Tax

Brass tax: Simplify to digitise

Oct 01, 2020

The pandemic has broken several business taboos and accelerated the role of digitisation in all walks of life. The UK tax system is no different. HMRC’s role in developing the job retention and self-employed schemes’ online portals at speed to deliver support to employers and businesses at a time of crisis has shown that digitisation can be done quickly. It might not have been perfect, but it was very good. 

On the back of these lessons, the UK Government published its vision for tax administration in the UK in July: building a trusted, modern tax administration system. The strategic importance of this goal has clearly been brought into sharper focus by the pandemic.

An important part of the July publication was the announcement of further steppingstones in the roadmap of the Making Tax Digital (MTD) project, starting with extending MTD for VAT to VAT-registered businesses with turnover below the current £85,000 VAT registration threshold from April 2022. MTD for income tax will commence for self-employed businesses and landlords with income over £10,000 from April 2023.

But there’s one glaring issue missing from the picture: UK tax legislation is extremely complex. Unless this is seriously addressed, efficient, problem-free, further digitisation of the UK tax system cannot be effectively achieved. For that reason, the Government should also develop a roadmap for simplification of the UK tax system which should work as a precursor to any new digital services developed. 

This should begin with income tax complexity. If this doesn’t happen, having to navigate legislation that continually increases in complexity coupled with a requirement to make multiple filings to HMRC has the capacity to be extremely challenging for both HMRC, the taxpayer and their agent. The UK Government must simplify to digitise.

Leontia Doran FCA is a UK Taxation Specialist with Chartered Accountants Ireland.