News & Articles
News 09.5.16 Author: Robert Maas

The Digital Divide: Making Tax Digital. Robert Maas writes for Taxation

News 09.05.2016 Author: Robert Maas

Robert Maas analyses the responses to his digital questionnaire and finds that there is support for Making Tax Digital but not for making it mandatory.  This article was written for and first published in Taxation Magazine.

Many thanks to readers who completed the questionnaire in my article ‘Digital direction, Taxation, 17 March, page 18 and online at taxation.co.uk. As I said then, I was prompted to raise those questions by a brief HMRC report  of 27 January 2016 called Digital Communications Research, which  had been  carried  out by Jigsaw Research. What the report said about agents’ views surprised me and I wanted to check how valid its comments were.

I said in my article that it was not clear whether the conclusions drawn by the Revenue report were those of Jigsaw, HMRC or both organisations. The research on agents consisted of nine in-depth interviews with agents. It did not reveal how they were selected, so I do not know how representative Jigsaw tried to make them or whether HMRC simply supplied a list of agents who were supporters of its digital ambitions. I refer to the report below as ‘Jigsaw’.

Taxation questionnaire

Fully 159 readers completed my questionnaire which, although an excellent response, is a very small proportion of the magazine’s readership.

Again I do not know how representative it is of the mass. It is a self-selecting sample, in that it is not the views of all Taxation readers, but of a small subset.

The likelihood is that readers responded because they felt strongly one way or the other. Accordingly,  the sample does not necessarily reflect the views of the middle ground. I understand that the readership of Taxation is mainly qualified professionals  in general practice who use the magazine to  keep abreast of tax changes, rather than tax specialists. I call this group ‘Taxation’.

I was recently lecturing to the south-west London chartered accountants tax discussion group. The chairman kindly asked attendees to complete my questionnaire and 30 people did so. I was going to add their voices to those of Taxation readers, but noticed that some of the results were significantly different so decided to keep them separate.

This is another self-selecting group and consists of people living in south-west London who were prepared to give up an evening to listen to me talking about the Budget and Finance Bill. I suspect these were mainly sole practitioners or people in small firms with a leaning towards tax. I call them ‘SWLCA’. Most of those present completed the questionnaire, so their views probably include the middle ground.

Key points:

  • Nearly 160 readers responded to the digital direction questionnaire
  • Communicating with HMRC digitally should be voluntary for everyone
  • Agents would like HMRC’s agent-only service extended
  • Is HMRC’s plan for digital dealing in line with agents’ and taxpayers’ wishes?

Encouraging result for HMRC

I asked three general questions:

1. Do you agree that Making Tax Digital is a sensible approach?

2. Do you agree that the vast majority of people should be required to deal digitally with HMRC?

3. Do you believe that those who are not prepared to do so should not be allowed to carry on business?

The second and third questions are, in effect, the same, the third being in a more provocative form.  This is because, if people are required to pay tax and deal with HMRC digitally, it follows that they cannot carry on a business if they refuse to engage digitally with HMRC – unless they migrate to the black economy. Those in favour were:

Qs                             Taxation               SWLCA
Q1                              68.35%                     30%

Q2                              16.35%                      3.3%

Q3                              4.4%                          3.4%

Note that 3.3% and 3.45% out of 30 is one person and 4.4% out of 159 is seven people. So that is relatively good news for HMRC.

Most agents (although possibly fewer tax people) agree that Making Tax Digital is sensible (or possibly inevitable) although most from both Taxation and SWLCA believe that it should be voluntary, not mandatory.

Hardly anyone felt that those who are vehemently opposed to dealing digitally should have to shut their business or sell their rental properties. I suspect that they feel that, like self assessment, most people will voluntarily go digital over a relatively short time.

Enthusiasm wanes

Jigsaw says its research shows that ‘agents … will embrace HMRC’s new digital services. High usage of existing online services and a high attitude to do more digitally mean that [agents] will naturally migrate to using the business tax account (your tax account) and the personal tax account’. It goes on to say that agents ‘see what is proposed as a natural evolution from the current digital offer … The benefits of the proposed service are self-evident to those customers’.

Jigsaw adds: ‘Agents·use and are heavily dependent on the current agent online services. They are keen for those services to be extended and enhanced in line with the digital offer provided by other organisations that they routinely deal with.’ The Taxation and SWLCA responses were:

Taxation    SWLCA

Have a strong appetite to do more with HMRC digitally                                   45.91%         23.33%

Think most clients want to do more themselves                                                  16.35%           3.33%

Anxious for HMRC agent-only service to be extended                                        80.13%         61.54%

In other words, less than half want to deal digitally with HMRC, although most do want the ability to do more. I suspect this means that most want to use digital like a tool: use it when it suits us, when it is easy to do, but do not want to be required to do so when it is easier to fill in a form manually or write a letter.

The general feeling that clients do not want to do it themselves suggests either that we do not know our clients as well as we think or that Jigsaw is incorrect in thinking that ‘small and medium-sized enterprises and most self-assessment customers will embrace HMRC’s new digital services’.

Self-serve concerns

Jigsaw also says: ‘Agents … are not concerned that, if HMRC’s digital service was improved, it would mean that their customers would self-serve.’ The Taxation and SWLCA responses were:

Taxation    SWLCA

You think your customers would self-serve                                                             13.84%       17.86%

You would be concerned if this were to happen                                                      46.20%      51.73%

This is the opposite of Jigsaw’s research. My research shows that agents do not think that their clients want to self-serve but would be concerned if this were to happen. I suspect this is because agents think they would have to spend half their life correcting clients’ errors if they chose to self-serve, rather than that they would be out of a job.

Jigsaw says agents ‘are particularly keen to be able to communicate directly with HMRC specialists by email’.  They are right on that. 78.62% of the Taxation cohort and 70% of SWLCA respondents want to do so.

Jigsaw also concludes that agents ‘are particularly keen to manipulate and filter multiple client records’. This compared with only 60.65% of the Taxation sample and 70% of SWLCA’s. However 97.48% of Taxation and 82.33% of SWLCA do want the ability to make simple updates to client information held by HMRC, indicating that most agents want greater digital involvement with the department albeit not necessarily in the ways HMRC envisages.

Jigsaw says agents ‘are particularly keen to be able to communicate and file everything digitally (removing the need for paper copies transmitted by post)’. I did not seek readers’ views on this because I am pretty sure that 100% agree with Jigsaw.

Sadly, HMRC continues to hold out against the general use of email. At least that is its official position but there seems to be a lot of exceptions. Officers seem happy to use email as long as the client gives his written consent and if the issue relates to VAT, to internal reviews and appeals or to some specialist areas. Precisely why the department thinks it is dangerous to use email, even  with the client’s consent, for an income tax return query, but consider it safe to do so if a similar issue arises on his VAT return is a mystery to me.

Some misconceptions

I admit that this survey disproved some of my own perceptions. There seems to be a greater wish to move towards dealing digitally with HMRC than my own conversations with people had led me to believe, even though I do think that the route HMRC is taking to get there does not mirror the road that agents would prefer to follow.

There also seems a strong perception that clients do not want to self-serve. I hope that HMRC listens or, at least, researches this in more depth.

I have the impression that it believes that the average window cleaner, repairman or even small shopkeeper wants to keep his accounts in his mobile phone and hit a button periodically to send everything to HMRC to work out his tax.  I suspect that most of us who deal with clients doubt that many want to do this.

About the Author

Robert Maas

Tax Consultant +44 (0)20 7309 3800