AAT RESPONSE TO: “HMRC Digital Strategy – legislative changes to enable
Paperless Self Assessment”
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INTRODUCTION
1.1
The Association of Accounting Technicians (AAT) is pleased to take part in
this opportunity to comment on the “HMRC Digital Strategy – legislative
changes to enable Paperless Self Assessment”.
1.2
AAT has 50,0001 Members and 75,0001 Students worldwide.
1.3
AAT has over 3,9001 Members in Practice who provide accountancy and tax
services, including assisting taxpayers to meet their statutory filing
obligations.
1.4
AAT is a registered charity whose objectives are to advance public education
and promote the study of the practice, theory and techniques of accountancy
and the prevention of crime and promotion of the sound administration of the
law.
1.5
In pursuance of those objectives AAT provides a membership body. We are
participating in this consultation not only on behalf of our membership but also
from the wider public benefit perspective of achieving sound and effective
administration of taxes.
OVERVIEW
2.1
AAT is supportive of the drive from the Government and HMRC to introduce
an end-to-end digital experience for taxpayers and claimants (hereafter
referred to simply as taxpayers), as previously outlined in the HMRC Digital
Strategy Paper published December 2012.
2.2
The proposals contained within the Consultation Document (condoc) provide
a positive step towards the published papers’ objectives. Any initial concern
that we might have had over the fact that taxpayers may not access their
secure mailbox regularly was mitigated by the fact that they will be sent a
notice (via email / SMS) that they have something to view.
2.3
We are pleased to note that the intended process is going to be on an opt-in
staged-introduction basis, with products only being made available when
technical capacity is available (condoc point 10).
2.4
Correspondingly we were pleased to note reference to a taxpayer’s ability to
opt-out in the future (condoc point 18). For reasons set out at 3.11 – 3.12 we
believe that such a facility should be made available.
Figures correct as at 31 October 2013
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2.5
The specific reference to agents under the “What this means for agents”
heading (condoc pages 7 & 8) is welcomed. Instructed agents fulfil a vital
role within the UK for many taxpayers who either find engaging with the
taxation system too onerous or who would simply rather engage the services
of those suitably qualified to take care of their tax compliance requirements.
2.6
AAT is concerned to note that the condoc has not given consideration to what
might happen on occasion of a major failure in HMRC’s IT infrastructure
which could leave an opted-in taxpayer unable to access their HMRC account
at what might be a time-critical moment.
2.7
We are further concerned to note that there appears to be a complete
absence of consideration within the condoc to providing taxpayers with the
ability to correspond with HMRC, either on a reactive or proactive basis.
2.8
Enabling an opted-in taxpayer to take reciprocal actions, such as an ability to
respond to correspondence received, or to submit unsolicited claims and
elections via their secure mailbox is, in our view, a vital feature of paperless
SA. We are concerned that a failure to build reciprocity in from the outset will
significantly hamper taxpayer take-up.
RESPONSE TO CONSULTATION QUESTIONS
Question 1
HMRC intends to make available electronically the Self Assessment products listed
at paragraph 9 to those who have opted-in to Self Assessment Online. Views are
sought on the suitability of those products being made available online.
3.1
We have reviewed the list of statutory notices, reminders and other tax
related communications (condoc, pages 5 & 6) and, provided that a robust
form of notification to taxpayers and their agents is in place, we consider it to
be reasonable.
3.2
In the case of penalty notices, enquiry notices or other time critical
correspondence remaining unopened we believe that after a period of time,
appropriate to the correspondence concerned, a formal notice should be
issued to the taxpayer concerned via the normal postal service drawing to
their attention the matter in hand and what the taxpayer might expect to
experience if they continue to fail to comply.
3.3
Taking into account delays experienced with the implementation of Agent
online Self-serve arising from the evolving and on-going work on the
Government’s Identity Assurance (IDA) programme, we would expect an
undertaking from HMRC, similar to the one that it is proposed to give to
taxpayers (condoc 17), that until agents have the same ability to access client
information online, electronic notices to represented taxpayers would be
mirrored with duplicate paper-based notices being sent to their agents.
Question 2
Many customers registered to use the Self Assessment Online service do not
personally access the system, but allow their appointed agent to file on their behalf
(see paragraph 22). HMRC welcomes suggestions on how customer consent can
be best achieved in circumstances such as these.
3.4
Taking into consideration the following “HMRC will not be providing agents
with the ability to automatically enrol their clients in the new service without
the customer having consented to the change” (condoc, 24) and taking this to
mean that there will not be a status of “Trusted Agent”, as previously
discussed as part of HMRC’s first iteration of its Agent Strategy, it would seem
a robust regime involving the issuance of a pin number direct to the taxpayer
to pass onto their agents would be required.
3.5
The above scenario is not dissimilar to the approach employed by the current
online agent authorisation process. The drawback from an agent’s
perspective is that the sending of a pin number to a taxpayer for them, in turn,
to pass on to their agent leads to delays. There are many occasions when for
a variety of reasons taxpayers fail to deliver to their agents the activation code
within a 30 day window from the date of origin. A failure to make use of the
activation code within the 30 day window results in the need for the
registration process to be repeated in order to obtain a fresh authorisation
code.
3.6
In fact, the scenario outlined in 3.5 is precisely the reason that many agents
continue to use the paper based authorisation process known colloquially as
the 64-8 process. Under this process the agent at the time of instruction
arranges for the taxpayer to sign a paper based authority which is then
submitted to HMRC and taken prima facie as being signed by the taxpayer
without any real validation of this fact. HMRC’s systems are then updated to
register the fact that the submitting agent is duly authorised, without the need
for recourse to the taxpayer. From the tax agents’ perspective the removal of
the taxpayer from the system (after their signing of the 64-8) makes the whole
process relatively straightforward.
3.7
Whilst AAT cannot readily see an alternative for taxpayers who do not want to
opt-in to HMRC’s paperless SA system, those taxpayers who have opted-in
and as a result have access to their own online account could nominate their
accountant / agent from within it and, thus, negate the need for either a paper
64-8 submission or for HMRC to issue an activation code.
3.8
Assuming the introduction of an activation code method for authorisation is to
be adopted, one possible practical low-cost aid aimed at reducing costs for
HMRC and agents alike which AAT would recommend to be implemented is
an automatic email notification to be despatched to the agent involved at the
time of the production of the authorisation code. Such action could be used to
put the agent on notice that a code had been despatched, making them aware
of the start date of the 30 day window, and thereby enable them to contact the
taxpayer to progress their supply of the activation code at the appropriate time
and reduce the incidence of taxpayers failing to supply codes to their chosen
agents within the allotted time.
Question 3
Comments are sought on whether the draft legislation set out in Annex A works as
intended and facilitates HMRC’s electronic interaction with its customers. In
particular HMRC welcomes views on the definition of ‘secure mailbox’, the deemed
delivery provisions and conditions and the provision and withdrawal of consent.
3.9
As a matter of policy AAT does not comment on the drafting of legislation.
Instead, as a matter of course, we reserve our observations to whether
relevant draft legislation is likely to achieve its objective from an operational
perspective, as well as considering what the possible impacts of the
legislation as drafted might be.
3.10
In this instance, after taking into account that the proposed legislation is for an
opt-in approach and that there is no move toward mandation, AAT supports
the intended change to the current legislation, provided that the ability for a
taxpayer to opt out is included in any change (see also 2.4 & 3.11 – 3.12).
3.11
Our view is that it is important to formally recognise that there might be many
reasons why a taxpayer might wish to reverse their decision for example:
i.
ii.
iii.
3.12
A move to a geographic area that does not enjoy broadband
coverage.
A change in the health of the taxpayer leading to their inability
to use computers.
Deterioration in/an unsatisfactory experience with the online
services provided by HMRC.
Taking into account that a significant proportion of UK taxpayers are, for a
host of reasons, digitally excluded and also the impact of three recent Low
Income Tax Reform Group appeal cases heard in the First Tier Tribunal (FTT)
in respect of taxpayers’ Human Rights, AAT would not be supportive of any
possible future move towards mandation.
Question 4
HMRC welcomes comments on the assessment of the impacts of these proposals in
the Tax Impact and Information Assessment on page 12 including but not limited to
the equalities impacts, impacts on individuals and burden reductions.
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3.13
AAT wishes it to be noted that without our being privy to the underlying data
available to those drafting the condoc our response to this particular question
will not be empirical.
3.14
We were surprised to read that there would be “negligible” impact on the
Exchequer. AAT perceives that HMRC will incur significant upfront costs in
respect of software and related system changes. Which we believe will be
followed by considerable cost savings, achieved through a corresponding
sustained reduction in post production, handling and despatch costs. In
addition HMRC will benefit from an efficiency boost achieved through the
removal of several days out of the despatch to arrival chain.
3.15
Whilst at present we cannot see any Equalities Impacts, taking into account
the recent FTT cases (3.12) and, as already outlined clearly at 3.11 above,
AAT would definitely not be supportive of any later move to mandation.
3.16
Whilst as observed at (3.14) we can see cost savings for HMRC through a
significant reduction in postage and post-handling costs, we are not
persuaded that there will be significant, if any, reduction in the compliance
burden for the taxpayer.
3.17
The main benefit arising from the proposals for taxpayers is not a cost saving.
Instead those taxpayers who decide, or are able, to opt-in will have an
engagement with their revenue authority that is not so dissimilar to the one
that they have with their banks, utility providers and many other third parties
that they chose to engage with. In fact, an experience that school leavers /
new younger taxpayers would expect as-of-right.
3.18
The main negative that we can see is that the means of communication
appears to all be one way, from HMRC to the taxpayer. If this is indeed the
case then it is a significant oversight that undermines the value of the
proposal and means that the objective of the consultation “Paperless Self
Assessment” will not be fully achieved.
3.19
Any failure to design into the proposals the ability for taxpayers to either
respond to, or initiate, correspondence from within their HMRC account will
lead to HMRC continuing to bear costs in receiving, handling and distributing
post they could otherwise mitigate. From the taxpayers perspective they will
increasingly be of the view that HMRC is an organisation mired in the 20th
century; which otherwise, in reality, might not be the case.
CONCLUSIONS
4.1
As observed in our earlier overview (2.1 – 2.4) the AAT is supportive of the
condoc’s proposal for a variety of reasons. We would not, however, support
any subsequent attempt to mandate the change. Our own recent research
into digital exclusion has told us that a small but significant proportion of the
UK population are digitally excluded.
4.2
We were pleased to note that Tax Agents were taken into account within the
condoc. As mentioned above (2.5) agents play an important operational role
in making the UK tax system work.
4.3
Whilst we fully understand the reason for the fact that agents will not have the
same access as taxpayers from the outset (3.3) we are nevertheless
concerned about this aspect of the proposals. Our concerns could be
addressed through HMRC giving an undertaking that all documents delivered
to a taxpayers’ secure mailbox would be sent using traditional post to their
agent, where there is one under instruction.
4.4
We believe that there is a need for HMRC to issue a paper-based notice to a
taxpayer in cases where they fail to access their mailbox (3.2) during a
statutory notice period.
4.5
AAT supports the need for the consequences of opting-in to the new service
to be clearly explained (condoc 14). An important function of the sign-up
process is that taxpayers should be presented with a “health warning” clearly
explaining to them what opting-in will mean to them in the future and
explaining the implications of their signing up. In particular this explanation
must cover whether the process is capable of being reversed at a later date if
such an action might be considered desirable in the future.
4.6
The omission of any consideration in the condoc of the impact on an opted-in
taxpayer of failure of HMRC’s IT system (2.6) is a significant issue that we
feel strongly needs to be addressed in any legislation that might flow as a
result of this consultation.
4.7
AAT believes that if HMRC wishes to ensure that it has maximum take up of
paperless SA by taxpayers it is vital that reciprocal functionality is made
available for opted-in taxpayers (see 2.7 & 2.8) from the outset. Whilst we do
not believe that taxpayers will benefit in the same way as HMRC from cost
savings, we do believe strongly that they should be able to take advantage of
the same efficiency savings.
4.8
Finally AAT recommends that HMRC hold discussions with its colleagues in
Companies House over the experience that they have gained in
communications with officers of companies, we feel that there might be vital
lessons learned by them that could be shared to the benefit of HMRC.
If you have any questions or would like to consult further on this issue then please contact
the AAT at:
email: [email protected] and [email protected]
telephone: 020 7397 3088
FAO. Aleem Islan
Association of Accounting Technicians
140 Aldersgate Street
London
EC1A 4HY