United Kingdom

Tax Faculty supplements ICAEW’s Spring Budget 2024 representations by writing to government on HMRC service performance and VAT simplification.

On 29 January 2024, ICAEW Head of Tax Strategy, Frank Haskew, sent two letters to the Financial Secretary to the Treasury (FST), Nigel Huddleston MP.  

The first letter concerned HMRC service performance. It called for increased investment in HMRC to develop better digital services. Additionally, it recommends that HMRC should improve customer support until these services can be demonstrated to reduce phone and telephone demand. The full list of recommendations is as follows: 

  • setting up an HMRC taskforce to clear the backlog of correspondence and to keep on top of it;
  • better prioritisation of HMRC resources. ICAEW thinks there may be scope to refocus HMRC resources onto the development of digital services and altering processes that will reduce phone and post demand in the short to medium term. This is particularly the case for digital services for agents. We have provided a list of possibilities to HMRC. As part of this reprioritisation, HMRC may need to stop some activities;
  • greater consideration of the impact of any tax policy changes on HMRC’s effectiveness. This includes, for example, the increase in the number of taxpayers who will need to complete self assessment tax returns because of the freezing and reduction of bands and allowances;
  • bringing about a step change in HMRC’s approach to driving forward improvements, along with greater accountability;
  • ensuring that any tax policy changes adopt a ‘digital first’ position with the aim of reducing the administration burdens placed on HMRC and taxpayers; and
  • radical simplification of the tax system in the longer term so that taxpayers are able to successfully engage with it without needing to seek help from HMRC. 

The second letter focused on VAT simplification. It recommends that HM Treasury alter HMRC policy to ensure that import VAT can be recovered by any business importing goods in which it has an ‘economic interest’. This would support businesses that process goods in the UK on behalf of third parties, and UK businesses importing goods on hire, such as heavy plant for infrastructure projects. 

The letter also called for the thresholds for simplified VAT accounting schemes to be reviewed. The cash accounting, annual accounting, and flat rate schemes are designed to reduce the administrative burden for small businesses when they register for VAT. However, these thresholds have not changed for at least 15 years. Given the impact of inflation, more and more small businesses are losing access to these simplified VAT accounting schemes each year.