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ICAEW responds on simplifying income tax administration


Published: 14 Jun 2023 Update History

HMRC’s discussion document on simplifying income tax administration covers several disparate topics. ICAEW’s response agrees that improvements are possible if HMRC has the resources to develop its digital services and the needs of agents are considered.

HMRC’s tax administration framework review (TAFR) is one element of HMRC’s 10-year Tax Administration Strategy, launched in 2020. The tax administration framework refers to the set of laws, regulations, processes and guidance that allow HMRC to administer the tax system. These elements are inextricably linked. IT and systems design need to be considered at the same time as possible legislative change. An initial consultation ran from March to July 2021. 

The initial consultation has been followed by several further consultations and discussion documents including Simplifying and modernising HMRC's Income Tax services through the tax administration framework, to which ICAEW has responded in ICAEW REP 53/23

ICAEW’s comments on the discussion document’s three main areas include:

Development and promotion of HMRC’s digital services 

Some of these services need to be improved before they become digital by default. The needs of agents must be considered before changes are made.

PAYE codes 

There are opportunities to reform current processes, many of which ICAEW has suggested in previous representations. While seeking to ensure that PAYE deductions match the final liability in so far as that is possible, HMRC should consider how it educates PAYE taxpayers to take more responsibility for their tax affairs. 

Registration and filing for income tax self assessment

In general, ICAEW agrees that HMRC should move to registration and filing being digital by default, but the amount of work involved in achieving this should not be underestimated. 

The criteria for filing a self assessment tax return need to be reviewed and clarified. ICAEW considers that legislation should be framed around a requirement to file a self assessment tax return, rather than a requirement to notify. 

There are some broader issues around the different ways in which income tax liabilities are finalised and the need for HMRC’s back-end systems to be properly interlinked. The current system of using PAYE code adjustments to deal with untaxed income and claims is often not satisfactory.

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