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Where Taxpayers and Advisers Meet
Modernising the personal tax system
27/02/2012, by Low Incomes Tax Reform Group, Tax Articles - General
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LITRG welcomes a recent HMRC consultation on modernising personal tax and its ideas for creating a more transparent system, provided due consideration is given to those without access to technology. 

Introduction

LITRG’s assessment of the HMRC proposals is that it is good to look forward and consider how technology can enhance individuals’ understanding of their taxes, so long as due consideration is given to those who might be left behind. 
 

The consultation

HMRC’s consultation Modernising the administration of the personal tax system: Tax transparency for individuals set out ideas which build on technological developments of recent years.
 

HMRC proposals

The ideas put forward in the consultation include:
  • A tax calculator, planned to be available online from April 2012
  • An online tax account for all individuals 
  • Pre-filling of information on tax returns
  • A regular ‘tax statement’ for individuals 

 

Summary of LITRG response

LITRG welcomes and supports these initiatives, but stresses that careful consideration needs to be given to those who are ‘digitally excluded’ and therefore cannot take advantage of online facilities. Alternatives, including a paper option, are essential.
 
Tax statements and online accounts would have to be clear, explaining what the individual is expected to do and how any mistakes in HMRC data can be corrected. Given that HMRC data will be used for the calculation of Universal Credit entitlement, interaction of the two systems must be considered at an early stage. Arguably the best solution would be for taxes and benefits to be reconciled together in a single statement (or online portal for those able to make use of such channels).  
 
Encouraging people to engage with the tax system and educating them – whether at school, as students, or on arrival into the UK – is important. Indeed, LITRG thinks the Government should consider making tax awareness a compulsory part of the school curriculum.
 

LITRG recommendations for the short term

Many people believe that the PAYE system takes care of their tax, and there are few triggers to alert them to the contrary. The LITRG response therefore suggests that, as the above initiatives might be some years away from fruition, there are shorter term improvements for HMRC to consider. For example, steps could be taken to improve the format of existing information, calculations and statements – the PAYE tax calculation form ‘P800’ being a prime example. Indeed, taking some smaller steps towards transparency in the shorter term would help to inform the direction of the bigger ideas raised for the future. 
 

About The Author

The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation to give a voice to those who cannot afford to pay for tax advice. LITRG comprises tax specialists from professional practice and the voluntary sector, from publishing and from HM Revenue & Customs, together with people from a welfare benefits and social policy background. Visit www.litrg.org.uk for further information.
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