HMRC’s digital dilemma
01 June 2023
More of our daily lives are becoming digital, the pandemic undoubtedly a catalyst for increasingly moving our transactions to an online platform with users enjoying the benefits. From HMRC’s perspective, the financial benefits of digital services over offline offerings are substantial, with up to £270m estimated savings every year. This would go a long way toward balancing the government’s books and supporting a resourced stretched department, with the work towards the self assessment filing deadline of 31 January being HMRC’s single biggest business event of the year.
The benefits of digital providing a simpler and more efficient service are welcome, however HMRC should be wary of running before it can walk. For example, HMRC launched the online UK property reporting service for capital gains tax disposals in April 2020, but many individuals could not access or use the online account, including digitally excluded users, and were forced to call HMRC to request a paper return instead. It took HMRC another three years to publish the form to download online.
The strides toward digital may not be necessary if HMRC simplifies the administration of the income tax system. For example, HMRC sets its own criteria for self-assessment which causes unnecessary administration for both taxpayers and HMRC. A welcome simplification from April 2023 is that HMRC has increased the threshold for filing a tax return if a taxpayer earns £150,000 or more from employment, up from the previous threshold of £100,000. However, these taxpayers are already paying tax through the PAYE system, and many have no other untaxed income to report so the tax return filing is an entirely administrative exercise. Better management through the PAYE system would remove the duplication altogether. Unfortunately, many taxpayers are not even aware of this rule, so for any simplification or digital transformation process to be successful, building knowledge through easy to access guidance available to the public is crucial.
The bottom line is that HMRC will always need to have offline facilities to be able to support digitally excluded taxpayers and will need to build trust in digital alternatives over time as many taxpayers still like confirmation from a human being on the phone. Unfortunately, trust from taxpayers may currently be in short supply and HMRC is arguably undermining its own digital efforts with the recent struggles in dealing with written and telephone enquiries. Most taxpayers are only concerned with getting their taxes right and are fearful of the consequences of getting things wrong. As a result, some taxpayers may find it difficult to have confidence in HMRC’s digital alternatives when HMRC is seemingly struggling with getting the basics right.
HMRC’s consultation is open until 7 June 2023.
The benefits of digital providing a simpler and more efficient service are welcome, however HMRC should be wary of running before it can walk. For example, HMRC launched the online UK property reporting service for capital gains tax disposals in April 2020, but many individuals could not access or use the online account, including digitally excluded users, and were forced to call HMRC to request a paper return instead. It took HMRC another three years to publish the form to download online.
The strides toward digital may not be necessary if HMRC simplifies the administration of the income tax system. For example, HMRC sets its own criteria for self-assessment which causes unnecessary administration for both taxpayers and HMRC. A welcome simplification from April 2023 is that HMRC has increased the threshold for filing a tax return if a taxpayer earns £150,000 or more from employment, up from the previous threshold of £100,000. However, these taxpayers are already paying tax through the PAYE system, and many have no other untaxed income to report so the tax return filing is an entirely administrative exercise. Better management through the PAYE system would remove the duplication altogether. Unfortunately, many taxpayers are not even aware of this rule, so for any simplification or digital transformation process to be successful, building knowledge through easy to access guidance available to the public is crucial.
The bottom line is that HMRC will always need to have offline facilities to be able to support digitally excluded taxpayers and will need to build trust in digital alternatives over time as many taxpayers still like confirmation from a human being on the phone. Unfortunately, trust from taxpayers may currently be in short supply and HMRC is arguably undermining its own digital efforts with the recent struggles in dealing with written and telephone enquiries. Most taxpayers are only concerned with getting their taxes right and are fearful of the consequences of getting things wrong. As a result, some taxpayers may find it difficult to have confidence in HMRC’s digital alternatives when HMRC is seemingly struggling with getting the basics right.
HMRC’s consultation is open until 7 June 2023.
