A single identifier for individuals and smoother registration processes are pre-requisites for a better tax system, argues ICAEW. HMRC also needs funding to develop an improved process for registering, authenticating and authorising agents.
The first of five areas tackled in HMRC’s Tax Administration Framework Review (TAFR) focuses on how taxpayers should be identified by and registered with HMRC.
In its response to HMRC’s consultation on TAFR, published as ICAEW Rep 65/21, ICAEW’s Tax Faculty concludes that a unique identifier and a simple registration process are vital for effective tax reform.
ICAEW highlights the need for a single, unique identifier for each individual or organisation that needs to interact with the UK tax system. Whatever unique identifier is chosen it needs to be adopted by all UK government systems operating tax and social security benefits and stay with an individual throughout their life as their circumstances change.
The Office of Tax Simplification has suggested that the solution might be to extend the availability of national insurance numbers (NINOs) to include all individuals who need to engage with the UK tax system.
Similar challenges exist when identifying organisations including companies, partnerships and trusts. In the future, HMRC may also need to be able to link individuals associated with those organisations, such as partners, company directors and trustees to their individual tax identities.
Agents are essential to the smooth running of the UK tax system and HMRC needs to be funded to develop a single system to register, authenticate and authorise agents that is fit for purpose and applies to all taxes.
The current patchwork of processes across different services, including the problematic digital handshakes for certain services, needs to be consolidated in an improved, streamlined process.
ICAEW argues that the system also needs to be able to accommodate multiple agents for different aspects of the same tax and changes of agent over time.
While acknowledging that a single registration process for all taxes is probably not realistic, ICAEW suggests it should be possible for a taxpayer or their agent, through the single digital account, to be able to turn registrations and obligations on and off as circumstances change.
There is an opportunity to reform the timing of notification of liability for income tax which in general needs to be closer to the time that the relevant source of income starts, but this needs to be done in a way that does not discourage those that fail to register immediately from doing so.
ICAEW concludes that there is also scope to reform the rules for notifying chargeability to income tax and to remove the confusion between notifying chargeability and an obligation to file a self assessment return.
Read more on ICAEW's response to TAFR
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