Among the many Budget announcements were some which, while less eye-catching, may have important long-term effects.
The Government plans £180 million of investment in new technology for HMRC which is expected to produce £1.6 billion more revenue by 2025/26. The intention is to invest in improved IT systems to make it easier for taxpayers to deal with HMRC, to recruit extra staff to tackle tax evasion, and to modernise and digitalise the business rates system and generally improve tax collection and compliance.
If this plan is successful it would be an excellent return on investment, providing the technology performs as anticipated. As HMRC becomes increasingly guided by computers it is hoped that an appeal system will be in place to deal with the inevitable errors, and that the digitally excluded will continue to be protected and helped.
There is a plan for particular focus on early intervention on tax avoidance schemes which is clearly needed. The current loan charge demonstrates the difficulties which arise when a scheme HMRC believes is problematic is allowed to run for years. Taxpayers who believe their tax structure had been accepted may suddenly be hit by demands for years of tax in one go. Many of these taxpayers are not wealthy, and the sudden demands can be financially devastating.
Current confusion relating to the tax status of gig workers is also likely to store up similar problems for the future if not dealt with correctly now.
COVID support fraud
Some 1,265 staff are being tasked with combatting fraud in relation to the coronavirus support packages, where there is anecdotal evidence of material issues. There will also be a focus on DWP fraud and error. The fast roll-out of the support schemes, where the priority was to get relief to those needing it, appears to have proved particularly attractive to fraudsters. Catching these people must be a priority, both to reclaim the money and also prevent further abuse.
For some time, we have been expressing concern that HMRC was underfunded, especially with the extra roles it has had to take on in the past year in relation to coronavirus and Brexit. Let’s hope this is a step towards giving HMRC the funding it needs and deserves.