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HMRC 10-year strategy: ‘It’s all about the data’

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HMRC’s plans in the next 10 years include using more data from third parties to work out tax bills, but agents and professional bodies are asking some difficult questions.

29th Jul 2021
Editor in Chief AccountingWEB
Columnist
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HMRC’s 10-year strategy puts a lot of emphasis on using real-time information to improve the tax department’s overview of tax liabilities, while also simplifying the process for the taxpayer, to the extent that Wendy Bradley quipped back in February: “Using third party data is pretty much the entirety of HMRC’s Ten Year Plan.” 

In addition to the £1.8bn put aside to develop the MTD infrastructure, the government recently committed another £68m to help HMRC develop the single customer account (SCA) and single customer record (SCR). The SCA will pull together all the taxpayer’s information in one place and supersed the the existing personal tax account and business tax accounts.

As HMRC sees it, the SCA will pull in feeds from a range of third party organisations to record income figures based on:

  • interest certificates from banks
  • dividend statements from brokers
  • rental income from letting agents
  • pension contributions paid
  • gift aid statements from charities and from online donations; and
  • employer information, such as P60, P45, P11D.

HMRC already uses some external data to pre-populate the taxpayer’s online tax account. But as the ICAEW Tax Faculty pointed out in its commentary on the Office of Tax Simplification Making better use of third party data consultation, some of the data in taxpayer accounts isn’t accurate.

Previously the Tax Faculty expressed concern that PAYE codes were not well understood by taxpayers and automated updates based on data feeds could overload them with too many changes and too much detail.

“All of this pre-supposes that the information supplied is accurate and taxpayers and their agents would still want to check this. None of this is easy,” the ICAEW tax experts noted.

Problems with existing data quality

AccountingWEB member kevinringer was ready to pounce with multiple examples to substantiate the institute’s stance. “The first step is to make better use of the information HMRC already has. For example, why are student loan deductions on the P60, but not the P45?” he asked.

“I’ve got a client who never received payslips and relied on the P60, but he’s ceased employment in 2020/21. HMRC has the student loan information from RTI, so why doesn't it download through the self assessment API?”

That was just one of many gripes about HMRC data quality and sharing. Ringer also experienced issues around having to wait for the PAYE reconciliation before the SA API will download figures, inaccurate CIS figures and, more recently, SEISS compliance processes failing to register data from self-employment income.

After complaining to HMRC at the end of October about a client who had claimed SEISS while ceasing one source of self-employed income but continuing with another, Ringer got a call from HMRC’s complaints department this week.

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Replies (27)

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By johnjenkins
29th Jul 2021 10:14

HMRC 10 year plan? Well I think most of us know where MTD is going. Every transaction of every business will be tagged, then cross checked so that HMRC will know if the figures submitted are correct. HMRC have long thought that expenses claimed are higher than what they deem they should be. This will then result in a massive increase in the "coffers". Of course Government like this idea. HMRC are conning the Government into agreeing by way of using the old "error" ploy.
Yes of course there are some errors (none of us are perfect) but not to the tune of £2b and rising cost of implementing this absurd system. Just look at all the mistakes and rubbish coming out of HMRC at the moment. It's going to cost a lot more to even get HMRC fit for purpose never mind anything else.
So for ten year plan read 15 to 20 year plan, maybe even 25 years.

Thanks (7)
Replying to johnjenkins:
Morph
By kevinringer
29th Jul 2021 20:46

johnjenkins wrote:

HMRC have long thought that expenses claimed are higher than what they deem they should be.


HMRC already have a mechanism for checking proving this hypothesis: Self Assessment enquiry. But does HMRC still carry these out? I've not had one for over a decade. And when I did have them, HMRC found nothing. HMRC should step back and mull this over. It either proves that Self Assessment Tax Returns are 100% accurate, or HMRC are mistargeting their enquiries.
Thanks (4)
Replying to kevinringer:
Chris M
By mr. mischief
30th Jul 2021 05:56

I have more or less the same experience. 15o clients. About 60% of my enquiries are in VAT. Just about all of my enquiries are stupid beyond belief.

Total tax sought by HMRC is about £1m, making reasonable assumptions on what they were looking for.

Total tax take achieved is £105.00, which I thought was also spurious but the client wanted to stop as the initial target was about £50k.

Thanks (4)
Replying to mr. mischief:
Morph
By kevinringer
30th Jul 2021 06:44

HMRC said MTD was needed to close the 'tax gap'. HMRC when then invent a figure in the billions. But I've doubted that there is indeed a tax gap. In my experience HMRC enquiries have found £nil. Mr Mischief's experience HMRC's tax gap of £1million was in fact £105 which itself was spurious. In effect Mr Mischief's tax gap was also £nil. So the evidence does not back up HMRC's tax gap. Which means the tax gap has never been the real reason for MTD. So what's the hidden target for MTD? Some agents might say it is so that HMRC can ultimately obtain details of all transactions, but I'm not so sure because (1) HMRC would then be overloaded with data it can't cope with (as happened with RTI) and (2) realistically HMRC would only need details of every transaction if it wanted to reconcile to find missing tax ie close the tax gap, but we've already established there isn't a tax gap. Or should I clarify, there is no tax gap (or not significant tax gap) amongst registered taxpayers. Any tax gap that exists is amongst those who are not in the tax club. And they're not going to comply with MTD anyway. Maybe HMRC is hoping to use all the transactional data not to find problems with businesses that are in the tax club, but to locate businesses that aren't. Having said that, HMRC could do that today if it put its mind to it. HMRC is getting increasingly lazy failing to use data it already has. Maybe MTD is just another manifestation of HMRC's inability to think and use its own data.

Thanks (8)
Replying to kevinringer:
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By johnjenkins
30th Jul 2021 09:00

You've hit the nail on the head, Kevin. HMRC deem there to be a "tax gap" in order to have more control over business and the way it is carried out (IR35 classic example). HMRC do not like the SE community because they do not have control over it. MTD with quarterly updates says it all. Everyone is asking WHY? There is no doubt in my mind that HMRC want to tag and cross check every transaction, starting with business then going on to personal, with computer algorithms.
All this stems from the "deemed" tax gap.

Thanks (5)
Replying to kevinringer:
Chris M
By mr. mischief
30th Jul 2021 14:10

They look in all the wrong places. There are plenty of material "grey area" issues in my client base. I offer clients the choice. Ones who are very scared on a £50k grey area issue will, for example, treat it as capital not repairs. But most will instead come up with extra arguments for why it is a repair, fine by me.

If this was 1991 someone from HMRC local office would most likely turn up and have a good look at the hotel concerned and say, "I think 80% of this is capital". And my client might end up agreeing on 50% just to close off the situation.

But this is 2021 and HMRC is a bunch of numpties who don't like to get their arses of their chairs - if indeed they've not already sacked all of those field agents anyway - so this never happens. They look in all the wrong places and waste untold resource doing so.

Thanks (3)
Replying to mr. mischief:
Chris M
By mr. mischief
02nd Aug 2021 11:30

In case HMRC are watching:

£50k of repairs which are capital at 19% = £9,500 excluding any penalties.

Time required = 2 hours motoring plus visit, 6 hours follow up by letter plus introductory letters.

Which fool in HMRC top brass thinks that there is something better for their staff member to do than £9,500 for one day's work?

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Tornado
By Tornado
29th Jul 2021 11:46

I remember that the original aim of Real Time Information was that Employers would submit wages & salaries information to HMRC and make a payment to them. HMRC would then process all of an individual's income/allowances, etc, through their single 'Payroll' software for a period and then make a single payment to the individual for that period after making all relevant deductions. The system would automatically work out any benefits due and basically do everything to ensure that an individual only received the correct amount actually due for that period.

As usual, this was a great plan (to those naive enough to believe it) but the reality is very much different to this, as we all know.

The problem with all of these schemes is that they leave out the one key factor that will always scupper these ambitious plans, and that is that we are human beings and we do not work like computer programs. As soon as the Government starts to work on ideas that are centred on people and not computers, then they may make some progress, otherwise the 10 year plan will eventually end up in the Waste Bin (virtual of course) along with all the other expensive and unrealistic Government projects of past years.

Thanks (6)
By ireallyshouldknowthisbut
29th Jul 2021 12:45

So it seems HMRC are trying to turn the clock back before self assessment to have HMRC assessment based on all this data that is fed in, which by definition will be incomplete.

I had to laugh at the thought of HMRC software importing lettings agent statements. They are one of the worst documents we see, often full of inaccuracies and produced by a very wide range of business from one person businesses to large chains. Good luck with that. It also seem to ignore the fact that landlords often claim lots of other costs for works performed not by the agents, and of course the biggest number - mortgage interest - would be ignored.

I am also interested to note they are planning to yet again muck about with the business tax account and personal tax accounts which clients really struggle to open, maintain and indeed understand. We have had layers and layers of tinkering on those and each iteration seems to fix some problems and create many more so we are in a constant position of broken IT not fit for purpose and having to relearn how to do anything. Most tax payers only interact with HMRC once or twice a year, so changing things rapidly means its always a new system which means no-one ever understands it.

What you really need to static systems which might well do different things underneath, but always look the same to the tax payer so they can easily use and navigate. But of course the tax payers needs are bottom of the rung here and largely irrelevant to the designers of these systems hence the current bizarre systems where if you log in from a different page of HMRC's site using the same URL you get different access and different screens. Not a single other commercial software product does that as its insane from a user standpoint.

Thanks (7)
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By North East Accountant
29th Jul 2021 13:03

I understand why HMRC want this as they don't trust taxpayers.

It all started with the offshore bank accounts back in 2006, where they got 400,000 names and addresses of people who lived in the UK with offshore bank accounts whereas only 10,000 were declaring them on tax returns.

And don't forget about the cash trader pocketing fiddle jobs.

AI and machine learning will be all over the data about a taxpayer making it easy for HMRC to pick a winner..... and rake in some extra tax.

It's the future and we better get used to the idea.......it might not happen as quick as HMRC want but it will happen.

Thanks (1)
Replying to North East Accountant:
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By johnjenkins
29th Jul 2021 13:46

I understand where you're coming from but have to disagree. You are dealing with the British public who will eventually tire of HMRC's charades and do something about it.
You've only got to go back to 2016 and the last general election to see what we are capable of.
Many people have said there will soon be a cashless society, it's never going to happen.
When you look at AI and technology as a whole, there is a major problem. It's far too advanced without a time of consolidation so once you get the hang of a system it's outdated. The other problem which successive Governments have ignored is the fact that us Brits don't want compliance and rigidity, (that might be ok for the EU) we want and thrive on common sense and flexibility

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By AdamMurphy
29th Jul 2021 16:56

So they're moving onto new systems before they even get current ones working to an acceptable level.

They're no better than children who demand a new toy then soon get bored of it and want the next new shiny thing

Thanks (6)
Replying to AdamMurphy:
Chris M
By mr. mischief
30th Jul 2021 05:58

That's a very good analogy of HMRC policy 2000 to 2021.

Thanks (4)
Replying to mr. mischief:
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By Catherine Newman
30th Jul 2021 08:53

Potfolio managers are only just issuing portfolio reports now and quite often they are incorrect. I don't honestly see them being capable of providing their information to HMRC to enable returns to be prepared . When I and others have referred to this on the Agent Forum, we have just been told it is not an issue for HMRC. We need to contact the Portfolio Managers. Each provider has different layouts and different reports eg Coutts provide a Consolidated Tax Voucher but you don't use that as it certifies the income of the portfolio irrespective of who the holders are. You use the UK Tax Report to ascertain the individual's income. Will HMRC prescribe the format?

Thanks (4)
Replying to AdamMurphy:
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By Paul Crowley
01st Aug 2021 13:49

Spot on
HMRC are like a child that does not read the rules
Toy not understood
New toy wanted

Thanks (5)
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By Beef curtains
30th Jul 2021 11:37

Treasury officials display a bizarre paranoia about how the tax system works. They’re always trying to close loopholes that aren’t there and see abuses, which just don’t exist, in every corner. They are in their own little world, away, as they say, with the fairies. Regulation is, for them, a recreational drug.

The dirigiste attitude of government ministers and civil service bureaucrats towards reducing taxes is evident in a sinister phrase often read in newspapers or heard on television, the claim that tax reductions are a “cost to the government”.

They have a mindset that believes that the Nation’s wealth really belongs to the government, which makes some of it available, under sufferance, to the people.

During my lifetime I have witnessed a litany of half-baked "initiatives" each of which would revitalize the British economy. None made much difference. So I look around and conclude that what has NOT changed much is the lunatic tax system under which our economy suffers.

This planned new idea will just make things worse. Welcome to 1984 kids, I'll be dead before this new crap lands on the fan.

Thanks (2)
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By djtax
30th Jul 2021 12:04

I always find rental agency statements amusing especially the 'annual' ones (for which they often charge extra) which defy the normal definition of a year as 12 months - OK I know you can do it on a
cash basis but it goes against the grain to submit 'annual' tax returns with variations on 11, 12 or 13 months and very occasionally even 14 - which in some cases can push a client (otherwise avoidably) into a higher tax band. Even 'better' I have recently seen one rental agency's statements completely lose one month's income between two tax years (and no the property was not vacant that month)!

My experience of HMRC is that as they lack any sense of commercial imperative to get things right (ie with no competitor they cannot lose 'customers' regardless of poor service, unlike commercial entities who could even go bust through chronic bad service) they may always aspire to greatness but we always end up with a botched mess. Just look at the ever increasing criticisms (to put it mildly) over the ill thought out and inadequately tested CGT 30 day reporting and the confusion ranging over the extra boxes now on CT and SA returns for last year's Covid grants etc.

I sympathise with/pity those going into the tax profession nowadays. Perhaps in the long term we will simply dumb down to a less effective brave new world accepting lower standards as the new norm.

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By amycollier2893
30th Jul 2021 15:25

On the off chance that a representative from HMRC may be reading this - please take these comments seriously (for once) they are based on experience in the real world which you are as always invited to experience. Words of warning though, the world in which we operate is not as you perceive it to be and people do not behave in the way you seem to hope and even expect.

Thanks (2)
Replying to amycollier2893:
Tornado
By Tornado
30th Jul 2021 16:10

Whilst I can sympathise with your apparent belief that individuals within HMRC are capable of making changes within that organisation, this is extremely unlikely.

There are 66,000 people employed by HMRC and I think only a handful have any real executive powers. The other tens of thousands are just part of the corporate body and move as one, so whilst 33,072 of 66,000 may understand what you are talking about, there will be absolutely nothing they can do about it. The same would apply to 43,892 of 66,000 and probably 21,957 of 66,000 as well.

It seems that in a world so woke that it hurts, the Government see nothing wrong in forcing millions of people to use the MTD system when they have not been trained to use the system, their mental health problems from trying to get to grips with the system seem unimportant to the Government and this sort of enforced regime that will achieve very little is nothing more than the Government trying to enforce its will on us, just because it can.

That is the nature of government today, but it will not work in the end.

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By rfandaltd
02nd Aug 2021 10:46

Ha, Ha, Ha, Ha!
Laughed like a drain when I read these absolutely spot on comments from real world practitioners compared to the fairy tales, pie in the sky and pure lies as justification for the 'benefits' of MTD from fintech, HMRC and those in thrall to fintech and this ridiculous and pointless project.
Thank my lucky stars I'm out of this now.
Spoke to a friend I see occasionally a week ago. Not an ex client so don't normally bore eachother with anything tax or accountancy related.
He's a mechanic. Practical, with a small thriving business, but dislikes computers and social media and doesn't need to engage with technology any more than the bare minimum neccessary.
Asked him what he knew about MTD.
Cue blank look and when I filled in a few gaps, then came the stream of expletives and a suggestion where the government could stick its plans if it thought he was going to change the way he did things especially if was going to cost him more money and time.
I think the profession as a whole ought to disengage from this process, stop being free and enforced MTD facilitators for HMRC and fintech and watch this idiocy implode when 5-6 million small business people and voters, many of whom still don't have a clue what MTD is about, or have even heard of it refuse to participate.

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By rfandaltd
02nd Aug 2021 13:28

As I'm having a bit of fun here, I know this site and its owner Sift exist to push the agenda of and attempt to popularise fintech amongst the profession. At least that's what the Sift homepage, 'what we do', 'how we do it' and 'brands we work with' suggest. They pay Sift, we don't.
I thank you for a platform to express to fintech pushing MTD they are greedy, devious, dishonest and selfserving and HMRC they are cretinous, misguided, delusioned and out of touch with reality.

Clearly as commented in so many previous threads, most recently in 'Accountancy bodies and push back against software' the governing bodies care not one jot about small practice accountants. I think we meet the criteria of BCG Matrix cash cows to them. Mature, consistent cash generators that can be ignored and need neglibible investment to keep producing returns. Far more enjoyable sucking up to the big four and the largest firms of the second tier with the money generated from the unimportant 90% of members and their subs. So no use expecting the governing bodies to fight our corner or do anything useful to combat MTD or the takeover bid of the profession and ousting out of the small practice accountant by fintech and its owners.

I relish the day millions of taxpayers unaware and as yet unaffected by the full implications of the MTD/ HMRC data gathering project refuse to participate with this nonsense or rebel once they realise the extent of the extra burden on them and the ridulous TV adverts proclaiming cloud software packages they will be forced to use as infallable, all signing, all dancing and fun- can you believe that bookkeeping, accountancy and tax fun!!! do not live up to expectation in reality. I only feel sorry for accountants still around expected to pick up the pieces and sort out the mess. I hope they are well paid for the stress. I really hope small practice accountants refuse to act as unpaid facilitors in the run up to all this becoming live. It's a career, we have a job to do and we make a living out of it, but we've been used to uncomplainingly taking on far too much out of generosity of spirit and have been roundly abused by HMRC and fintech because of our sense of ethics and duty.

Thanks (4)
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By biff1001
02nd Aug 2021 14:00

Already having problems with MTD for vat.
Register a client for vat and receive a vat certificate. Then when i try to register the details on the MTD gateway they are not recognised!
Ring the vatman and am told "Yes we are aware of this problem and no we don't have a timescale for it getting fixed. We can put the details on a spreadsheet and don't worry if they get assessments due to non filing of vat returns".
This is all because the IR35 treatment of HMRC IT contractors resulted in them now all working elsewhere.
You just can't make it up!

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By bluebaron
02nd Aug 2021 17:09

I informed a sole trade client today (with turnover under £20K p/a) that in two years time he will have to:
-Start keeping digital records.
-Submit quarterly reports to HMRC.
-Change his year end from 30th November.
Understandably, he couldn't take it all in, and I will go through it again tomorrow, when I see him in person.

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Replying to bluebaron:
Tornado
By Tornado
02nd Aug 2021 18:31

I am beginning to wonder if we are reaching a situation where MTD and associated requirements being imposed on people when they are not capable of dealing with them, is a breach of Human Rights. Surely the Government cannot seriously require people, on threat of financial and other penalties, force people to do something that they cannot.

Thanks (1)
Replying to Tornado:
Morph
By kevinringer
03rd Aug 2021 08:07

Tornado, I claimed MTD exemption for 25% of my MTD VAT mandated clients on the grounds of digital-exclusion. HMRC accepted my arguments for all but one case. That one case is still not MTD compliant so I'll have another go at claiming exemption. I will be claiming exemption for most of my <£85k VAT clients next year. By then, I expect to have obtained exemption for 50% of my VAT clients. This exemption will also apply to MTD ITSA. I will be applying for exemption for many of my MTD ITSA clients too.

To date, I have claimed based on age or remoteness of location (we're in rural Wales). But the legislation permits a claim 'for any other reason' and I'm beginning to wonder whether mental health is a good reason. There are clients who don't fall in the 'age' or 'remoteness of location' categories, but would find these requirements unreasonably stressful and would cause damage to mental health. Those clients could pay me to do their MTD for them but that would result in unreasonable cost, which is a valid reason for exemption (under the 'any other reason' category). Just because someone can use Facebook doesn't mean they can use bookkeeping software. So we can add mental health to Human Rights.

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Replying to kevinringer:
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By johnjenkins
03rd Aug 2021 09:05

You're probably not the only one Kevin. That's probably one of the reasons why our Digital Minister has been given umpteen millions to upgrade broadband, especially in rural areas. However you still have the cost of broadband at circa £30 per month, then the software. I doubt if some business earning under £85k could genuinely afford it. Perhaps the Government might give "just eat" vouchers as an incentive.

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Replying to johnjenkins:
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By bluebaron
03rd Aug 2021 10:07

It was like trying to get blood out of a stone, obtaining exemption from MTD VAT for a client who left school at the age of ten. I have zero confidence in getting MTD for Income Tax exemption for sole trader clients in their 40's who live in a town or city.

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