Introduction

The Northern Ireland Tax Committee of Chartered Accountants Ireland is pleased to have the opportunity to comment on the above consultation launched on 15 August 2016 as part of the Making Tax Digital (“MTD”) project. Information about Chartered Accountants Ireland and the Northern Ireland Tax Committee are provided on the previous page.

We would be happy to discuss any aspect of our comments herein and to take part in any further consultations/initiatives in this area that there may be in the future. We wish to comment briefly on some specific aspects of the current consultation. Our comments herein have been compiled from feedback received from our members via various channels over the course of the last few months.

Chartered Accountants Ireland is supportive of the overarching principles of this consultation in the context of making compliance easier for taxpayers. However, as it sits within the overall MTD project we think the timetable is not realistic and should be reconsidered. The decision to not grant qualified and appointed agents access to a client’s digital tax account is short sighted.

Development of enhanced agent services has been in progress for over five years now with little to show for it. These services were announced many years before MTD and appear to be being left behind in favour of the development of the business and personal tax accounts. This is causing major problems for agents and needs to be addressed urgently.

Data issues

The sharing of information between third parties and HMRC inevitably raises privacy, confidentiality and security issues. It is comforting to note from the consultation that HMRC is upfront about the challenges they face in this area.

The OECD’s 20061 report on “Using Third Party Information Reports to Assist Taxpayers Meet their Return Filing Obligations” describes a number of critical success factors for efficient and effective arrangements (e.g., comprehensive third-party reporting systems, high integrity taxpayer identifiers, compatible legislative framework, and effective use of technology), bearing in mind the objective of providing as many taxpayers as possible with a pre-filled return that is largely complete.

That report also recommends that Revenue bodies contemplating the possible use of pre-populated return arrangements are likely to benefit greatly from a close examination of the experiences of Nordic region countries.

A number of other key principles matters of particular importance are highlighted:-

• The need to have a comprehensive base of third party information, covering both income and deduction items, that must be routinely reported to the revenue body;
• A capacity for this information to be accurately and rapidly reported to revenue bodies and matched, using a system of high integrity taxpayer identifiers, with taxpayers’ records;
• A capability to quickly deal with taxpayers’ adjustments arising with personalized returns.
• Optimal use of technology by information providers, the revenue authority, and taxpayers is also central to having highly efficient and effective arrangements in place; and
• A relatively simple legislative framework in place, thus limiting the amount of “adjustment” action required by taxpayers.

As the UK moves closer to pre-population it would seem sensible that the OECD’s report and recommendations are considered as part of this aspect of MTD.

Dividends and shares

The consultation proposals discuss HMRC’s ambition to open up access to new third party information sources by 2020 which might include information on dividend income and shares. Assuming an obligation is imposed on companies to report the paying of dividends, this would have a disproportionate impact on small companies from an administrative and cost burden perspective.

Additional avenues for third party information should be explored with care and we look forward to engaging with the planned consultation process that will precede the opening up of any new avenues.

Conclusion

If the proposals in this consultation are to meet their stated aim, any new IT systems developed must work as intended, for both the taxpayer and HMRC. Data must be accurate, secure and up to date if it is going to be used to prepopulate tax returns and assess a taxpayer’s compliance behaviour. Data protection and confidentiality will also critical elements underpinning pre-population of digital tax accounts.

HMRC is currently in the process of a major IT transition from its Aspire outsourcing contract to a new mix of in-house and external service providers. Timed with the MTD proposals, this raises concerns about whether HMRC’s systems will be able to cope with the inevitable scale of change MTD will require, which will include getting the MTD system up and running in parallel with the old self-assessment system for those not required to report more regularly under MTD.

The 2006 Carter Review2 advocated that any new systems developed should only be introduced after at least one years’ trial period. We advocate that this should equally apply to the proposals for developing digital services to support the pre-population of digital tax accounts.

In conclusion, the changes proposed are laudable but consist of too much change and too soon. It is disappointing that taxpayers who choose to be represented by an agent seem to be being penalised for doing so as their agent cannot access their digital tax account. We believe agents are vital to implementation and every effort should be made to work with agents and ensure that they can assist their clients in dealing with the huge challenge of MTD.

Freedom of Information

We note the scope of the Freedom of Information Act with regards to this submission. We have no difficulty with this response being published or disclosed in accordance with the access to information regimes. This response will be published on our own website in due course and will be available to all of our members and the general public.

Source: Chartered Accountants Ireland, www.charteredaccountants.ie