Self-assessment system is faulty

It’s as well 31 January, like Christmas, only comes once a year.

Talking of Christmas, it seems as if the Inland Revenue’s Christmas comes in February when it sends out all those £100 negative gift vouchers. Why is it so many people are being so generous to the taxman by missing the tax return deadline?

Consider the evidence. In each of the first two years of SA, some 650,000 returns were late of the nine million issued. The number late rose in Year 3 to 750-800,000, suggesting that we don’t learn – or, of course, that life gets ever more difficult. With three million returns still outstanding at the beginning of January, it’s a fair bet that, despite sackloads of mail arriving at tax offices, and floods of personal callers taking advantage of the so-called extension of the deadline, a depressing number will be supplementing the chancellor’s already bulging coffers with £100 penalties.

We all know there are some returns so complex they need more time. But what are the reasons for the legions of defaulters?

What proportion are finding it too confusing? (Solution – better guidance?).

Fiscal recidivists? (Solution – targeted enforcement?). Too detailed?

(Solution – a simplified return for those with simple affairs – particularly the elderly?) Burying their head in the sand? (Solution – more targeted education?) Nil tax liability, so nil penalty, so forget it? (Solution – get them weeded out of the system!) Or is the system just too complex?

(Solution – a lesson for parliament, already reeling from the CIOT’s challenge to MPs to fill out their own tax returns).

What is going on? We can guess, but there is no evidence of the reasons.

Can I suggest that if the numbers have risen again the Revenue has a problem? If nearly one in ten of their SA customers can’t manage to comply with its obligations, is the system all it should be?

Incidentally, if this article has a faint sense of deja vu about it, I am repeating a call I made on these pages 12 months ago. Nothing has changed to prevent the flood of defaults happening again.

Surely the authorities must appreciate that a system penalising so many users could fall into a certain amount of disrepute? Let’s please have some work on the reasons. There will be lessons for all in the results.

  • John Whiting is a tax partner at PricewaterhouseCoopers and deputy president of the Chartered Institute of Taxation

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