The Single Customer Account: A key piece of HMRC’s digital jigsawby
A crucial element in achieving HMRC’s digital transformation ambitions will be the Single Customer Account, which could turn out to be the real game-changer in transforming UK tax compliance, writes AccountingWEB columnist and former ICAEW president Paul Aplin.
Making Tax Digital (MTD) is only one element in the digital transformation of tax administration. Technology offers many possibilities, not all of which will be affordable or appropriate. The key to making best use of technology in this domain is to ensure that it brings together timely, relevant information in one place with the functionality to make it accessible and useful to taxpayers, agents and HMRC in a consistent and mutually cost-effective way.
The fact that HMRC was a very early adopter of digital technology in some ways makes it more difficult to achieve this goal: legacy systems designed many years ago do not easily integrate with new systems. HMRC has also on occasion designed new systems that do not integrate (such as the UK Property Reporting Service for CGT on disposal of UK residential property, which should have been designed to integrate from day one with the self assessment system). All pieces of the jigsaw need to fit together by design.
We need a new approach, where systems are designed from the very outset to integrate, to give users – HMRC, agents and taxpayers – access to the same data at the same time and to make use of existing identifiers rather than creating more complexity by adding new ones. Such an approach is vital if HMRC is to achieve the ambitions set out in its 10-year digital transformation strategy published in July 2020. A key element in that transformation will be the Single Customer Record (SCR) which will feed the Single Customer Account (SCA).
The OTS view
I believe the SCR and SCA will together form the hub around which more personalised and efficient digital tax administration is built. I am therefore completely supportive of the enthusiastic position the OTS has taken on this in its recent Evaluation Note on the Single Customer Account.
The OTS describes the SCA as being “at the heart of the government’s 10-year strategy for tax and the keystone which will lock all the other pieces in place”. The SCA will, in the government’s words, enable taxpayers “to view their tax position and tell HMRC anything they need to know through a single online account”. The potential is huge, but delivering it will require not just vision but sustained commitment and funding. The current signs are positive: funds were committed in both the March and October Budgets last year.
One stage of development will be to bring all information currently held by HMRC about an individual taxpayer into their SCA; another will be to bring in any information provided through MTD for Income Tax. Beyond this, there is the potential for HMRC to seek additional information from third parties to enable increasing degrees of tax “return” pre-population, something the OTS explored – and advocated – in its report Making better use of third-party data: a vision for the future last July. I say “return” because the ultimate goal is a largely or wholly pre-populated document.
In the longer term, the SCA could include the state pension and some social security benefits. The OTS suggests an overhaul of the PAYE system to ensure that the PAYE and SCA systems are properly aligned, that the SCA should facilitate taxpayer registration (and be the hub for claims and elections) and that HMRC should publish an indicative roadmap, setting out key development stages over, say, the next five years.
It is easy to simply focus on technology and data but the SCA’s potential extends to influencing taxpayers’ attitudes to tax. The UK tax system is, like many others, built on high levels of voluntary compliance and goodwill. That goodwill may have a fair degree of elasticity, but it is not infinite and depends upon people’s perceptions of being treated fairly and receiving a good service. The SCA has the potential to be the main touchpoint with HMRC for 32 million individual taxpayers. If they see it as something helpful, then that will colour their view of tax administration in general.
What do I mean by helpful? If, for example, the SCA shows taxpayers their up-to-date tax position and the data on which it is based; if it prompts and then enables them to claim reliefs they are due (for example, relevant flat rate job-related expenses); if it warns them of impending compliance obligations and makes it easy for them to comply. All of these examples would be seen as positives. And if people can obtain information and take action through the SCA that would otherwise involve a call to HMRC’s helplines, that would improve their experience as well as reduce pressure on helplines.
I have said this in other AccountingWEB articles, but the new SA penalty regime provides a perfect opportunity for technology to colour a taxpayer’s view of HMRC and lay out the benefits of digitalisation. If prompts are channelled digitally to taxpayers to warn them they are about to incur a penalty point and the system proactively helps them avoid it, this would send a positive “here to help” message. If this opportunity is missed, then the risk is that a negative message is sent.
While I believe the new regime is fairer, it is vastly more complex and significantly increases the number of potential infractions due to the MTD quarterly reporting obligations, in some cases from one a year to 15. The SCA and an improved app could be key elements in delivering this functionality and experience.
I think the word the OTS used to describe the SCA is well-chosen. MTD is one building block in HMRC’s digital ambition – and one that has inevitably attracted a great deal of attention given its impact on businesses. But the SCA, as the hub connecting numerous sources of information and acting as the visible interface between taxpayers and HMRC, will I believe turn out to be the real game-changer in transforming UK tax compliance.
You might also be interested in
Paul Aplin was for many years a tax partner with an independent West Country firm. He is a past president of ICAEW, a former Chair of the ICAEW Tax Faculty, a member of CIOT Council and the Tax Technology Committee of CFE. He is a non-executive director of three companies, a member of HMRC’s Admin Burdens Advisory Board and the OTS Board....