Article by John Whiting, published in Accountancy Age on 30 September 2003.
January 31st, like Christmas, comes but once a year. For many tax practitioners, January 31st is in fact more familiar than Christmas, simply because the latter can disappear in a welter of self assessment (SA) work. The Chartered Institute of Taxation (CIOT) knows well from many members how much pressure they are under in the lead up to January 31st, so using part of the CIOT research budget in this area made sense. Our study was carried out by Catherine Pilkington, senior lecturer at the University of Central Lancashire; it surveyed CIOT and ATT members and thus looks at the 50% of SA taxpayers who are represented.
The aim of the study
was in essence to look at what in SA causes the time pressures – and ideas for improving the position. The full report can be found at www.tax.org.uk.
Advisers and Inland Revenue alike suffer from a bunching of work in the run up to the January 31st deadline. Nearly half the survey respondents said that the deadline created an unmanageable workload. I found it interesting, though worrying, that over a third reported that the filing date creates additional costs that cannot be recovered.
The problem can be traced to client behaviour: 83% of respondents say that delays occur through clients assigning too low a priority to their tax return – and thus to sending in information. This is to a degree inevitable, as is the feeling that high net worth individuals are the worst offenders.
One enduring issue with SA has been whether filing early increases your chance of being selected for enquiry. Regular Revenue denials have never quite killed that belief, though most practitioners (90+%) are with my firm in filing as soon as the return is ready.
What can tax advisers do?
Surely clients should be warned that if they don’t get information to you by a certain date, there can be no guarantees that their return will be in on time? Managing such a process will never be easy but I was surprised that only 53% do this. Less surprisingly, few respondents felt that increasing the late filing penalties would help, presumably on the basis that it would not change the underlying issue.
Differential fee structures struck a majority of respondents as likely to encourage clients to get information in earlier – but hardly anyone admitted to using them, not even offering a discount to those who send in all information by (say) 30 June. Why is this? I suspect advisers are wary of the possibility of client arguments and fee disputes. It would be an intriguing exercise to try and extend the low-cost airline seat-pricing model to SA work!
Changing the rules
Having an enquiry window of 12 months from the time the return is filed has, to me, the potential to help all sides, though I can see management issues for the Revenue. Views on this were mixed – 44% agree with me but 38% felt it would make no difference.
Most thought that changing the filing date wouldn’t help; one third wanted the date put back to 5 April, something I can’t ever see happening though tying filing dates to business year ends (as for corporation tax) does strike me as having merit for the self employed.
How could the Revenue help?
The Revenue’s considerable efforts on advertising were felt to have contributed only modestly. I remain unconvinced that the advertising is worth it; for represented taxpayers it can serve to confuse - an acknowledgement of the real deadline might help.
It is possible that some incentives for early filing might help – but most respondents thought that any incentive would have to be “significant” to make a difference. Would a £100 discount be enough, in the same way as a penalty of £100 suffices? Many thought that discounts would just move January 31st stresses to “discount day”. I tend to agree with all this.
I’d like to progress e-filing, asking the Revenue to share the benefits with advisers – indeed design the system with advisers in mind. It’s clear that some still feel bruised by ELS (I do); nearly half the respondents felt that they would incur irrecoverable costs in switching to FBI and also have to change working practices. E filing has to be the way forward but at the moment most advisers seem to be of the view that the benefits are all on the Revenue’s side. There is much more to be done here.
There are useful lessons for all parties in the survey results: taxpayers (should they choose to look!), advisers and the Revenue (I hope they take note). I’d like to see what the Revenue’s own review of self assessment turns up (will they do some proper work on those who miss the January 31st deadline?) and then we can try and work together to improve things, which can only be in everyone’s interests.
John Whiting chairs the CIOT’s Tax Policy Sub-Committee and is a tax partner with PricewaterhouseCoopers