HMRC’s Transformation Roadmap

Overview of HMRC’s Transformation Roadmap

The Transformation Roadmap is a long-term strategy based on the principles of transparency, accountability, and innovation. Its core aim is to deliver a tax administration that is described as being simpler, more resilient, and better equipped for the demands of the digital age. The roadmap encompasses technological upgrades, policy reforms, and process enhancements across the entire spectrum of UK tax and customs administration.

The Transformation Roadmap is organised around several key pillars, each designed to address specific areas of challenge and opportunity within UK tax measures.

1. Digital transformation
   Digitalisation is considered to be central to HMRC’s future ways of working. The Making Tax Digital (MTD) programme, launched in recent years, aims to leverage technology to improve accuracy, efficiency, and accessibility. MTD mandates that businesses and individuals keep digital records and use compliant software to submit tax returns.
   Digital technologies should help to minimise errors, accelerate refunds, and enable real-time updates. Organisations above the VAT threshold are now required to use MTD for VAT, with plans to expand to income tax self-assessment. Although it is noted that MTD for corporation tax has been abandoned. Instead, they will develop, in consultation with wider stakeholders, an approach to the future management and administration of corporate tax that is tailored to the range of needs of the diverse corporate tax population.
2. Simplification of UK tax measures
   A major focus of the transformation is to reduce complexity in the UK’s tax system. This includes streamlining tax codes, harmonising rules, and providing clearer guidance to taxpayers.
   Some of the announcements are below.
   • Personal taxation:  Simplifying PAYE reporting, improving guidance on tax bands and allowances, and making the annual tax return process more user-friendly.
   • Business taxation: Harmonising Corporation Tax reporting and payment systems, clarifying rules around deductible expenses, and automating compliance checks.
   • VAT and indirect taxes: Rationalising VAT registration and reporting and introducing digital tools for cross-border transactions.
3. Tackling non-compliance and tax evasion
   Successive governments have talked about closing the tax gap which is currently estimated by HMRC to be around £46.8 billion for the year 2023-2024 across all taxes.
   The Transformation Roadmap promises a greater use of advanced analytics, data sharing, and targeted interventions to detect and prevent tax fraud and evasion. Some of the announcements are below.
   • Data analytics: Use of artificial intelligence to flag suspicious activity and improve audit targeting.
   • International cooperation: Collaborating with global partners to address international tax avoidance and enforce cross-border compliance.
   • Public engagement: Educating taxpayers about their obligations and the consequences of non-compliance.
   • Confirmation that HMRC are exploring the use of e-invoicing across UK business and the public sector, following the recent e-invoicing consultation.
4. Enhancing customer service
   HMRC says that is committed to providing high-quality support to taxpayers. The transformation paper talks about “digital inclusion” and includes the development of intuitive online help tools, faster response times on queries, and personalised assistance for those with complex needs. The document includes an ambition that a minimum of 90% of interactions will be undertaken digitally by 2029/30 (up from 76% at the moment). Whether the public is ready for the phasing out of postal communication and an increased reliance on automation and the impact of this approach remains to be seen.

In conclusion

HMRC’s Transformation Roadmap is ambitious, but not without challenges. Ensuring digital inclusion and maintaining (hopefully growing) public trust are priorities, as is closing the tax gap. HMRC are proposing to deliver more digital self-service options for taxpayers, and many will be happy to ‘manage’ their tax compliance in this way. However, there are often times where human intervention is needed, and it is hoped that there are channels to facilitate this.

HMRC has a wealth of data about organisations and individuals, and using a data-led approach to target area of perceived tax avoidance is welcomed. However, does the application of technology still need oversight by a human to be truly effective? It is hoped that there will still be experienced officers reviewing the data and the actions that HMRC then proposes to take.

For further information on anything discussed in this article, please contact your usual Crowe contact.