The clock is ticking on the 10-year plan

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The Government is undermining its own efforts in ‘Building a Trusted Modern Tax Administration System’.

27 April marked Tax Administration & Maintenance day. It’s a date in the calendar that tends to only draw the attention of those interested in future tax policy, though it has ramifications for the whole economy. This year, the annual announcement had three main planks: simplification and modernisation, tackling the tax gap and a set of further policy and administration announcements that feed into the Government’s 10-year vision of Building a Trusted Modern Tax Administration System.

When the Government published its initial vision document in 2020, there was a sense of urgency around the desire to overhaul and update the UK’s sometimes archaic tax system, setting out a clear vision for the future of tax administration in the UK. The ambition was to improve resilience, effectiveness and support for taxpayers, bringing the UK’s tax administration in line with more forward-thinking countries such as Denmark and New Zealand and reflecting the growing impact of technology.

The vision therefore centred on the role of a progressive extension to the Making Tax Digital (MTD) programme of work, harnessing systems and technological infrastructure to support taxpayers, and conducting a review of the overarching tax administrative framework.

There is little to dislike about a desire to improve the experience for taxpayers and businesses, supporting the scope for easier navigation of the tax system and the resolution of issues at first contact. If you also throw in the intent to eliminate paper-based communication and improve the tax gap, the vision’s appeal is further enhanced.

A little less consultation, a little more action

This Tax Administration day, the Government announced new consultations in a number of areas, including potential new options when considering how to pilot and test legislative changes as well as simplifying and modernising HMRC’s Income Tax services. That means that, nearly three years on from the publication of the vision document, we’re still in the consultation phase.

As a core stakeholder in the process, it seems fair to ask how much progress has been made. The short answer, regrettably, is not much.

The decision to postpone MTD for ITSA just before Christmas was the latest indication that this plan is falling behind. Even without further delays, the 2026 deadline allows little time to really deliver tangible improvement by 2030. Equally, it’s difficult to discern much progress in the move away from paper-based interaction, despite many in the profession being keen to see that gather pace.

Losing confidence

We support the Government’s vision but it needs to be deliverable, and to achieve that it will rely heavily on the accounting profession, software providers and others to buy into a realistic strategy that they are confident will come to fruition. Take MTD for instance – we have been staunch in our support for the transition right from the point at which it became clear that the Government was set on that as its course of action, but having made that commitment, the Government now needs to deliver.

Many stakeholders are affected. Unless software providers have confidence in timelines and plans, HRMC cannot expect them to invest the necessary resources in updating and adapting their products and services to help accountants and taxpayers reach compliance. Are they really going to buy into and push through solutions, having already been burnt by the delay to MTD implementation?

Providing reassurance

Given the slow progress to date, how can the accounting and tax community buy into the ambitious vision that’s been laid out but not backed up so far?

First, there needs to be recognition that little progress will be made without the necessary investment in HMRC. The Revenue’s current performance levels are well below what most of us would view as ‘modern, effective and efficient’, and any discussions about future developments will be moot for as long as existing systems and services fall short of reasonable expectation; the resourcing problem is nothing new, and remains a real issue. We raised this directly with the Chancellor ahead of the Spring Budget and it was disappointing to see no commitment to address the resource shortages at HMRC.

It’s likely that confidence will rise if HMRC delivers some quick wins. Stakeholders need to see real progress for reassurance that there’s a commitment to address and respond to customer challenges. This isn’t a call for a symbolic gesture, but some clear and discernible improvements in the short term.

Vital national interest

Because make no mistake – this is critically important to the UK’s economic future, and the risks of it failing are significant. If we don’t modernise our tax system, the tax gap will inevitably widen.

The PAC report Managing tax compliance following the pandemic released today (3 May) shows just how vital this overhaul is. With levels of non-compliance rising, the highly critical report states that HMRC must ensure it is never easier to cheat the tax system than comply. The report finds that over 2021-22, tax revenue yield dropped £9 billion compared with pre-pandemic performance. There’s a risk that, since HMRC “cannot demonstrate a credible deterrent effect of its tax-compliance work,” non-compliant taxpayers will continue to escape paying their fair share – meaning the tax gap could continue to grow.

No Government can hope to fund its programme without increasing the tax yield so modernising tax collection is imperative – especially in such a challenging economic environment. Similarly, failure to deliver will severely damage the trust between HMRC and its customers. Accountants in particular need to see, not just a commitment to change, but also a realistic ability to deliver on that change, along with tangible results in order to maintain their engagement with the process.

Real and lasting change is never easy. Reforming a system as resistant to quick fixes as the tax system is a big task and requires patience, commitment and political skill. As a voice of the profession, we have backed the Government’s plan right from the off. But as a critical friend, it’s important we speak clearly: more needs to be done, and soon, to ensure this ambitious and vital process really delivers for everyone.

Adam Harper is AAT's Director of Professional Standards & Policy..

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