The lack of funding for HMRC is raising serious concerns about the way that the tax authority is going to cope in the short term, warns ACCA
As the new tax year starts, the problems facing HMRC, tax advisers and taxpayers are only going to get worse.
It is already well documented that HMRC services have fallen to unacceptable levels.
Glenn Collins, head of technical and strategic engagement at ACCA, said: ‘The March Budget was completely silent on the problems and so missed the opportunity to resource the UK’s tax authority adequately.
‘Looking ahead to some of the changes to the tax system we know about, the problems facing HMRC, tax advisers and taxpayers are only going to get worse. ACCA members and other tax advisers are facing long delays – hanging on the phone for an hour or more to sort out the simplest query with HMRC.
‘ACCA has long campaigned for HMRC service levels to be improved; our members want to work with HMRC in an efficient and effective manner. It would be good to see a long-term action plan but in the short term the government does have an urgent duty not to make a bad situation even worse.’
A number of changes to tax rules mean that more taxpayers are going to have to interact with HMRC to resolve queries, particularly with the reduction in the dividend allowance.
The dividend allowance will be reduced to £1,000 from 6 April 2023 and then to £500 from 6 April 2024. This is a major fall from the £2,000 level in the year to 5 April 2023.
Collins said: ‘This cut means that many individuals who have not previously engaged with HMRC are now going to have to do so. It looks likely that a lot of those people who will now be asked to report their dividend income to the tax authorities will be retired people.
‘They will now have a notification obligation although in all likelihood they will not be higher rate taxpayers and they will not be required to pay any extra tax.
‘This group of people may not have previously used tax advisers and may not know who to turn to. Given the amount of money involved they should not have to – and they will not be able to – access good value tax advice.
‘So they will be turning to HMRC for advice and guidance on what to do and when. Just at the time when HMRC is in no position to do anything else and certainly not provide answers in a timely or efficient manner.
‘The government should take urgent action now to try to avoid making a bad, unprecedented situation any worse. It is too late to reverse the dividend allowance cut from £2,000 to £1,000. But the government could pause the further reduction from £1,000 to £500 until service levels have improved dramatically.
‘The other step is that HMRC – backed by HM Treasury – needs to set up a solution to help taxpayers who are now being drawn into telling tax authorities about their dividend income. Ideally a simple, reporting digital solution.
‘At the same time HMRC needs to make sure that taxpayers aren’t prey to unscrupulous websites charging fees for reporting to HMRC.
‘The dividend allowance is just one example of problems that ACCA and its members see coming down the tracks.’