Headlines: March 9th, 1998

The introduction of self assessment for income tax payers was probably the most significant change at the government- public interface in 1997. Compared to the previous system where taxpayers declared incomes and claimed allowances the new DIY role demands a calculation of tax due. The change went fairly smoothly with 90% of taxpayers submitting returns by the January 1998 deadline. A spokesperson for the Inland Revenue said: “The accuracy of returns exceeded expectations and in many cases staff were able to spot errors and make corrections.” Because most people affected by this change run small businesses this was one case where, contrary to the general trend, the ‘burden on business’ moved substantially away from the Department and on to the business community.The Inland Revenue want to know how they can make life easier for the DIY tax calculator in the coming year. Some might claim that with a 10 page tax return, an 11 page calculation guide showing the arithmetic processes to follow and a 46 page guide on how to complete the return, there is plenty of scope for making things simpler. The reality is rather different. Taxation law, including that relating to income tax is complex and this is an issue the Inland Revenue are seeking to change. In 1996 a project was set up to re-write the UK’s direct tax legislation so that it is clearer and easier to use. A Consultative Committee of representative bodies meets monthly and the project is guided by a Steering Committee chaired by Lord Howe. Despite all this activity the project can offer no immediate help for those who have to assess their own tax bill.

The prospects for simplifying self assessment in the short term are to find out what is causing the most difficulty and devise ways to make things simpler and to find out what went well, and apply the technique or approach elsewhere. This is the feedback the Inland Revenue are seeking from taxpayers and they have invited views by 29 May 1998. It could be argued that this is not the most effective way to get feedback that is clearly vital for the smoothing running of the system in 1998/99. A structured sample would give a more representative picture, but it would also be more expensive. The expectation is that the most significant difficulties will emerge, because the Inland Revenue staff already know where most people got it wrong.