Ahead of the announcement of the next prime minister next week, the Chartered Institute of Taxation (CIOT) has penned a letter laying out three priorities for improvements in the tax system.

Susan Ball, president of the CIOT, wrote to both Rishi Sunak and Liz Truss, setting out the institute's views on what the next prime minister should focus on within the tax system.

The top priorities

Invest in HMRC

In the letter, Mrs Ball first argued for more investment in HMRC to improve its performance in collecting taxes and administering business support.

"HMRC's performance standards are falling short and need to be improved if HMRC is to play its essential role in supporting taxpayers and businesses," the letter reads.

CIOT also expressed concerns about the staffing levels at HMRC, arguing that cuts to staff to make way for the digitisation of tax systems has harmed the current performance standards.

This follows statistics from the Institute of Chartered Accountants in England and Wales, which showed the average HMRC call waiting time increased from 15 minutes in March to 19 in April. The pre-Covid target was originally 5 minutes.

Making Tax Digital

The next priority set out by CIOT is a review of Making Tax Digital (MTD).

While the tax expert institution agreed with the Government that digitalisation is the best way to improve the tax system, it has three main concerns over the timetable:

• whether taxpayers understand their new obligations under MTD and can overcome the technical challenges
• the limited choice of approved software available to taxpayers
• the number of taxpayers willing to participate in the pilot which means the Government risks rolling out future instalments of HMRCwithout proper piloting.

The letter continues to say that the next PM should undertake an early review of MTD and its implementation, ensuring the launch is successful and reflects the current digital landscape.

Simplifying the tax system

CIOT's final priority is to simplify the current tax system, stating it has become "far too complicated for taxpayers to understand and comply with."

In 2010, the then chancellor George Osbourne established the Office for Tax Simplification to ease the burden on taxpayers and accountants.

However, CIOT argues the tax regime has nevertheless become more complex while the tax code has increased in size.

This, according to Mrs Ball, has hindered efforts to completely digitise the tax system, which the Government had wanted to do by 2020 back in 2015.

The Government's tax plan

As part of the spring 2022 statement, former chancellor Rishi Sunak announced a three-part tax plan designed around tackling the cost of living crisis, investing in people and "sharing growth".

In the plan, Mr Sunak, now a candidate in the prime ministerial race, promised to reform the tax system, so it is "simpler, fairer and more efficient".

"We have already reformed some reliefs and allowances and will look to go further, ahead of 2024," the Treasury wrote.

Lizz Truss has vowed to "simplify" taxes and introduce tax cuts worth an estimated £30 billion in tax cuts, including a reversal of the National Insurance hike and cuts to green taxes.

She also promised to review IR35 if she became the new prime minister, which is often criticised as being complex.

At the end of her letter, Mrs Ball wrote:

"We would welcome the opportunity to work with the new Government, HMRC and other professional bodies to effect improvements in the UK tax system, focusing initially on the three priority areas we have identified above."

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