Thank you for being a Tax Faculty member in 2023.

Looking back at 2023, it has been a busy year for everyone involved in tax. However, in contrast to the roller coaster ride that we saw at the end of 2022, this year saw a welcome return to some sense of normality in the tax environment based around a Spring Budget and an Autumn Statement.

In its quest to improve the UK’s investment record and growth and productivity, the UK government continues to amend investment incentives. However, at the same time, the freezing of personal allowances and reductions in the capital gains tax and annual dividend allowances are drawing more citizens into higher rate taxes, increasing complexity and exposing the number of ‘cliff edges’ in the UK tax system. These cliff edges hamper growth and productivity. The government’s abolition of the Office of Tax Simplification has done little to suggest that tax simplification is a priority. The complexity of the UK’s tax system, along with the problems caused by cliff edges, continue to increase year on year.

Alongside the increased complexity and the associated compliance costs, HMRC’s service standards remain poor. Many members continue to experience severe problems with HMRC’s administration of the tax system. These range from delays in processing and issuing of tax repayments through to lengthy delays in answering correspondence – a situation exacerbated by the inability to contact HMRC quickly by phone to resolve matters. HMRC’s answer to this is that taxpayers and agents should make more use of HMRC’s digital systems. Unfortunately members report that these are not comprehensive, are difficult to use and are not always joined up. We appear to be a long way from the promised seamless experience where agents can see and do everything that their clients can do, but we are continuing to press the case for improvements.

Problems with HMRC’s processing of R&D tax credit claims has also come in for much criticism from members. Although, clearly, standards of R&D claims submitted need to improve, many members have reported that all the claims they submit are being rejected, causing a serious cash flow problem for many companies. We have been in constant discussion with HMRC to see how the system might be improved for bona fide claims.

Looking ahead to 2024, there are a number of developments in the pipeline including:

• basis period reform and the adoption of the tax year basis from 6 April;
• the cash basis becoming the default option from 6 April;
• R&D tax relief – the proposed merger of the two schemes for accounting periods beginning on or after 1 April; and
• a possible consultation on regulation of the tax profession. 

We also have a general election coming down the track, with the inevitable tax policy uncertainty this creates. 

Taxpayers need help to ensure that they make the right choices and comply with their responsibilities. Whether you work in business or in practice, the need for professional tax advice has never been more important. The responsibility on ICAEW members to give good tax advice continues to increase. Whatever happens in 2024, we look forward to supporting you and guiding you through the forthcoming changes to the UK tax system. If you haven’t done so already, please renew your faculty membership so that you can continue to receive updates from the Tax Faculty directly to your inbox.