As taxation specialists as well as accountants, we are firmly of the opinion here at M&S that tax simplification is “a good thing.” Consequently, when we learned of the report from the Office of Tax Simplification (OTS – effectively the body that advises the Government on tax) which suggests that we could get rid of the need for self-assessment by allowing data to be automatically transferred from finance companies to the tax office, we were interested to learn more.
Unfortunately (inevitably!), despite its name, the OTS doesn’t always make things simple. Their idea is that data from banks, investment firms and pension providers could be fed directly into a digital tax portal where taxpayers could not only see their tax bills but also claim reliefs automatically.
The OTS believes this would reduce the number of people who need to fill in tax returns each year and also cut down on errors made during self-assessments and also help prevent late payments. Late payments mean, of course, that the government doesn’t have all the money it should have in its coffers, which is increasingly important as we pay for Covid. Moreover, errors and late payments have a nasty tendency to land taxpayers with fines.
What’s not to like? Well, quite a lot actually and I don’t think we will be alone. M&S is not the only organisation concerned about the potential risks and lack of safeguards – specifically issues around privacy and data sharing (GDPR). Whilst there will undoubtedly be safeguards and checks, I don’t think you can rule out the wrong information ending up in the wrong taxpayer’s records.
Further, if something is registered incorrectly within the financial institution (how often do we see names misspelt) there must be a concern that incomplete data could lead to HMRC undertaking unnecessary enquiries when information inevitably doesn’t match up. One such incident would undermine the whole process.
In many respects, this is putting the cart before the horse. Our view is that the government needs to start by simplifying the tax rules and then start trying to build a computer system around them. Credit where credit’s due: HMRC has done a brilliant job with the rapid set-up and implementation of the tech that underpins furlough and the other business continuity and support schemes. That said, this new idea from the OTS has too many potential problems around data privacy and consequently it’s not one we think people would support.
Stewart McKinnon, Director, M&S Accountancy & Taxation