The future of taxpayer guidance
While welcoming a new vision of the future of taxpayer guidance, Donald Drysdale questions whether it would be achievable. The views expressed are his own and not necessarily those of ICAS.
Coping with change
Successive Governments have changed UK taxes frequently. HMRC’s daunting taxpayer guidance material currently runs to around 90,000 pages – and is growing.
Tax compliance relies increasingly on technology which is subject to rapid changes beyond Government control. Keeping up to date with both tax and IT has become a major challenge for practitioners and their clients.
The role of guidance
On 5 October the Office of Tax Simplification (OTS) published a report entitled ‘Guidance for taxpayers: a vision for the future’. This took a strategic look at the Government’s general approach to providing guidance for taxpayers.
The OTS focused on areas where improvements might positively impact the greatest number of taxpayers on the largest number of occasions. It suggested seeking quick wins where opportunities arose. And it recommended addressing difficult areas where the case for change was compelling.
HMRC already publish masses of information (e.g. tax rates, thresholds, and deadlines) and guidance (e.g. how to fill in particular forms, what certain legislation means, and what options are available to taxpayers). Although there are fine dividing lines, they take pains not to publish advice (e.g. which choices a taxpayer might best make, and what risks might be involved).
Supplying information and guidance is fully within HMRC’s remit. Providing advice is not. However, where HMRC engage directly with taxpayers, they should draw taxpayers’ attention to options available to them.
Existing guidance has grown piecemeal, not as a single plan – until HMRC embarked recently on an overall review of their guidance manuals. The OTS thinks that HMRC should now give a higher and consistent priority to coordinating and directing their guidance.
The future of HMRC guidance
Based on wide-ranging consultations, the OTS concluded that HMRC should transform the guidance experience as an embedded priority, make the right guidance easier to find, improve guidance by renewed collaboration across the tax community, and clarify the extent to which taxpayers can rely on guidance.
Taxpayers need to know whether they have legitimate expectations to rely on published guidance. Other points remain open for debate – for example, whether binding rulings should be available from HMRC and, if so, whether these should be published.
The OTS paints an ambitious, strategic vision of a new model for future guidance. This assumes that technology will be deployed to the maximum possible extent to create a service where most taxpayers will not need to use any obvious form of guidance to comply with their tax obligations – and apparently little human contact with HMRC.
The report envisages that taxpayers “will instead have ready to hand a variety of simple, short and information-rich sources, from videos, voice-activated search on their phones, pop-up boxes that appear to tell them what to do, to automated processes that bring them to an appropriate answer to their specific question. This will not feel or look like formal Government guidance. It will look and feel like any other source of information that people have become used to using in the early 21st century: they will be as simple and intuitive to operate as when using the most modern IT devices.”
Simple guidance would cater for the majority of individual taxpayers. Advanced guidance would aim at more sophisticated taxpayers and others in business, while HMRC’s technical manuals would continue to be available primarily for tax advisers.
Clear links would assist navigation from one level of guidance to the next. Changes would be made swiftly, or the fact that a change was pending would be flagged quickly after the need for change was identified.
Revenue Scotland and the Welsh Revenue Authority also produce guidance for taxpayers. The OTS has not considered the guidance produced by those bodies, but some of the principles in its report could be relevant to them.
Is the OTS vision achievable?
Since its formation in 2010, the OTS has done much good work in recommending ways in which taxes might be simplified. Its wish to improve HMRC guidance and thereby simplify tax administration and compliance should be applauded, but at first sight its recommendations sound too futuristic to be achievable.
All too often, tax guidance material provided by the Government Digital Service (GDS) on GOV.uk is inadequate, generally because attempts to use plain English over-simplify what are complicated tax concepts. Practitioners and their clients have become accustomed to this, and have learnt to mistrust GOV.uk.
The OTS recommends that HMRC, GDS and tax specialists outside HMRC collaborate on equal terms when guidance is being written and updated, to make it as user-friendly and correct as possible. This might be a tall order, given that GDS already puts technology and plain English before accuracy.
While collaboration would be essential, the OTS wants clear ownership of all tax guidance to rest with HMRC – with one senior person in HMRC having overall responsibility for giving HMRC’s guidance a coherent high-level identity.
GOV.uk’s guidance is modified without notice, and cautious taxpayers and advisers have learnt the importance of retaining copies of HMRC guidance material they’ve relied on, as evidence to produce in the event of subsequent disputes. It seems unlikely that “simple, short and information-rich sources, from videos, voice-activated search on … phones, pop-up boxes [and] automated processes that bring … appropriate answer[s] to … specific questions” will facilitate such a prudent approach.
The innovative OTS vision of technology-supported guidance should be viewed in context. There are high hopes for what artificial intelligence (AI) may eventually achieve, but today some delivery mechanisms envisaged by the OTS are barely credible. Even at a simple level, practitioners are well aware of the flaws in CEST, HMRC’s online tool for checking employment status for tax.
No mention of IT literacy appears in the OTS report, but perhaps it should. While many under-40s may identify instantly with the guidance delivery mechanisms suggested by the OTS, a significant proportion of them – and many older taxpayers – will not.
Any project to substantially overhaul HMRC guidance would be massive and is being suggested at a time when HMRC are scarcely able to cope with Brexit-related pressures and other key projects. This might not justify ignoring the OTS recommendations, but could be reason enough for postponing their implementation.
While improved guidance would help taxpayers, radical simplification of our tax laws would be a much better aspiration.
Article supplied by Taxing Words Ltd