Making Tax Digital

The direction of the Making Tax Digital (MTD) project continues to cause ICAEW’s Tax Faculty concern. In addition to our continued unease about policies such as quarterly reporting, the impact of basis period reform on the MTD project will create considerable complexity, burdens and costs for those whose accounting period does not align with the tax year end. During August, we held a number of catch-up meetings with software providers to understand their perspectives of the MTD project. We also attended meetings of HMRC’s Virtual Communications Group and the Issues Overview Group.

HMRC service standards

Poor HMRC service standards continue to cause taxpayers – and ICAEW members – a considerable amount of frustration and increased costs. The latest service performance figures did not make for encouraging reading. The concerns about long delays are now appearing regularly in the media and we provided several comments to the national press. HMRC’s latest statistics for April to June 2023 show that the average time for a call to be answered has lengthened to 22 minutes, up from 16 minutes for the year 2022/23. Some 70% of callers wait for more than 10 minutes and only 63% of calls are answered.

On a more positive note, the percentage of post answered within 15 working days has remained stable. HMRC has been allocated some additional temporary resource to clear old correspondence. However, the temporary resource is only available until September 2023.

Last month, we reported on a new HMRC initiative to tackle post that is more than 12 months old. Subsequently, HMRC has announced an extension of the trial to assist with processing post that is more than 12 months old.

Regulation of the tax profession

On 2 August, ICAEW attended a meeting between HMRC and the professional bodies to discuss raising standards/regulation of the tax profession. ICAEW attendees gave a presentation about professional conduct in relation to taxation (PCRT). 

It was agreed that better data is needed to identify the problems that need to be solved. HMRC raised concerns about the growing risks around data security, identity, tax software and the impact of AI on tax services. 

While HMRC recognised that professional agents are not the root cause of most problems that need to be solved, the corporation tax gap is becoming a growing cause for concern at HMRC. HMRC noted that 71% of companies use a tax agent, so it would be reasonable to expect professional advisers to play a key role in helping to support and improve corporation tax compliance.

Tax simplification

The Tax Faculty attended a further meeting with HM Treasury/HMRC to discuss how tax simplification will be embedded into their activities. Unlike the Office of Tax Simplification, which looked only at the existing stock of the tax rules, this work will also encompass the flow of new policy initiatives and how they will measure up to simplifying the tax system. We also discussed several ‘quick wins’, namely areas where we believe that tax simplification measures could be made relatively easily. 

Representational work

On 8 August, Tax Faculty staff joined a meeting of professional bodies with the advisers to the House of Lords Economic Affairs Finance Bill sub-committee to provide feedback on the draft Finance Bill 2023-24 and the areas that the committee might usefully discuss.

On 8 August, the Tax Faculty met with HMRC to discuss the need for further improvements to the PAYE RTI system.

On 9 August, we attended a meeting of the Representative Bodies Steering Group. The topics included service standards (including the latest performance statistics, clearance of old post, the impact of the self assessment helpline closure and HMRC’s assessment of its SMS deflect trial), HMRC’s activity on repayment agents and a possible refresh of HMRC’s Tax Administration Strategy.

On 14 August, the Tax Faculty attended a meeting of the Joint Customs Consultative Committee. 

Tax Faculty committee meetings 

During the month there was a meeting of the Employment Taxes and NIC Committee.

Representations published

The Tax Faculty submitted four representations in August, as follows: 

ICAEW REP 74/23 Reform of transfer pricing, permanent establishment and diverted profits tax

ICAEW REP 79/23 Non-discretionary tax-advantaged share schemes

ICAEW REP 81/23 Tackling non-compliance in the umbrella company market

ICAEW REP 82/23 Introducing a voluntary standard for customs intermediaries

TAXguide published

TAXguide 05/23 explains top ups for low earners in net pay arrangement schemes and the digitalisation of top-up claims by pension scheme administrators for relief at source pension schemes.