In an exclusive interview with Accountancy Age, HMRC’s Joanna Rowland says collaboration with industry stakeholders is becoming ‘invaluable’ to the design of its new digital offering
Digital transformation is the cornerstone of HMRC’s efforts to improve its customer service in the coming years. But according to Joanna Rowland, director general of transformation at HMRC, the tax authority must apply caution and patience when developing its new digital services.
Back in January 2023, the Public Accounts Committee (PAC) said in a report that it was “not convinced” by HMRC’s plans to move towards a more digitised system to reduce demand for traditional channels. The report argued that HMRC’s transition to digital services would take too long and would not be appropriate for all customers.
Moreover, the report was critical of the decision by HMRC to shrink its workforce, with staff numbers having decreased from 25,500 to 19,500 in the last five years.
According to Rowland, the PAC report directly influenced HMRC’s decision commence co-creation sessions with various industry stakeholders to help design its new systems.
“They are coming in and helping us with some of the particularly more complex elements of the tax system. As we develop and digitise more and more of it, the role of these co-creation sessions is becoming invaluable in helping us design how it should operate.”
A challenge HMRC has faced during its digital evolution is the complexities of moving such a significant amount of tax data from its legacy systems, delaying the whole process.
When the Making Tax Digital (MTD) programme was announced by the UK government in 2015, it was initially intended to be imposed in 2020, but currently only operates for VAT, due to various postponements and resource limitations.
MTD for ITSA will now be enforced in April 2026 following the decision to delay in for another two years. The earliest MTD for corporation tax will be introduced will also be 2026 with no official date confirmed yet.
Rowland began her role in 2016 while the MTD programme was in its infancy. “We underestimated the sheer amount of work it would take to move from legacy systems,” she says.
“If you were a startup business, you’d have the choice of buying fresh software, you’ve got fresh data. We rightly are focused on providing high quality, so moving from legacy systems that currently manage millions of tax records and billions of pounds worth of tax, we need to ensure we do that prudently.”
Rowland adds that while HMRC is making steady progress, it will be very meticulous in its planning of new services so as to avoid rushing the process.
In June 2023, it was revealed that HMRC would close its self-assessment helpline for three months from July to September. The tax authority said that it recognises the seasonal nature of the tax system, stressing that the closure is merely being piloted in an attempt to make the best use of its resources until it reopens.
At the time of the announcement, HMRC encouraged individuals to utilise its online services or the HMRC app. Last year, the helpline received three million phone calls on just three subject matters, including sourcing a national insurance number, which Rowland says could have been found online.
“We do know we’ve got more development to do to allow customers to not just check their tax affairs or pay, but also put things right,” she says.
Presently, HMRC is engaged in improving PAYE coding to assist customers in utilising the online service for comprehending their tax code. Providing an employer with this code specifies the amount of tax-free earnings an individual is eligible for in a specific pay period .
At the end of 2022, HMRC announced that MTD for ITSA would be delayed for a second time, with self-employed people and landlords earning over £50,000 subject to the rules from April 2026, and those earning over £30,000 from April 2027.
Additionally, a recent report published by the National Audit Office (NAO) revealed that the MTD program is now projected to cost the government £1.3bn, equivalent to five times the initial forecast.
But according to Rowland, HMRC is still fully committed to making MTD work despite recent criticisms as it is an important part of their strategy to close the tax gap that results from errors or misreporting.
However, a survey conducted by the ATT in collaboration with CIOT disclosed that nearly 90% of respondents said MTD for VAT had not reduced errors.
Looking back, Rowland says a longer time frame should have been set for the implementation of MTD because of the difficulties that may have been overlooked with legacy systems. Furthermore, the inception of the co-creation sessions with numerous stakeholders is driving the design of HMRC’s digitisation, which Rowland says she is very “grateful” for.
Rowland adds that HMRC aims to have made significant progress with its online services by 2025. While longer-term aims remain in place, “progress is happening now and will keep happening between now and 2025,” she says.
