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Tax admin: Sow’s ear repair kit

Wendy Bradley is perplexed by the latest Office of Tax Simplification suggestions for tax claims and elections. Is it really possible to improve this mess without radical reform?   

17th Nov 2020
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OTS tinkers at the fringes of expenses claim reform
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The Claims and elections review: simplifying administrative processes is something the OTS decided to do itself; it wasn’t commissioned by the Chancellor. So you would expect the tax boffins to come up with something a little more purposeful than simply asking for more money to be spent, for HMRC forms to be tidied up, and time limits to be aligned.

What did the OTS find?

The report makes 15 recommendations, most of which fall into three or four key areas:

  • Merging of the personal tax account and business tax account into an all-singing all-dancing personal tax account through which you can make all claims, where all claims are recorded, and that can be accessed by agents as well as taxpayers.
  • Improvements to HMRC’s forms.
  • Improvements to the employee claims process (the government to explore reducing the number of different categories and levels of employee flat rate expense claims).

Merging the PTA and BTA

This is a “motherhood and apple pie” suggestion. We can all agree that HMRC should have a decent online presence through which anyone can conduct any tax transaction, simply, safely and with as little administrative grit as possible on either side. To be fair, this is exactly HMRC’s vision of its own development over the next 10 years.

My only problem with this proposition is that it is spectacularly ill-timed: HMRC has already had to pause development of any number of nice-to-haves in favour of doing the urgent “need-it-now” tasks in the middle of a pandemic.

Yes, the OTS has it right, but is the Treasury going to allocate the necessary funds right now? I didn’t think so.

Practical improvements

What practical measures may be within the realms of possibility?

Many of the recommendations and sub-headings within recommendations amount to “sort out your forms and time limits” and I’m sure most of us would be in favour of that.

My problem is that the OTS report doesn’t go far enough. It is easy to say; "This form is hard to complete”. It’s much harder to say what you need to do to make it easy. HMRC will be more likely to take the OTS suggestions on board if they had come in with oven-ready proposals. OTS has done half the work already: why didn’t it go the whole hog?

Employee expenses

The third strand of suggestions relate to employment expenses, and it is useful to look at the list of odd amounts that different trades and professions can claim.

The OTS suggestions are sensible and unobjectionable:

  • reduce the number and levels of amounts that can be claimed, perhaps move the claiming method to the employer;
  • look at some kind of check when the same allowance rolls over from year to year.

But surely the purpose of the Office of Tax Simplification is to look at the obvious simplification: abolish the lot!

In a climate where the personal tax allowance has been substantially increased, why not fold these relatively trivial allowances into the next uprating of the allowance, explain that no-one will be worse off and no-one will have to faff about making these claims in future and just boost the allowance for everyone by £x to “buy out” the allowances?

Impossible patching

Essentially the OTS is taking the pig’s ear of the tax administration system and trying to turn it into a silk purse. But why concentrate on the fine details of stitching when surely the first task is to transform the fabric?

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Ivor Windybottom
By Ivor Windybottom
17th Nov 2020 20:54

Wendy, great analysis as always. Ta!

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