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A brief look into the future of compliance

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21st Jul 2015
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Can technology ease the burden on small companies trying to file their accounts and pay their tax?

That is a question posed by a new whitepaper from cloud software house FreeAgent on the future of compliance.

The guide grew out of an online webinar with ACCA that looked at the impact HMRC’s Digital by Default strategy was likely to have on small business owners and their accountants. The government pushed this agenda along significantly in the March Budget when it signalled the death of the tax return, to be replaced by 2020 with an online personal tax account.

Many in the software industry and accountancy profession continue to voice doubts about the project, but from conversations with HMRC, FreeAgent argues that cloud accounting could pave the way for a new environment for small business regulation.

The current regime places a considerable compliance burden on the business population that is least equipped to handle it, the paper argues, pointing to the annual festival of “Last Minute Self Assessment” as a sign that there is friction in the process that needs to be removed.

The government’s digital strategy means that tax, accounting and other regulatory requirements are likely to go the same route as music, entertainment and other consumer services that have all migrated online. It won’t be long until the tax assessment will become redundant like the video rental store, as more and more people embrace new technology, the paper argues.

The end game could mean many businesses will find compliance processes less intimidating and time-consuming. Practitioners may get to the point where they will be able to share and access data with the tax department so that managing tax liabilities can happen alongside day-to-day finance management.

There are other aspects of the new regime to consider; FreeAgent discussions with HMRC point to a future where agents are provided with differentiated services - so submissions from low-risk sources might qualify for a “virtual green lane” to free up HMRC resources to focus on higher risk submissions. 

Download the Future of Compliance whitepaper for more background on this topic.

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