CIOT: Our work for a better tax system continues

The Chartered Institute of Taxation is an educational charity and established under Royal Charter. Our technical work is driven by our public benefit objectives, including seeking a simpler, more workable tax system and ensuring the interests of taxpayers are considered by policymakers.

We undertake this work through a small team of technical staff, and a large number of hugely-valued volunteers, including within our Low Incomes Tax Reform Group, who give their time to lead or participate in our activities.

Here we take a look at some of CIOT and LITRG’s achievements during the last 100 editions of Tax Weekly.

Much of our work is carried out through meetings with HMRC, HM Treasury and other government and parliamentary bodies across the UK, and via written submissions responding to consultations, commenting on draft legislation and guidance. In 2023, we held or attended nearly 300 such meetings, and made nearly 330 written submissions. That itself is some achievement, and testimony to the commitment of the team and our volunteers.

Some of our engagement has to be confidential, meaning we can’t share with members and the wider public the topic of conversation. It’s important to us that we respect this confidentiality, so that HMRC and other policymakers trust us to have ‘safe’ conversations about matters which might be considered sensitive, or in the early stages of development.

Similarly, we often have to walk a difficult line in our engagement with policymakers. For instance, the overwhelming theme of our engagement with HMRC in 2023 continued to be about their service levels. We have at times been critical of them and the steps that they have taken, but we do this in a balanced way, to ensure we continue to be ‘in the room’ for the more sensitive conversations that we would like to have.

HMRC and HM Treasury

While HMRC’s service levels remain inadequate in many areas, we have successfully raised our concerns with HMRC’s senior staff and ministers, sharing with them the results of our member surveys, and individual member feedback, highlighting the impact they have on businesses and taxpayers. We continue to work with, rather than against HMRC to improve service levels, and in particular how digital services for agents can be improved so that the frustrating and time-consuming phone calls can be minimised.

We are also working with HMRC to improve GOV.UK guidance, including as part of the review of tax guidance and forms for small business announced at Spring Budget 2023. We are represented on the Charter Stakeholder Group, where we look at HMRC’s performance against its charter, and suggest how HMRC might embed the principles of the charter into its operations. Following the abolition of the Office of Tax Simplification, we have been working with HMRC and HM Treasury to embed tax simplification in the policy making process and develop a framework in which simplification ideas can be considered. There is much more to do in all these areas, but we are in a good position to make further progress.

Making Tax Digital (MTD)

A significant focus during 2023 has been on Making Tax Digital for Income Tax (MTD for ITSA). We engage with HMRC at all levels, both at a senior level to discuss concerns with the policy, and more operationally to address difficulties with several of the key requirements. In the summer, we undertook a member survey about MTD covering both VAT and ITSA. We shared and discussed the results with HMRC, and we wrote to the minister before the autumn statement, expressing our concerns evidenced by the survey. 

Many of the simplification changes announced in the autumn statement, such as cumulative treatment of quarterly updates and removal of the end of period statement were measures which we had been encouraging for some time.    

We continue to work with HMRC on their digital services for agents and have shared what we consider to be the minimum standards required for new digital systems and new digital forms.

Research and Development (R&D)

Another significant focus  during 2023 was R&D, highlighting members’ concerns with HMRC’s compliance approach and the detrimental impact of this on the policy intentions of the relief. We engaged in constructive dialogue with HMRC about improving standards and ensuring that enquiries into R&D claims are effective at tackling error and fraud, while being balanced and fair for all claimants. We are already seeing improvements in HMRC’s compliance approach.

We have also worked with HMRC regarding other compliance changes, such as the introduction of the additional information form for all claims and claims notification requirements for new claimants. With the Autumn Statement confirming that the government will introduce a new merged scheme for R&D relief, we shared with HMRC our concerns about the rushed timetable, and potential uncertainty around some of the rules within the new scheme, and in our evidence to the House of Lords enquiry.  

Tax administration and compliance

We engage with HMRC on their approach to nudges and prompts in their one-to-many (OTM) letters – the letters that suggest there might be an error in an aspect of someone’s taxes, and what to do next. During the year we provided comments to HMRC on nearly 50 OTM campaigns, seeking to ensure that they are better targeted, clear in terms of HMRC’s concerns and next steps, and clear as to the penalty implications. 

We have also been working with HMRC’s Customer Compliance Group, to increase their awareness of how agents operate and the standards to which they must adhere, so that HMRC have a better understanding of the agent-client relationship, and ultimately place greater confidence on returns from and interactions with affiliated agents.

Devolved Taxes

We are pleased to have strong relationships with the Welsh Revenue Authority (WRA) and Revenue Scotland (RS), and their governmental counterparts.

In Wales, we responded to the consultation on the proposed discretionary visitor levy, substantial reforms to council tax and business rates. We spoke at the Welsh government’s annual tax conference, and participate in several working groups with the WRA and Welsh Government.

In Scotland, we responded to consultations on the transient visitor levy, the Land and Buildings Transaction Tax (LBTT)  Additional Dwelling Supplement, and on a devolved aggregates levy. We met with Tom Arthur MSP to discuss our priorities in the December Scottish budget, and we are represented on the Scottish Tax Advisory Group. We strengthened our engagement with Revenue Scotland, such as through attendance at the launch of their annual report, and discussions about their corporate plan. Along with ICAS, we put forward a detailed ‘half-term report’ to the Scottish Government, giving an update on their 2019 tax pledges and proffering advice for moving forward. 

Everything else!

We have continued our engagement with HMRC on the provision of a set of taxes already paid where the status of an Off-Payroll Worker is changed to ‘inside IR35’ following a compliance enquiry. We were pleased that the government accepted our position and have included an enabling clause in Finance Bill 2023-24. 

We have been proactive for some time in suggesting that a landlord's contributions to a tenant to carry out fit out to a building should be removed from scope of the Construction Industry Scheme. The government’s agreement in principle at the Autumn Statement to this change is therefore welcome, bringing a significant reduction in the administrative burden and removing cash flow disadvantages for start-ups and inward investors.  

We have engaged with HMRC on Basis Period Reform, discussing implementation and communication of the changes, with some of our volunteers taking part in testing HMRC’s online overlap relief request form. 

Following our scrutiny of the simplifying measure in section 29 and Schedule 2 of the Finance Act 2023, whereby income of any description from a trust or estate does not have to be reported if it is less than £500, the government introduced an amendment to ensure that, where a settlor has created a number of trusts and the £500 exemption is divided between them, any pension trusts are ignored.  

Low Incomes Tax Reform Group

The CIOT’s Low Incomes Tax Reform Group (LITRG) exists to give a voice to those unable to pay for advice in the tax system. Through LITRG, we provide free guidance to nearly 6 million people each year via the LITRG website and work to make the tax and related benefit systems more equitable and accessible for the needs of those taxpayers. Our LITRG team works closely with our technical team but operates with a distinct identity.

In 2023, LITRG held or attended over 350 meetings, and made around 70 written submissions.

LITRG contributes to the CIOT’s public benefit role by helping those unable to afford tax advice. This is fulfilled in two ways: by providing free, comprehensive online guidance; and by working to make the tax and associated welfare systems more equitable and accessible. Although aimed at those unable to pay for advice, the LITRG materials are widely used by CIOT and ATT members, other professionals and third sector advisers.

LITRG’s work covers a wide range of areas across the tax system. In 2023, we continued our work on highlighting issues with certain tax refund companies. As a result of concerns raised in 2022, over 60,000 individuals received a refund directly. Building on this work in 2023, we raised further concerns which led to a change in the law from 15 March 2023 allowing HMRC to render void assignments of income tax repayments. More recently, HMRC have amended the process for PPI tax refunds, requiring taxpayers to submit evidence of the original PPI claim.

Over the last few years, we have also led the net pay action group which has been pressing the government to put in place a solution to address the inequality of some low earners not receiving tax relief on their pension contributions. Draft legislation to put in place a scheme has now been consulted on which will help over 1 million people.

In early 2023, LITRG published a detailed report on HMRC guidance which received high praise and has already led to several changes. We were heavily quoted in the Public Accounts Committee report on Making Tax Digital and we continue to put forward views on behalf of unrepresented, small businesses.

When HMRC announced the closure of the self-assessment helpline in the summer, we tested the alternative routes for people needing extra support and flagged up deficiencies, to which HMRC responded quickly and dealt with some of the key issues. We often deliver presentations to other organisations – as a result of one such presentation, a local authority is now using a LITRG factsheet to help understand the correct employment status of personal assistants.

Multiple HMRC letters and HMRC guidance have been updated following LITRG feedback over the last year, making them easier to understand for unrepresented taxpayers.

To find out more, visit the  CIOT (www.tax.org.uk) or LITRG websites (www.litrg.org.uk), where you can find details of our submissions, news articles, and even how to volunteer.

Helen Whiteman CEO, Chartered Institute of Taxation

This article was originally published in Tax Weekly on 17 January 2024.