Brought to you by
Indicator - FL Memo logo
Indicator - FL Memo is part of a leading European publishing business and has been producing...
Save content
Have you found this content useful? Use the button above to save it to your profile.

Tax Administration and Maintenance Day 2023 - the dampest squib?

28th Apr 2023
Brought to you by
Indicator - FL Memo logo
Indicator - FL Memo is part of a leading European publishing business and has been producing...
Save content
Have you found this content useful? Use the button above to save it to your profile.

27 April was Tax Administration and Maintenance Day 2023. Billed as to “outline the action the government is taking to simplify the tax system, tackle the tax gap and modernise the tax system”, it sounded quite exciting. If only.

tax cube being flicked
AdobeStock

A list of the topics covered will dampen any residual enthusiasm.

Simplification:

  • Help to Save (promising consultation on an esoteric point concerning the interaction of child benefit and pension entitlement);
  • treatment for customs purposes of post and parcel exports;
  • tax treatment of “decentralised finance” lending and staking;
  • Reserved Investor Fund (consultation on a new unauthorised co-ownership contractual investment scheme);
  • the diverted profits tax, transfer pricing and permanent establishment reform;
  • yet more tinkering with Gift Aid; and
  • updating of the VAT Terminal Markets Order legislation.

Modernisation:

  • information and data (more on this below);
  • a “legislative approach to piloting” (a proposal to trial reforms with defined small groups of taxpayers – also referred to as a “sandbox”);
  • data gaps (a consultation response about how HMRC will collect more data from taxpayers); and
  • stamp taxes on shares (another consultation).

Also announced were: various measures to try to catch up with promoters of schemes marketed as “tax avoidance” but in reality simply mass frauds; and minor reforms to charity taxation and the construction industry scheme.

Finally, HMRC will consider through another consultation whether or not to continue to collect tax and NICs twice from those caught by IR35.

Approaches to simplification

Conspicuous by its absence from the announcements was anything promising actual simplification. In the context of the UK tax system this word seems to have lost its meaning altogether, though considering its history, that is not really surprising.

Many readers will remember the Tax Law Rewrite Project, albeit that it commenced in the last century. There was great enthusiasm when it was announced as a wholesale simplification of the UK tax system. This waned dramatically as it became clear that the project involved no more than a restatement of the legislation in supposedly more comprehensible language, with no simplifying amendments to its meaning or structure.

Likewise, the (recently abolished) Office of Tax Simplification was created to simplify the system but ended up merely suggesting well-intentioned but laughably peripheral changes. The OTS’s position in history was sealed early on when it proposed everybody’s favourite simplification – merger of income tax and NICs – and was told that could not be considered because of the “contributory principle” (that pensions and benefits depend on contributions having been made). Apart from the fact that the “contributory principle” is one of the good reasons why NICs need to be abolished, it isn’t even a real thing and the so-called National Insurance Fund doesn’t genuinely exist any more.

Information and data

As promised above, a few words on this subject. HMRC has been looking at other tax administrations around the world and wondering why and how they can operate so efficiently (apparently the average time to complete a tax return in Estonia is 5 minutes). One of the answers is data collection and pre-population of returns with that data. HMRC knows this and has been working for many years on pre-population. Now it is thinking about how to collect the data to effect that pre-population. Everything here seems to have been done in reverse order: first try to set up an online return system, then look at what would make it easier for people to use, then look at how to get the data to make it easier. (Estonia, by the way, legislated for this in 2015 and HMRC is starting to think about how to do something similar a mere 8 years later. By the time a workable plan has been made and legislated for, then the online tax return systems have been rewritten to be compatible with this new data, perhaps another 8 years, or 18, or 28 will have passed.)

For a free demo of Tax Essentials