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KEY POINTS
- 5.75 million tax returns were filed electronically.
- Was it the carrot or stick approach that worked?
- Workarounds must be fixed for 2008-09.
- HMRC and the accounting bodies worked well together.
How was it for you - online filing, that is? Did 31 January pass you by with a whimper and a click? You may even have already forgotten it and moved on to the next task (skiing holiday?).
This year, HMRC systems worked almost effortlessly as 5.75 million tax returns (67%) were filed online by 31 January.
This record, of which HMRC can be justly proud, is a 50% increase on the number filed electronically in 2007.
The busiest day was Friday 30 January which saw a peak of 390,000 being filed, which, say HMRC, is 185,000 more than the previous highest total recorded in the run up to last year’s deadline.
Congratulations go to HMRC for managing to create a system which worked efficiently and speedily. Such success was almost unthinkable when thinking back to the debacle at the end of January 2008.
Paul Aplin, chairman of the ICAEW’s Tax Faculty says that HMRC ‘delivered on the Carter infrastructure. It was robust and reliable. There were no significant outages and no repeat of the January 2008 problems’.
Furthermore, the place where advisers tend to turn to voice their complaints, AccountingWeb, also reflected relatively little dissatisfaction, with one or two users even praising the system this year.
Paul’s firm, AC Mole, uses IRIS for personal tax and partnership returns and PTP for trust returns, and all three types of return went through steadily. There was the occasional slow moment, but it was mostly fine.
One has to assume that HMRC tested their system to ensure it would withstand the final onslaught of returns in January, as they are required to do as part of meeting the Carter arrangements.
Technically, the system is supposed to be tested for a year before being put into public use; this may not, however, be practical, says Paul, given the speed at which technology moves. However, the system coped with the pressure, so whatever HMRC did, it worked properly.
Why the increase?
Why did so many taxpayers and advisers file their tax returns online? The obvious answer is because they had to. If the paper return was not submitted by the end of October 2008, the only option was to file electronically, apart from the few exceptions, e.g. judges, MPs.
So, was it the stick approach that really worked or is it just a matter of time and getting used to filing online?
No, says Paul Aplin, or at least not in the main. He feels that word of mouth has been equally if not more important in contributing to the increase in online filing. ‘Only a few years ago, many advisers would not have seen it as the way ahead, but this is no longer the case.’
HMRC’s Carter roadshows have also widened the audience, says Paul. ‘The formal presentations were persuasive, but the conversations between attendees during coffee breaks were just as significant.’
There is an ‘overwhelming feeling of inevitability about carrying out compliance online’ says Paul, and the 67% take-up confirms this.
He feels that so many people use the Internet in their lives generally, e.g. for banking, booking holidays, buying goods, ordering the week’s shopping, that it has been accepted as ‘normal and routine’ to graduate towards it for tax purposes.
Paul also pays tribute to how HMRC worked with the professional bodies this year.
He says the department was ‘very open’ and there was an ‘astonishing amount of e-mail traffic’. He cites as an example the matter of reasonable excuse. Overall, this was ‘excellent joint working’ and the degree with which HMRC listened to the profession was a real and welcome ‘step change’.
The Chartered Institute of Taxation’s Tina Riches agrees that online filing worked well this year. She mentioned a poll of the ATT/CIOT online filing panel which took place immediately after January to gauge reaction to HMRC’s performance.
Approximately 90% said online filing had gone much better than expected and most had suffered no significant problems. Members of the Working Together E-group are now being given the opportunity to comment more deeply on how online filing went for 2007-08.
She adds that the representative bodies did a lot of work talking to HMRC, making sure that problems that could be ironed out, were sorted. The reasonable excuse form is a perfect example of this. She is also pleased that HMRC have agreed to take a light touch where workarounds were in place.
Perfect?
Is everything perfect, though? No, it is not. HMRC’s SA Online tax return completion software could be better. Yes, it is simple to use, but more obvious improvements that need to be made include the following:
- The comment that the taxpayer’s notice of coding included an underpayment is badly worded and illogical. It should ask if the notice includes an underpayment and move on from there.
- The tax calculation really must refer to payments made on account. Even if the precise amounts cannot be entered automatically, the user should at least be reminded to subtract them from the balance outstanding.
Then there are questions of what users should be able to do on HMRC’s software. Should the partnership return be available, for example? At the moment it is not; instead proprietary software must be purchased.
This caused problems for some advisers who realised late that they had to file such returns electronically and were eager to obtain low-cost, if not free, software.
This however takes us into the realms of how comprehensive HMRC’s software should be. This could take an entire article and countless arguments for and against.
In essence, as I see it, the main argument in favour is that if taxpayers must send their returns online, as is effectively the case now that paper returns filed after 31 October will attract a late-filing penalty, HMRC should provide the necessary tools with which to do it.
On the other hand, is this good use of taxpayers’ money, when there is reasonably priced proprietary software available? Rather than employ software developers or contract the job to a software company to write software for them, perhaps HMRC should consider permitting taxpayers to allow the cost of tax software as a revenue expense.
Too much too soon
Then there were all the problems early in the tax return season. The crux of this is that HMRC should not have done a major redesign of the return and introduced statutory online filing in the same year. This was asking a lot of not only HMRC’s systems but also those of the software houses.
As Digita’s Nigel Powell says, the redesign caused problems for many software houses as they had to adapt elderly systems. Thus some 2007-08 self assessment software was late being released, e.g. CCH. Not all suffered. For example, Digita’s Personal Tax was shipped to clients at the beginning of April, as was Drummohr’s Tax Return.
However, as advisers will know only too well, the many exclusions and workarounds caused a lot of hassle over the summer and autumn. Paul Aplin comments that now is the time to concentrate on getting HMRC and the software houses (regardless of whose fault the workarounds were) to work together to make the number of workarounds for this year’s return minimal.
He accepts that many were the result of a major redesign of the tax return, but says he would be ‘very concerned if there were more than a very few workarounds necessary this year’. Similarly,
Tina Riches feels that the workarounds must go and agrees that it was probably not a good idea to redesign the main tax return at the same time as making deadline changes.
The fact that the lists of exclusions and workarounds were constantly changing made life very difficult, says Nigel Powell. It was not helpful that when users contacted HMRC’s helpline, they were often directed to their software provider, even when the problem was at HMRC’s end.
This meant that suppliers’ helplines were stretched ‘because of an excessive volume of calls on personal tax’ and this, not unreasonably, led to a certain amount of frustration on the part of the users. Despite this, he too agrees that online filing has been a ‘phenomenal success’ in 2007-08.
In terms of the paper tax return, Nigel says that the actual form has no relevance if you are filing online. So why not just have a list of the required questions in a given order? He adds that paradoxically, while the new self assessment form was designed for optical character recognition, HMRC are in fact having to key in the information provided in paper returns. Plus ça change...
Another issue that HMRC need to address, says Tina Riches, relates to unrepresented taxpayers; namely the time it takes between registering to file online and receiving the activation pin.
The fact that taxpayers have to wait for up to seven days for the pin to arrive should be made more public earlier. However, she is pleased that HMRC have said for 2007-08 where an individual or agent:
- registered for the online service before 31 January;
- does not receive the PIN by 31 January; and
- files their return online ‘promptly’ once they have received the PIN;
then the individual or agent will be treated as having a ‘reasonable excuse’.
Next year
It will be interesting to see how many more taxpayers and advisers are lured to file returns online in the next tax year, given the success of the system in 2007-08.
The workarounds may act as a deterrent unless HMRC can show that they have sorted them out. It is clear that these created a lot of problems for advisers and were not conducive to a constructive relationship between HMRC and the software houses.
The latter two are co-dependent, and HMRC certainly could not have had anything like the success they had with online filing if the software houses had not supported them and worked to have software ready for the new returns and statutory online filing.
Given that 67% of taxpayers’ returns were filed online, how long will it be until the paper return is consigned to history?
