By 2020, Britain will have one of the most “digitally-advanced” tax administrations in the world.
That’s the aim of HM Revenue and Customs (HMRC), which in August published a consultation on its plans (“Making tax Digital: Bringing business tax into the digital age”).
Most businesses, self-employed people and landlords will keep track of their tax affairs digitally and update HMRC at least every three months through their digital tax account. The new system will replace annual self-assessment tax returns.
Oliver Fisher, head of policy and delivery for Making Tax Digital (for business), is responsible for a large part of the making tax digital (or MTD as it’s often abbreviated to). The project includes creating a digital tax account for each taxpayer (telling them how much tax they have paid and owe), making sure that the technology works and liaising with accountants and software suppliers, who need to link to the HMRC’s digital tax system.
“[I’m] responsible for the quality, design and delivery of the business tax elements of Making Tax Digital,” he says. “From the underlying thinking, through to the consultation phase. All the way through to the Finance Bill and the design becoming law. I’m also responsible for driving up insight and research around the design, recognising how important the value and design is in terms of an impact perspective.”
A big to-do list then.
Accountants often complain that HMRC doesn’t listen to them before it changes the tax system. But Fisher − who talks fluently in a measured tone − often using the business jargon that has infiltrated Whitehall (he calls taxpayers “customers”) − says that HMRC is listening
There’s HMRC’s “formal research programme”, which communicates “in a structured way” to businesses and tax agents about the design of the digital tax system.
HMRC’s senior leadership team, including Fisher and the director general of business tax, travel around the UK to meet businesses and accountants.
HMRC also talks to business bodies and the accountancy institutes and associations, including AAT, the Institute of Chartered Accountants in England and Wales and Chartered Institute of Taxation.
There’s also a “digital advisory group”, including accountants and people from software suppliers and those from a “customer background” who are “sort of a critical friend”.
“[MTD] is a big change and certainly ambitious,” Fisher says. “[It’s] comparable to the introduction of self-assessment and probably comparable to RTI, the digitisation of Pay As You Earn. [MTD] is a change that’s appropriate for the age. We’re trying to bring the administration of tax into the 21st century. We’re catching up with what many businesses are already doing.”
OK, but does HMRC, which has cut tens of thousands of jobs in the last 10 years, have the skills or experience to deliver such a large IT project?
As HMRC digitises the tax system it is due to replace its multi-billion IT outsourcing contract with Cap Gemini, which accounted for about 84% of HMRC’s total spending on technology between April 2006 and March 2014. Much of this will be run by HMRC again. Other contracts will be smaller and shorter.
Also, HMRC has to improve service levels which “collapsed” in 2014–15 and early 2015–16, according to the UK parliament’s Public Accounts Committee.
That doesn’t inspire confidence but Fisher says that HMRC’s recent record on IT projects is good.
“I’d focus you back down on what we have delivered. RTI, personal tax accounts with over three million users…” he says. “I think we have got a good track record in delivering IT projects. That’s not to say this is not a challenge. It is. But we are confident in our plan that we are taking [the IT] on a step by step approach.”
If we encounter a problem, and there will be challenges along the way [we can deal with it quickly] as opposed to building lots of stuff and releasing it in [in one go] and then being surprised when there are hiccups. Breaking things into small chunks is a different way of doing things for HMRC and for the government as a whole.”
Fisher also says that MTD isn’t an excuse to cut costs, for example, by sacking more staff.
“We’re building services to improve customer experience [and] to ensure that businesses are paying the right amount of tax and we’re driving out error. Although we do need to do so within the spending envelope that has been agreed.”
Fisher joined the Inland Revenue in 1990. He began doing customer, corporate tax and compliance jobs.
He moved to London about 10 years ago where he did a mix of cost-cutting, strategic and policy jobs at HMRC. Since 2014, he has been working on HMRC’s project to digitise the tax system.
“For me what really counts is that what tax really boils down to if you strip off the IT element and the legislative and customer insight, it comes down to people,” says Fisher, who lives on the South coast of England, opposite the Isle of White. “And it’s the way you interact, whether it’s colleagues at work, customers or professional advisers or what I’m doing at the moment with software provides. It’s integrity, professionalism and building trust.”
On weekends he teaches children to sail. “There’s nothing better than sitting in the boat or sitting on the shore on a sunny and moderately breezy afternoon and just watching children learn the basics of sailing and to grow in confidence and to enjoy themselves.” It must be a refreshing break from making waves in tax.
Nick Huber is a freelance journalist and has written for Accounting Technician magazine, The Guardian and BBC.