HMRC service standards

HMRC’s service standards remain a topic of major concern for ICAEW members. However, given that HMRC’s budget will be cut further in 2024, it does not appear that standards will improve any time soon. ICAEW’s Chief Executive Michael Izza wrote to the CEO of HMRC expressing concern about HMRC’s service standards. These concerns were raised in a meeting Michael Izza had on 16 October with HMRC’s Director General of Customer Strategy and Tax Design. 

The Faculty submitted detailed written evidence to the Public Accounts Committee inquiry on HMRC Standard Report 2022-23. The Tax Faculty was also quoted in the Times newspaper regarding HMRC’s possible closure of the self assessment helpline for a second time and the continued drive to move taxpayers to using HMRC’s digital services. 

Regulation of the tax profession

The proposed meeting with HMRC to discuss the regulation agenda that was referred to last month was deferred until the end of November. However, it is clear from discussions with HMRC that regulation in some form or another as a topic is still very much under consideration, with the possibility of a consultation document being published in the first quarter of 2024. 

Tax simplification

The Tax Faculty continues to consider ways in which the tax system might be simplified. Our current thinking is focused on identifying opportunities for ‘quick wins’ – namely measures that could be implemented quite quickly at little cost. Our initial view is that the scope for quick wins is actually quite limited. Therefore, we also need to consider measures for longer term simplification. We would welcome views and comments from members as we develop our thinking. 

Ethical standards in tax

As noted last month, a working party of the International Ethics Standards Board (IESBA) has been working on a long-running project to include a new ethical code on tax planning and related services into its international ethical code, which currently contains very little relating to tax. The latest draft included a number of revisions that were of concern to the profession; in particular one reading of the current draft might suggest that member firms could be prohibited from providing certain services related to resolving tax disputes. 

We held a virtual meeting with the working party to highlight these concerns and our conclusion that the text needed to be changed so that they were not potentially prohibited. The working party appreciated the concerns and noted that they were not seeking to prohibit such services in the circumstances we had highlighted. We will report further, but we are grateful to the members of the IESBA working party for agreeing to meet with us and are hopeful that the concerns will now be addressed by revisions to the draft text. 

Making Tax Digital (MTD)

On 23 October, Tax Faculty staff and other professional bodies participated in a meeting with the new HMRC Director of MTD. The professional bodies reiterated concerns about the fundamental design aspects of MTD. However, the outgoing Director made it clear that, although some welcome changes to policy detail and simplifications are expected at the Autumn Statement, the fundamental MTD ITSA strategy will not change. The following day, Caroline Miskin attended an MTD co-creation design workshop that considered HMRC’s plans for the new tax liability calculator that is being built for MTD.

Representational work

The Tax Faculty contributed extensively to the ICAEW Autumn Budget 2023 Representation 107/23 on the theme of resilience and renewal. It is clear from ICAEW surveys of members across every region and sector of the UK economy that members want an economy underpinned by certainty, clarity, stability and the right long-term incentives to influence investment, employment and growth. The tax recommendations reflect these member aspirations. 

A team from ICAEW had a meeting with James Murray MP, the Shadow Financial Secretary to the Treasury, to discuss the tax recommendations in ICAEW’s Autumn Budget submission. We also discussed HMRC’s service standards, problems in R&D claim processing hindering growth and the embedding of tax simplification within HM Treasury/HMRC.

On 20 October, Tax Faculty staff met with HMRC’s recently appointed Director of Individuals Policy, whose remit includes income tax, national insurance, pensions, charities, employment status, and financial support policies such as child benefit and tax credits. We agreed to maintain a regular dialogue on matters of mutual interest. 

The Tax Faculty submitted four representations in October as follows: 

ICAEW REP 096/23 EOTs consultation

ICAEW REP 101/23 Salary advances – Proposed amendments to regulations

ICAEW REP 102/23 Plastic packaging tax – Chemical recycling and adoption of a mass balance approach

ICAEW REP 103/23 Tax incentives for occupational health

R&D claims

Members continue to report major problems with HMRC’s checking, processing and repayments of R&D tax credits. Faculty staff have discussed the concerns with HMRC at several forums and meetings. We are also in dialogue with colleagues at CIOT and have also discussed experiences of the Irish R&D system with our colleagues at Chartered Accountants Ireland to see if there are any lessons the UK might learn from their experiences. 

In addition, the faculty is reconvening the ICAEW R&D working party that last met in 2022. We propose to discuss with the working party the current R&D claim landscape and identify what should be ICAEW’s next steps to address the problems, both in terms of HMRC’s approach to compliance and what the faculty should be doing to communicate developments and best practices to members. 

In the meantime, the Tax Faculty has published a guidance note on what information now needs to be submitted with R&D claims: TAXguide 07/23: Making R&D claims – what information must be submitted and when?

Meetings with HMRC

Tax Faculty staff attended the latest meeting of HMRC’s Representative Bodies Steering Group meeting, where topics discussed included HMRC’s current service standards and how they might be improved, MTD developments and an insight into how the tax gap is calculated (which underpins the MTD business case).

Meeting with the Adjudicator

Tax Faculty staff also had an introductory meeting with the new Adjudicator. Issues discussed included the increase in ‘premature’ complaints, HMRC resource constraints, gaps in HMRC’s digital services and HMRC’s complaints-handling process. We agreed to hold regular update meetings that had fallen off since the pandemic. 

Tax Faculty committee and other meetings 

During the month there were meetings of the Employment Taxes and NIC committee, the VAT and Duties Committee, the Duties Subcommittee and the Tax Policy and Reputation Committee. 

The Tax Faculty’s VAT manager Ed Saltmarsh joined the National Technical Committee meeting of the VAT Practitioners' Group (VPG) to discuss how we could work together more effectively going forward. The VPG is a membership body of over 1,000 VAT professionals working in practice.

Webinars and other events

TAXline editor Lindsey Wicks participated in a panel session at an event organised by ICAEW’s Corporate Finance Faculty on when and how to use earn-outs in deals. The event was to promote a new ICAEW Corporate Finance Best Practice Guideline on earn-outs in deals that is currently open to all ICAEW members – download your copy now.