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OBR brands HMRC digital tax accounts project ‘high risk’

Office for Budget Responsibility says HM Revenue and Customs’ £1.3bn digital tax accounts project contains uncertainties in “behavioural response and operational delivery”

HM Revenue and Customs’ (HMRC) plan to turn the department into a “digital tax administration” has been labelled a “high-risk” project by the Office for Budget Responsibility (OBR).

In the spending review yesterday, chancellor George Osborne announced a £1.3bn investment to transform HMRC into “one of the most digitally advanced tax administrations in the world” and giving access to digital tax accounts for all small businesses and individuals by 2016-17.

But the OBR, in its economic and fiscal outlook report, has given the project a high uncertainty rating, referring to uncertainties “in behavioural response and operational delivery”.

The digital tax account project aims to “design out record-keeping errors in taxpayers’ returns”, the OBR report said.

“In terms of behaviour, the uncertainty relates to the extent to which the software will prevent errors by taxpayers,” it added. “In terms of deliverability, the uncertainty relates to whether HMRC can deliver this challenging project in time for the benefits to be realised as scored.”

HMRC launched its digital strategy in September last year, when it said it aimed to create personalised digital tax accounts based on a “multi-channel digital tax platform” over the next four years.

“Personal tax accounts will allow users to file, pay and make changes across all of their taxes in a single place based on real-time data,” the strategy said.

Read more about the spending review

The government estimates that the move to digital will deliver an additional £1bn of tax revenue by 2020-21.

“From 2019, once those [digital tax] accounts are up and running, we’ll require capital gains tax to be paid within 30 days of completion of any disposal of residential property,” Osborne said.

 In a public accounts committee report published earlier this month, MPs said HMRC is “still failing UK taxpayers by failing to provide an acceptable service to customers, only answering 39% of calls within five minutes”.

The digital tax account project is intended to improve customer dealings with HMRC, but Computer Weekly reported earlier this year that an estimated 10 million users will need assistance to use the digitals services because of lack of internet access, disabilities or other problems.

HMRC is currently working on transitioning away from its £800m-a-year Aspire IT outsourcing deal, one of the biggest IT contracts ever signed by the UK government. By the end of the contract, its main supplier, Capgemini, will have cashed in £10.4bn of taxpayers’ money.

In January this year, Tory MP Richard Bacon said HMRC’s record in managing IT contractors “gives us little confidence that it can successfully achieve this transition, or that it can manage the proposed model effectively to maximise value for money”.

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