Digital plan for tax returns runs into IT issues

George Osborne’s Budget plan to digitise paper tax returns for most of the UK population by 2020 is already throwing up IT, security and software questions that appear unanswered.  

The chancellor has promised a “roadmap” to demystify the plan, but the questions are coming thick and fast -- and not just from accountants who stand to lose business as a result of it.

Under the plan, 15million self-assessors will be able to see, send and manage their tax accounts via PC, tablet or mobile whenever they like, initially from “early 2016.”.

But a further 35million people -- including small business owners who the system will be introduced to next year -- will use it by 2020. PwC calls this timetable “highly ambitious”.

A contractor accountancy firm hinted why. “We all know from experience that government IT projects rarely run on time,” says ClearSky Contractor Accounting.

Even if it was a private sector IT project, “one year [from now] to implement [it] is a very tough goal,” according to Iain McCluskey, a tax director at PwC.

He said: “This is a digital transformation of a very significant scale for HM Revenue & Customs, employers, banks and other stakeholders.”

Similarly, the five-year project will require many parts of government to work together, with banks and other parties, to deliver a “truly joined-up digital service” for taxpayers, says EY.

Indeed, it will be HMRC’s job to collate taxpayers’ data, yet it will be drawn from employers, investment firms, state pension services, banks, building societies and other sources.

Some of the information that goes onto a tax return is information that the Revenue already holds, such as the salary of a limited company director, so it will draw data from itself too.

But the department’s most recent attempt at an automated system, RTI, doesn’t bode well. “RTI payroll reporting has been far from trouble-free,” says FreeAgent, a tax software firm.

“So,” says the firm’s chief accountant Emily Coltman FCA, “I have my doubts as to how well a similar system would work for collecting other data.”

She pointed out that, by 2020, it is possible that small firms will be able to link their accounting software to government systems in order to share financial details.

There are therefore “genuine concerns about the security” of the IT that will underpin the system, Dawn Register, a partner at BDO reportedly believes.

She also thinks that the ability of HMRC to get accurate data flows is a concern, as is the procedure that will be in place for taxpayers to correct errors in the online accounts.

Seeming to try to head off such concerns, Treasury minister David Gauke says that what’s envisaged is “just like an online bank account.”

“Everyone can expect a very different experience from the one they receive today — it will be simple, personalised and secure,” he said, writing in Making Tax Easier.

“They will be able to register, file, pay and update their information, at any time of the year, using the digital device of their choice.”

More in line with the private sector’s interpretation of the plan, the Revenue has said that “some of the changes” required to bring it about require “investment in new systems.”

Contractor trade body the Association of Independent Professionals and the Self-Employed (IPSE), knows who should be brought in to build and run those systems.

“The UK has an army of 1.8 million highly skilled independent professionals who the government can draw on to implement this project without delay.”

IPSE’s Andrew Chamberlain added: “We would urge George Osborne to carefully consider the delivery of [these digital accounts], and ensure business groups are consulted.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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