HMRC’s digital roadmap – two sides to every story

15 December 2015

In a first for Tax Brief, two of our experts go head to head in the debate about the newly-published digital roadmap.

Up first, is George Bull with his concerns… 

Digital is definitely the way forward. At least, that’s what I wanted to say when I began to write this piece. However, as the town where I live is suffering a power cut which is likely to take all day to fix, I am only too aware of what it means to be digitally excluded.

Which takes us neatly to my first reservation about HMRC’s digital strategy, which is the government-wide idea of ‘digital by default’. That’s fine in theory, but in practice it means that people who are committed to being good citizens and to discharging all their obligations to government, but can’t do so because they are digitally excluded, will be branded as non-compliant with all that means in terms of interest and penalties, loss of services and even naming and shaming. 

Digital exclusion takes many forms including:

  •  geographic – there are still many areas in the UK where digital access is so restricted as to be unusable for the purposes of tax compliance;
  •  income – it used to be said that those who could not afford a computer could always go to the local library. But what happens if the local library has been closed? Or is in another town with no access because the bus service has also been axed?
  • age and infirmity – not even post-millennials are immune from the passage of time; sooner or later all of us face the prospect of mental or physical infirmity with the attendant inability to reliably use digital communication.

So while I am a supporter of the government’s digital strategy, it must be a digital strategy with a heart. If the strategy does not recognise digital exclusion, then it does a disservice to all of us.

It would be good to feel that HMRC displays the kind of symmetrical and sympathetic approach which this requires. One only has to look at telephone call centre performance, or the Scottish rate of income tax letters sent with no telephone number on them, or at the operation of real-time information for employers (real-time for employers that is: HMRC still do not seem to recognise that they should also be providing real-time responses) to appreciate that this message really has not gone home yet. So there is work to be done within HMRC if they are to prove themselves worthy of implementing a digital strategy across England and Wales as a whole.

Underpinning HMRC’s demands for the mandatory digital discharge by citizens of their obligations to the tax authority are three further strands of reasoning:

  • the abolition of cash (a proposal currently subject to consultation);
  • the deep use of artificial intelligence to mine the web for evidence of transactions relevant to citizens’ tax obligations;
  • more not fewer self-assessment returns (whatever happened to the Chancellor of the Exchequer’s Budget Day announcement on the 'death of the tax return'?

These are all huge issues which need to be debated properly with all the implications understood. The digital project is enormously complex but, as it stands, HMRC seem to be rushing towards implementation in some areas without clear recognition of problems in others, and no thought as to how others still might be addressed. Citizens need to have confidence that they can trust the tax authorities with this issues. That trust has to be earned.

Returning to where we started, don’t get me wrong: I am very much in favour of the digital strategy, but not at any price.

Next up is Andrew Hubbard who argues that actually it’s not all doom and gloom...

Like most people I look forward to completion of my tax return about as much as I look forward to a visit to the dentist. So if you had read the press reports suggesting that I will in future have to do four returns a year, you could be forgiven for imagining that I have sunk into despair. Far from it. I take a lot of positives from the publication of HMRC’s digital strategy roadmap.

In the new digital world much of the routine form-filling and processing of information should disappear, as information already held by HMRC will automatically appear online in my tax account. Similarly, information about business activity or property income will automatically flow though into the tax account from record keeping software without the need to extract figures manually and submit them in a tax return. If all of this works – it is a big ‘if’, but I am broadly confident that it will – then most tax compliance will be a continuous low-level process which operates ‘under the bonnet’, as it were, without the need for returns as we currently understand them.

Of course there will be lots of challenges in making this work. I think that making the IT itself work is probably the easier part. The more difficult area will be getting the legislative framework right. This will not only involve wholesale changes to the rules governing filing dates, interest and penalties but also changes to the way in which business profits are calculated. If we can get to a system where, at least for small businesses, taxable profits do not require year-end adjustments but can be measured in real time on a cash in/cash out basis, then we will start to see the benefits of this new approach. I am heartened by the fact that consultation is built into the timeline at all stages and that there is recognition in government that there has to be a joined up approach between policy, administration and technology.

There are bound to be bumps along the way, and some of what is currently proposed may end up looking significantly different when it comes to be implemented. But I firmly believe that once the new system is bedded in, we will look back at the ways that things operate at the moment and ask ourselves ‘however did we cope with such an antiquated and cumbersome system?’