Is it the end of the UK tax return?

HMRC's latest and ambitious move aims at getting rid of the annual ritual of filing tax returns
LONDON - Feb. 11, 2016 - PRLog -- Notwithstanding all the scorn poured over HMRC's (the UK taxman) poor track record of customer services, HMRC are going ahead with modernising their administration of taxes through digital means. Attractively titled ‘end of tax returns’, the proposal is to abolish the tax returns altogether and replace them with a digital solution: a digital tax account that would operate like an internet bank account. With a vision to ‘close the tax gap’, HMRC appear to have already made moderate success in capturing employment-related data real time through the monthly RTI filing requirement. Greater the control over taxpayers’ financial data, greater may be the scope for widening the tax base! Regardless of the ‘digital’ overtone, the latest move could simply be the outcome of having to find cash savings, against the backdrop of the overall governmental spending cuts!

Historically, taxpayers in the UK self-assessed their tax liability and paid the tax over to HMRC. The law also requires them to tell HMRC if they owe any taxes. Once a self-assessed tax return has been filed off, it is up to HMRC to decide whether or not to enquire into a tax return. However, when a digital tax account is in place all that the taxpayers need to do is upload all their data on revenue and earnings into their respective digital tax accounts in real time, either through the use of a commercial software or by accessing the government gateway. The account will be automatically updated throughout the year with information coming in from employers, banks, pension providers and the Department for Work and Pensions. Going forward, landlords and self-employed businesses with income of more than £10,000 in a year will be required to update their records at least on a quarterly basis.

Come 2016 Christmas and HMRC expect that registering for new services, updating the taxpayer information, and understanding the tax payable could all be done at the click of a button for millions of small businesses and individuals. To the dismay of tax accountants and tax advisors, the access to the digital tax accounts will initially be available only to the tax payers, not to their tax accountants and tax advisors.

As the fine prints get clearer and clearer, it is unlikely that this ambitious project will be a walk in the park. Already, the First-tier Tax Tribunal had ruled in LH Bishop Electrical Co Ltd case [2013 UKFTT 522 (TC)] that forcing taxpayers having difficulty with digital technology to file VAT returns online infringed on human rights. That said, even if this digital solution becomes a reality, accuracy with HMRC data will always remain a challenge; at least for the next few years to come. But then, whenever faced with criticisms, HMRC offer helpdesks, despite the general consensus amongst the taxpayers being that neither there is a help nor a desk!

Contact
Tax Partners, Chartered Certified Accountants
***@taxpartnersuk.com
02079935282
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