;ril 1997. However, electronic filing was old-hat in Australia by this time. Electroning filing of tax returns commenced in Australia in 1988.

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By ireallyshouldknowthisbut
29th Apr 2022 14:00

Its a a good reminder that personal tax has been digital since 1997.

I don't think VAT was much far behind. The new system is lets face it virtually the same as the old system from a user point of view with the exception you cant just key it into HMRC's portal.

Quite why "the new digital" is any better to the "old digital" is anyone's guess.

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Replying to ireallyshouldknowthisbut:
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By Hugo Fair
02nd May 2022 16:16

"virtually the same as the old system from a user point of view with the exception you can't just key it into HMRC's portal" ... actually misses the point.

Prior to MTD, all moves to on-line reporting/submissions were just that ... a form or a portal whereby your 'return' could be submitted over the internet - with nary a mention of any underlying 'digital records'.

In many cases, the need for consistent data collection + validation prior to the complex calculations necessary to end up with suitable values to submit (step forward RTI) equated to the need to use software.
And I was happy to take advantage of this (with my own photos similar to Paul Aplin's of a slightly newer PC surrounded by excited HMRC directors as the first FPS was submitted live in my office).
But ... the "mandation" for maintaining digital records was never part of RTI, even if it made sense from an efficiency & economic perspective for medium+ sized businesses.

And the same applies to SATR - or take your pick of your 'favourite' from IHT to CT etc.

However, step forward to MTD and everything's different.
The only driving objective/imperative is to mandate digital records (with little impact on the quality or timeliness of tax returns) - and this is irrespective of the suitability of such an approach for any particular taxpayer (due to the ludicrously low entry-point for mandation).

A bit like Smart Meters (for energy consumption) there may well turn out to be a good and beneficial need for the policy ... but it's not the story being promoted, so we all give up trying to believe and ignore the half-truths (that's generous) being peddled. I foresee mass non-compliance, but that's another story ...

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By North East Accountant
29th Apr 2022 15:59

One small click for man....one giant leap for mankind.

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By Nigel Hughes
01st May 2022 10:01

Paul, what a great article. As you know, my father was editor of Taxation magazine back in the 1960s and 70s and used to host Taxation conferences attended by tax professionals on both sides of the Revenue/Practitioner divide. Never having made it into tax practice myself, I feel I have watched these developments as an interested observer over, now, nearly 50 years, in the profession. Nostalgia's not what it used to be, but I wonder what my father would have thought about the deteriorating relationship between the two sides of the fence and the technological developments. I think he would have been excited by the latter, saddened, but not surprised, by the former.

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By dmmarler
06th May 2022 04:55

From the outset the move from a portal to a digital records system was all about control. HMRC's IT guys sold the concept on the basis it would be possible to search back into the underlying records. This was discussed at the time and I am sure this might be possible, but not yet. The software companies should have put barriers in place on accounts packages long before this is a possibility (like the Exocet key to disarm an incoming missile). HMRC keeps asking for direct debit payments - this is all about control as well. Smart meters are another aspect of control: if the power company (or its computer) thinks you have underpaid, the Smart meter can be switched off. OK, there are supposed to be checks and balances but there are also admin errors and these checks are overlooked. I suggest a re-read of 1984 is in order.

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