HMRC digital strategy: An inside view
HMRC recently invited 25 agents to a presentation in Portsmouth to tell them about its new digital strategy. Jennifer Adams was there and presents her feedback on these new processes.
“Digital by default” is the current theme guiding the future of all government departments, not just HMRC. What this means for the tax department was set out in a December 2012 document entitled HMRC Digital Strategy, which defined the main components of the new approach, what changes are being implemented and when.
There are numerous benefits from digital services including reliability, speed and convenience, but the key reason behind the government’s strategy is cost. Paper costs money to process.
According to HMRC, it handles 80m pieces of paper per year relating to self assessment, and processes 1.3m paper 64-8 authorisation forms, each of which has to be inputted manually by employees who could be better employed in a more cost effective (and more interesting) role.
When the digital plans were announced back in 2012, HMRC recognised that to deliver the strategy it needed to:
- understand the agent population and the links to clients’ behaviours
- reduce exposure to cybercrime by bogus agents
- move agents away from paper towards digital interactions with HMRC
- enable authorised agents to digitally see and do what their clients can see and do.
The department’s tax agent strategy is progressing along these lines, the speaker explained and the purpose of the Portsmouth meeting was to give accountants, many who run their own practices, more detailed insights into the agents online self serve component of the strategy and to solicit their feedback.
Revised criteria for ‘known’ agents
Readers of the previous article Will your firm pass HMRC’s new test? will know that HMRC is considering using various criteria to test whether an agent will be permitted to use the new digital system to undertake transactions on someone else’s behalf - giving agents the confidence and convenience of “self service”, while minimising HMRC’s workload.
The exact criteria still await the conclusion of consultations between HMRC and the professions’ representatives. The suggested criteria for VAT registration that upset so many practitioners has been withdrawn, but the other criteria described in the original article are still being considered, including the key money laundering registration requirement.
Most importantly, it was confirmed that should an agent pass the identity assurance (IDA) criteria, they will then get full access to the online agent services. There is no question of there being a system of differing levels of access to particular services for different types of agents. However, there is a proviso that as more services are loaded onto HMRC’s website, access may be considered separately for each service. There will be no complete restriction and the only time access will be fully restricted is in the event of an agent being the subject of criminal proceedings.
Identity assurance was described by HMRC at the meeting as “a process for providing individuals with credentials that allow them to prove they are who they claim to be (when online)”.
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The problem with IDA centres around the legal requirement for checks to be in place before someone who is not the taxpayer can enter a taxpayer’s file and change personal information. The aim is for the technology to work in a similar way as logging on to a bank account, with an IDA number/code to let an agent log onto the system via an IDA supplier. Various suppliers are being considered including Amazon and the Post Office. A major sticking point is the question as to how an agent is to be authorised without the use of paper, as emails may not always reach the correct recipient.
One attendee commented at this point that it is not HMRC’s job to judge whether someone is “good enough” to be an agent. If one person has agreed for another to be their agent, then it is not within HMRC’s remit to refuse that agent permission to be able to use HMRC’s systems.
Pilot scheme progress
The December 2012 document lists target dates including testing a prototype agent registration and authorisation between autumn 2013 and spring 2014. Individual taxpayers are already getting to test their online services, but this is not yet happening for agents as HMRC has put them last on its testing list. The first pilot of many is currently being undertaken in a controlled environment of 1,000 employees (300 from one company and 700 employees from another). It is a privately controlled test which; should it not work for some reason as effectively as HMRC would wish, it will be pulled, revised and retested.
AccountingWEB members should be aware that agents can view clients’ notices of coding online, which is proving to be a very valuable resource. HMRC plans to take this a step further with a pilot under way for car benefits. Many taxpayers assume that their coding is correct year on year and should they be given a company car, they often assume the company will advise HMRC and the code will be correct as amended. HMRC is working towards a different procedure that will link HMRC’s website to the DVLA database so that all that needs to be entered is the car registration number and the date of allocation to the employee. The website will then automatically create a schedule detailing the car benefit, estimated tax liability and generate a revised notice of coding. The company will submit a P11D as usual and should the figures not match, then the company’s figures will be used by default.
Currently only a company is permitted to offset CIS payable on subcontractors pay against CIS suffered by the company via the completion of a section on the EPS. HMRC is looking to extend this facility to let all businesses offset overpaid VAT, for example against a self employed taxpayer’s liability and visa versa. This could be a great help with cashflow for many firms.
What agents can do to plan for the new system
HMRC will not be looking to transfer all clients onto the new system automatically. The original plan was for HMRC to send details of all clients to the individual agents asking them to confirm whether the list was correct. This procedure has now been revised; instead HMRC will be asking agents to “cleanse” their lists first to make it easier for HMRC to transfer all active clients to the new system.
64-8 authority forms still on the rise
If proof was need that some accountants are not convinced by HMRC’s digital strategy, it comes with the fact that 1.3m 64-8 paper authority forms are submitted every year (a rate equivalent to roughly 5,000 per day) - but only 30,000 are submitted online. Attendees were asked as to how many of their firms still use paper. Out of the 23 accountants at the meeting, 15 admitted they had used paper submissions for a variety of reasons, the main one being that it was too much hassle to chase clients for reference numbers that had probably been thrown away as junk mail.
If you must insist on submitting the authority form by paper, the presenter has compiled a useful help card of hints and tips that will help the HMRC employees to process the forms more quickly. The Card includes the following suggestions:
- Use the up-to-date authority form 08/11
- Type don’t write – it makes it clearer for the poor person who is inputting by hand
- Send signed original
- Don’t send a covering letter
- Submit the form on its own – for example, don’t include the SA1 in the same envelope as each form goes to separate departments.
A version of this card has been posted in the Agent Strategy discussion group.
From the presentation and discussion that followed it is clear that HMRC is making steady progress (or ‘agile’ one presentation slide put it). But there are still many obstacles to be overcome.
As the months progress more details will be released both online and at future presentations. Should you be invited to a presentation you should try to attend, for no other reason than to give your view and obtain first-hand insight as to what is happening which will enable you to plan your firm’s response more effectively.