HMRC closes the self-assessment helpline, and MTD deemed ‘too complex’ to pilot. 

The HMRC makes a step to make all of our lives more difficult.

The HMRC has announced that it will be shutting down the self-assessment tax hotline until September.

The recent decisions by Her Majesty’s Revenue and Customs (HMRC) cast an already heavy shadow of doubt over its efficiency as an organisation, leading many to question its commitment to providing public service.

Is HMRC’s role as an organisation changing?

Recent developments suggest a potential shift in HMRC’s role, driven by the governments cost-cutting efforts. The decision to close the main self-assessment helpline until September 2023 raises serious concerns about the impact on the service provided to taxpayers. The plan, supposedly aimed at ‘redeploying’ staff and replacing human interaction with chatbots, could result in you poor taxpayers struggling to access the help that you need, let alone us accountants. We’ve all wasted time pressing 1 for this and 2 for that. It’s frustrating.

Chatbots and automation will make doing our taxes harder (except for those with great accountants who do all the work for them).

What happens next?

The once-local tax inspectors, familiar with the individual needs of their taxpayers, are being replaced by faceless call centre workers and automated systems. The risk of errors in tax returns increases, with the potential for some paying too much or too little. With HMRC’s limited resources, many of these errors could go unnoticed. Furthermore, there’s the added risk of scammers and ‘the bad people’ exploiting the system, even more than they do now.

Not only will most taxpayers face difficulties in completing their tax returns, but the demand on the helpline will also surge in the autumn. The HMRC reassures us that the move will free up advisers to address urgent issues and respond to emails.

Stirring in parliament

The consequences of HMRC’s decision have been widely criticised, even attracting the attention of Harriet Baldwin, of the House of Commons Treasury Committee. She expressed concern over the potential impact of the helpline closure on taxpayers and questioned whether HMRC thoroughly analysed the costs and benefits before reaching its decision. She also raised questions about the short notice and lack of transparency in this decision.

Why is Making Tax Digital ‘too complicated’?

The journey towards a fully digital tax system has undoubtedly hit a speed bump as HMRC continues to grapple with the complexities of transitioning to the Making Tax Digital (MTD) system. The project which was intended to streamline tax reporting for income tax and reduce errors, has been subject to ongoing delays and a disappointing pilot scheme.

HMRC underestimated the MTD Challenge

In a recent Public Accounts Committee hearing, HMRC CEO, Jim Harra, candidly admitted that the body had underestimated the challenges posed by the digital overhaul. The shift from traditional systems to MTD proved to be more complicated than initially thought, with the data migration process exposing ‘unforeseen’ issues and detracting from the next phase of the project.

MTD’s Potential Benefits and Current Limitations:

The MTD initiative was designed to facilitate tax reporting for small businesses and property owners, ultimately aiming to shrink the tax gap and lessen the burden on HMRC’s investigative resources. However, the reach of HMRC’s resources only extends to a small proportion of small businesses, and frequent turnover in this sector further diminishes the long-term benefits of compliance work.

A Failed Pilot

Despite the clear potential benefits, MTD’s first phase for income tax will not launch until April 2026, two years later than initially planned. HMRC officials were questioned about the alleged deliberate exclusion of taxpayers from the MTD pilot scheme, with only 15 meetings the eligibility criteria from a pool of over 1,100.

Explaining the delay and failure of the pilot scheme, Harra cited the incomplete development of several functions that would have created cumbersome workarounds and negatively impacted the user experience. The decision to limit the number of participants was primarily to ensure quality support for customers.

HMRC’s next steps

To resolve issues, HMRC says they will co-create solutions with stakeholders and collaborate with representative bodies. One such challenge involves developing language and tools that facilitate the use of the system by bookkeepers and accountants, who may also need access to tax returns.

Despite the setbacks, HMRC still expects a positive return from the MTD programme,. However, the National Audit Office (NAO) estimates a loss of £1.5bn due to the delay in implementing MTD. As HMRC continues to navigate the complexities of the transition, it is crucial that the body learns from past missteps and takes on a more collaborative approach with stakeholders. The ultimate aim of a streamlined, error-free tax system is in sight, but it’s clear that more work is needed to achieve this goal.

This article was originally written for Professional Driver Magazine