Curtains for the annual tax return?

Millions of taxpayers will no longer have to make annual tax returns if plans outlined in the Budget come to fruition. But the timetable for giving personalised digital accounts to over 50 million individuals and small businesses by 2020 is ambitious, and it is worth remembering that other big government  IT projects have run into difficulties. The idea is that the digital accounts will bring together everything needed to calculate an individual’s tax position. This will include details that HM Revenue & Customs (HMRC) already holds, such as pensions and income taxed under PAYE, and third party material including savings income.

Data will be added in real time so taxpayers will know how much they owe through the year.

Taxpayers will be able to register, update and file information at any time. They will also make tax payments directly from the account, with an option to ‘pay as you go’. As a first step, by early 2016 the UK’s five million small businesses and the first ten million individuals will be moved onto the new electronic tax system. Early beneficiaries are likely to be higher rate taxpayers who entered self-assessment because they or a family member receives child benefit.

Taxpayers remain responsible

HMRC will not be able to gather all the information automatically. Taxpayers will remain responsible for reporting any other income and chargeable gains and, crucially, for the accuracy of their tax bills. The proposals are silent on any potential changes to the present deadlines and penalties.

Small businesses and companies will still have to supply details of their income and expenses.

The plans include the prospect of business accounting software feeding data straight into digital tax accounts, so that most businesses will log in just to check their details with no need to send a return. They will be able to let agents manage the account on their behalf. HMRC promises ‘extra help and support’ for people who have difficulty going online. Another benefit for businesses will be that information about all their liabilities, including VAT and PAYE, will be held on the same digital account. However the plans do not include any changes to VAT returns. In time, small businesses will be able to use their digital accounts to access tailored government support to help their business grow. Individuals will be able to see how their national insurance contributions affect their state pension. More information about the transition to digital accounts will appear in the autumn. So make sure you get in touch with us about this initiative – we’re here to help. T: 020 7376 9333 E: info@figurit.com

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