How do you solve a problem like TMA?
It is hard to argue that the Taxes Management Act 1970 (TMA), wouldn’t benefit from some substantial updating. It came into force back in the mists of time when the Inland Revenue and HM Customs & Excise had yet to coalesce to form HMRC, before separate taxation, self-assessment and even VAT (prior to 1973 we had Purchase Tax instead). After 50 years of updates, it now resembles more of a patchwork quilt than the solid underpinnings of a tax system. But where would one even start to tackle such a challenge? Well, the government has started with a call for evidence as part of a 10-year plan to build trust and modernise the tax administration system.
This consultation was issued in March as part of ‘Tax Day’ and closed this month (July). Developing some of the themes from the government’s 10-year strategy, the consultation’s scope was not limited to TMA, but encompassed any legislation relating to the collection and payment of tax over the complete duration of engagement from initial registration to compliance, payment, review and enquiry and safeguards, and finally deregistration for direct and indirect taxes.
As a consequence, it is, to put it politely, a somewhat unwieldy and at times unfocused consultation, which has been quite a challenge to respond to. On the other hand, it is only intended to be the start of a conversation, so there will be opportunities for further, more focused consultations as a result of this first one. In the Association of Taxation Technicians’ (ATT) response to this first consultation, we highlight some key themes which we think could be developed in subsequent rounds of discussion.
Systems and processes
While obviously all HMRC operations need to be underpinned by comprehensive legislation, what people engage with directly is not the legislation itself but HMRC’s systems and processes. It is the quality of these engagements that drive trust and a sense of the modernity of the system.
It is crucial therefore that any revision of framework legislation is not done in isolation from the digitalisation of the tax system. Future developments of framework legislation – in fact any tax legislation – should be developed not just by policy staff, but jointly with those with the relevant expertise and knowledge and understanding of HMRC’s systems to either confirm what is practically possible for these systems to achieve now – or what it is practically and economically possible to develop.
The development of the various pandemic-related support schemes is a prime example of how policy and processes can work together. We understand that both IT and policy teams were in the room at the same time during the development of these emergency schemes, ensuring that only those policy ideas which could be effectively implemented were taken forward. In contrast, the UK Property Reporting service was developed and accepted as a policy idea, before detailed review of the implementation established that a standalone service would be needed to serve it, resulting in serious problems regarding its interaction with self-assessment.
A consistent approach
One of the themes the consultation picks up is whether various aspects such as the timing of registration, payment of taxes and de-registration could be made more consistent. Since there are very good reasons why Stamp Duty Land Tax (SDLT) is due within 14 days and inheritance tax (IHT) within six months, we think it would be more useful to look for consistency in the mechanisms or methods of registration, payments etc – with processes following similar themes and existing information held by HMRC being used to pre-populate forms at least partially.
The Single Customer Account which is mentioned in the 10-year strategy – and which is presumably a development of the existing Personal Tax Account – would seem a good place to centralise a lot of taxpayer-HMRC interactions, provided of course that agents can be granted full access to all the same information that their clients can see.
While there are benefits to digitalisation, it also needs to come with support for the digitally excluded. There will always be an element of the population who are not capable of handling their affairs online and provision for this population remains important. Someone who might be digitally capable now may not be in the future because of age, illness or simply moving to a more remote location.
A number of times throughout our response, we highlight the importance of clear guidance. Taxpayers should be able to clearly see what they need to do – and by when. While any given tax return itself may not be straightforward, it is clearly essential that the taxpayer can understand their actual obligations. This is a key part of what an updated framework should achieve.
So where next? Well, having attended a few roundtables on this consultation, I don’t envy HMRC teams trying to create coherent themes from the vast range of comments which they will have received. Hopefully, subsequent more focused consultations will provide greater clarity on many of the various issues identified.
With April 2023 rapidly approaching, we suggest that HMRC’s efforts could be most usefully directed in the short term to tackling those areas of the framework that relate to Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA), rather than add yet another set of patches to the TMA 1970 quilt.