Our election challenge – the responses

The challenge

In her letter, Charlotte said that any party serious about improving economic growth and productivity should be making the administration of the tax system a key part of its general election platform.

The seven issues she identified are:

1.            Resourcing HMRC to provide the level of service taxpayers need
2.            Review tax digitalisation to focus it on the needs of taxpayers
3.            Commit to meaningful simplification of the tax system
4.            Get research and development tax credits working properly
5.            Effective but proportionate action to tackle rogue tax agents
6.            Greater transparency and accountability over policy costings
7.            Adherence to sound tax policy making principles

The letter stated: “We believe that unless these are addressed the tax system will continue to become less efficient, harder to comply with and less effective at both raising revenue and supporting taxpayers.”

The letter was sent to spokespeople for the Conservatives (Nigel Huddleston), Labour (James Murray), Liberal Democrats (Sarah Olney), SNP (Drew Hendry), DUP (Sammy Wilson), Plaid Cymru (Ben Lake), Green Party (Molly Scott Cato) and Reform UK (Lee Anderson).

Read the letter in full here and our press release here.

The responses

During a busy election campaign it is understandable that not all of those we wrote to have been able to find time to reply yet. Nevertheless we have received substantive replies from the Lib Dem, Green and DUP spokespeople.

We publish the text of these below, as we said we would in the letter. We also pick out manifesto policies which touch on the areas raised in our letters.

We will be following up with all the parties’ spokespeople on these issues following the election.

The Conservatives

While we wrote to Nigel Huddleston as a representative of the Conservative Party we received a reply from the Treasury correspondence team stating that “the upcoming General Election on 4 July means that it would not be appropriate for me to comment on specific policy proposals. I have however ensured that the relevant officials are sighted on the contents of your letter.”

In the Conservative manifesto costings document the party states that it will raise a further £6 billion per year by 2029-30 from ‘tackling the tax gap’. “Key measures include hiring additional HMRC staff, investing in labour-saving technology such as AI, and focusing particularly on problem issues like umbrella companies and regulation of the tax advice market.” Other relevant policies include committing to maintain R&D tax reliefs and abolishing class 4 National Insurance contributions for the self-employed, which is described as “a simplification which means that 93% of self-employed people – four million of them – will no longer pay self-employed National Insurance”.

Additionally at the March 2024 Budget the government announced a number of measures which it said would simplify the tax system, including:

• Simplifying access to digital services for customers who want to pay in instalments in advance via a Budget Payment Plan, or in arrears via a Time to Pay Arrangement
• Abolishing the current tax regime for non-UK domiciled individuals
• Abolishing the Furnished Holiday Lettings (FHL) tax regime
• Four metrics to track progress being made in simplifying the tax system, especially for small businesses and individuals

Labour Party

At time of writing we have not received a reply from Labour, though we have at various times discussed all the issues covered in the letter with James Murray and his advisers.

Labour’s manifesto contains a number of proposals related to HMRC, including:

• Modernise HMRC and change the law to tackle tax avoidance.
• Increase registration and reporting requirements, strengthen HMRC’s powers, invest in new technology and build capacity within HMRC.

These are expanded upon in the party’s April 2024 paper ‘Labour’s plan to close the tax gap’ which cites CIOT concerns over HMRC customer service and states: “Improving customer service: HMRC’s customer service record is dire at present. This means that more and more taxpayers risk making errors in their tax returns. Alongside getting a grip on the rollout of digital solutions, Labour would seek to improve the core customer service offer”

On digitalisation the paper states: “An effective digital tax system will improve the experience for individual taxpayers, reduce the tax gap, and drive productivity gains for businesses. Digitisation would also free up HMRC resources to focus on improving the experience of the tax system for taxpayers, dealing with more complex cases and supporting the digitally excluded… Labour will work with businesses, the tax profession and digital service providers to bring a new focus to HMRC’s modernisation, including greater use of AI – learning from industry and best practice overseas to make sure its scope is ambitious, whilst having new, achievable timescales for delivery”

On tax policymaking Labour’s manifesto commits the party to one major fiscal event a year, and to publishing a roadmap for business taxation for the next parliament.

Liberal Democrats

Liberal Democrat Treasury spokesperson Sarah Olney replied to our letter as follows:

Thank you for writing to me about the vital issue of tax administration.

Liberal Democrats are committed to ensuring that HMRC and our tax system work for all taxpayers and the country as a whole, and we support the objectives you have set out in your letter.

Under the Conservatives, the amount of taxes going uncollected for reasons including avoidance, evasion and criminal activity has reached £35.8bn a year. As you have rightly pointed out, customers are spending over twice as long waiting to speak to an adviser than they were in 2019, with poor service impacting on the ability for HMRC and its customers to do business.

Liberal Democrats would invest in HMRC to provide the level of service people need, as well as delivering tax digitalisation in a way that works for taxpayers.

The Liberal Democrats will take serious action to narrow the tax gap - tackling tax avoidance and evasion and ensuring that HMRC has the resources to achieve this. The Conservatives have promised an additional £51 million of funding to HMRC - but this is more than offset by £116 million of “efficiency” savings they expect the department to make. Given the pressures on the department this will not tackle the problems you have outlined. In contrast, the Liberal Democrats will invest an additional £1 billion a year into HMRC - more than any major party has pledged in this General Election.

A recent report by the Association of Revenue and Customs estimated that around four million working hours at HMRC are lost to poor technology every year, and that hold times on customer phone lines had risen from just under five minutes in 2013 to 24 minutes.

The report recommended investing in staffing, skills, technology and customer services to help narrow the tax gap, and these are the steps we intend to take to boost our revenue service. Investing in customer service in particular is vital to ensuring people get the support they need to file their taxes properly, which would help reduce the 15% of the tax gap that is due to error. We would make digitalisation focus on the needs of taxpayers, by putting in the investment and staff needed to make it work effectively.

You are right to highlight that the UK tax system has become far too complicated for taxpayers to understand and comply with. It was during the Liberal Democrats’ time in Government that the Office of Tax Simplification was founded, which the Conservatives scrapped as part of their infamous mini-budget in 2022 - a move we opposed. We want to make the tax system simpler, fairer and more efficient for all taxpayers, and we look forward to working with you after the election to develop our proposals further.

Liberal Democrats understand that to grow our economy we need to support research and development (R&D). We would aim for at least 3% of GDP to be invested in R&D by 2030, rising to 3.5% by 2034. We would also launch an industrial strategy to ensure that policies across a range of key areas are properly coordinated, including skills, R&D, taxation, finance and trade. The industrial strategy process should include a review of R&D tax incentives, to make sure they work fairly and effectively, fostering investment and growth.

We would also take effective and proportionate action to tackle rogue tax agents. Along with properly resourcing HMRC, we believe the next government should act on the findings of the recent consultation on rogue tax agents. We want to see a targeted and effective approach to tackle poor performance and unethical practices. We look forward to working with CIOT to further develop our approach to this issue.

Lastly, we are equally committed to transparency and accountability over the Government’s policy costings. We saw the disastrous effects of ideological and uncosted tax policy during the Conservatives’ notorious mini-budget, which added thousands of pounds to people’s mortgages and damaged our public finances. We are fully committed to having the OBR conduct proper, impartial impact assessments and forecasts of all fiscal events. For individual policies, we want to see the maximum level of transparency and openness on how they are developed to facilitate scrutiny of their impact on individuals and businesses.

Thank you once again for writing to me about these vital issues. I look forward to continuing to engage with the CIOT in calling for a fairer, simpler and more effective tax system.

Yours sincerely,

Sarah Olney

Scottish National Party (SNP)

At time of writing we have not received a reply from the SNP, though we have at various times discussed some of the issues covered in the letter with the party’s spokespeople, and the party raised some of our concerns around the abolition of the Office of Tax Simplification, as well as arguing for Finance Bill committee to take oral evidence (one of our proposals for improving tax policymaking).

In their manifesto the party state: “With the full devolution of tax powers, we would crack down on tax avoidance and evasion and improve the transparency of tax paid by international companies to ensure that they make a proportionate contribution to tax revenues.”

Democratic Unionist Party (DUP)

Sammy Wilson, DUP Treasury Spokesperson, replied as follows:

Thank you for your email regarding the priorities for the tax administration in the next Parliament.

I think that many of the issues that you have addressed in this have already been highlighted in the recent National Audit Office investigation into HMRC and the level of dissatisfaction that there is amongst the general public and their dealings with HMRC.

I have already raised the issue of research and development tax credits and how badly the system is working at present, especially for small and medium enterprises and for many years it has been known that the tax system needs to be simplified.

The one issue that you have not mentioned is the way in which HMRC are treating some taxpayers especially those who are affected by the loan charge an issue which I have been deeply involved with in Parliament.

Thank you for taking the time to write to me on these issues and I would appreciate you keeping me informed of your concerns if I am elected again to the House of Commons so that I can raise them on a regular basis.

Sammy Wilson

Plaid Cymru

At time of writing we have not received a reply from Plaid Cymru.

The party’s manifesto proposes to “Crack down on tax evasion and avoidance” and to “Increase government investment in Research and Development”.

Green Party

Molly Scott Cato, Spokesperson on Finance and Economy for the England and Wales Green Party, replied as follows:

Thank you for your letter. This response reflects comments by a fellow Green Party member who is a Chartered Accountant and partner in a small farming business and therefore a user of HMRC customer services.

1.Resourcing

We agree that HMRC is under-funded and that customer service levels are poor. Telephone queues are unacceptably long and responses when eventually the call is answered can be disappointing because of lack of knowledge.

2.Digitilisation

We agree that the on-line self-assessment system is working well. But the effect of Making Tax Digital on small businesses filing their VAT and PAYE returns is troublesome. There are often long delays when the HMRC website fails to respond. We fully support your request that HMRC provide free software to small businesses. This is particularly urgent for VAT but the Basic PAYE software already provided leaves a lot to be desired.

3. Simplification

The Green Party has long called for simplification. In our manifesto for the 2024 General Election we are calling for changes to CGT and NI that would move us nearer to an merging of income tax, NI and CGT into a single consolidated income tax.

4. Research and development

Our manifesto recognises the vital importance of R&D to take forward some of the more challenging tasks required for the transition to Net Zero. Claims for R&D tax credit can help advance this agenda and it is disappointing to hear that legitimate claims are being turned down or discouraged.

5. Rogue tax agents

Given the complexity of the tax system it is necessary for many taxpayers to seek advice. We agree however that individuals and tax payers as a group should be protected from inexpert or self-serving agents.

6.Sound policy making

Your proposed principles seem appropriate. We also have concerns about the quality of political debate around tax reform. It is very difficult for challenger parties such as ours to access quality advice on the design, yield and incidence of tax changes. We believe this helps fossilise the tax system because the political risks of making proposals for substantive changes are increased.

Best wishes

Molly Scott Cato
Spokesperson on Finance and Economy, England and Wales Green Party 

Reform UK

At time of writing we have not received a reply from Reform UK.

The party’s manifesto states that HMRC “failed to collect tens of billions in taxes last year due to understaffing and bad management. Improved HMRC competence would deliver lower taxes to British workers.” However it provides no further information on how this would be done.

Reform also promise to reform the tax system, saying: “Major simplification is needed”. While the party is not specific about what it means by this a number of proposals in the manifesto can be argued to be simplifications, particularly in terms of taking groups out of tax. For example:

• Lift the income tax personal allowance to £20,000 per year and the higher rate threshold to £70,000. 
• Abolish inheritance tax for all estates under £2 million
• Free over 1.2m small and medium sized businesses from corporation tax by lifting the minimum profit threshold to £100,000.
• Lift the VAT threshold to £150,000 to free up small entrepreneurs from red tape
• Scrap environmental levies
• Cut red tape from HMRC for farmers and the British Cattle Movement Service

Last updated 28 June 2024
This page will be updated if we receive further replies