HMRC review reveals digital plan for future of tax

This project was announced by Chancellor George Osborne as part of the spending review back in March, where he allocated £1.3Billion to the department to turn HMRC into “one of the most digitally advanced tax administrations in the world” However, this isn’t simply a case of creating an online portal for people to interact with HMRC. This project requires the tax authority to simplify its systems and integrate the data it holds across a number of silos. Equally, it will see the department shift from interacting with most people over a very short timeframe (when annual tax returns are filed), to frequent interaction.

Digitalization of UK tax administration has seen both revolutionary and evolutionary change. Revolutionary change has frequently – but not always been triggered by HMRC initiatives, while evolutionary change has taken place as technology, software and apps have increased in functionality and as digital platforms have become more familiar through online banking, shopping, and the growth of social media and digital information channels.

The government’s aim, explains Monteith, is to build a system that is digital from the original transaction, through processing and reporting, taking the profit, and paying the tax. Everything happening much closer to real-time than it is now.

According to the paper, a modernized registration process for tax should be straightforward, with minimal manual intervention, and only require taxpayers to provide HMRC with data once.

For data that needs to be inputted into the system as part of the assessment, the vision is for HMRC to request it at the right time and to receive it only once. If HMRC gets it right, this would mean that those paying capital gains on UK residential property would not, as they have to do now, report the gain within 30 days and then enter it again on a self-assessment tax return following the end of the tax year.

The government’s fundamental review of the processes that underpin the UK’s tax system, makes it clear that to be fit for the future the system has to embrace and embed digital technologies at its very heart Anita Monteith explains that change is coming.

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