David Gauke sets out vision for making tax digital
Financial Secretary to the Treasury's speech to the HM Revenue and Customs stakeholder conference on 14 December.
Good afternoon, and welcome to HMRC’s first-ever Christmas conference.
It’s been quite a year – two Budgets, a Spending Review, an Autumn Statement, and of course a General Election.
Lots of work has been done, lots of changes have been put in place, and I suspect that many of you, like me, are now looking forward to some time away from the office.
I certainly have one eye towards the upcoming Christmas festivities, as I’m sure many of you do. And as the father of three boys, I’m currently in the process of managing expectations around presents.
We’re having mixed progress on this in the Gauke household, but it’s fair to say that digital expectations are high and will remain high. And as a government minister, I have to take some responsibility for that.
Because the government has similarly high digital expectations for HMRC, albeit expectations that must – and will – be met, and not just for Christmas! I am confident will be met.
In every walk of life, people are embracing the digital revolution. From banking online to doing their food shopping, from advertising a business to paying invoices, millions of individuals and businesses are benefiting from the convenience and simplicity of digital services.
But businesses and service providers are going further than simple digital interaction with their customers – they are harnessing the opportunities of the digital age to transform how their businesses work, and how they provide their services.
And it’s the customers who are reaping the benefits.
If businesses can do this then so should government. Our ambition is bringing the digital revolution to Whitehall – ensuring that the services it provides are similarly transformed. Last year for example, more than 27% of people renewed their tax credits online, almost doubling the previous year’s figure. This online renewal service has been welcomed by users with customer satisfaction rates for the service reaching over 80%.
Life should be made easier for the customer
The tax system is no exception.
My ambition is to make fundamental changes to the way the tax system works, transforming tax administration to make it more effective, more efficient and easier for people and businesses to pay their taxes.
And we have made it a priority to invest in making that a reality.
Last month the Chancellor announced, as part of the Spending Review, a further investment of £1.3 billion to transform HMRC into one of the most digitally-advanced tax administrations in the world.
This includes access to digital tax accounts for all small businesses and individuals by 2016-17, delivering an additional £1 billion of tax revenue by 2020-21.
And today I have published ‘Making Tax Digital’. This sets out the overall vision to achieving this transformation, the steps needed to get there over this Parliament, and details of the consultations to follow in the coming months.
‘Making Tax Digital’ is structured around four foundations:
First, ‘Tax simplified’ – All taxpayers will receive the data and services relevant to them and, for those who have difficulty going online or who need extra support, help will be available through other channels.
Taxpayers shouldn’t have to give HMRC information that it already has, or should be able to get from elsewhere – for instance, from employers, banks, building societies and other government departments.
Taxpayers will see the information that HMRC holds through their digital tax accounts, and be able to check at any time that their details are complete and correct.
Better data means fewer mistakes, fewer delays, and a better outcome for all parties. This is an important development both for individuals and businesses, which Jim [Harra] will talk about in greater detail in the next session.
HMRC will use this data to tailor the service it provides, according to each taxpayer’s individual circumstances. In 2016, HMRC will consult on how information from more third parties might reduce the reporting burden on taxpayers.
Second, making tax digital for businesses. By 2020, most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account.
We will expect businesses to keep digital records and to update HMRC on a quarterly basis. But these updates will be done through software or apps and will be integrated into business’ digital record keeping.
And I want to stress that this is the end of the tax return – this is not going to feel like doing four tax returns a year. Indeed, we expect these reforms to ease the admin burdens on businesses and to help them plan their cash flow more easily, by providing greater certainty about what they will owe.
Updating HMRC directly in this way will be secure, light-touch and far less burdensome than the tax returns of today.
In a real-time economy we should match tax more closely with the related transactions – many taxpayers have told HMRC that they want more certainty over their tax bill, and don’t want to hold on until the end of the year or even longer to find out how much they have to pay.
Many businesses already use tools like these, but sometimes we need a catalyst to energise change. The requirement to use software or apps is this catalyst; it gives business certainty in terms of direction and allows full benefit from their use to be realised.
Over the next year, HMRC will be undertaking a wide-ranging consultation exercise, and I want to work with you in ensuring that these reforms provide the maximum possible benefit for business.
Third, making tax digital for individual taxpayers’. By April 2016, every individual and small business will have access to a digital tax account which will be simple, personalised and secure, offering an ever-wider range of services. Individual taxpayers will be able to interact with HMRC digitally and at any time that suits them.
Fourth and finally, tax in one place.
At the moment, many taxpayers have to contact different parts of HMRC to find out their financial position relating to different taxes. A business may pay income tax, VAT, National Insurance or Corporation Tax; an individual may pay income tax, National Insurance contributions or student loan repayments, and receive Child Benefit; some people run a business as well as being an employee or having a pension.
In the next five years, all taxpayers will be able to use their digital accounts to see a single, up-to-date and easy-to-follow overview of their tax affairs, just like they do in their online banking.
Together, all these elements will ensure that, by 2020, HMRC will have moved to a fully-digital tax system.
So I’d like to share with you what that system could look like.
Needlessly bureaucratic form-filling will be eradicated – taxpayers will not have to tell HMRC information it already knows.
Unnecessary time delays will also be eliminated, because the tax system will be operating much more closely to ‘real time’. This will keep everyone up to date, removing the risk of missed deadlines, unnecessary penalties, debts arising and errors in the tax system being carried forward from one year to the next.
Importantly, taxpayers would have 24/7 access to digital accounts, as well as having a complete view of all their tax liabilities and entitlements, allowing them to send HMRC information and payments simply and efficiently.
And for those who have difficulty going online or who need extra support, help will be available through other channels. These taxpayers will be offered alternative means of support – over the phone, through face-to-face visits or through partners in the voluntary and community sector. We will also ensure free software is available for those with the simplest affairs.
These reforms will quite simply transform the experience of millions of taxpayers.
You’ll hear more about these plans this afternoon, including how these will be implemented and how some aspects of their design will be the subject of further consultation.
And I would urge you all to get involved in shaping these plans – we want them to be the best they can possibly be.
As we make tax digital, we will need to make sure that the new plans work for you, for the taxpayer, and for the UK. So we want to hear your voice and your views. Today I have also published a discussion document on payment, and we’d welcome your comments on that.
We very much hope that events like today, as well as our more formal consultations, will give you and the people and organisations you represent the opportunity to contribute to this work, and shape tax administration for a generation to come.
So – before I hand back to Edward [Troup]– thank you for your work so far, have a relaxing Christmas break, and let’s continue our conversations in the New Year.