HMRC has recently been reviewing its planned projects over the next few years and has recently announced a delay to some including halting progress on simple assessment and real time tax code changes. However Making Tax Digital for business is unchanged with the launch date of MTD for VAT still 1 April 2019 with 1 April 2020 the earliest date that MTDfB will commence for other taxes.

“HMRC Update – Prioritisation

Dear Stakeholder,

We wanted to share the detail of the work we’ve been doing to prioritise change in HMRC, some of which was mentioned by Jon Thompson and Jim Harra at today’s Public Accounts Committee hearing.

These changes will enable us to deliver new priorities – particularly EU Exit – while keeping us on track with our ambition to become the world’s most digitally advanced tax authority.

The final details of this work will depend on the confirmation of the Department’s 2018–19 budget settlement. But we wanted to share our direction of travel – and will continue to keep you updated as details are finalised with Ministers.

Achievements

Over the past couple of years we’ve delivered some brilliant results. In 2015, when HMRC secured £1.3 billion from government to transform the way we worked, we said that our goal was to become the world’s most digitally-advanced tax authority. That’s an ambition we still hold and are on track to deliver.

It means modernising almost every aspect of what we do – from the systems and technology we use, to where and how we work, through to the skills our people have.

Some of the highlights of our transformation work include:

• More than 15 million people now have Personal Tax Accounts, which were used 32 million times last year (up from 21 million the year before).
• New online services are used by millions – including an HMRC mobile app, virtual assistant, web-chat service, and tax credits payment tracker.
• Three million businesses now use Business Tax Accounts and we’ve launched live pilots that will enable them to keep digital records for VAT and income tax and automatically send information to us from those records, as part of Making Tax Digital.
• We have welcomed 13,000 new colleagues, announced the locations for 12 regional centres and opened our Croydon regional centre.
• Powerful new data sources, including land registry and credit card information helped us to secure a record £28.9 billion through our compliance work last year.
• We have delivered against our revenue targets and our forecasts show that we are broadly on track to meet our efficiency targets for this point in time – no mean feat.

Challenges

While our transformation is on track, it hasn’t all been smooth sailing. We were overly ambitious about the number of customers who would stop contacting us by phone and post after we introduced digital channels. Demand is falling, but not by the amount assumed in 2015.

Then, in 2016, the EU referendum result heralded potentially major changes in our customs, tax, tax credit and child benefit work.

For HMRC that means delivering essential programmes to support access to European markets and boost free trade with countries across the world. Many of these will be delivered through sophisticated digital systems.

This meant that, at the end of 2017, we had 15 major programmes and more than 260 projects running. So, given the scale of what we were already doing, it made sense to take a step back and look carefully at what we could, and should, deliver in light of those challenges.

We have prioritised the projects that make the most difference – pausing some work and stopping other projects to make room for our EU Exit work.

The things that we’re stopping or pausing will slow our journey but they don’t change our overall ambition to become the world’s most digitally-advanced tax authority. But crucially, they will allow us to support EU Exit while continuing to deliver ambitious changes for our customers.

EU Exit

Even before the EU referendum, we were working to replace our CHIEF customs system with a modern, more flexible service – giving us a head start on the task ahead. Today, 99 percent of the 55 million annual customs declarations are made online through our CHIEF system and 92 percent are processed within five seconds.

The new Customs Declaration Service (CDS) is flexible enough to support any new UK customs regime. While it’s on track to be delivered by January 2019, we are also upgrading the existing CHIEF system, so it can handle a greater number of declarations. Our intention is to run it in tandem with CDS during the transition – providing an extra level of assurance.

Other HMRC programmes will support the free flow of goods and revenue collection at the border. This includes ensuring the smooth flow of freight and passengers from day one, and introducing processes and systems that will allow frictionless movement of goods between the Republic of Ireland and Northern Ireland.

Identifying projects that have a supporting role in EU Exit change has been a major part of our prioritisation work. We will deliver other projects to support EU Exit – from changes to tax credits through to a number of VAT projects.

Individuals

We have made the decision to delay plans to introduce further digital services for individuals, to release project capability to EU Exit work. This means halting progress on simple assessment and real time tax code changes. The MTD for Individuals programme has made significant progress here, so we’ve laid foundations that will enable us to return to this in the future.

We remain committed to our digital ambitions: we will continue to encourage more customers to use their Personal Tax Accounts and will focus on improving the existing service. Additional services will be added only where they reduce phone and post contact or deliver significant savings.

We will pause work to digitise services that impact fewer numbers of customers, such as those paying Inheritance Tax, or applying for Tax Advantaged Venture Capital Schemes and PAYE settlement agreements.

And as no new tax credits claims will be made after January 2019, we won’t move ahead with an online service for new tax credits claims. We will focus instead on improving the existing Tax Free Childcare system. And changes to the Child Benefit system will be limited to the underlying IT infrastructure.

Business

As we announced last July, the pace at which businesses will be required to keep digital records and send information to us through Making Tax Digital has been slowed, to make the transition as smooth as possible, particularly for smaller businesses.

Delivery on this work has continued. We launched the voluntary Making Tax Digital for Business service for income tax on 15 March. We are also on track to introduce the mandatory service for VAT for those with a taxable turnover above the VAT threshold from April 2019, and a live pilot has just started.

As we confirmed last July, we will not mandate any further MTD for Business changes before 2020, at the earliest.

The prioritisation work means the convergence of business taxes from our current range of IT systems onto a single system will now happen at a slower pace. This will slow the creation of the single account for all business customers. This remains our ultimate aim and it does not impact the delivery of Making Tax Digital.

Compliance

Improvements to the tools and processes that our compliance teams use to identify, work and resolve compliance risks will now be delivered over five years, instead of three.

Ministerial Priorities

We will continue to deliver all of the additional work we were given in Budgets and Autumn statements for which we were given funding. This includes: the Soft Drinks Industry Levy; the Trust Registration Service; work to tackle avoidance schemes that seek to exploit tax and National Insurance Contribution advantages through Disguised Remuneration and Salary Sacrifice arrangements; and work tackling non-compliant overseas suppliers who sell goods to UK customers.

Regional Centres

Our move to 13 Regional Centres is an essential part of our transformation, and this work will continue. In order to ensure we progress at a manageable speed, and spread out the costs of our estates programme over a longer period, we will now refurbish Longbenton in 2020–21, two years later than originally planned. In Nottingham, we will either refurbish our existing Castle Meadow site, or move to a new building in the city during 2020–21.”

END OF HMRC UPDATE