Panellists

Stephen Relf, Technical Manager, Tax, ICAEW

Producer

Natalie Chisholm

Transcript

Stephen Relf: Hello and welcome to The Tax Track, the podcast series from ICAEW, where we explore the latest developments in the world of tax. I’m Stephen Relph, a technical manager for tax at ICAEW. A regular subject on The Tax Track is HMRC performance, from missed targets on answering the phone and responding to post to the possibility of new and improved digital services in the future. So I am delighted to say that in this special episode, we are joined by one of the senior leaders at HMRC, Jonathan Athow, Director General for Customer Strategy and Tax Design.

Jonathan Athow: We want to make digital services better, but how we do that is going to be joint work with taxpayers, with the end customer, but also with agents.

SR: As we know, the government’s priorities for HMRC are to modernise and reform the tax system, to improve customer service, and to close the tax gap. Jonathan’s with us today to explain how HMRC intends to deliver on those priorities and, crucially, what this means for our members. Welcome Jonathan and thank you very much for joining us.

JA: I’m delighted to be here. Thank you very much for the invitation.

SR: So let’s go straight in with our first question. HMRC is on a journey to becoming a digital first organisation. It has already made significant progress towards that goal. For example, HMRC’s app had close to six million unique users in March 2025, and recently in the spending review, we were given some insight into what a future tax system may look like with ambitious targets set for increasing digital interactions and reducing outbound post. Jonathan, perhaps you could begin by telling us more about those targets.

JA: Yes, let me start with our headline target. And really the one that perhaps caught a lot of people’s eye was this target of 90% of interactions with HMRC being digital. Now at the moment, we’re about 76% – as you said, we’re not starting from scratch. We’ve got some good bases to build on, but we want 90% of our interactions to be digital. Now, it’s not always swapping like for like – a phone call is quite different from, you know, just logging onto your app. So I wouldn’t always want to be saying it’s a one-for-one swap. But essentially what we’re trying to do, as I said, is move that to 90%; we want to reduce outbound post, all of these things. There’s a number of reasons why we’re trying to trying to do this. Firstly, customer experience tends to be stronger for our digital services. We measure customer satisfaction: it’s about 80% for our digital services – they tend to be more accurate; you know, if you’re not re-keying information or having to write things down, it tends to be more accurate. And importantly, it’s about also saving money, because every pound we spend is public money. And one of the other targets, maybe not quite so obvious in our spending review, was that we needed to save, I think it’s £773m of efficiencies by the end of the year. So that’s kind of the motivations for it. But you know, I’m certain we’ll get into more detail about exactly what that digital shift looks like.

SR: Certainly, as we said, they are quite ambitious targets. Is it 2030, when you’re trying to hit those figures?

JA: So it’s by, basically, by the end of the decade – that’s where we want to be. And it is quite ambitious. As I said {we made a] good start. But as we get into it, every extra percentage point we want to get does become a little bit harder, you know, to encourage people to use digital services or build those digital services in the first place.

SR: Yes, it is very much going to be a gradual transition, still, even though we’re a few years away from it.

JA: Indeed, and there’s no sort of single project that is pulling everything together. It’s kind of, a sort of broad-front approach of trying to improve all our services – all the different things we’re trying to do, every one of them needs to be moving towards that digital first ambition.

SR: Now, a few weeks after the Spending Review, HMRC published its transformation roadmap, setting out more than 50 IT project,s services and measures that it says will modernise the UK’s tax and customs systems and make it easier for taxpayers and agents to interact with HMRC. Which of these new or expanded services for taxpayers are you most keen to see?

JA: So I think one of the things – there were a couple of elements to it – but one of the things I’m really pleased with is what we are doing to offer better services to PAYE customers. Many of our PAYE customers, they often don’t need to interact with us. They may not be used to things like self assessment, all of that, all of those processes, but they still sometimes need to check that their tax is right, and often, in the past, the only way for them to do that or query a tax code has been to phone us up. So we’re really expanding our services aimed at that particular particular group. So we’ve got new services that allow PAYE customers to put interest information in, or dividend information in, without having to phone us up. So I think that could be really transformational in terms of not just allowing people to do more, but allowing people to have more control over their tax. Their tax is not just their tax coding notice they get once a year. It’s online and there for them to check, make certain they’re happy with it. And yeah, so I think that’s going to be really exciting.

And alongside that is really our app. Now the app is just a different way of accessing many of those services, but it’s really, really taken off. As you said in your introduction, we’ve got over six million users now; we’re seeing really, really strong growth. So that app feels a really exciting prospect, given the demographics of many younger people who prefer apps or using phones to desktops. So there’s a real opportunity for us to not just improve the services, but actually to appeal to a wide range of the demographic.

SR: So all good news so far. But obviously, as we said, these are ambitious targets, so let’s talk about some of the obstacles that HMRC may need to overcome if it is to hit those digital targets. Now, in May 2025, Parliament’s Public Accounts Committee said that HMRC’s legacy systems are holding back progress. How much of an issue is that?

JA: I would say it is a challenge. So by legacy systems, we’re often talking about IT systems that be 20, 30, years old, and what we tended to do in the past is we would build a new IT system for every new tax, or every time we wanted to introduce something new. So we would have a separate system for each tax. And that really limits what we can do in the digital age, because we don’t actually bring a customer together across all those different taxes, or a taxpayer together across those different taxes, and that does limit what we can do in terms of some of our services. There are also other reasons why you want to get off legacy. It’s often quite expensive to run. It’s not as resilient, or maybe as secure as some of the new technology we have. So it is a challenge for us, and what we want to do is get off that legacy technology. We’ve already done some of that, but what you’ll see as part of the transformation roadmap is a determination to do that, to get off those legacy IT systems, and as we do that, improve our services at the same time – that underpins, for example, making tax digital. We’ll probably come on to some of that a bit later. But actually, that is also not just about the front end. It’s also about getting off the legacy at the back end,

SR: And as you move from an old system to a new system, assuming you’re managing the risks of short fall in service in the meantime?

JA: Yes, we need to migrate people’s records securely. At the moment, we have about 12 million people on self assessment. Not all of those people are in scope of making tax digital, but over time, all of their records will need to be managed to move securely to our new system. Doing that in a way that doesn’t mean we have duplicates, doesn’t mean we get corruption in the data, doesn’t mean errors get introduced, is really, really challenging. So it’s not easy just shutting down one system. It’s not just shutting down one system and starting another. It’s making certain all the data is copied across and all the services people use are built on the new system as well.

SR: So we’ve mentioned obviously making tax digital, MTD, a few times already, and we’re going to come back to it later, but obviously there we have close to three million people who are going to be mandated to use digital services, but also an awful lot of people you are goint to have to encourage them to use them voluntarily. Now, trust could be an issue, as not everyone feels comfortable sharing personal or financial information online. And also, some people can’t use digital services – they’re digitally excluded – and many others may not feel they have the skills to do so. Could this also hold backprogress? And if so, how do you intend to address it?

JA: So I think there’s a number of issues you’ve touched on there. There will be some people who are genuinely digitally excluded. And, you know, we will need to make certain we have alternative ways of meeting their need, whether that’s telephone, post, those sort of services. But the genuinely digitally excluded is probably relatively small. There’s a lot of people who are, I think, as hesitant around tax, what we see is, when we research, do research, lots of people are willing to use digital services, but often they need reassurance that the service is going to help them, it’s not going to be too complicated – all those issues around trust you talked about. So if we can build the services right, we can hit a very, very high percentage of the population.

SR: So that first interaction could be quite important for someone the first time they engage with HMRC digitally. If it’s easy to do, if it’s simple to do and it’s successful, then they’ll be encouraged to do more.

JA: Yes, exactly. And the key one, I think, with tax, is the word reassurance. People want to know, if I’ve submitted something online, has it been received – and again, there are things we can do where we can send out messages or email saying, you know, if you file your tax return, we send out an email saying we’ve received it; here’s the reference number. There are things you can do to build confidence, but actually surprising people with really good services is also a really good tactic, as you sort of already hinted at. And back to our app – paying your self assessment bill from the app now, using open banking, you see some of the reactions we get from people saying, “I didn’t believe it was going to be that simple.” If we can get that right, it becomes a virtuous circle, but there’s a real challenge there.

SR: So recently, we had some figures come out of HMRC, some revised estimates for the number of taxpayers who are going to be within making tax digital and also a kind of breakdown of their characteristics. So I think I mentioned that close to three million people will be brought in over the next few years. But it’s interesting to note that of those three million, one million aren’t represented by an agent, and of that one million, 840,000 aren’t currently using software to file a return. Now that group are going to be particularly challenging when it comes to MTD, aren’t they?

JA: So if I start with the general picture on where we are on making tax digital – it begins in April 2026 for those [earning] over £50,000. The IT delivery is on track at our end, and what we are seeing is growing awareness among the agent community. So all the indicators are [good] and the great work that, actually, ICAEW and lots of other representative bodies are doing is really, really helping us to drive up awareness. I’m really grateful for that work. So we’re seeing good progress. We’re doing a testing phase at the moment, we’ve seen hundreds of people signing up for that. So that side of it is really very, very good. I think that you hit the nail on the head with the challenge here’ it’s not just the agents. And obviously, if you’re an agent, it may be a big change to your working patterns, and you need to think about that – but it’s the unrepresented… Now, we have got some advantages, because we know kind of broadly the sectors some of those unrepresented customers work in – things like construction. So there are routes to target our activities, to promote awareness, raise awareness with that group. But as we go throughm closer and closer to the go live date, you will see more and more activity targeted not just at agents, but as I said, that unrepresented group. And as you say, some people are using software. Some people aren’t – even many agents are not using software to help their clients. So it’s not just the unrepresented who’ll need to think about software. I would really encourage any agents who are thinking about MTD to also think about what is the right software choice for them. As we work through this, I think it’s become increasingly clear that choosing the right software is really going to be helpful, and that will really set you up well for making the most of making tax digital.

SR: Yeah, it is interesting. OK, you mentioned tax software. There was a recent report – I don’t know if you saw it – from the Tax Law Review Committee, and they did recommend that HMRC should take a more active role in setting standards for tax software. Is that something that’s on your horizon?

JA: We want to think about how we work with soft software. If I went back 20 years and asked people about tax and how it was, who were the key intermediaries in the tax system, they’d say, well, agents, of course – accountants, bookkeepers, really very important for us. And they’d say, well, employers – they run PAYE. But increasingly, software has become a key source of intermediation. More and more people are using it. That software is becoming more and more sophisticated, got more and more uses. So I think software is an increasingly important part of our system, our tax system. So we do need to think about how we modernise our processes. Please don’t go away from this thinking we’re going to be regulating software, but we do need to think a little bit more about what those standards are, how we work together. It’s going to be quite a big change, I think, in our relationship with the software industry. We’re now dealing with hundreds of vendors with 1,000s of different products, and so our approach there probably does need to be different from how we’ve done things.

SR: I think that was the main surprise for me, from reading the report, because you know the big players in the software industry. But there’s, as you say, an awful lot of people who are putting software out there, and so guaranteeing that consistency must be very difficult.

JA: It is. We want diversity, because the modern British economy is very, very diverse. Even within that making tax digital population, the three million you talked about, there’s a huge diversity of affairs there. So we need a really rich software offering. We want a really rich market, lots of providers. That looks like it’s happening, but at the same time, how do we make certain that people can rely on the software that’s being marketed? How can they know that it will work effectively with HMRC systems? So there is more for us to do in that space. I don’t have an immediate answer, but I think it’s a really good report and raises some really important questions.

SR: Yeah, I’m sure that’s something we’re going to come back to a lot on The Tax Track in future. So HMRC’s digital offering for agents is lagging behind that for taxpayers – w e hear that a lot from our members, and I think it is also acknowledged by HMRC in the transformation roadmap, where HMRC says that compromises have been made that have reduced HMRC’s ability to deliver access to good quality services for agents and intermediaries?

JA: So there’s probably two elements to address. But if I go back I would say, you know, I think it’s a very fair comment, we have not always delivered parity of service for agents and their clients. And also, I don’t want to over promise and say we will fix all that by, you know, 2030, or those sorts of things. Because, again, I think that would just be a bit of a hostage to fortune, and it is challenging to do. So there are some things we would like to do. We highlighted four elements where we would like to make progress in the transformation roadmap, particular issues around tax codes and those sorts of things. But in general, what we want to do as we build new services is almost back from the get go, make them exactly accessible to agents in the same way as their clients are. And you know, I’ll go back to making tax digital: the service that we will need to build to allow people to see their self assessment tax affairs, that is now being built in a way that agents will have exactly the same access and exactly the same functionality, apart from the things we don’t want agents to have functionality over such as changing direct debits, all those sorts of things. But we will give them exactly the same functionality as their client, but it is going to be a slow, slow burn here. We’re not going to be able to do that overnight, but that is definitely the direction of travel. So we’ve got a strategic direction of travel and some tactical things we’d like to do. And I do recognise as well that if we don’t provide good services to agents, that has costs and inconvenience built in – rather than what we want to do, which is take out costs and make it more straightforward for people. But I also, as I said, don’t want to over promise that we can fix those things.

SR: So it does sound that there’s been a change in approach from HMRC? Before it was maybe taxpayer first, agent second, whereas going forward it’s trying to deal with the needs of both groups?

JA: Yes, and I think actually, it’s almost easier when you’re designing something from scratch to make it available to both rather than coming on later and saying, this service was designed for the end user, the client. How do we now make some build some functionality? So if we can get it right from the get go, hopefully that will be more straightforward. But as I said, it’s not an instant solution.

SR: So HMRC has planned digital developments, including the four you mentioned for agents, that are listed in Annex B of the transformation roadmap. Now, in some instances, an indication is given that HMRC is working to a deadline. So for example, there’s a commitment to roll out a new child benefit claims tracking service in 2025/2026, but this isn’t the case for most of the new and enhanced services. Will HMRC provide more detail on when these new and improved services will be delivered, and can we expect to see regular updates on progress?

JA: Certainly, we would like to make regular updates on what we’re doing along that roadmap. There is a sort of challenge for us. You know, obviously things that are closer, we kind of have these planned now. Some of the areas we put in the roadmap are a bit more aspirational. We would like to do them, but we haven’t really done the work yet to know exactly how we would do it, and so putting a deadline there just runs the risk of disappointing people. And what we want to do is be completely transparent: what we know, we will put deadlines in; if we don’t know, we won’t necessarily put a deadline in. But what we will hope to do – and again, we haven’t worked out exactly how we’ll do this – is regular updates to that annex or the material in it, so people can see what we’ve got planned say for the next six months or the next year, and also what we’ve delivered. So we’re very clear again about the progress we’re making on that roadmap.

SR: Yeah, I do think that transparency is important, so all agents and taxpayers can buy into what is going to change, feel comfortable to know what is coming and when.

JA: Yes, I think it’s really important that people understand, even if it isn’t going to happen immediately, what the motivation is. Why we think these are the ways we need to go, why we think these are the right steps to take. So a lot of this is about that transparency. And again, we want to give people reassurance. We’re listening as well, and we understand, even if we can’t immediately solve the problem.

SR: And I guess also, if you’re a taxpayer and agent and you’re experiencing difficulties in a particular service, you can see that change is coming at some point?

JA: Yes, and I recognise that if you are stuck with a problem and you can’t solve it using our current systems, I recognise that will be frustrating. But we do want to give, where we can, examples of what we’re doing to improve services, to give people a sense that actually, you know, collectively, working together with taxpayers, with agents, we can really make big progress.

SR: There has been a lot of criticism of HMRC customer services in recent years as key targets on calls and posts have been missed. Now we highlighted the issues facing agents in particular in a joint report with CIOT at the end of 2024 where we found that agents struggled to get through to HMRC, and if they did get through, they then struggled to resolve their issue on first contact. How will this move to digital help?

JA: I think there’s two things. One, you know, if we can help people to solve problems without needing to speak to us, that’s great. So we would like to build those digital services – as I said, some of the ones we’ve talked about: giving agents more control over what they can do. So that in itself will help people get things right. But also we want to, you know, use the phone and the post – the phone, in particular – for the more complex queries that can’t really be resolved through digital services. So if we can reduce the number of calls on things that can be done easily online, it allows us to focus our resources – our limited resources – on those calls that are most complex. So if we can get this right, not only do digital services have benefits themselves, but as I said, they free up our people to be able to work on the more difficult and complex cases.

SR: I think there’s always been concern in the past that, in moving to digital, calls and post could be left behind and could kind of wither on the branch, but I’m assuming that you feel the resources are there to maintain a good service?

JA: So back to one of my introductory remarks. We are going to have to make efficiencies savings. You know, some of that is about reducing the amount we spend on outbound post. We send out over 100 million items of posts every year. That has a cost. If we can reduce that cost, that is good. So we are going to have to make those efficiency savings. If we make those efficiency savings, we will be able to maintain the level of customer services that we have at the moment, which is broadly hitting our targets.

SR: In February this year, the National Audit Office reported that the annual cost for businesses of meeting their tax obligations is £15.4bn. Now, having to update systems and processes will add to that, at least in the short term, taking money and time away from growing the business. How does HMRC assess the impacts on businesses when making decisions around digitalisation, and does it reassess this as the system design evolves?

JA: Yes, so certainly, when we’ve got a large project, we will undertake an analysis of what the costs are for us, but also the costs for businesses. Now that’s quite difficult to do. We follow a particular methodology for doing that, called the standard cost model, but we will look at those costs. We will also look at, often, the difference between the ongoing costs and the upfront costs. Sometimes the biggest costs are in the transition from one system to another. People have to retrain or relearn systems. Sometimes it’s about setting up new processes. So we are mindful of those costs. One of the other things, I would say, is sometimes as well, what we have seen in other areas is sometimes there are benefits as well from moving down those digital services that if you just look at the costs you might ignore. So making tax digital for VAT has been up and running for many years now. Around two thirds of businesses said they saw benefits from making tax digital, either in terms of better management of their taxes, or actually just being better for better understanding of where their business is in terms of profitability. So you do also look at the cost, but you also need to look at kind of what some of the benefits of digitalisation will be as well.

SR: Yeah, so as you say, there could well be initial costs, but in the longer term, as systems bed in, and people get used to them, benefits may come as well?

JA: Yes, and as we get used to processes, something that might feel burdensome the first time you do it, as you learn becomes a lot easier. So again, hopefully there will be a learning process going on here.

SR: So let’s change tack slightly. At the beginning of the episode, I mentioned that one of the government’s three priorities for HMRC is to close the tax gap. Now this is the difference between the tax that HMRC believes is due and how much it actually collects. The latest estimates put the tax gap at £46.8bn, or 5.3% of total liabilities. How does HMRC digital transformation play a role in closing the tax gap?

JA: As you said, the tax gap is a very, very large number. Underpinning that is lots and lots of different behaviours. At one end, the most egregious end, we see evasion. We see criminal attacks on our systems. But at the other end of behaviours, we see errors, and also something we call failure to take reasonable care, which is where people are just not necessarily maintaining good records. Digital services primarily help that, ending error and failure to take reasonable care. We’ve all made mistakes, re-keying numbers, transcribing numbers from one system to another. Simple errors like that can be removed from our from our system, but also having digital links to other data sources, things like open banking, will allow data sometimes to be pre-populated in systems. So again, the more digital you are, the less scope there is for error. So that’s one of the reasons we’re quite keen on digital services. It doesn’t, as I said, necessarily crack down on the evasion, but sometimes will make it more obvious if people are manipulating figures. So again, it won’t necessarily automatically help there, but again, across all those behaviours we see in the tax gap, it should help us.

SR: So as you say, it will enable HMRC to have a bigger picture. So even on evasion, as you say, you may be able to help crack down on that?

JA: Indeed. And if we see all the information around a taxpayer, we can sort of spot anomalies. If we look at different tax regimes all together, we might be able to spot anomalies where people are maybe deliberately under-reporting income.

SR: If we look at the tax gap by customer group, then 60% relates to small businesses, and that’s up from 56% in the previous year. What has been done to address this?

JA: The small businesses, they cover a variety. And just before I get into what we’re doing, sometimes they are incorporated small businesses, so corporation taxpayers, but often they are self-employed people, unincorporated businesses, you might say, and landlords, that sort of group of people. So that’s what we’re talking about. And we’re talking about this across different taxes. So some of it is income tax, some of its corporation tax. Part of our strategy here is greater digitalisation. So MTD for income tax is really targeted on that group. But we’re also thinking about kind of, can we simplify processes where possible? So, you know, we’ve widened out the scope for three-line accounts to allow those who are self-employed to report on that on that basis, that should make it easier. And if we make it easier, hopefully more people will be able to comply with that without obligation. So it’s a combination of digitalisation, simplification where we can, but also, where do we get new data source sources from, as well to double check. So we get data from merchant acquirers on credit cards that allows us to better understand the difference, maybe a discrepancy, between what people are telling us and what we know from credit card companies. So there’s a wide range of things. Third-party data, simplification and digitalisation would be three, I would really pull out.

SR: On the whole, those three measures shouldn’t necessarily impact too severely on a compliant business. It shouldn’t get in the way of normal businesses going about their day-to-day running of the business?

JA: What we want to do is encourage good record-keeping, and if you’re keeping good records already, the extra burden should be relatively modest.

SR: A particular challenge for small businesses as well is that you’re having to engage with and apply rules which are actually quite complicated to understand. So for example, wholly and exclusively – simplification does play a part in that?

JA: Yes, it does. And again, I would distinguish as well between small businesses, say, in the corporation tax regime, where there are many obligations that go with just being a company. That does add to the degree of complexity. How you withdraw money from your company, for example – you know, making certain you understand what is your money and what’s the company’s money. Those sorts of things do add a degree of complexity. And again, the main challenges we see for small businesses in general is, as you say, hinting at what’s a reasonable expense, what is allowable expense, and also making certain we have a complete picture of people’s income. So there’s a number of elements there that we need to get right.

SR: For HMRC, closing the tax gap also involves raising standards in the tax compliance and advice markets. On L-day [Legislation day], legislation was published in draft that requires agents to register with HMRC and expands HMRC powers, where advisors facilitate non-compliance. Our members tell us that they are very concerned that the draft legislation will not drive out the bad actors, but merely increase costs for the rest of the market. How does HMRC strike a balance between driving up quality and not pushing up the cost of tax advice, with the risk that fewer taxpayers can get help from agents, widening the tax gap and increasing the burden on HMRC resources?

JA: Let me start with registration. Now it’s very important – elsewhere we have been consulting on regulation, but registration really allows us to have a better understanding of which agents we have in our system, and who they’re acting for. So it’s really a baseline for just making certain we know who’s doing what in the system. Now we’re not going to be charging for registration. That’s a service we’re going to be providing. It will require some upfront information, just so we can verify who we have in the system. But the aim here is to make certain, if we want to take action against somebody – we already have powers to take action – we can make certain that action will stick. And if somebody is taken out of our system because we find them non-compliant in some way, they can’t then just come back in through another route. So that’s the aim there. And we are seeing, you know, the vast majority of agents we deal with are adding value to the tax system. They’re helping people to get their tax right. But we do see a small number of agents who don’t uphold those standards, and we do need to think about what powers we need to tackle those agents. And we’re constantly thinking about, have we got the balance right? And it is a balance between wanting to tackle those bad actors, but also not inconveniencing, as I said, that majority of agents we see who help us get the tax.

SR: As you say, agents are crucial in making the tax system work well. But obviously everyone is interested in driving out the bad actors. It doesn’t help agents at all if bad actors are in the field. On agent registration, that takes place – it’s going to come in from April 2026 which isn’t too far away now, and roughly the same time as making tax digital as well. Do you feel comfortable at HMRC that you’ll be up and ready for that?

JA: Yes, I’m pretty confident on both of those programmes. Certainly, I’m confident we’ve got good processes in place. Also, I think with new programmes like registration, we also need to recognise we might not get everything right first time. We might need to change things, but we’ve been consulting, we’ve shared information on what we think the right approach is. So hopefully we’ve been very transparent, and we’re building all the systems needed, but it will be a little bit of a time for us to get really up to speed, make certain we’ve got everything absolutely as we want it to be working.

SR: And once we do get agent registration up and running, and once HMRC has its expanded powers to deal with the bad actors, will there be a period of quiet where you reflect and see if this has actually worked or not, whether the problem still remains?

JA: Yes,I think we want to learn. And actually some of the things around powers has been reflecting on some of the challenges we’ve found, using our existing powers around dishonest agents. And again, you look at kind of, have you got the right powers? Is it working in the way you want? And then you think about whether you should change it or iterate. As I said, there’s a separate conversation, really, around regulation. You can have regulation with registration, or you can have registration without regulation. The two are separable, but that’s just a question we haven’t yet come back to thinking about – what the future is for that regulation question.

SR: So all of the things we’ve discussed so far, they would all be easier to achieve if tax rules were simpler to understand and to apply. The transformation roadmap talks about simplifying tax administration, which is welcome; as we covered earlier, complying with tax obligations costs businesses a significant amount of money. But is this a missed opportunity to make significant changes to tax legislation and so make all of our lives easier?

JA: Tax legislation is complex for a number of reasons. Sometimes there is scope for simplifying, taking out some complexity. But we do live in a very complex economy, and some of those rules are there to reflect that we need to make certain we tax economic activity in a consistent way. And sometimes, you know, the complexity of that economy is changing. You know, a few years ago, nobody would have thought about how you tax crypto assets. Now we have to think about how those rules apply there. Do we need something different or bespoke for those arrangements. And also tax itself is there to do a number of things. Yes, it’s there to raise money. But successive governments have also sought to change behaviours through tax. Taxes encourage certain behaviours or discourage some of the other behaviours. So there is going to be an element, I think, of complexity in the tax system, where we put advice to ministers about what those trade offs are. But there will be some, I think, some fundamental challenges in how simple you want the tax system to be, given the complexity of the economy, given the outcomes, fairness or economic activity that you’re looking to promote or not.

SR: And of course, determining the tax treatment of something can be quite subjective. That’s the way a lot of our rules are drafted, and that can cause a lot of problems in terms of differences of interpretation when it comes to the tax advice profession and HMRC. If that’s something that you’re not necessarily going to address in your legislation, would improved HMRC guidance help?

JA: Yes, guidance, I think, is really absolutely key here. There will be new products, new services come online. How they are dealt with in the tax system will have to be up for debate and dometimes have to be resolved through the courts. But I think good guidance can be really very helpful, being clear sometimes about how we are framing an issue, how we are approaching it, I think can be really very, very helpful. So I’m a big fan of guidance. I think if it’s done well, it can really supplement our legislative base.

SR: So finally, I think it’s very clear from what we’ve discussed today that HMRC has a lot on its plate over the next few years. We began this episode talking about the spending review. HMRC settlement was £7.3bn for 2026/2027 – an increase of £0.5bn on 2025/2026. But then it does fall away to £7.1bn for 2027/2028 and to £6.9bn for 2028/2029. And we also know from the Spending Review, as you mentioned earlier, that the government is asking HMRC to deliver efficiencies of £773m per year by 2028/2029. With that in mind, do you believe that HMRC has the financial resources it needs to deliver on the three priorities the government has set for it?

JA: It is those targets, and what we’re setting out is very stretching. I think it’s credible that we can get to that outcome. We can make those efficiency savings. But we are going to have to work really hard, but we’re also going to work with other people to make certain we land those changes really well. We want to make digital services better so we reduce the pressure on the phones, but how we do that is going to be, you know, it’s going to be joint work with taxpayers, with the end customer, but also with agents to understand what the challenges they face are. So it’s a challenging set of targets, but I think we’ve got a good shot at meeting all those targets and delivering everything in the roadmap.

SR: That’s good and also reassuring, as you say, that agents will be part of that.

JA: Yes, I think one of the things, and again, it’s not just me, but many of the senior leadership in HMRC, our minister, has been very keen to make certain we are open, as open as we can be. Sometimes there will be details we can’t share, but where we can share things we ought to be thinking about how we can do things together. It doesn’t mean we will always agree on exactly the way forward. Reasonable people can disagree over some of these questions. But I think just being open and transparent when we can be is really important.

SR: That’s great. We’ve referred to an awful lot of publications and documents today – the Spending Review, transformation roadmaps and the performance figures. And thank you, Jonathan for coming along today and bringing those to life for us and explaining them to our members.

JA: It was a pleasure. Thank you.

SR: That’s it for this episode. Many thanks again to Jonathan for your contribution.

All of the topics we’ve discussed today are covered in more depth and the articles linked in the show notes. If you found this useful, then don’t forget to subscribe so that you never miss an episode. You can rate and share the podcast too. We’ll be back next month with the next Tax Track. In the meantime, why not check out the sister podcasts from ICAEW? Accountancy Insights provides business, finance and accountancy analysis, while each episode of Behind the Numbers offers a deep dive into a selected topic. There’s also the students podcast aimed at young professionals. If you’re not already a member of ICAEW’s Tax Faculty, remember that Institute members can join the faculty for no additional cost. Faculty members receive our monthly TAXline bulletin. In addition, anyone can subscribe to receive our weekly TAXline newsletter containing the latest tax news from ICAEW. Thank you for listening.