New HMRC tax system review suggests major shake up coming

HMRC has launched a major review of how the tax administration framework could be reformed.

This could pave the way for changes in the way in which tax liability assessments are carried out.

“Smarter use of data about taxpayers and their activities could create opportunities” for this change, officials said in new consultation papers released yesterday (23 March).

“The roles and responsibilities of the taxpayer, HMRC and third parties may need to evolve as well”, they added.

What do the new HMRC papers say about the review of the tax system?

One thing that jumps out from the papers is the call for evidence to begin exploring the opportunities for more frequent payment of Income Tax and Corporation Tax. We all guessed this would be coming in the early days of MTD.

Talking of which, MTD and digitisation feature heavily throughout the documents (The tax administration framework: Supporting a 21st century tax system).

What’s the purpose of this review?

In the new call for evidence, the Government says it’s seeking views on how the tax administration framework could be updated to:

• provide a better experience for individuals and businesses
• enable opportunities to further reduce the tax gap
• help build greater resilience and responsiveness to future crises

What might the benefits be?

The advent of MTD and new tech should “create opportunities to simplify and improve the taxpayer experience”, HMRC states in the papers.

It also adds: “The greater use of digitisation will provide further opportunities for estimating liabilities and processing tax reliefs in real time.

“The tax framework should complement and enable these changes to make the most of these advancements and ensure the benefits from tax modernisation are felt by both taxpayers and agents, as well as HMRC.”

If we look beyond the compliance aspect, these potential changes can be a positive for businesses who have more accurate data at their fingertips - making managing their task easier.

What about any immediate tax changes?

The papers have been expected since the Chancellor’s Budget on 3 March. It’s worth noting there were no big announcements about immediate tax changes despite some speculation in the media.

29 questions from HMRC for accountants to consider

HMRC has listed a host of questions – all of which can be seen here in the call for evidence. Our customers should look to respond to these questions by the closing date of 13 July.

Questions include:

• Where is the tax administration framework creating challenges to the trust that taxpayers place in the tax system and HMRC’s administration of it?
• Are there other international examples or models of tax administration that could inform this review of the UK’s tax administration framework?
• What likely changes and developments will the framework need to handle? What are the key priorities for framework reform in the area of calculating and assessing tax liabilities?
• What principles should govern HMRC’s collection, use and onward transmission/sharing of taxpayer data?
• What additional safeguards would be needed for taxpayers and third parties if the role of third parties/intermediaries was expanded?
• What benefits of the current legislation should be preserved?
• What are the key priorities for framework reform to support taxpayers to get their tax right and deter non-compliance?

How can accountancy software help?

Software is key to getting compliance right first time, every time. IRIS accountancy solutions do just that. Check out our pages here.