ICAS calls for government action on tax simplification
By Susan Cattell, Head of Tax Technical Policy
26 September 2023
We have joined other professional bodies to call for the government to take nine actions to deliver on its commitment to tax simplification.
The importance of tax simplification
The complexity of UK tax legislation is reflected in complex tax administration systems which are difficult to use and do not facilitate compliance. Compliance is also undermined because many taxpayers do not understand their basic tax obligations. Complexity drives up costs for taxpayers (and HMRC) and undermines trust in the tax system. For businesses, it can divert resources away from running the business into dealing with tax administration.
We strongly support tax simplification, so we were disappointed by the abolition of the Office of Tax Simplification (OTS) in 2023. However, we welcomed the assurance from the current Chancellor, in response to concerns raised by the Treasury Committee, that the closure of the OTS did not mean that simplifying tax is no longer a priority.
We are keen to help HMRC and HM Treasury make progress with simplification.
Meetings with the Financial Secretary, HM Treasury and HMRC
In April 2023, ICAS joined with other professional bodies (CIOT, ICAEW, LITRG and ATT) to write to the Financial Secretary to the Treasury (FST), offering our support to help Treasury and HMRC officials achieve simplification and calling for the government to take nine actions to deliver on its commitment to tax simplification.
With representatives of the other bodies, we held a constructive meeting with the FST in May to discuss simplification. Subsequently, we have participated in meetings with HMRC and HM Treasury officials to discuss how simplification can be embedded in the system; we have agreed to form a regular group to discuss progress on simplification.
The professional bodies have also been working on a business case template for simplification suggestions, which we hope will provide a useful tool for the professional bodies, HMRC and HM Treasury, enabling consistency, easier comparison of ideas and consideration of key factors.
Second joint letter to the FST
We still have concerns that without a clear plan, focused resource, accountability and investment, it will be very difficult to deliver meaningful tax simplification and ensure that simplification is given adequate weight in the policy making process.
The professional bodies sent a second joint letter to the FST in September 2023, noting that publication of a roadmap for simplification would signal the government’s commitment to simplifying tax. We also requested a written response to our April letter, setting out the FST’s thoughts on each of the nine proposed actions:
1. Identify the characteristics of tax simplification
The government must set out what it means by tax simplification, so that everyone (officials and stakeholders) understands what the government is trying to achieve. There needs to be a yardstick for measuring success.
2. Ensure someone is accountable for delivery of tax simplification
Successive governments have introduced new taxes and amended existing ones – with no apparent accountability for the increased complexity. Someone should be accountable for delivery of simplification – either the Chancellor or the Financial Secretary to the Treasury (FST) – and progress needs to be monitored and scrutinised.
3. Include simplification declarations in tax information and impact notes
Tax information and impact notes (TIINs) are intended to give a clear explanation of a policy’s objective, together with details of the tax impact on the Exchequer, the economy and different societal groups. They should be expanded to include an assessment of how the measure compares against the characteristics of simplification. If it does not contribute towards simplification, an appropriate explanation should be given.
4. Gaining external input to policy design and implementation
The tax system contains many examples of legislation and obligations which are overly complex, because the tax policy-making process was not followed in full, and consultation took place too late (if at all).
The government should re-commit to the tax policy making process, consulting on new policies at stage 1 (setting out objectives and identifying options), with tax simplification considerations being a mandatory part of the process. Where exceptional circumstances prevent the full consultation cycle being respected, a Ministerial Statement should explain why that is the case, and what the government is doing to mitigate the adverse impacts.
5. Seek feedback from a broad range of stakeholders
One of the strengths of the OTS was its ability to engage with a wide variety of groups affected by the tax system. Steps need to be taken to ensure that input from some groups is not completely lost, due to reluctance to engage directly with HMRC or HM Treasury. The use of third-party researchers (such as Kantar Public and IFF Research) will need to increase.
6. Ensure HMRC and Treasury engagement groups include tax simplification as a standing objective
Ensure that tax simplification forms part of the remit for all stakeholder engagement groups run by HMRC and HM Treasury. This will help to embed the requirement for tax simplification across HMRC and the Treasury, rather than it being the responsibility of what seems to be, a small team.
7. Increase awareness and improve guidance
Taxpayers need to be informed of their obligations and entitlements and have easy access to guidance they can understand. Guidance on GOV.UK can be hard to find, inaccurate, and difficult to follow. Some improvements have been delivered but far more needs to be done.
8. Allow time for development and integration of systems
Changes to taxes frequently involve new processes and digital systems. Too often, recently, changes have produced new, stand-alone systems that are not integrated with existing systems. They also require separate credentials and agent authorisation processes. This causes confusion and duplication of effort. New services are also often introduced with less functionality than those they replace, either because insufficient time has been allowed for their development, or the importance of the existing functionality has not been considered.
In future, any tax changes should be capable of being accommodated within HMRC’s existing systems and processes, and sufficient time permitted for design and testing before being implemented. There should be a commitment that any change to existing processes should deliver, as a minimum, the existing functionality.
9.Adopt a consistent approach across tax regimes
Aligning rules and processes across different tax regimes, wherever possible, would reduce complexity.
Let us know your views
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. We welcome input from members to inform our work; email tax@icas.com to share your insights and feedback.
