Plea for new tax rules to fit with digital systems

The call comes in the ATT’s response to an HMRC consultation on the tax administration framework.¹ In this consultation, the Government seeks comments on the legislation which forms the tax administration framework² as part of a longer term strategy to ‘build a trusted modern tax administration system’.³ The current legislation is a patchwork with some elements of current legislation dating back to 1970. While HMRC operations need to be underpinned by comprehensive legislation, what people engage with directly is not the legislation itself but HMRC’s systems and processes, says the ATT. It is the quality of these engagements that drive trust and a sense of the modernity of the system, adds the ATT.

The ATT response highlights the importance of developing tax policy jointly with digital teams who understand what can, and cannot, be achieved with the existing digital systems, or what developments can be practically and cost-effectively be added on.

Jon Stride, Co-chair of ATT’s Technical Steering Group, said:

“We know that HMRC can achieve impressive results when policy and digital teams are in the same room at the same time. The rapid development of the various COVID-19 support schemes is an excellent example of how policy and processes can work together. This approach where not just the what the policy should do, but how it will be implemented is considered from the start would be hugely helpful for all new tax policies.

“In contrast to the success of the COVID-19 support schemes, policies such as the new reporting requirements for UK residents disposing of UK residential property⁴ were developed before it was realised that a new, standalone digital system was required. We have received almost universal negative feedback from members about the new system, which has caused serious issues when it comes to interacting with the existing self-assessment system⁵. If more thought had been given to how the policy was to be implemented in practice earlier on, many of these issues could have been avoided.”

---

Notes for editors

1. The ATT’s submission can be found here. The original consultation ‘The tax administration framework: Supporting a 21st century tax system’, was first published on 23 March 2021 and closed on 13 July 2021.
2.  The tax administration framework is defined in the consultation as all the legislation relating to the collection and payment of tax from initial registration through to compliance, payment, review and enquiry and safeguards and finally deregistration for direct and indirect taxes.
3. HMRC’s 10-year strategy for the future of the tax system includes as an objective the development of a ‘fully digital tax administration system able to support taxpayers across the full range of their needs’.
4. Since 6 April 2020, UK resident individuals, estates and trusts who dispose of UK residential property and have capital gains tax to pay as a result, must calculate, report and pay that tax within 30 days of the completion of the transaction. These rules build on similar (but wider) rules for non-UK residents. To enable taxpayers to comply with the new rules, a new standalone service called the UK Property Reporting Service has been developed.
5. Most taxpayers who realise a residential property gain must also report the gain again on their self-assessment return. As an example of how the two systems do not operate well together, if it turns out that the taxpayer has overpaid capital gains tax during the year, then the overpayment can only be recovered (or offset against other self-assessment liabilities) via self-assessment if the taxpayer calls HMRC to request a manual adjustment is made to their account.