For many of those closely involved in working with the UK’s tax system, there has been little doubt that it has, for some time, been crying out for reform.
The government had already announced its 10-year strategy to “build a trusted, modern tax administration system”, and now we know more about what that will entail, and how it may impact businesses and individuals.
The UK’s first ‘Tax Day’ earlier this week saw a raft of announcements signalling changes to the tax regime, with the government setting out a series of measures and new consultations that it said will foster greater visibility and transparency.
There remains an emphasis on closing the ‘tax gap’ - that is the difference between the tax that is paid and what should be paid. Currently at a record low of 4.7%, authorities want to bring that down further, by removing errors and by doing more to tackle non-compliance, tax avoidance and evasion.
In practical terms, this will undoubtedly mean greater scrutiny of the tax affairs of businesses and private individuals and we have already seen evidence that HMRC is strengthening its armoury in that regard with a £100m investment in a 1,200-strong Taxpayer Protection Taskforce.
With Making Tax Digital to be further extended over the coming years, much of HMRC’s investigations will likely be carried out online as progress is made on delivering the tax administration strategy to modernise the system. This will deliver a fully digital regime designed to operate much closer to real time than at present.
Among the Tax Day announcements, it was particularly welcome to see efforts to raise standards in the tax advice market and discussion around making professional indemnity insurance compulsory for all tax advisers.
As a result, those with complex tax requirements will increasingly benefit from seeking advice from large teams with the requisite insurance, qualifications, and breadth of expertise across a multitude of disciplines.
Tax Day also saw some potential new measures revealed, for example, the government said it will consult on a new tax on the largest residential property developers with a new levy to be introduced in 2022 that will help to pay for the costs of cladding remediation.
There is much detail in the consultations that we as tax advisers will be poring over throughout the coming days and weeks.
The government hopes that by this increased scrutiny of tax measure will improve the quality of tax policy and legislation, relied upon by millions of taxpayers, and that is to be welcomed.
We look forward to working with government over the coming months as it shapes a fully digitised tax system befitting the 21st century.