Recent consultation submissions and Department of Finance publishes summary report on fiscal powers consultation

The Institute recently responded to the consultations Expanding the cash basis and Simplifying and modernising HMRC’s income tax services. Both submission responses are available to read in the Tax Representation section of our website. Key points from each are set out below. The Department of Finance has also published a factual summary report of responses to the “Consultation on devolution of more fiscal powers” launched late in 2022 by the then Finance Minister.

Chartered Accountants Ireland’s response to that consultation is available to read on our website. The report will help inform any incoming Finance Minister’s considerations regarding further fiscal devolution, and it would then be for a future Executive to consider any potential recommendations.

Expanding the cash basis

The following key points and recommendations are made in the Institute’s response to this consultation:-

• The cash basis should remain as opt-in only.
• The turnover limit should be aligned with the thresholds used for the VAT cash accounting scheme, which should also be uprated.
• The rules for vehicles in the cash basis should be reformed and simplified. A review of the simplified expenses regime should be undertaken, and their rates uprated.
• A number of recommendations are made to improve the self-assessment form in order to both raise awareness of the cash basis and minimise the impact of businesses moving between the cash basis and the accruals basis.
• The exclusion for business premises renovation allowance and claims for research and development allowance should be removed.
• A number of the current restrictions should be removed including the restriction on sideways loss relief and relief for interest costs. The cap on certain income tax reliefs needs to be uprated.
• The additional income tax and Class 4 NIC as a result of the transitional adjustments should be spread over a number of tax years via an election.
• A number of recommendations are made to lessen tax complexity.
• The Office of Tax Simplification’s (“OTS”) recommendations on tax education tools/learning should be included in the Tax Administration Strategy and HMRC should explore the potential to provide basic tax information or training to young people on entering the workforce.

Simplifying and modernising HMRC’s income tax services

Key points and recommendations are as follows:-

• HMRC should seek additional investment for the final two tax years of the current spending review period to ensure that current service levels do not further deteriorate and to support the introduction of new digital services.
• HMRC should focus on its current objectives for simplifying income tax services before considering more radical reform. A number of recommendations are also made to lessen tax complexity.
• Taxpayers should be able to opt out of the “digital by default” approach.
• HMRC’s current transformation project should include the development of a secure email communication channel for taxpayers and agents.  
• HMRC must develop, implement, and maintain online services and contact routes specifically for agents. A facility for agents to access their clients’ data should be included in the development of new online services. Agent services for taxpayer registration should also be developed in tandem with the development of any online taxpayer registration system.
• HMRC should examine the root cause of the ongoing high levels of amendments needed to PAYE codes and a review should be conducted of how RTI data could be used more effectively by HMRC. The March 2022 recommends of the OTS in its “Evaluation paper on improvements to the operation of the PAYE system” should also be considered by HMRC.
• Tax refunds for employees should not be processed into their employer’s payroll bank account and HMRC should consider how a similar system for PAYE could be implemented in the UK like the system currently available to taxpayers in Ireland.
• A roadmap should be published setting out how the digitally excluded will be catered for.
• Any new services must contain the necessary safeguards to protecting sensitive taxpayer data.
• A number of suggestions are made to improve the current ITSA criteria and codifying in legislation should be avoided.
• HMRC should consider how tax guidance principles can be developed outside Government Digital Service constraints and the recommendations made by the Low Income Tax Reform Group in its report on guidance should also be reviewed and considered for implementation.
• HMRC will need to embark on an education and communication campaign to communicate any new online services to taxpayers and agents. Several recommendations are also made to improve taxpayer education and awareness of the UK tax system.
• A full roadmap for the future delivery of the Tax Administration Strategy needs to be published.