ICAS comments on proposals for HMRC to collect more data
By Susan Cattell, Head of Tax Technical Policy
9 November 2022
Susan Cattell outlines the ICAS response to proposals for HMRC to collect more data about the self-employed, employees and shareholders of owner managed businesses
'Improving’ the data collected by HMRC
ICAS has responded to HMRC’s consultation - 'Improving the data HMRC collects from its customers' The title could be viewed as slightly misleading, as the proposals would involve HMRC collecting more data and sharing it widely with other government departments. The additional data would be required from the self employed, employers/employees and shareholders of owner managed businesses – details of the data HMRC wants (and why) were set out in an earlier article. Some of the suggested benefits relate to HMRC use of the extra data – but others would involve sharing with other government departments.
The ICAS response raised some general concerns about the proposals – and commented on some of the specific extra information to be collected.
HMRC’s role and resources
HMRC’s core role is to administer the tax system and to ensure that, as far as possible, the right amount of tax is paid. However, in recent years its functions have expanded well beyond this core remit, so that it now has a role in a range of other areas, including student loans, minimum wage enforcement, benefits, money laundering regulation and most recently Covid support. Another recent consultation ‘Digitalising Business Rates’ also proposed that it should take on a role in the business rates system.
ICAS is concerned that HMRC’s resources have not kept up with its expanding responsibilities – with adverse effects on its service levels over a number of years. There is also a perception that it has not ‘bounced back’ from the pandemic as quickly as other organisations: poor HMRC service levels continue to be a significant issue.
ICAS does not believe that HMRC should undertake the collection of additional data (for other government departments), or the proposed role in the business rates system, as it is unlikely that the necessary additional resources will be available on an ongoing basis. The consequence will therefore be a further deterioration in HMRC’s service levels, which will undermine confidence in HMRC and the tax system.
Beyond the issue of resources, ICAS also questions whether HMRC should take on further responsibilities that are not part of its core role. Whilst some of the data mentioned in this consultation could be useful to HMRC in its work, much of the data would be collected on behalf of other departments. We believe this would be inappropriate and would bring with it considerable risk. GDPR issues would also need to be considered and addressed.
It is important that the tax system functions properly and that taxpayers trust HMRC to run the system fairly and effectively. Most taxpayers accept that HMRC requires data from them to do this, to establish the correct tax position. However, asking HMRC to collect and process large amounts of data that have little to do with its core role – and to pass on the data to other government departments – risks undermining trust and voluntary compliance.
It would be preferable to ask other bodies, for example the Office for National Statistics, to collect data for non-tax purposes and other government departments, in a transparent and open way – setting out exactly what any data collected would be used for. HMRC should dedicate its resources to running the tax system efficiently and maintaining acceptable service levels.
Administrative burdens for businesses
The proposals that employers should provide significant amounts of extra data about employees will impose additional administrative burdens and costs on businesses. It is difficult to identify any benefits for businesses from providing the additional data.
Large businesses are already subject to significant tax administrative burdens – and are currently having to devote resources to a range of other new tax-related issues (on top of ongoing work), including compliance with environmental tax and reporting requirements, and dealing with implementation of international tax reform.
Post-Brexit it is important to ensure that the UK remains an attractive location for multinational companies to do business – both to attract new investment and to retain businesses already located here. An efficient tax administration system, which minimises the administrative burdens placed on multinational enterprises is important.
Other comments
The ICAS response also included comments on some of the specific additional data to be collected, including comments on some of the practical issues that would be faced by employers in collecting the proposed data about employees.
This information may be held in different departments in a business (typically HR and Payroll) and in a number of different systems. Pulling it together to report to HMRC would not be straightforward. For large entities, with thousands of employees and operating from multiple sites, there would be an initial huge manual exercise (to collect and input the base data) – with frequent updates required as changes occur.
Costs will be incurred for updated software and altering business systems. Larger entities will be able to manage this – at a cost – but smaller employers may struggle. Many employers outsource their payroll function – adding another layer of cost and complexity because the additional data will need to be collected and transferred.
Let us know your views
We would welcome Members’ views on this consultation, or on other tax-related matters – email tax@icas.com to share your insights and feedback. ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by Members.