The problem with HMRC’s accessibility is well known to taxpayers and agents. Not only are call waiting times too long, but there are significant delays and errors in processing paperwork. We at the Tax Panel of the UK200 Group have discussed this a number of times, with members recounting a catalogue of lost forms, lost or delayed post, untrained or disempowered HMRC staff, and so on.

HMRC’s response has been two-fold. First, it has teams of people who are redeployed to deal with the most urgent matters. The problem with this is that it is just firefighting: the ‘less urgent’ matters then flare up later.

Second, it is trying to automate systems by moving as much as possible online. This offers huge opportunities, although it has a number of problems – systems are not ready in time, or cannot cope with the variety of taxpayers’ positions, or just fall over at important moments – but the key strategic issue is that the automation process is being done backwards.

Automated systems allow for taxpayers and agents to have control over their tax affairs, which should reduce the resources HMRC needs to deal with routine matters. However, HMRC’s resources have been reduced first, with the automated systems left to follow later.

This is equivalent to a supermarket stripping out the manual tills before the self-service ones have been installed. It would be far better to have maintained HMRC’s resources until the automated systems had had time to bed in.

The key strategic issue is that the automation process is being done backwards

Lack of resources

HMRC simply needs more resources to cover the next few years of Making Tax Digital – the move to digital tax accounts. Only once Tax Has Been Made Digital can headcount be sensibly reduced.

The subsidiary issue with Making Tax Digital is, of course, that HMRC is trying to run before it can walk. Having determined that an online tax account would be a useful tool for taxpayers to manage their existing tax obligations, HMRC is looking at how it can be expanded to cover a whole raft of new obligations.

This could be an excellent idea – in five years’ time, once the inevitable teething problems have been resolved. However, it has not even set out any ways in which the new information could be used by HMRC, never mind how it could improve routine tax compliance.

At present, if you look at HMRC’s case studies it almost appears that it is trying to become everyone’s management accountant and treasury manager, which seems to be a huge ambition – not to mention impossible and inappropriate – thing to attempt.

These problems are not all down to HMRC: the department has been told to cut staff far too early. Parliament needs to reinstate those resources and give HMRC the tools to build a better tax system, in conjunction with taxpayers and agents.

Deadlines slipping

HMRC was planning to start beta testing a system for quarterly reporting in July this year, which was encouraging when announced, but as the consultation seems to be moving very slowly this now seems highly unlikely.

Unfortunately, there seems to be no indication that the implementation dates will be moved to compensate, which is simply going to add more pressure to an already delicate system.

Backwards approach to tax policy

This all comes back to the making of tax policy, which works backwards in many respects. First we get an overview of a new policy and a start date, followed by HMRC’s recommendations for how it will work.

Then we get a consultation period, which closes almost immediately before the declared start date, and finally we get rules which may or may not bear any relation to those consulted on.

As a result, there is no time to actually test or consider the new rules before they are in force. Indeed, in many cases they come into force before the consultation finishes.

The whole system is too rushed. This is largely political – there is no mileage in announcing a policy that your successor will get credit for - but to be honest, I suspect that it is also fuelled by a tendency for HMRC to think that it can get it right first time without outside help.

A far better method is used by the Office of Tax Simplification. Its technique is to consult widely first, and only then to make recommendations. If a start date were only determined once the consultation is complete – with several rounds of it, if necessary - then we would get much better tax regimes.

We would also have much more time to ensure that they can be implemented properly by taxpayers, agents, software suppliers, and indeed, UK business generally.

Checklist for HMRC

With Making Tax Digital, which is a fundamental shift in tax reporting – arguably bigger than the shift to self assessment – we cannot afford to get these things wrong. We really need to take this step by step:

1)    Automate existing reporting, and bring it into one place; and

2)    Allow time to consolidate the position and ensure the information is flowing easily and reliably

and only then:

3)    Reduce or redeploy headcount that is no longer needed for compliance; and

4)    Identify additional reporting that would be useful, and repeat the process

Only once we have self-service tills in place, with people happily using them, should HMRC be cutting its customer-facing staff.

About the author

Andrew Jackson is head of tax at UK200Group member firm Fiander Tovell LLP 

Andrew is head of tax at UK200Group member firm Fiander Tovell LLP in Southampton, where he advises on tax issues for a range of clients from individuals and owner-managed businesses through to major corporates. Tel: 023 8033 2733 email: [email protected]