The Institute of Chartered Accountants of Scotland (ICAS) has confirmed in principle support for modernising the UK tax system, a position that matters to institute professionals as chartered bodies increasingly shape how digital tax reforms land on smaller businesses and their advisers rather than leaving that entirely to government. The institute responded to two separate consultations, an HMRC review of reporting on payments to company participators and a joint HMRC and Department for Business and Trade call for evidence on business systems integration.

ICAS is the professional body for chartered accountants in Scotland, established in 1854 as the world's first professional body of accountants.

The submission responds to a structural shift in how HMRC targets the tax gap rather than a routine consultation response.

The UK tax gap reached £59.2 billion in 2024-25, its highest cash value on record, with small businesses continuing to account for the largest share, according to International Tax Review. Separately, HMRC's Making Tax Digital rollout is projected to cost affected business owners around £350 each, according to GB News.

ICAS noted that connected software platforms ought to reduce administrative workloads and raise data quality, but it questioned whether the associated costs are consistently justified for smaller enterprises, and it cited cases where software upgrades were pushed through during critical periods at additional cost to businesses. On HMRC's participator reporting proposals, ICAS observed that directors receiving professional advice generally understand their statutory duties, whereas companies without external advice often do not, and it raised concerns that wider access to AI tools could lead more companies to forgo professional guidance altogether.

For the sector, chartered bodies weighing in on the practical mechanics of digitalisation, not just its principle, signals a shift from resisting reform outright toward shaping its implementation details. For the sector's smaller advisory firms specifically, ICAS's warning about mid-year software changes reflects a compliance burden that falls disproportionately on practices with the least capacity to absorb disruption.

Whether HMRC incorporates proportionality into the final rules, rather than treating digital integration as an unqualified efficiency gain, will determine how much of this compliance burden lands on smaller firms regardless.

Source: The Accountant / International Tax Review / GB News