With the tax return deadline looming, Madison HR talks tax with the Chair, Office of Tax Simplification, Angela Knight.
What’s your current role at OTS?
I am the Chair of the Office of Tax Simplification. The OTS has been around for some 5 years as something of an experiment. Then when George Osborne, when he was still Chancellor, decided to put it on a statutory footing, I applied through the public appointment process and was appointed to the role. The Chancellor changed, but Philip Hammond confirmed that decision. In the Chair role, I put in place an independent board, brought in a new Tax Director from the business world (this is the main executive role) and a head of office (a bit of a civil service term) from HMRC. Together we then wrote a strategy for the OTS; toured the many and various stakeholders to get their views and ideas; agreed an early programme and a pipeline of projects and agreed them with HMT, HMRC and ministers; decided what skills and expertise was required; and add to existing staff accordingly. The OTS is now fully underway. But in all this I always remind people that the OTS does not set tax rates. The day that tax rates are the responsibility of an unelected quango, is the day the UK ceases to be a democracy!
What’s the biggest challenge posed by the gig economy from a tax perspective?
The biggest challenge is the potential for a significant drop in employment taxes. Look at it like this. If you have a company employing 200 people, then that business will pay employers National Insurance, collect and pass on employees National Insurance and income tax through PAYE and then VAT as relevant and corporation tax if it makes a profit.
If that company still offers the same goods or services, but now does in as an IT platform, those 200 employees now become say 5 and the other 195 are still doing the same job as before, but are now either self employed, partnerships or have formed themselves into small companies. Now assume – as it is reasonable to do – that no one is breaching employment rules, what this gigging of that company has done is reduced dramatically employers National Insurance from 200 to 5; increased the number of relationships that HMRC has to have to get its tax from one to 196; and each of the 195 former employees, may well pay less employment taxes because they are no longer an employee. Complicated? Yes. Should we care? Yes we all should care. The two broad areas where government get tax income is from employment taxes (NICS and IT) and consumption taxes (VAT). Gig reduces all of this and legitimately. So the stark choices are either that Gig is prevented or at least reduced (and as preventing people from choosing how they want to live their lives is a non starter outside communist countries) or we accept less expenditure on public services (totally unlikely), or we modernise the tax system by finding a fair way of taxing work in this new environment.
How can advances in technology aid the simplification of the design and/or administration of the tax system?
Aps, FinTech, technology are the great saviour for the tax system, or more correctly, us taxpayers. Print off the tax law and it will be several times taller than me. And the principle reason for this is that the UK has been taxing and redistributing since the napoleon wars and is a vibrant and plural economy and a global trading nation. So it’s complicated. But so is an iPhone and I don’t need to know all that incomprehensible to us normal people stuff that sits behind the screen, I just need to press the buttons. This is how technology can be used to make the tax system simple to its customers – that is the overwhelming majority of the individuals and companies that pay tax.
If you could flick a switch and change one thing with the current tax system, what would it be?
The easy answer is either to abolish a tax, or to say no more changes. But neither are realistic. I had thought I would say that if a new tax is added or increased, then an existing one should be abolished or reduced. That won’t work either as what would be abolished or reduced would be so minor that it’s passing would not even create enough breeze to stir the net curtains. So on reflection, as apart from people wanting to pay tax and someone else to pay more (!) top of the complaints pile is how HMRC interacts with the tax payer. From taking too long to answer a call, through to not giving a definitive answer to the question; and from using complicated language in forms to sending letters in language that is unnecessarily frightening; the list of issues raised by the customer is long. So at the flick of a switch I would employ the head of customer services from a major supermarket and put them in charge of the whole of the HMRC customer side of the business.
And…with the making tax digital deadline looming, what’s your golden tip for our clients completing their tax returns?
Don’t leave it to the last minute. It is inevitably going to be more tricky than the rhetoric would imply and you will have questions!