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  • Editorial

    Digital Revolution

    TW Ed thinks it is high time HMRC used its vast information powers to help taxpayers to complete their tax returns, as set out in its latest Digital Strategy paper.

    Last week, HMRC published its Digital Strategy for 2014 and beyond. Beneath the froth and pratulent images, some good work seems to be in hand. Ordinarily, I’d (literally) fight shy of any publication which suggested that I “Think of it as a journey...” (8.2) but for once, I recommend people grit their teeth and read (this article and) HMRC’s paper. While this article focuses on HMRC using information it already holds to make it easier to fill in tax returns, there are some other issues which are picked up towards the end.

    Tectonic Shift

    Those who have been working in tax for long enough will recall the introduction of Self Assessment as being something of a revolution in the way that taxpayers were obliged to report and account for their tax affairs. In the good old days, the taxpayer told HMRC about his or her income, and HMRC worked out what tax was due... and then the taxpayer’s agent would tell HMRC why the sums were wrong – or incomplete. In the early / mid-nineties, the legislative ground shifted: the taxpayer had to do all the work, and the taxing authority was able to spend more time checking that work than crunching numbers.

    Since then, HMRC has spent considerable time and effort honing its information powers and using them: for instance, HMRC requires banks and similar institutions to provide details of interest paid to their respective account-holders. In recent years, HMRC has become quite proficient at processing such copious amounts of data to tie in to individual taxpayers’ records and highlight apparent discrepancies. Of course, HMRC has access to many more third party information sources than just banks and building societies.  

    HMRC’s digital capabilities appear to have increased dramatically in the last few years – not just in terms of raw power but also in terms of administration and organisation. Previous articles have referred to HMRC’s “Connect” tool, which aggregates and refines data from a vast array of sources, to provide a detailed picture about an individual. It has been said before that it will not be long before HMRC knows more about you, than you.

    Use Those Powers for the Greater Good?

    Again, those who are long in the tax tooth will recall that enquiries which opened around omitted sources often started with a dialogue along the lines of,

    “I have some information about you/ client. I am not going to tell you what it is, in the hope that, by aiming and missing, you/your client will disclose yet more omitted income. Let verbal Battleships commence.”

    Such fun and games are largely now a thing of the past, thanks to a greater emphasis on ‘sharing the perceived risk’ with the taxpayer...

    For the full article, see Will HMRC be Preparing Your Next Tax Return..?

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